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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission file number 0-18560
The Savannah Bancorp, Inc.
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(Name of Small Business Issuer in Its Charter)
Georgia 58-1861820
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
25 Bull Street, Savannah, GA 31401
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(Address of Principal Executive Offices) (Zip Code)
912-651-8200
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b)
of the Exchange Act: None
Securities registered under Section 12(g)
of the Exchange Act:
Common Stock - $1.00 par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days. Yes X No_
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B in this form, and no disclosure will 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-KSB or any amendment to
this Form 10-KSB. X
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Issuer's revenues for its most recent fiscal year were $12,085,000.
The aggregate market value of the voting and non-voting common equity held by
non-affiliates, based on the price of the last trade of $28.75 per share times
1,302,082 non-affiliated shares, was $37,435,000.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act
subsequent to the distribution of securities under a plan confirmed by a court.
Yes__ No__
APPLICABLE ONLY TO CORPORATE REGISTRANTS
As of February 27, 1998, the registrant had issued and outstanding 1,709,548
shares of common stock.
Traditional Small Business Disclosure Format (check one):
Yes_ No X
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THE SAVANNAH BANCORP, INC.
1997 ANNUAL REPORT ON FORM 10-KSB
TABLE OF CONTENTS
PART I PAGE
Item 1. Business 5
Item 2. Properties 26
Item 3. Legal Proceedings 27
Item 4. Submission of Matters To a Vote of Security Holders 27
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters 27
Item 6. Management's Discussion and Analysis
of Financial Condition and Results of Operations 28
Item 7. Financial Statements and Supplementary Data 36
Item 8. Changes in and Disagreement with Accountants
on Accounting and Financial Disclosure 54
PART III
Item 9. Directors and Executive Officers of the Registrant 54
Item 10. Executive Compensation 57
Item 11. Security Ownership of Certain Beneficial
Owners and Management 58
Item 12. Certain Relationships and Related Transactions 60
Item 13. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 61
Signature pages 62
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PART I
THE SAVANNAH BANCORP, INC. (THE COMPANY) MAY FROM TIME TO TIME MAKE WRITTEN OR
ORAL "FORWARD-LOOKING STATEMENTS", INCLUDING STATEMENTS CONTAINED IN THE
COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION (INCLUDING THIS
ANNUAL REPORT ON FORM 10-KSB AND THE EXHIBITS THERETO), IN ITS REPORTS TO
SHAREHOLDERS AND IN OTHER COMMUNICATIONS BY THE COMPANY, WHICH ARE MADE IN GOOD
FAITH BY THE COMPANY PURSUANT TO THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, SUCH AS
STATEMENTS OF THE COMPANY'S PLANS, OBJECTIVES, EXPECTATIONS, ESTIMATES AND
INTENTIONS, THAT ARE SUBJECT TO CHANGE BASED ON VARIOUS IMPORTANT FACTORS (SOME
OF WHICH ARE BEYOND THE COMPANY'S CONTROL). THE FOLLOWING FACTORS, AMONG OTHERS,
COULD CAUSE THE COMPANY'S FINANCIAL PERFORMANCE TO DIFFER MATERIALLY FROM THE
PLANS, OBJECTIVES, EXPECTATIONS, ESTIMATES AND INTENTIONS EXPRESSED IN SUCH
FORWARD-LOOKING STATEMENTS: THE STRENGTH OF THE UNITED STATES ECONOMY IN GENERAL
AND THE STRENGTH OF THE LOCAL ECONOMIES IN WHICH THE COMPANY CONDUCTS
OPERATIONS; THE EFFECTS OF, AND CHANGES IN, TRADE, MONETARY AND FISCAL POLICIES
AND LAWS, INCLUDING INTEREST RATE POLICIES OF THE BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM; INFLATION, INTEREST RATE, MARKET AND MONETARY
FLUCTUATIONS; THE TIMELY DEVELOPMENT OF AND ACCEPTANCE OF NEW PRODUCTS AND
SERVICES OF THE COMPANY AND THE PERCEIVED OVERALL VALUE OF THESE PRODUCTS AND
SERVICES BY CUSTOMERS, INCLUDING THE FEATURES, PRICING AND QUALITY COMPARED TO
COMPETITORS' PRODUCTS AND SERVICES; THE WILLINGNESS OF CUSTOMERS TO SUBSTITUTE
COMPETITORS' PRODUCTS AND SERVICES FOR THE COMPANY'S PRODUCTS AND SERVICES; THE
SUCCESS OF THE COMPANY IN GAINING REGULATORY APPROVAL OF ITS PRODUCTS AND
SERVICES, WHEN REQUIRED; THE IMPACT OF CHANGES IN FINANCIAL SERVICES' LAWS AND
REGULATIONS (INCLUDING LAWS CONCERNING TAXES, BANKING, SECURITIES AND
INSURANCE); TECHNOLOGICAL CHANGES; ACQUISITIONS; CHANGES IN CONSUMER SPENDING
AND SAVING HABITS; AND THE SUCCESS OF THE COMPANY AT MANAGING THE RISKS INVOLVED
IN THE FOREGOING.
THE COMPANY CAUTIONS THAT THE FOREGOING LIST OF IMPORTANT FACTORS IS NOT
EXCLUSIVE. THE COMPANY DOES NOT UNDERTAKE TO
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UPDATE ANY FORWARD-LOOKING STATEMENT, WHETHER WRITTEN OR ORAL, THAT MAY BE MADE
FROM TIME TO TIME BY OR ON BEHALF OF THE COMPANY.
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
General
The Company was incorporated as a Georgia business corporation on October 5,
1989, for the purpose of becoming a bank holding company by acquiring all of the
common stock of The Savannah Bank, National Association, Savannah, Georgia (the
"Bank"). The Company became a bank holding company within the meaning of the
Federal Bank Holding Company Act (the "Act") and the Georgia Bank Holding
Company Act (the "Georgia Act") upon the acquisition of 100% of the common stock
of the Bank on August 22, 1990.
The Bank currently is the sole operating subsidiary of the Company. The Bank
received its charter from the Office of the Comptroller of the Currency (OCC) to
commence business and opened for business on August 22, 1990. The deposits at
the Bank are insured by the Federal Deposit Insurance Corporation (the "FDIC").
On February 10, 1998, the Company entered into a binding definitive merger
agreement to acquire the outstanding stock of Bryan Bancorp of Georgia, Inc.
("Bryan"). Each share of Bryan common stock will be exchanged for 1.85 shares of
the Company's common stock. Based on the Company's closing stock price of $25.50
per share on February 10, 1998, the transaction would be valued at approximately
$24 million. The merger, which is anticipated to be accounted for as a pooling
of interests, is expected to be consummated by mid-year 1998, pending approval
of Bryan and Company shareholders, regulatory authorities and other customary
conditions of closing. The transaction is expected to be a tax-free
reorganization for federal income tax purposes.
Bryan is a one-bank holding company for Bryan Bank & Trust Company. Bryan Bank &
Trust Company has one office in Richmond Hill, Georgia and another planned for
mid-year 1998. As of December 31, 1997, Bryan had total assets of $66 million,
total deposits of $56 million, total stockholders' equity of $7.4 million and
$1.2 million in 1997 earnings.
(b) INFORMATION ABOUT INDUSTRY SEGMENTS
Not Applicable
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(c) NARRATIVE DESCRIPTION OF BUSINESS
GENERAL
The Company is authorized to engage in any activity permitted by law to a
corporation, subject to applicable Federal regulatory restrictions on the
activities of bank holding companies. The Company was formed for the purpose of
becoming a holding company to own 100% of the stock of the Bank. The holding
company structure provides the Company with greater flexibility than the Bank
would otherwise have to expand and diversify its business activities, through
newly formed subsidiaries, or through acquisitions. While the Company has no
present plans to engage actively in any nonbanking business activities,
management anticipates studying the feasibility of establishing or acquiring
subsidiaries to engage in other business activities to the extent permitted by
law.
BANKING SERVICES
The Bank has 49 full-time and 12 part-time employees and offers a full range of
deposit services, including checking accounts, savings accounts and various time
deposits ranging from daily money market accounts to longer-term certificates of
deposit. 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 IRA (Individual Retirement Accounts) and
SEP (Simplified Employee Pension) accounts are offered. The FDIC insures all
deposit accounts up to the maximum amount (currently $100,000 per account). The
Bank solicits these accounts from individuals, businesses, foundations and
organizations, and governmental authorities.
The Bank offers a full range of short and medium-term commercial, real estate
and personal loans. The Bank's primary lending focus is business, real estate
and consumer lending. Commercial loans include both secured and a limited volume
of unsecured loans. Consumer loans include secured loans for financing
automobiles, home improvements, real estate and other personal investments.
Unsecured consumer loans are limited and generally made to our most creditworthy
borrowers. The Bank originates fixed and variable rate mortgage loans and offers
real estate construction and acquisition loans.
The Bank's lending policies generally require an 80% loan to value ratio on
secured term real estate lending. Additionally, the existence of a reliable
source of repayment/cash flow is usually required before making any loans,
regardless of the security. Appraisals are obtained as required and lending
officers make on-site inspections. New loans over
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$10,000 are reported to the Credit/ALCO Committee, and this Committee approves
loans over $750,000, prior to the loan being made. Generally, lending
relationships over $100,000 are reported to the full Board of Directors.
Both management and the directors are aware that environmental liabilities may
negatively impact the financial condition of borrowers, the value of real
property and the contingent environmental clean-up liabilities the Bank could
incur by having a lien on environmentally deficient property. The Bank generally
declines to make loans secured by property with environmental deficiencies.
Environmental surveys are required when there is reason for concern about
potential environmental liabilities.
The Bank operates a residential mortgage loan origination department. The
department takes mortgage loan applications, obtains rate commitments and
completes various origination documentation and follow-up for an origination and
service release fee from third-party mortgage bankers. In addition to generating
fee income, the department also generates banking relationships from its
customers and real estate-related contacts. These loans are funded by other
mortgage investors and have not been warehoused on the Bank's books.
CREDIT RISK MANAGEMENT AND ALLOWANCE FOR LOAN LOSSES
The Bank has a multi-faceted program designed to control and continually
monitor the credit risks inherent in its loan portfolio. This begins with a
structured loan approval process in which the Board of Directors delegates
authority for various types and amounts of loans to loan officers on a basis
commensurate with seniority and lending experience. The Bank uses an asset
classification system that is consistent with OCC regulations, which apply to
all assets of an insured institution and require each institution to
periodically classify its assets.
There are four categories of "criticized" assets: Special Mention, Sub-Standard,
Doubtful and Loss. Assets classified as substandard, doubtful or loss are
considered "classified". The classification of assets is subject to OCC review
and re-classification. The Bank includes aggregate totals of criticized assets,
and general and specific valuation reserves in quarterly reports to the Board of
Directors, who approve the overall loan loss reserve evaluation. The Bank's loan
classification system utilizes both the account officer and loan review function
to monitor the classification of the Bank's loans.
The account officer is charged with the responsibility of monitoring changes in
loan quality within his or her loan portfolio and reporting changes directly to
loan review and senior management. Additionally, loan review performs a review
of the Bank's loans to determine that the appropriate risk grade has been
assigned to each borrowing relationship. Delinquencies are monitored on all
loans as a basis for potential inclusion in general valuation reserves or,
ultimately, for potential charge-off. Loans which are delinquent 90 days (four
payments) or longer generally are placed on nonaccrual status unless the
collectibility of principal and accrued interest is assured beyond a reasonable
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doubt. In certain cases, loans less than 90 days (four payments) delinquent are
placed on nonaccrual where uncertainty exists as to their collectibility. Real
estate acquired through foreclosure is classified as sub-standard unless there
is sufficient evidence to indicate such classification is not warranted.
Loan loss reserves are determined based on management's internal review of non
per-forming loans, delinquency trends, the level of rated assets and charge-off
trends. Additionally, management assesses general and specific economic trends
both nationally and locally and regulatory information to determine the impact
of those external factors on loan loss reserve levels. Based on the internal and
external reviews, the Bank segregates its loan portfolio by type of loans and by
loan classification within each loan type. Reserve percentages are applied
(based on historical and anticipated loss rates) to each loan group to determine
the required amount of allocated general loan loss reserves. Additionally, an
amount is provided for unallocated general loan loss reserves, reflecting the
potential for estimation errors in allocated reserves.
In November 1996, the Bank applied for and received trust powers from the OCC.
The Bank hired a Trust Department Manager/Trust Officer and an assistant. The
trust operations, employee benefit administration and certain money management
functions are being outsourced to third parties, at least for the early years of
the department. Using these resources the Trust Department offers a full array
of Trust Services including investment management, personal trusts, custodial
accounts, estate administration, and employee benefit administration.
The Bank also offers cash management services, a non-cash deposit courier
service, safe deposit boxes, travelers checks, direct deposit of payroll, U.S.
Savings bonds, official bank checks and money orders and 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 Savannah and
other cities. The Bank issues ATM cards and currently has six teller machines in
the area. The Bank also offers both VISA and MasterCard credit cards, on an
agent bank basis, which have a pre-authorized line of credit for personal
purchases and expenses.
LOCATION AND SERVICE AREA
The Primary Service Area of the Bank is the City of Savannah and certain
contiguous areas of Chatham County. Its secondary service area is the remainder
of Chatham County and communities in Bryan, Effingham and Liberty Counties,
Georgia and Beaufort and Jasper Counties, South Carolina. The Bank's target
markets are individuals residing in the Primary Service Area, small to medium
size businesses, including retail shops and professional service businesses in
the community. The Bank is also targeting individuals who meet certain net worth
and income requirements as potential customers for private banking services.
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The Bank's main office, known as the Johnson Square Office, is located in the
primary business district in downtown Savannah on Johnson Square where most of
the commercial banks in the Primary Service Area have their main Savannah
offices. In recent years, regional banks have acquired several of the banks in
the Primary Service Area with headquarters outside of the state of Georgia. The
Bank emphasizes that it is based in Savannah, and that its directors and the
executive officers are committed to the economic development of the Savannah
area.
On October 1, 1992, the Bank opened its second office at 400 Mall Boulevard. The
Mall Boulevard Office competes in the area of Savannah that has the second
largest concentration of deposits. This office is in the primary commercial and
retail district in Savannah and includes a high concentration of professional
and service-related businesses.
On November 20, 1995, the Bank opened its third office, the West Chatham Office,
at 100 Chatham Parkway. West Chatham is a full service office located in the
most significant commercial and industrial growth area of Chatham County.
On October 1, 1997, the fourth office at 4741 Highway 80 East on Whitemarsh
Island, six miles east of the main office location opened for business.
Deposits, mortgage loan origination and consumer loans are the primary
opportunities for this location which will serve a large concentration of higher
net worth individuals as well as a young adult population in apartments and
first homes.
In October 1997, the Bank signed a long-term lease for its fifth Savannah
location in space presently occupied by a regional bank competitor in the
Medical Arts Shopping Center. This office is strategically located near two
major hospitals and numerous medical, dental and professional practices. This
location is approximately four miles southeast of the main office. The lease
term begins in June 1998. The new office is expected to be open in the third
quarter, 1998.
The Bank's business plan relies principally upon local advertising and
promotional activity and upon personal contacts by its directors, officers and
stockholders to attract business and to acquaint potential customers with the
Bank's personalized services. The Bank emphasizes a high degree of personalized
customer service in order to be able to provide for each customer's banking
needs. The Bank's marketing approach emphasizes the advantages of dealing with
an independent, locally-owned and relationship-oriented bank to meet the
particular needs of individuals, professionals and small to medium-size
businesses in the community. All banking services are continually evaluated with
regard to their profitability and efforts will be made to modify the Bank's
business plan if the plan does not prove successful.
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ASSET AND LIABILITY MANAGEMENT
Assets of the Bank consist primarily of loans and an investment portfolio. In an
effort to maintain adequate levels of liquidity and minimize fluctuations in the
net interest margin (the difference between interest income and interest
expense), the rate sensitivity of the loan and investment portfolios are matched
to the maturities and rate sensitivity of the liabilities.
The Bank invests the majority of its investment portfolio in highly marketable
medium-term and short-term maturity assets, such as Federal Funds, U.S. Treasury
securities, U.S. agency securities, marketable mortgage-backed securities and
high quality bank-qualified tax-exempt securities. By pricing loans on a
variable rate structure, or by keeping the maturity of the investment and loan
portfolios relatively short-term, the Bank expects to be able to maintain loan
interest, or to reinvest securities proceeds, at prevailing market rates. This
will help to maintain a generally consistent spread over the interest rates paid
by the Bank on the deposits which are used to fund the investment and loan
portfolios.
Deposit accounts represent the majority of the liabilities of the Bank. These
include non- interest-bearing checking accounts and interest bearing NOW
accounts, savings accounts, money market accounts and certificates of deposit.
Most time deposits have maturities of twelve months and less, but the maturities
may be extended based on liquidity position, interest rate expectations and the
rate sensitivity in the loan portfolio of the Bank. In managing its liabilities,
the Bank attempts to attract deposits from customers who, assuming rates are
competitive, are inclined to maintain an ongoing relationship with the Bank.
The Bank has no investment risk in off-balance sheet derivative-related
investments. The Bank owns $12 million in callable agency obligations which have
normal interest rate and marketability risk. Of the callable obligations, $7
million have one time only calls. The call dates and the final maturities are
laddered so that an excessive amount of cash flow from callable bonds will not
be received in any one quarter or year. The remaining $5 million of callable
obligations are callable quarterly or semiannually.
INTEREST RATE RISK
Interest rate risk is a measure of exposure to changes in net interest income or
the theoretical market value of portfolio equity due to changes in market
interest rates. The differential (known as "gap") between interest rate
sensitive assets and interest rate sensitive liabilities over a specified period
of time represents a measure of sensitivity of net interest income to changes in
interest rates. A positive gap indicates an excess of rate sensitive assets over
rate sensitive liabilities, while a negative gap indicates an excess of rate
sensitive liabilities over rate sensitive assets.
The Bank operates under an interest rate risk policy through an Asset Liability
Management Committee ("Credit/ALCO"). The policy outlines limits on interest
rate risk
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in terms of changes in net interest income and changes in the net market values
of assets and liabilities over certain changes in interest rate environments.
These measurements are made through a cash flow simulation model which projects
the impact of changes in interest rates on the Bank's assets and liabilities.
Additionally, the committee may set other interest rate risk objectives. The
policy also outlines responsibility for monitoring interest rate risk, the
process for the approval, implementation and monitoring of interest rate risk
strategies to achieve The Bank's interest rate risk objectives.
FEDERAL AND STATE LAWS AND REGULATION OF BANKS AND BANK HOLDING COMPANIES
Bank holding companies and banks are extensively regulated under both federal
and state law. To the extent that the following information describes statutory
and regulatory provisions, it is qualified in its entirety by reference to the
particular statutory and regulatory provisions. Any change in applicable law or
regulation may have a material effect on the business of the Company and its
subsidiary.
The Bank is subject to extensive supervision and regulation by the OCC and, to a
lesser extent, the Federal Deposit Insurance Corporation (FDIC) and the Federal
Reserve Board. The OCC is responsible for overseeing the affairs of all national
banks and periodically examines national banks to determine their compliance
with laws and regulations. National banks must make periodic reports of their
condition to the OCC.
In addition, the OCC has authority to issue cease and desist orders against
national banks which are about to engage, are engaging or have engaged in an
unsafe or unsound practice in the conduct of their business. The OCC can order
affirmative action to correct any harm resulting from a violation of practice,
including, but not limited to, making restitution and providing reimbursement or
guarantees against loss in certain cases. The OCC also administers several
federal statutes such as the Community Reinvestment Act and the Depository
Institution Management Interlocks Act, which apply to national banks. The Bank
also is subject to special examination by the FDIC and to certain FDIC
regulations.
The OCC has adopted risk-based capital requirements that specify the minimum
level for which no prompt corrective action is required. In addition, the FDIC
adopted FDIC insurance assessment rates based on certain risk-based and equity
capital ratios. The table in Note 10 of the notes to the consolidated financial
statements in the 1997 Annual Report shows the capital ratios for the Company,
the Bank, and the regulatory minimum capital ratios at December 31, 1997. The
capital ratios of the Company and Bank exceeded the ratios required to be
"well-capitalized" by the FDIC.
A national banking association is insured by the FDIC and must be a member of
the Federal Reserve System. Therefore, the Bank is subject to applicable
provisions of the Federal Reserve Act, which restrict the ability of any
national bank to extend credit to its
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parent holding company. Additionally, a national banking association cannot
extend credit to any affiliate (including its parent and non-bank subsidiaries
of its parent) to purchase the assets thereof, to issue a guarantee, acceptance
or letter of credit (including an endorsement or standby letter of credit) to
its affiliates, or to invest in the stock or securities thereof or to take such
stock or securities as collateral for loans to any borrower.
Stockholders of banks (including bank holding companies which own stock in
banks, such as the Company) may be compelled by bank regulatory authorities to
invest additional capital in the event their bank's capital shall have become
impaired by losses or otherwise. Failure to pay such an assessment could cause a
forced sale of the holder's bank stock. In addition, the Company may also be
required to provide additional capital to any additional banks that it acquires
as a condition to obtaining the approvals and consents of regulatory authorities
in connection with such acquisitions.
The earnings of the Bank and, consequently of the Company, are affected
significantly by the policies of the Federal Reserve Board, which regulates the
money supply in order to mitigate recessionary and inflationary pressures. Among
the techniques used to implement these objectives are open market operations in
United States Government securities, changes in the rate paid by banks on bank
borrowings, changes in reserve requirements against bank deposits and
limitations on interest rates that banks may pay on time and savings deposits.
These techniques are used in varying combinations to influence overall growth
and distribution of bank loans, investments and deposits, and their use may also
affect interest rates charged on loans or paid for deposits.
The monetary policies of the Federal Reserve Board have had a significant effect
on the operating results of commercial banks in the past and are expected to
continue to do so in the future.
In view of changing conditions in the national economy and money markets, as
well as the effect of actions by monetary and fiscal authorities, no prediction
can be made as to possible future changes in interest rates, deposit levels,
loan demand or the business and earnings of the Company and the Bank.
The Company, as a bank holding company, is required to register as such with the
Federal Reserve Board and the Georgia Department of Banking and Finance. It is
required to file with both of these agencies annual reports and other
information regarding its business operation and those of its subsidiary. It is
also subject to examination by these two agencies and will be required to obtain
their approval before acquiring directly or indirectly, ownership or control of
any voting shares of a bank or bank subsidiary of a bank holding company if,
after such acquisition, it would own or control directly or indirectly, more
than 5% of the voting stock of such bank or banking subsidiary of a bank holding
company. Furthermore, a bank holding company is prohibited from acquiring direct
or indirect ownership or control of any voting stock of any company which is not
a bank or bank holding company, with limited exceptions. It
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must engage only in the business of banking or managing or controlling banks or
furnishing services to or performing services for its subsidiary banks. During
1996, the Federal Reserve Board enacted regulations that are slightly less
restrictive of the types of businesses which bank holding companies may own.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
Act) has introduced a process that enables nationwide interstate banking through
bank subsidiaries and interstate bank mergers. Separately, the Act also permits
bank subsidiaries to act as agents for each other across state lines. Since
September 29, 1995, adequately capitalized and managed bank holding companies
have been permitted to acquire control of a bank in any state. Any acquisitions
are subject to concentration limits. Beginning June 1, 1997, banks were
permitted to merge with one another across state lines. The Interstate Banking
Act also permits de novo branching to the extent that a particular state "opts
into" the de novo branching provisions. The legislation preserves the state laws
which require that a bank must be in existence for a minimum period of time
before being acquired as long as the requirement is five years or less. This
legislation has immediate relevance for the banking industry due to increased
competitive forces from institutions which may consolidate through mergers and
those which may move into new markets through enhanced opportunities to branch
across state lines.
A bank holding company and its subsidiaries are prohibited from engaging in
certain tie-in arrangements in connection with the extension of credit or
provision of any property or service. Thus, a bank may not extend credit, lease
or sell property or furnish any service or fix or vary the consideration for
such on the condition that (i) the customer obtain or provide some additional
credit, property or service from or to such bank (other than a loan, discount,
deposit or trust service related to and usually provided in connection with a
loan, discount, deposit or trust service), its bank holding company or any other
subsidiary of its bank holding company or (ii) the customer not obtain some
other credit, property or service from a competitor, except to the extent
reasonable conditions are imposed in a credit transaction to assure the
soundness of the credit extended.
The Federal Reserve Board has cease and desist powers over parent bank holding
companies and non-banking subsidiaries should their actions constitute a serious
threat to the safety, soundness or stability of a subsidiary bank. The Company
is also subject to certain restrictions with respect to engaging in the business
of issuing, underwriting and distributing securities.
Although the Company is not presently subject to any direct regulatory
restrictions on dividends (other than those of Georgia corporate law), the
Company's long-term ability to pay cash dividends will depend on the amount of
dividends paid by the Bank, and any other subsequently acquired entities. OCC
regulations restrict the amount of dividends, which the Bank may pay without
obtaining prior approval. Based on such regulatory restrictions, the Bank is
limited from paying dividends in a calendar year, which exceeds the current
year's net income combined with the retained net profits of the preceding two
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years. The Bank may pay no dividends to the Company in excess of the retained
earnings of the Bank of $4.031 million plus future earnings of the bank.
The Bank is a member of the Federal Home Loan Bank ("FHLB") System, which
consists of 12 regional FHLB's subject to supervision and regulation by the
Federal Housing Finance Board ("FHFB"). The FHLB's maintain central credit
facilities primarily for member institutions. The Bank, as a member of the FHLB
of Atlanta, is required to acquire and hold shares of capital stock in the FHLB
of Atlanta in an amount at least equal to the greater of: (i) 1% of the
aggregate outstanding principal amount of its unpaid residential mortgage loans,
home purchase contracts and similar obligations as of the beginning of each
year, (ii) 5% of its advances (borrowings) from the FHLB of Atlanta, or (iii)
$500 thousand. Additionally, during 1996 the FHLB of Atlanta imposed a maximum
investment in its capital stock equal to $500 thousand over the required
minimum. The Bank is in compliance with this requirement with an investment of
$412 thousand in FHLB of Atlanta stock at December 1997.
Each FHLB serves as a reserve or central bank for its member institutions within
its assigned regions. It is funded primarily from proceeds derived from the sale
of obligations of the FHLB System. The FHLB makes advances (i.e., loans) to
members in accordance with policies and procedures established by its Board of
Directors. The Bank, is authorized to borrow funds from the FHLB of Atlanta to
meet demands for withdrawals of savings deposits, to meet seasonal requirements
and for the expansion of its loan portfolio. Advances may be made on a secured
or unsecured basis depending upon a number of factors, including the purpose for
which the funds are being borrowed and existing advances. Interest rates charged
for advances vary depending upon maturity, the cost of funds to the regional
FHLB and the purpose of the borrowing.
COMMUNITY REINVESTMENT ACT
The Community Reinvestment Act of 1977 ("CRA") requires the federal bank
regulatory agencies to encourage financial institutions to meet the credit needs
of low- and moderate-income borrowers in their local communities. In May
1995,the federal bank regulatory agencies published final amended regulations
promulgated pursuant to the CRA. The final regulations eliminate the 12
assessment factors under the former regulation and replace them with performance
tests. Institutions are no longer required to prepare CRA Statements or
extensively document director participation, marketing efforts or the
ascertainment of community credit needs. Under the final rule, an institution's
size and business strategy determines the type of examination that it will
receive. Large, retail-oriented institutions will be examined using a
performance-based lending, investment and service test. Small institutions will
be examined using a streamlined approach. All institutions have the option of
being evaluated under a strategic plan formulated with community input and
pre-approved by the applicable bank regulatory agency.
14
<PAGE>
CRA regulations provide for certain disclosure obligations. In accordance with
the CRA, each institution must post a CRA notice advising the public of the
right to comment to the institution and its regulator on the institution's CRA
performance and to review the CRA public file. Each lending institution must
maintain for public inspection a public file that includes a listing of branch
locations and services, a summary of lending activity, a map of its communities,
and any written comments from the public on its performance in meeting community
credit needs. Large institutions also are required to collect certain data
including the amount and location of, originated and purchased small business,
small farm, community development, and home mortgage loans, and to report this
data to their regulatory agencies.
Public disclosure of written CRA evaluations of financial institutions made by
regulatory agencies is required under the CRA. This promotes enforcement of CRA
requirements by providing the public with the status of a particular
institution's community reinvestment record. The Bank received an "satisfactory"
rating on the most recent performance evaluation of its CRA efforts by the OCC.
Congress and various federal agencies responsible for implementing fair lending
laws have been increasingly concerned with discriminatory lending practices. In
1994, those federal agencies announced a Joint Policy Statement detailing
specific discriminatory practices prohibited under the Equal Opportunity Act and
the Fair Housing Act. In the Policy Statement, three methods of proving lending
discrimination were identified: (i) overt evidence of discrimination, where a
lender blatantly discriminates on a prohibited basis;(ii) evidence of disparate
treatment, when a lender treats applicants differently based upon a prohibited
factor, even where there is no showing that the treatment was motivated by
intention to discriminate; and (iii) evidence of disparate impact, when a lender
applies a practice uniformly to all applicants, but the practice has a
discriminatory effect, even where such practices are neutral in appearance and
applied equally. Lenders are particularly uncertain about the application of the
"disparate impact" criteria by virtue of the vague nature of the Policy
Statement. The Policy Statement notes that "the precise contours of the law on
disparate impact as it applies to lending discrimination are under development."
RECENT BANKING LEGISLATION
Bills are presently pending before the United States Congress and certain state
legislatures, and additional bills may be introduced in the future in the
Congress and the state legislatures, which, if enacted, may alter the structure,
regulation and competitive relationships of the nation's financial institutions.
It cannot be predicted whether or in what form any of these proposals will be
adopted or the extent to which the business of the Company or the Bank may be
affected thereby.
The Federal Deposit Insurance Corporation (FDIC) approved a reduction in the
rates charged for deposit insurance premiums. The reduction has significantly
reduced the amount of premiums assessed on well-capitalized banks. The Bank's
assessment rate
15
<PAGE>
decreased to 4 cents per one hundred dollars of total deposits, effective June
1, 1995. It was further reduced to a minimum charge of $2 thousand dollars for
1996. In 1997, the assessment was increased to 3.2 cents per one hundred dollars
of total deposits, which approximated $14 thousand dollars in 1997 FDIC
assessment expense. This significant decline in FDIC insurance premium rates has
had a positive impact on the Company's and banking industry earnings.
In January 1996, Georgia law was amended to allow banks to establish up to three
de novo branches anywhere in the State of Georgia. The three-branch limitation
is effective from July 1, 1996, through June 30, 1998. On July 1, 1998, the
number of branch banks that a bank may establish is no longer limited.
Various other legislative proposals are expected in Congress concerning the
banking industry. Given the uncertainty of the legislative process, management
cannot assess the effect any such legislation would have on the Company's
financial condition or results of operations.
COMPETITION
The banking business is highly competitive. The Bank competes with other
commercial banks and savings and loan associations in its Primary Service Area,
the city of Savannah and parts of Chatham County. The surrounding counties and
communities of Hilton Head and Beaufort also have banks and savings and loans,
many of which have local ownership.
Banks generally compete with other financial institutions through the banking
products and services offered the pricing of services, the level of service
provided the convenience and availability of services, and the degree of
expertise and the personal manner in which services are offered. The Bank
encounters competition from most of the financial institutions in the Bank's
Primary Service Area. In the conduct of certain areas of its banking business,
the Bank also competes with credit unions, consumer finance companies, insurance
companies, money market mutual funds and other financial institutions, some of
which are not subject to the same degree of regulation and restrictions imposed
upon the Bank. Many of these competitors have substantially greater resources
and lending limits than the Bank and offer certain services, such as
international banking services, that the Bank does not provide currently.
Many of these competitors have more branch offices in the Company's Primary
Service Area. However, the Company's plan is to expand into the markets which
will best serve our targeted customers. Management believes that competitive
pricing, local ownership and personalized, relationship-oriented service provide
the Bank with a method to compete effectively for prospective customers.
16
<PAGE>
The Bank offers the full range of deposit services that are typically available
from financial institutions, including NOW accounts, demand, savings and other
time deposits ranging from money market accounts to longer term certificates of
deposit. In addition, retirement accounts such as Individual Retirement Accounts
are available. All deposit accounts will be insured by the FDIC up to the
maximum amount permitted by law.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
17
<PAGE>
SELECTED STATISTICAL INFORMATION OF THE COMPANY
The following statistical information is provided for the Company for the years
ended December 31, 1997, and 1996. The data is presented using daily average
balances. This data should be read in conjunction with the financial statements
appearing elsewhere in this Report. The Company has no foreign operations and,
accordingly, there are no assets or liabilities attributable to foreign
operations.
Table 1 - Average Balance Sheet and Rate/Volume Analysis - 1997 and 1996
The following table presents average balances of the Company and the Bank on a
consolidated basis, the taxable-equivalent interest earned and the rate paid
thereon during 1997 and 1996.
<TABLE>
<CAPTION>
Average Balance Average Rate Interest (a) Variance
---------------- ------------- --------------- Vari- Attributable to
1997 1996 1997 1996 1997 1996 ance Rate Volume
------- ------- ------ ------ ------- ------ ------ ----- --------
<C> <C> <C> <C> <S> <C> <C> <C> <C> <C>
(Thousands) (%) Taxable-Equivalent (Thousands) (Thousands)
Interest Income and
fees(b)
$ 27,067 $ 26,871 6.25 6.28 Investment - taxable $ 1,692 $ 1,687 $ 5 $ (7) $ 12
3,206 2,461 6.86 6.91 Investments - 220 170 50 (1) 51
non-taxable
10,473 7,197 5.47 5.29 Federal funds sold 573 381 192 19 173
Loans (c)
39,032 34,258 9.15 9.10 Commercial 3,570 3,118 452 17 435
15,819 11,594 9.24 9.33 Real estate 1,461 1,082 379 (15) 394
39,506 34,802 9.29 9.24 Consumer 3,669 3,217 452 17 435
------- ------- ------ ------ ----
94,357 80,654 9.22 9.20 Total loans 8,700 7,417 1,283 23 1,260
------- ------- ------ ------ -----
135,103 117,183 8.28 8.24 Total interest- 11,185 9,655 1,530 54 1,476
------- ------- ----- ----- earning assets ------ ------ ----- ---- ------
Interest Expense
Deposits
$ 22,828 $ 21,075 2.69 2.66 NOW accounts 614 561 53 6 47
3,690 3,125 3.25 3.30 Savings accounts 120 103 17 (2) 19
18,104 14,758 3.88 3.86 Money market accounts 703 570 133 4 129
23,575 20,935 5.67 5.78 CD's, $100M or more 1,336 1,210 126 (27) 153
38,064 33,585 5.66 5.84 Other time deposits 2,154 1,963 191 (70) 261
------- ------- ------ ----- ----
Total interest-bearing
106,261 93,478 4.64 4.71 deposits 4,927 4,407 520 (82) 602
Federal funds
purchased and secur-
ities sold under
3,112 1,307 5.04 5.13 repurchase agreements 157 66 91 (3) 94
------- ------- ------ ------ ----
Total interest-bearing
$109,373 $ 94,785 4.65 4.72 liabilities 5,084 4,473 611 (78) 689
-------- ------- ----- ----- ------ ------ ----- ------ -----
3.78 3.52 Interest rate spread
Net yield on interest-
earning assets and
4.52% 4.42% net interest income $ 6,101 $ 5,182 $ 919 $ 131 $ 788
----- ----- ----- ------ ----- ---- -----
</TABLE>
(a) This table shows the changes in interest income and interest expense for the
comparative periods based on either changes in average volume or changes in
average rates for interest-earning assets and interest-bearing liabilities.
Changes which are not solely due to volume changes or solely due to rate changes
have been attributed to rate.
(b) The taxable equivalent adjustment results from tax exempt income less
non-deductible TEFRA interest expense. There was $96 in average non-accrual
loans in 1997 and $0 in 1996. Interest was accrued until the date placed on
non-accrual status.
(c) The loan classifications shown here are based on the primary source of
repayment. There are loans secured by real estate in both the commercial and the
consumer categories.
18
<PAGE>
Table 2 - Average Balance Sheet and Rate/Volume Analysis - 1996 and 1995
The following table presents average balances of the Company and the Bank on a
consolidated basis, the taxable-equivalent interest earned and the rate paid
thereon during 1996 and 1995.
<TABLE>
<CAPTION>
Average Balance Average Rate Interest (a) Variance
---------------- ------------- ---------------- Vari- Attributable to
1996 1995 1996 1995 1996 1995 ance Rate Volume
------- ------ ------ ------ ------- ------- ------ ----- ---------
<C> <C> <C> <C> <S> <C> <C> <C> <C> <C>
(Thousands) (%) Taxable-Equivalent (Thousands) (Thousands)
Interest Income and
fees (b)
$ 26,871 $ 19,030 6.28 6.53 Investment - taxable $ 1,687 $ 1,243 $ 444 $(68) $ 512
2,461 1,325 6.91 7.09 Investments - 170 94 76 (5) 81
non-taxable
7,197 7,235 5.29 5.96 Federal funds sold 381 431 (50) (48) (2)
Loans (c)
34,258 26,244 9.10 9.61 Commercial 3,118 2,521 597 (173) 770
11,594 9,361 9.33 9.67 Real estate 1,082 905 177 (39) 216
34,802 33,292 9.24 9.38 Consumer 3,217 3,123 94 (48) 142
------- ------ ------ ------ ----
80,654 68,897 9.20 9.51 Total loans 7,417 6,549 868 (250) 1,118
------- ------ ------ ------ ----
117,183 96,487 8.24 8.62 Total interest- 9,655 8,317 1,338 (446) 1,784
------- ------- ----- ---- earning assets ------ ------ ----- ----- -----
Deposits
21,075 17,214 2.66 2.99 NOW accounts 561 514 47 (68) 115
3,125 2,959 3.30 3.51 Savings accounts 103 104 (1) (7) 6
14,758 12,140 3.86 3.84 Money market accounts 570 466 104 4 100
20,935 16,828 5.78 5.95 CD's, $100M or more 1,210 1,001 209 (35) 244
33,585 27,599 5.84 5.99 Other time deposits 1,963 1,652 311 (47) 358
------- ------ ----- ------ ----
Total interest-bearing
93,478 76,740 4.71 4.87 deposits 4,407 3,737 670 (145) 815
Federal funds
purchased and secur-
ities sold under
1,307 731 5.13 5.61 repurchase agreements 66 41 25 (6) 31
------- ------- ----- ------ ----
Total interest-bearing
$ 94,785 $ 77,471 4.72 4.88 liabilities 4,473 3,778 695 (148) 843
------- ------ ----- ----- ----- ------ ---- ----- -----
3.52 3.73 Interest rate spread
Net yield on interest-
earning assets and
4.42% 4.70% net interest income $ 5,182 $ 4,539 $ 643 $(298) $ 941
------ ----- ------ ------ ---- ----- ------
</TABLE>
(a) This table shows the changes in interest income and interest expense for the
comparative periods based on either changes in average volume or changes in
average rates for interest-earning assets and interest-bearing liabilities.
Changes which are not solely due to volume changes or solely due to rate changes
have been attributed to rate.
(b) The taxable equivalent adjustment results from tax exempt income less
non-deductible TEFRA interest expense. There were no non-accrual loans in 1996
or 1995.
(c) The loan classifications shown here are based on the primary source of
repayment. There are loans secured by real estate in both the
commercial and the consumer categories.
19
<PAGE>
Table 3 - Long-Term Maturity Gap and Repricing Data
The following table is the Company's long-term maturity and repricing data for
the Company as of December 31, 1997.
($ in 000's)
<TABLE>
<CAPTION>
Fair
Interest-bearing assets 1998 1999 2000 2001 2002 Beyond Total Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------ ------- ------- ------- ------- ------- ------- -------
Investment securities 9,016 10,215 6,094 386 - 3,789 29,500 29,500
6.43% 5.82% 6.30% 8.95% - 6.73% 6.26% -
Federal funds sold 13,187 - - - - - 13,187 13,187
5.45% - - - - - 5.45% -
Loans - fixed rates 22,060 12,193 10,351 3,779 4,707 2,777 55,867 55,772
8.80% 8.73% 8.92% 8.96% 8.89% 8.78% 8.82% -
Loans - variable rates 25,141 7,047 9,514 3,127 4,430 895 50,154 50,154
9.05% 9.10% 9.19% 9.04% 8.80% 8.74% 9.06% -
------ ------ ------ ------ ------- ------- ------ --------
Total earning assets 69,404 29,455 25,959 7,292 9,137 7,461 148,708 148,613
7.95% 7.81% 8.40% 8.99% 8.85% 7.73% 8.10% -
Interest bearing deposits:
NOW and savings (a) 3,307 3,307 3,307 3,307 3,307 16,539 33,074 33,074
2.75% 2.75% 2.75% 2.75% 2.75% 2.75% 2.75% -
Money market (a) 2,020 2,020 2,020 2,020 2,020 10,103 20,203 20,203
3.85% 3.85% 3.85% 3.85% 3.85% 3.85% 3.85% -
Time, $100M and over 21,207 1,098 1,422 923 - - 24,650 24,728
5.67% 5.90% 6.55% 6.15% - - 5.75% -
Other Time 30,214 4,156 3,991 1,122 1,158 - 40,641 40,742
5.45% 5.80% 6.31% 5.68% 6.05% - 5.59% -
------- ------ ------ ------ ------ -------- ------
Total interest bearing
deposits 56,748 10,581 10,740 7,372 6,485 26,642 118,568 118,747
5.32% 4.48% 4.78% 3.92% 3.68% 3.17% 4.54% -
Funds purchased 3,250 - - - - - 3,250 3,250
5.05% - - - - - 5.05% -
------- ------- ------ ------ ------- ------- ------
Total interest bearing
liabilities 59,998 10,581 10,740 7,372 6,485 26,642 121,818 121,997
5.30% 4.48% 4.78% 3.92% 3.68% 3.17% 4.55%
GAP-Excess Assets 9,406 18,874 15,219 (80) 2,652 (19,181) 26,890 -
------- ------- ------ ------- ------ -------- -------
GAP-Cumulative-12/31/97 -
9,406 28,280 43,499 43,419 46,071 26,890 26,890
------- ------- ------ ------ ------ ------- -------
</TABLE>
(a) - estimated cash flow runoff of 10% per year has been assumed.
The Company's cash flow gap is $9,406 within one year, or six percent of total
interest-earning assets. Fixed rate earning assets with maturities over five
years total $6,417, or four percent of total interest-earning assets. The cash
flow gaps between one and five years will adjust significantly each year through
normal loan and deposit activity. Based on the principal cash flows and interest
rates presented above, and the policies and procedures in place to monitor
interest rate risk, management believes interest rate risk is being adequately
managed within reasonable earnings fluctuation tolerances.
20
<PAGE>
Table 4 - Investments - Securities Available for Sale
The aggregate amortized cost and fair value of securities available for sale as
of December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997
------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Investment securities:
U. S. Treasury securities $ 12,141 $ 3 $ - $ 12,144
U. S. Government agencies 11,700 43 - 11,743
Mortgage-backed securities 995 - (7) 988
State and municipal 3,377 150 - 3,527
Other taxable securities 1,087 11 - 1,098
---------- ----------- ---------- ---------
$ 29,300 $ 207 $ (7) $ 29,500
========== =========== ========== =========
</TABLE>
<TABLE>
<CAPTION> 1996
-------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Investment securities:
U. S. Treasury securities $ 16,236 $ - $ (26) $ 16,210
U. S. Government agencies 6,988 - (42) 6,946
Mortgage-backed securities 1,927 - (15) 1,912
State and municipal 3,125 61 - 3,186
Other taxable securities 1,020 17 - 1,037
---------- ----------- ---------- ---------
$ 29,296 $ 78 $ (83) $ 29,291
========== =========== ========== =========
</TABLE>
Table 5 - Investments - Weighted Average Yields by Maturity
The following table sets forth the amortized cost, fair value and tax-equivalent
yields by investment type and maturity category at December 31, 1997.
<TABLE>
<CAPTION>
Amortized Fair Tax-Equivalent
Cost Value Yield (a)
---------- --------- --------------
<S> <C> <C> <C>
Securities available for sale:
U. S. Treasury, other U. S. government
Agencies and Mortgaged-backed:
Within one year $ 8,995 $ 9,016 6.43%
One year to five years 15,840 15,859 5.99
Five years to ten years - - -
Over ten years - - -
---------- --------- --------------
Total 24,835 24,875 6.15
Other interest-earning investments:
Within one year 450 450 6.38
One year to five years - - -
Five years to ten years 2,928 3,077 6.76
Over ten years - - -
---------- --------- --------------
Total 3,378 3,527 6.71
---------- --------- --------------
Total available for sale interest-
earning investments 28,213 28,402 6.22%
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---------- ---------
<S> <C> <C>
Federal Reserve Bank Stock
and other investments 1,087 1,098
---------- ---------
Total available-for-sale securities $ 29,300 $ 29,500
========== =========
</TABLE>
(a) the yield is calculated on the amortized cost of the securities.
LOANS
The following tables set forth certain information regarding the Bank's loan
portfolio as of December 31, 1997 and 1996.
Table 6 - Loans by Category
The composition of the loan portfolio at December 31, 1997 and 1996 is presented
in Note 3 to the consolidated financial statements.
<TABLE>
<CAPTION>
Percent Percent
1997 of Total 1996 of Total
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Commercial $ 18,754 17.7% $ 14,904 16.8%
Real estate - rental, constr-
uction and development 20,100 19.0 13,535 15.3
Real estate - mortgage 56,022 52.8 50,067 56.5
Installment and consumer 11,145 10.5 10,143 11.4
--------- --------- --------- ---------
Total Loans $106,021 100.0% $ 88,649 100.0%
========= ========= ========= =========
</TABLE>
Table 7 - Loan Repricing Opportunities
The following table sets forth certain loan maturity information as of December
31, 1997. Loan renewals generally reprice relative to the prime rate in effect
at the time of the renewal. Management expects that certain real estate mortgage
loans that have maturities of one to three years and longer amortization periods
will renew at maturity.
<TABLE>
<CAPTION>
After one year
One year through Over
Loan Category: or less five years five years Total
--------- --------------- ---------- ---------
<S> <C> <C> <C> <C>
Real estate-construction
& development $ 11,979 $ 8,115 $ 6 $ 20,100
Real estate-mortgage 17,538 35,077 3,407 56,022
Commercial, financial
and agricultural 13,732 4,897 125 18,754
Loans to individuals 3,951 7,059 135 11,145
--------- --------------- ---------- ---------
Total $ 47,200 $ 55,148 $ 3,673 $ 106,021
========= =============== ========== =========
Loans with floating and
adjustable rates $ 25,140 $ 24,118 $ 896 $ 50,154
Loans with fixed rates 22,060 31,030 2,777 55,867
--------- --------------- ---------- ---------
Total $ 47,200 $ 55,148 $ 3,673 $ 106,021
========= =============== ========== =========
</TABLE>
22
<PAGE>
Nonaccrual, Past Due and Restructured Loans
At December 31, 1997 the Bank had nonaccrual loans of $153 and had $32 in loans
past due over 90 days. Management also maintains a "watch list" of special
mention and classified loans that may not be past due, nonaccrual or
restructured which included $347 of loans in addition to the nonaccrual and 90
days overdue balances. Interest income of $7 was recognized from nonaccrual
loans in 1997. At December 31, 1996 the Bank had no nonaccrual loans and had $23
in loans past due over 90 days. No interest income on nonaccrual loans was
recognized in 1996.
Except for consumer loans, the Bank's policy is to place a loan on nonaccrual
status when, in management's judgment, the collection of principal and interest
appears doubtful. Interest receivable accrued in prior years and subsequently
determined to have doubtful collectibility will be charged to the allowance for
possible loan losses. Interest on loans that are classified as nonaccrual is
recognized when received. In some cases, where borrowers are experiencing
financial difficulties, loans may be restructured to provide terms significantly
different from the original contractual terms.
Loan Concentrations
Most of the Bank's business activity is with customers located within the
Chatham County area. As of December 31, 1997, the Bank had a concentration of
credit risk aggregating $76,122 on loans secured by real estate. This amount was
comprised of $56,022 of real estate in which the source of repayment is
primarily cash flow from commercial businesses and consumers and $20,100 to
finance investment real estate in which the primary source of repayment is cash
flow from sales proceeds and lease payments of income producing real estate. The
Bank has no exposure to highly leveraged transactions and has no foreign credits
in its loan portfolio.
Table 8 - Provision for Possible Loan Losses
Changes in the allowance for loan losses in 1997 and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Balance at the beginning of the year $ 1,240 $ 1,061
Charge-offs - Commercial (43) -
Charge-offs - Consumer (28) (23)
------- -------
Charge-offs - Total (71) (23)
Recoveries - Consumer 11 7
------- -------
Net charge-offs (60) (16)
Provision for loan losses 300 195
------- -------
Balance at the end of the year $1,480 $1,240
======= =======
Ratio of net charge-offs to average loans .06% .01%
======= =======
</TABLE>
23
<PAGE>
Table 9 - Allocation of Allowance for Loan Losses by Loan Type
The allowance for loan losses is allocated by loan category based on
management's assessment of risk within the various categories of loans. The
Company's allocation of the allowance for loan losses according to the amount
deemed to be reasonably necessary to absorb potential losses within each loan
category is presented in the following tables:
<TABLE>
<CAPTION>
% of % of
1997 Total 1996 Total
------- ------- ------- -------
<S> <C> <C> <C> <C>
Commercial $ 217 .21 $ 148 .17
Real estate - rental, construction
and development 287 .27 245 .28
Real estate - mortgage 100 .09 80 .09
Installment and other consumer 160 .15 133 .15
Unallocated 716 .68 634 .71
------- -------
Total Allowance for Loan Losses $1 ,480 1.40 $ 1,240 1.40
======= =======
</TABLE>
The allowance for loan losses is based on estimates and is maintained at a level
considered adequate to provide for potential loan losses. The adequacy of the
allowance is based on management's continuing evaluation of the loan portfolio
under current economic conditions, underlying collateral value securing loans
and such other factors, which deserve recognition in estimating loan losses.
Actual future losses may be different from estimates due to unforeseen events.
Loans, or portions thereof, which are deemed to be uncollectible will be charged
against the allowance.
Loan loss reserves are determined based on management's internal review of
nonperforming loans, delinquency trends, the level of rated assets and
charge-off trends. Additionally, management assesses general and specific
economic trends both nationally and locally and regulatory information to
determine the impact of those external factors on loan loss reserve levels.
Based on the internal and external reviews, The Bank segregates its loan
portfolio by type of loans and by loan classification within each loan type. The
allowance for loan losses is allocated by different loan classifications based
on management's assessment of risk inherent in the various types of loans.
Reserve percentages are applied (based on historical and anticipated loss rates)
to each loan group to determine the required amount of allocated general loan
loss reserves. Additionally, an amount is provided for unallocated general loan
loss reserves reflecting the potential for estimation errors in allocated
reserves.
24
<PAGE>
DEPOSITS
Table 10 - Deposit Average Balances and Rates Paid
The following table summarizes average balances of deposits of the Company and
the Bank on a consolidated basis and the average rates paid on such deposits
during 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
------------------ -------------------
Amount Rate Amount Rate
--------- ---- --------- ----
<S> <C> <C> <C> <C>
Non-interest bearing demand $ 18,904 0.00% $ 16,577 0.00%
Interest bearing demand 22,828 2.69 21,075 2.66
Saving deposits 3,690 3.25 3,125 3.30
Money market deposits 18,104 3.88 14,758 3.86
Time deposits 61,639 5.67 54,520 5.82
--------- ---------
Total $ 125,165 $ 110,055
========= =========
</TABLE>
Table 11 - Time Deposit Maturities
The following table indicates the amount of the Bank's time certificates of
deposit of $100,000 or more at December 31, 1997 by time remaining until
maturity.
<TABLE>
<CAPTION>
Maturity Period Amount
--------------- --------
<S> <C>
Three months or less $ 7,639
Over three through six months 6,571
Over six through twelve months 6,996
Over twelve months 3,444
--------
Total $ 24,650
========
</TABLE>
SHORT-TERM BORROWINGS
Short-term borrowings at December 31, 1997 and 1996 consist of securities sold
under agreement to repurchase and federal funds purchased. The maximum amount
outstanding at the end of any month was $3,543 and $1,911 during 1997 and 1996,
respectively.
As of December 31, 1997 and 1996, the Bank had short-term borrowings totaling
$3,250 and $1,850, respectively. The average interest rates were 5.04% and 5.13%
for the years ended 1997 and 1996.
Table 12 - Return on Assets and Equity
The following table shows return on assets (net income divided by average total
assets), return on equity (net income divided by average shareholders' equity)
and shareholders' equity to assets ratio (shareholders' equity divided by total
assets) for the years ended
25
<PAGE>
December 31, 1997, 1996 and 1995. Dividends paid, adjusted for stock splits and
stock dividends, were $.14 in 1997, $.08 in 1996, and $.07 in 1995.
<TABLE>
<CAPTION>
Ratio 1997 1996 1995
----------------------- ------ ------ ------
<S> <C> <C> <C>
Return on Average Assets 1.22% 1.20% 1.18%
Return on Average Equity 12.48% 12.01% 10.53%
Average Equity to Average Assets 9.79% 10.03% 11.20%
Dividend Payout Ratio 13.63% 8.69% 9.47%
</TABLE>
ITEM 2. PROPERTIES
The Bank's main office is located at 25 Bull Street, Savannah, Georgia 31401, on
the ground floor and lower level of a seven story office building located on
Johnson Square in downtown Savannah. The location is sometimes called the
Financial Square because seven financial institutions surround the square
(downtown park). The location is convenient to commercial customers and
consumers who already use the services of the six other financial institution
offices on Johnson Square.
The Company has leased approximately 4,710 square feet on the main floor of the
building under a five-year lease with two optional five-year extensions in June
1999 and 2004. The rental costs increase by 3% of the gross rental amount each
year during the initial five-year term and thereafter in accordance with the
Consumer Price Index. The Company is also responsible for its pro rata share of
increases in the cost of ad valorem taxes, insurance, utilities and janitorial
services.
The Company also leases approximately 4,210 square feet on the first floor of a
two-story building located at 400 Mall Boulevard, Savannah, Georgia. This space
is being used for the Bank's first branch location. The building is located near
the corner of Mall Boulevard and Hodgson Memorial Drive, a location that is
convenient to a significant concentration of commercial, service, and retail
entities. The lease rate increases with the consumer price index. The initial
lease term was for five years and ended March 31, 1997. The Bank has committed
to exercise the next five-year lease option. There are four five-year renewal
options included in the terms. The Company is also responsible for its pro-rata
share of increases in the cost of ad valorem taxes, insurance and maintenance of
common areas. The bank renovated the existing space, constructed a vault,
drive-in teller area and six drive-in teller lanes adjacent to the building.
During 1995, the Bank entered into a five-year ground lease with nine five-year
renewal options at 100 Chatham Parkway. The Bank also has a right of first
refusal to buy the property at appraised value should the owner ever decide to
sell the property. The location is at the intersection of Chatham Parkway and
U.S. Highway 80, a major commercial and industrial intersection in west Chatham
County. The Bank made land improvements and constructed a 2200 square-foot
banking facility including four drive-in
26
<PAGE>
lanes and an ATM drive-through lane. The West Chatham Office opened for business
on November 20, 1995.
In November 1997, the Bank entered into a ten-year lease beginning June 1, 1998
with four five-year renewal options in the Medical Arts Shopping Center at 4809
Waters Road. The property consists of 3055 square feet of banking office space
and a separate drive-through behind the shopping center. The space is presently
occupied by a regional bank and will require minimal leasehold improvements
prior to beginning operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its property the subject of, any
material pending legal proceedings incidental to the business of the Company or
the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the quarter ended
December 31, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock was sold in an initial public offering on April 10,
1990. It is traded in the over-the-counter market and is quoted on the NASDAQ
National Market System under the symbol SAVB. Information as to the quarterly
high and low stock prices for 1997 and 1996 is listed below. The prices
represent high and low bid prices and they have been adjusted to reflect the
two-for-one stock split distributed in July 1995 and a three-for two split in
the form of a 50% stock dividend declared in January 1997 and paid in February,
1997. There were approximately 220 holders of record of Company Common Stock
and, according to information available to the Company, approximately 530
additional shareholders through brokerage accounts at February 27, 1998.
Table 13 - Market Price per Common Share
<TABLE>
<CAPTION>
Fourth Third Second First
1997 Quarter Quarter Quarter Quarter
- ---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
High $24.00 $23.25 $23.00 $19.25
Low 21.50 20.00 18.63 15.00
1996
- ----
High $16.33 $13.83 $14.00 $14.00
Low 12.67 12.67 12.67 12.67
</TABLE>
27
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For a comprehensive presentation of the Company's financial condition and
results of operations, the following selected financial data and analysis should
be reviewed along with the consolidated financial statements and the
accompanying notes included in Item 7. in this Form 10-KSB Annual Report. All
dollar amounts except per share amounts are in thousands.
SELECTED FINANCIAL DATA - FIVE YEAR COMPARISON - 1993 - 1997
Selected Year-End Balances
<TABLE>
<CAPTION>
($ in thousands) 1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total Assets $163,659 $137,452 $115,088 $ 90,434 $ 71,834
Loans 106,021 88,649 75,827 61,219 52,037
Deposits 144,464 121,401 99,547 78,378 59,296
Interest-earning assets 148,708 128,755 108,005 85,743 68,155
Interest-bearing liabilities 121,818 101,438 85,866 63,045 52,513
Shareholders' equity 14,976 13,285 12,163 10,858 10,528
</TABLE>
Selected Average Balances
<TABLE>
<CAPTION>
($ in thousands) 1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total assets $143,543 $125,154 $102,142 $83,370 $ 66,280
Loans 94,357 80,654 68,897 57,261 46,235
Investment securities 30,273 29,332 20,355 15,159 10,319
Other interest-earning assets 10,473 7,197 7,235 6,634 5,564
Interest-earning assets 135,103 117,183 96,487 79,054 62,118
Interest-bearing deposits 106,261 93,478 76,740 57,657 45,781
Other borrowings 3,112 1,307 731 688 1,134
Interest-bearing liabilities 109,373 94,785 77,471 58,345 46,915
Non-interest bearing deposits 18,904 16,577 13,226 13,571 8,652
Deposits 125,165 110,055 89,966 71,228 54,433
Shareholders' equity 14,050 12,549 11,436 10,749 10,262
</TABLE>
28
<PAGE>
Selected Income Statement Data
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Summary of Operations -------- -------- -------- -------- --------
Interest income $11,132 $9,617 $8,297 $5,898 $4,269
Interest expense 5,084 4,473 3,778 2,143 1,647
-------- -------- -------- -------- --------
Net interest income 6,048 5,144 4,519 3,755 2,622
Provision for loan losses (300) (195) (172) (125) (257)
-------- -------- -------- -------- --------
Net interest income after
provision for loan losses 5,748 4,949 4,347 3,630 2,365
Other income 953 654 470 201 235
Personnel expense 2,192 1,719 1,487 1,167 981
Other expense 1,824 1,571 1,427 1,240 1,022
-------- -------- -------- -------- --------
Income before provision for
income taxes and accounting
change 2,685 2,313 1,903 1,424 597
Provision for income taxes (932) (806) (699) (518) (183)
-------- -------- -------- -------- --------
Income before accounting
change and extraordinary item 1,753 1,507 1,204 906 414
Effect of tax accounting change - - - - 115
-------- -------- -------- -------- --------
Net income $ 1,753 $ 1,507 $1,204 $ 906 $ 529
======== ======== ======== ======== ========
Earnings per share - basic $1.03 $.89 $.70 $.51 $.29
======== ======== ======== ======== ========
Earnings per share before
accounting change-diluted $.97 $.85 $.69 $.51 $.23
======== ======== ======== ======== ========
Earnings per share - diluted $.97 $.85 $.69 $.51 $.29
======== ======== ======== ======== ========
Average basic common
shares outstanding 1,708 1,701 1,711 1,762 1,783
======== ======== ======== ======== ========
Average diluted common and
common equivalent shares 1,802 1,763 1,747 1,762 1,783
======== ======== ======== ======== ========
Dividends per share $.14 $.08 $.07 $.03 -
======== ======== ======== ======== ========
</TABLE>
All per share data and average shares have been restated for a ten percent stock
dividend in May, 1994 and a two-for-one stock split in July, 1995 and a three
for two split in the form of a 50% stock dividend in February, 1997.
29
<PAGE>
Liquidity and Interest Rate Sensitivity Management
The objectives of funds management include maintaining adequate liquidity and
reasonable harmony between the repricing of sources and uses of funds or
interest sensitive assets and liabilities. The goal of liquidity management is
to ensure the availability of adequate funds to meet the loan demand and the
deposit withdrawal needs of the Bank's customers. This is achieved through
maintaining a combination of sufficient liquid assets, core deposit growth and
unused capacity to purchase funds in the money markets.
During 1997, loans increased $17.4 million, or 20%, and deposits increased $23.1
million, or 19% resulting in an increase in the loan to deposit ratio from 73.0%
at the beginning of the year to 73.4% at year-end. During 1998, management plans
to emphasize both loan and deposit growth and to target a loan to deposit ratio
in the 75% to 80% range. Core deposit growth will be accomplished through
marketing, competitive interest rates and through the opportunities at our new
Island Towne Center Office which opened in October, 1997 and our new Medical
Arts Office scheduled to open in the fall of 1998. The Bank became a member of
the FHLB in 1992. As a member of the FHLB, the Bank has access to short-term and
long-term borrowings at favorable rates. These borrowings can be used for
liquidity, asset-liability management and matched loan funding purposes. The
Bank also has $6.5 million of federal funds borrowing lines available from
correspondent banks.
A continuing objective of the Bank's asset liability management is to maintain a
high level of variable rate assets, including variable rate loans and
shorter-maturity investments, to balance increases in interest rate sensitive
liabilities. Interest sensitivity management and its effects on the net interest
margin require analyses and actions that take into consideration volumes
repriced and the timing and magnitude of their change.
The Company's maturity and repricing gap at December 31, 1997, was $9,406 within
one year, or six percent of total interest-earning assets. Fixed rate earning
assets with maturities over five years totaled $6,566, or four percent of total
interest-earning assets. The maturity and repricing gap between one and five
years will adjust significantly each year through normal loan and deposit
activity. Based on the presently expected principal cash flows and interest
rates and the policies and procedures in place to monitor interest rate risk,
management believes interest rate risk is being adequately managed within
reasonable earnings fluctuation tolerances.
The short-term asset sensitivity position of the Company indicates that net
interest income will be impacted negatively when the prime rate and deposit
rates decline. Soon after the rate declines stop, net interest income will be
impacted positively due to the continued time deposit repricing at lower rates.
The opposite is true in the event of rising rates.
30
<PAGE>
The gap position after one year is of less concern because management has time
to respond to changing financial conditions with actions that reduce the impact
of the longer term gap positions.
The Company is a party to financial instruments with off-balance sheet risks in
the normal course of business to meet the financing needs of its customers. At
December 31, 1997, the Company had unfunded commitments to extend credit of
$18,991 and outstanding stand-by letters of credit of $289. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
Company uses the same credit policies in establishing commitments and issuing
letters of credit as it does for on-balance sheet instruments. Management does
not anticipate that funding obligations arising from these financial instruments
will adversely impact its ability to fund future loan growth or deposit
withdrawals.
FINANCIAL CONDITION AND CAPITAL RESOURCES
The financial condition of the Company can be assessed by examining the changes
and relationships in the sources and uses of funds as shown in the consolidated
statements of cash flows. Excellent loan and core deposit growth resulted in an
increase of $904, or 18%, in net interest income. The Company increased its
investment in callable U.S. Government agency securities in 1997. In general,
investments have expected maturities of less than four years. Tax-exempt bank
qualified municipals total $3.5 million, or approximately 12% of the investment
portfolio, and have weighted average maturities of approximately eight years. At
December 31, 1997, approximately 19.6 percent of equity capital, or $2,931, was
invested in bank premises and equipment. The Medical Arts Office scheduled for
opening in the third quarter 1998 is an existing bank facility which will be
leased. Bank premise and equipment additions will be minor.
Management has classified all investment securities as available for sale since
January 1, 1994. In 1997, a decrease in U.S. Treasury market rates of
approximately 50 to 75 basis points caused net unrealized gains on available for
sale securities to increase to $124, which is included in shareholders' equity
at December 31, 1997. Increases in U.S. Treasury market rates of approximately
75 to 125 basis points in 1996 caused the equity valuation account to decrease
to a $3 net reduction of shareholders' equity at December 31, 1996.
The Company's lending and investment policies continue to emphasize high quality
growth. These policies do translate in to lower net interest margins; however,
management believes these policies are in the best interests of the shareholders
and customers in the long-term, as they lessen the negative impact of a
recessionary business cycle. Management is not aware of any known trends, events
or uncertainties that will have or that are reasonably likely to have a material
effect on the liquidity, capital resources or operations of the Company.
31
<PAGE>
The Office of the Comptroller of the Currency (OCC) has adopted capital
requirements that specify the minimum level for which no prompt corrective
action is required. In addition, the FDIC adopted FDIC insurance assessment
rates based on certain "well-capitalized" risk-based and equity capital ratios.
As of December 31, 1997, the Company and the Bank exceed the minimum
requirements necessary to be classified as "well-capitalized."
Total equity capital for the Company is $14,976, or 9.2% of total assets.
Management expects that the Company's and the Bank's capital ratios will
continue to remain above the well-capitalized capital ratio level, even in the
event of future substantial increases in market rates. The high capital ratio
and expected future earnings will allow the bank to continue its aggressive
growth objectives without having to raise additional capital in the near future.
RESULTS OF OPERATIONS
1997 COMPARED WITH 1996
For 1997, the Company had a net income of $1,753 compared to 1996 net income of
$1,507, an increase of 16%. Diluted earnings per share were $.97 in 1997 and
$.85 in 1996 an increase of 14%. Basic earnings per share were $1.03 in 1997 and
$.89 in 1996. Prior years earnings per share has been restated for a three for
two stock split declared January 27, 1997 and distributed on February 24, 1997.
The following discussion and analysis summarizes the more significant factors
affecting operating results in 1997 compared with 1996.
Net interest income was $6,048 in 1997 compared to $5,144 in 1996, an increase
of $904, or 18%. Average interest-earning assets were up $17.9 million, or 15%
in 1997 over 1996. The prime rate increased 25 basis points to 8.50% during 1997
and time deposit rates decreased between 5 and 10 basis points during 1997. The
net yield on interest earning assets increased to 4.52% in 1997 from 4.42% in
1996.
The provision for loan losses was $300 in 1997 compared to $195 in 1996. Net
loan charge-offs totaled $60 in 1997 and $16 in 1996. There was $185 in
non-performing assets at December 31, 1997 and $23 at December 31, 1996. Because
of the growth of the Bank since its inception in 1990, much of the loan
portfolio has not been through a weak economic cycle and the Company has not
developed loss experience over a complete business cycle. Accordingly,
management believes it continues to take a conservative posture with respect to
additions to the allowance for possible loan losses. The allowance for possible
loan losses was 1.40% of loans at December 31, 1997 and 1996.
32
<PAGE>
Other income was $953 in 1997 compared to $654 in 1996. Other income included
mortgage origination fees of $356 in 1997 and $200 in 1996. Lower mortgage rates
during 1997 stimulated the growth in mortgage origination fee income during
1997. Other income also included service charges on deposit accounts of $404 and
$373 in 1997 and 1996, respectively. The increase in service charges is
primarily due to the increased number of accounts. The Bank also implemented
charges for non-customers using our ATMs in early 1997. A trust department was
started in December, 1996 and trust fee income was $30 in 1997.
Other expenses were $4,016 in 1997 compared to $3,290 in 1996, an increase of
$726. Salary and employee benefit expense increased due to three officer and
five non-officer positions being added during the year and increased employee
incentives and benefits. Other operating expenses increased $135 or 13% as
increases in data processing, postage and supplies related to the increasing
volume of loan and deposit accounts and the costs necessary to acquire and
service them. Occupancy expense and equipment increased primarily because of new
space leased for the Mortgage Department in January 1997 and the Islands Towne
Center Office that opened in October 1997.
The provision for income taxes was $932 in 1997 and $806 in 1996. The effective
federal and state tax rates were 34.7% and 34.9% in 1997 and 1996, respectively.
The Company has never recorded a valuation allowance against deferred tax
assets. All deferred tax assets are considered to be realizable due to expected
future taxable income.
RESULTS OF OPERATIONS
1996 COMPARED WITH 1995
For 1996, the Company had a net income of $1,507 compared to 1995 net income of
$1,204 an increase of 25%. Diluted earnings per share were $.85 in 1996 and $.69
in 1995, an increase of 23%. Basic earnings per share were $.89 in 1996 and $.70
in 1995. Earnings per share have been restated for a three-for-two stock split
declared January 27, 1997 and payable on February 24, 1997. The following
discussion and analysis summarizes the more significant factors affecting
operating results in 1996 compared with 1995.
Net interest income was $5,144 in 1996 compared to $4,519 in 1995, an increase
of $625 or 14%. Average interest-earning assets were up $20.7 million, or 21% in
1996 over 1995. The prime rate decreased 25 basis points to 8.25% during 1996
and time deposit rates decreased between 10 and 25 basis points during 1996. The
net yield on interest earning assets decreased to 4.42% in 1996 from 4.70% in
1995. This ratio was declining at year-end 1995 with the decreasing prime rate
and was still declining slightly at year-end 1996 due to the level prime rate
and significant asset growth during 1996.
The provision for loan losses was $195 in 1996 compared to $172 in 1995. Net
loan charge-offs totaled $16 in 1996 and $10 in 1995. There was $23 in
non-performing assets
33
<PAGE>
at December 31, 1996 and $7 at December 31, 1995. Because
of the growth of the Bank since its inception in 1990, much of the loan
portfolio has not been through a weak economic cycle and the Company has not
developed loss experience over a complete business cycle. Accordingly,
management believes it continues to take a conservative posture with respect to
additions to the allowance for possible loan losses. The allowance for possible
loan losses was 1.40% at December 31, 1996 and 1995.
Other income was $654 in 1996 compared to $470 in 1995. Other income in 1996 had
no securities gains or losses compared to securities losses of $90 in 1995.
Other income also included mortgage origination fees of $200 in 1996 and $176 in
1995. Higher mortgage rates during mid-1996 moderated the growth in mortgage
origination fee income during 1996. Other income also included service charges
on deposit accounts of $373 and $339 in 1996 and 1995, respectively. The
increase in service charges is primarily due to the increased number of
accounts. The Bank also implemented charges for customers using other bank's
ATM's during mid-1996. A trust department was started in December, 1996. No
trust fee income was earned in 1996.
Other expenses were $3,290 in 1996 compared to $2,914 in 1995, an increase of
$376. Salary and employee benefit expense increased due to two officer and one
non-officer positions being added during the year and increased employee
incentives and benefits. The Company also began The Savannah Bancorp, Inc.
Employee Savings and Profit-sharing Plan, effective December 31, 1994.
Contributions and administrative expenses related to the plan were approximately
$58 and $45 in 1996 and 1995, respectively. Other operating expenses increased
$34 or 3% as increases in data processing, postage and supplies related to the
rapidly increasing volume of loan and deposit accounts and the costs necessary
to acquire and service them was largely offset by decreases in FDIC insurance
assessments. The FDIC dropped the insurance assessments for banks classified as
"well-capitalized" to 4 cents from 23 cents per $100 in deposits, effective June
1, 1995 and then to a flat $2,000 minimum in 1996. Approximately $22 of trust
department expense was incurred in 1996.
The provision for income taxes was $806 in 1996 and $699 in 1995. The effective
federal and state tax rates were 34.8% and 36.7% in 1996 and 1995, respectively.
The effective tax rate declined due to increased tax-exempt income. The Company
has never recorded a valuation allowance against deferred tax assets. All
deferred tax assets are considered to be realizable due to expected future
taxable income.
YEAR 2000
The Company has engaged Year 2000 consultants and is in the process of
developing a plan to ensure a smooth transition of the systems, products and
vendors that The Company relies on into the twenty-first century. Additionally,
The Bank will work with its loan customers to monitor potential credit exposure
that might result from a lack of their systems' readiness for the Year 2000.
34
<PAGE>
Substantially all of the Company's software systems are licensed from outside
vendors. The core customer information system (CIS), loan, deposit, general
ledger, ATM and card-based systems are all maintained and processed by a third
party, M & I Data Services, Inc., the largest bank-owned data processor of banks
in the United States. The Company expects to receive commitments from its major
vendors to provide the required systems modifications to ensure compliance.
Management believes those commitments will be met in advance of July 1, 1999.
Some software programs and some hardware will need to be modified or replaced
for Year 2000 compliance. To the extent possible, those changes will be
incorporated in the normal replacement or upgrade of hardware and systems.
Management believes it will be successful in the achievement of its plans and
does not believe that the execution of the plan will have a material adverse
effect on future operating results.
THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
35
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) 1. Financial Statements
The financial statements, together with the applicable report of independent
accountants, are included on pages 38-50 in this 1997 Annual Report on Form
10-KSB as show in the following index.
Page Number
(i) Consolidated Financial Highlights for 1997 and 1996 37
(i) Report of Independent Certified Public Accountants 38
(ii) Consolidated Balance Sheets
December 31, 1997 and 1996 39
(iii) Consolidated Statements of Income For the Years
Ended December 31, 1997, 1996 and 1995 40
(iv) Consolidated Statements of Changes in Stockholders'
Equity For the Years Ended December 31, 1997,
1996 and 1995 41
(v) Consolidated Statements of Cash Flows For the Years
Ended December 31, 1997, 1996 and 1995 42
(vi) Notes to Consolidated Financial Statements 43-53
2. Financial Statement Schedules
Report of Predecessor Independent Accountants Exhibit 23.1
The report of Price Waterhouse LLP for the year
ended December 31, 1995 is included as a financial
schedule exhibit in this Form 10-KSB.
THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
36
<PAGE>
The Savannah Bancorp, Inc. and Subsidiary
Consolidated Financial Highlights
December 31, 1997 and 1996
<TABLE>
<CAPTION> Percent
Increase
Balance Sheet at December 31 1997 1996 (Decrease)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
(Amounts in thousands, except per share data)
Total assets $163,659 $137,452 19%
Interest-earning assets 148,708 128,755 16
Loans 106,021 88,649 20
Allowance for loan losses 1,480 1,240 19
Non-performing assets 185 23 704
Deposits 144,464 121,401 19
Interest-bearing liabilities 121,818 101,438 20
Shareholders' equity 14,976 13,285 13
Allowance for possible
loan losses to total loans 1.40% 1.40%
Equity to assets 9.15% 9.67%
Tier 1 capital to risk
weighted assets 13.63% 14.85%
Book value per share (1) $ 8.76 $ 7.81 12
Outstanding shares (1) 1,710 1,701 1
</TABLE>
<TABLE>
<CAPTION>
Earnings and Performance Data
For the Years Ended December 31, 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 1,753 $ 1,507 16%
Return on average assets 1.22% 1.20% 2
Return on average equity 12.48% 12.01% 4
Earnings per share: (1)
Basic $ 1.03 $ .89 16
Diluted $ .97 $ .85 14
Average shares: (1)
Basic 1,708 1,701 0
Diluted 1,802 1,763 2
</TABLE>
(1) 1996 restated for 3 for 2 stock split on February 24, 1997 and for
restatement of basic per share amounts.
37
<PAGE>
Management's Responsibility for Financial Reporting
The management of The Savannah Bancorp, Inc. is responsible for the preparation
of the financial statements, related financial data and other financial
information in this annual report. The financial statements are prepared in
accordance with generally accepted accounting principles and include amounts
based on management's estimates and judgment where appropriate. Financial
information appearing in this annual report is consistent with the financial
statements.
In meeting its responsibility both for the integrity and fairness of these
statements and information, management depends on the accounting system and
related internal control structures that are designed to provide reasonable
assurance that transactions are authorized and recorded in accordance with
established procedures, and that assets are safeguarded and proper and reliable
records are maintained.
The Audit Committee of The Savannah Bancorp, Inc.'s Board of Directors, composed
solely of outside directors, meets regularly with the Company's management,
independent certified public accountants and regulatory examiners to review
matters relating to financial reporting, internal control structure and the
nature, extent and results of the audit effort. The independent certified public
accountants have direct access to the Audit Committee with or without management
present.
The 1997 financial statements have been audited by Arthur Andersen LLP,
independent certified public accountants. Their appointment was recommended by
the Audit Committee and approved by the Board of Directors. Their audit provides
an objective assessment of the degree to which the Company's management meets
its responsibility for financial reporting. Their opinion on the financial
statements is based on auditing procedures which include reviewing internal
control structure and performing selected tests of transactions and records as
indicated in their report. These auditing procedures are designed to provide a
reasonable level of assurance that the financial statements are fairly presented
in all material respects.
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
(Arthur Andersen LLP Letterhead)
To the Board of Directors and Shareholders
of The Savannah Bancorp, Inc.:
We have audited the accompanying consolidated balance sheets of The Savannah
Bancorp, Inc. (a Georgia Corporation) and its subsidiary as of December 31, 1997
and 1996, and the related consolidated statements of income, shareholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. The financial
statements of The Savannah Bancorp, Inc. and its subsidiary as of December 31,
1995 were audited by other auditors whose report dated January 17, 1996,
expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Savannah Bancorp, Inc. and
its subsidiary as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Jacksonville, Florida
January 21, 1998 (except with respect
to Note 15, as to which the date is
February 10, 1998)
38
<PAGE>
The Savannah Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
($ in thousands, except per share data) 1997 1996
--------- --------
<S> <C> <C>
Assets
Cash and due from banks $ 11,929 $ 6,015
Federal funds sold 13,187 10,810
Securities available for sale, at fair value (amortized
cost of $29,300 in 1997 and $29,296 in 1996) 29,500 29,291
Loans 106,021 88,649
Less allowance for loan losses (1,480) (1,240)
--------- --------
Net loans 104,541 87,409
Premises and equipment, net 2,931 2,368
Other assets 1,571 1,559
--------- --------
Total assets $ 163,659 $ 137,452
========= ========
Liabilities
Deposits:
Non interest-bearing demand $ 25,896 $ 21,813
Interest-bearing demand 29,121 22,611
Savings 3,953 3,232
Money market accounts 20,203 14,656
Time, $100,000 and over 24,650 23,106
Other time deposits 40,641 35,983
--------- --------
Total deposits 144,464 121,401
Securities sold under repurchase agreements 2,292 1,415
Federal funds purchased 958 435
Other liabilities 969 916
--------- --------
Total liabilities 148,683 124,167
--------- --------
Commitments and contingencies (Notes 11 and 13)
Shareholders' Equity
Common stock, par value $1 per share: authorized
20,000,000 shares; issued 1,782,598 and
1,188,408 shares in 1997 and 1996 1,783 1,188
Preferred stock, par value $1 per share:
authorized 10,000,000 shares, none issued - -
Contributed Capital 8,924 9,519
Retained earnings 4,649 3,135
Treasury stock, 73,050 and 54,200 shares
in 1997 and 1996, respectively (504) (554)
Unrealized gains (losses) on
securities available for sale, net of tax 124 (3)
Total shareholders' equity 14,976 13,285
--------- --------
Total liabilities and shareholders' equity $163,659 $137,452
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
39
<PAGE>
The Savannah Bancorp, Inc. and Subsidiary
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year Ended December 31,
($ in thousands, except for per share data) 1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Interest Income
Loans $ 8,700 $ 7,417 $ 6,549
Investment securities:
Taxable 1,692 1,687 1,243
Non-taxable 167 132 74
Federal funds sold 573 381 431
------- ------- -------
Total interest income 11,132 9,617 8,297
------- ------- -------
Interest Expense
Deposits 4,927 4,407 3,737
Securities sold under repurchase agreement 115 37 16
Federal funds purchased 42 29 25
------- ------- -------
Total interest expense 5,084 4,473 3,778
------- ------- -------
Net Interest Income 6,048 5,144 4,519
Provision for loan losses (300) (195) (172)
------- ------- -------
Net interest income after
Provision for loan losses 5,748 4,949 4,347
------- ------- -------
Other Income
Service charges on deposit accounts 404 373 339
Mortgage origination fees 356 200 176
Other income 191 81 45
------- ------- -------
Total other operating revenue 951 654 560
Gains (losses) on sales of securities 2 - (90)
------- ------- -------
Total other income 953 654 470
------- ------- -------
Other Expense
Salaries and employee benefits 2,192 1,719 1,487
Occupancy expense 334 296 239
Equipment expense 318 238 185
Other operating expenses 1,172 1,037 1,003
------- ------- -------
Total other expense 4,016 3,290 2,914
------- ------- -------
Income before provision for income taxes 2,685 2,313 1,903
Provision for income taxes (932) (806) (699)
------- ------- -------
Net income $1,753 $1,507 $1,204
======= ======= =======
Earnings per share (1)
Basic $ 1.03 $ .89 $ .70
Diluted $ .97 $ .85 $ .69
</TABLE>
(1) adjusted for a three for two stock split declared in January,
1997, distributed in February, 1997 and a two for one stock split
declared in June, 1995, distributed in July, 1995.
The accompanying notes are an integral part of these consolidated financial
statements.
40
<PAGE>
The Savannah Bancorp, Inc. and Subsidiary
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Unrealized
(Amounts in thousands, except Securities
for per share data) (Losses)
Common Stock Contributed Retained Treasury Gains,
Shares Amount Capital Earnings Stock Net of Tax Total
------- ------- ----------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 594,204 $594 $10,113 $669 ($206) ($312) $10,858
Cash dividends - $.10 per share (114) (114)
Two-for-one stock split 594,204 594 (594) -
Change in unrealized gains on
securities available for sale, 563 563
net of tax
Treasury stock purchases (348) (348)
Net income 1,204 1,204
--------- ------ ----------- -------- -------- --------- ---------
Balance, December 31, 1995 1,188,408 1,188 9,519 1,759 (554) 251 12,163
--------- ------ ----------- -------- -------- --------- ---------
Cash dividends - $.115 per share (131) (131)
Change in unrealized losses on
securities available for sale,
net of tax (254) (254)
Net income 1,507 1,507
--------- ------ ----------- -------- -------- --------- ---------
Balance, December 31, 1996 1,188,408 1,188 9,519 3,135 (554) (3) 13,285
--------- ------ ----------- -------- -------- --------- ---------
Cash dividends - $.14 per share (239) (239)
Three-for-two stock split 594,190 595 (595) -
Change in unrealized gains on
securities available for sale, 127 127
net of tax
Reissuance of treasury stock 50 50
Net income 1,753 1,753
--------- ------ ----------- -------- -------- --------- ---------
Balance, December 31, 1997 1,782,598 $1,783 $8,924 $4,649 ($504) $124 $14,976
--------- ------ ----------- -------- -------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
41
<PAGE>
The Savannah Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
($ in thousands) 1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Operating Activities:
Net income $1,753 $1,507 $1,204
Adjustments to reconcile net income to cash
Provided by operations:
Provision for loan losses 300 195 172
Depreciation of premises and equipment 269 237 188
(Gains) losses on sales of securities (2) - 90
Amortization of securities - net 424 139 52
Deferred tax benefit (32) (44) (144)
Increase in accrued interest receivable (94) (222) (275)
Decrease (increase) in prepaid expenses and other 36 (17) (76)
Increase in accrued interest payable 64 9 193
(Decrease) increase in accrued expenses and other
liabilities (13) (323) 163
------ ------ ------
Net cash provided by operating activities 2,705 1,481 1,567
------ ------ ------
Investing Activities:
Net increase in federal funds sold (2,377) (4,031) (1,658)
Purchases of available for sale securities (7,027) (13,804) (13,979)
Proceeds from sales of available for sale securities 603 992 2,405
Proceeds from maturities of available for sale
securities 6,000 8,775 5,437
Net increase in loans made to customers (17,432) (12,838) (14,618)
Capital expenditures (832) (598) (1,025)
------ ------ ------
Net cash used in investing activities (21,065) (21,504) (23,438)
------ ------ ------
Financing Activities:
Net increase in demand, savings and money
market accounts 16,861 12,645 8,447
Net increase in time deposits 6,202 9,207 12,722
Net increase (decrease) in securities sold under
repurchase agreements 877 (416) 1,832
Net increase (decrease) in federal funds purchased 523 274 (161)
Re-issuance (purchase) of treasury stock 50 - (348)
Dividend payments (239) (131) (114)
------ ------ ------
Net cash provided by financing activities 24,274 21,579 22,378
------ ------ ------
Increase in Cash and Cash Equivalents: 5,914 1,556 507
Cash and cash equivalents - beginning of year 6,015 4,459 3,952
------ ------ ------
Cash and cash equivalents - end of year $11,929 $ 6,015 $ 4,459
======= ======= =======
</TABLE>
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on deposits and other borrowings $ 5,020 $ 4,464 $ 3,585
Income taxes 1,011 1,075 815
The accompanying notes are an integral part of these consolidated financial
statements.
42
<PAGE>
The Savannah Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(All amounts in thousands, except per share data)
Note 1 - Organization and Summary of Significant Accounting Policies
Organization - The Savannah Bancorp, Inc. (the Company) was incorporated in
Georgia on October 5, 1989, for the purpose of becoming a bank holding company
for The Savannah Bank, N.A. (the Bank). In 1990, 540,200 shares of common stock
were sold in two public offerings at $20 per share ($6.06 per share, adjusted
for the effect of stock splits and dividend). The Company capitalized the Bank
on August 22, 1990, by contributing $10 million of net assets in exchange for
the Bank's common stock. The Bank began operations on August 22, 1990.
Nature of Operations - The Company is a one-bank holding company that offers a
full range of lending and deposit products. The primary service area of the Bank
is the city of Savannah, Georgia and surrounding Chatham County.
Basis of Presentation - The consolidated financial statements include the
accounts of the Company and the Bank. All intercompany accounts and transactions
have been eliminated in consolidation. The preparation of these financial
statements in conformity with generally accepted accounting principles requires
the use of certain estimates by management. These estimates include primarily
the estimation of the allowance for loan losses. Actual results could differ
from these estimates. Certain amounts in the previous years have been
reclassified to conform to the current year's presentation.
Cash and Cash Equivalents - For purposes of reporting cash flows, cash and cash
equivalents include cash on hand and amounts due from banks.
Securities Available for Sale --Management has classified its entire investment
security portfolio as available for sale. Securities available for sale are
carried at estimated fair value with unrealized gains and losses, net of
deferred income taxes, recorded as a separate component of shareholders' equity.
Loans and Loan Fees - Loans are stated at principal amounts outstanding reduced
by an allowance for loan losses. Interest income on loans is recognized to
reflect a constant rate of return on net funds outstanding. Accrual of interest
income is discontinued when management believes the collection of interest or
principal is doubtful. Accrued interest is reversed and charged against current
income when management believes, after considering economic and business
conditions and collection efforts, that the ultimate collection of interest is
doubtful.
Generally, the Company recognizes loan fees to the extent costs are incurred in
the origination of the loans. For certain loans, fees in excess of origination
costs are deferred and amortized over the life of the loan. The methodology
applied by the Company does not differ materially from generally accepted
accounting principles.
Non-Performing and Impaired Loans - The accrual of interest is generally
discontinued on all loans, except consumer loans, that become 90 days past due
as to principal or interest unless collection of both principal and interest is
assured by way of collateralization, guarantees or other security. Generally
loans past due 180 days or more are placed on nonaccrual status regardless of
security. A loan is also considered impaired if its terms are modified in a
troubled debt restructuring after January 1, 1995. For these accruing impaired
loans, cash receipts are typically applied to principal and interest receivable
in accordance with the terms of the restructured loan agreement. As of December
31, 1997 and 1996 there were no accruing impaired loans.
Allowance for Loan Losses - The allowance for loan losses is based on estimates
and maintained at a level considered adequate to provide for potential loan
losses. The adequacy of the allowance is based on management's continuing
evaluation of the loan portfolio under current economic conditions, underlying
collateral value securing loans and such other factors that deserve recognition
in estimating loan losses. Actual future losses may be different from estimates
due to unforeseen events. Loans that are determined to be uncollectible are
charged against the allowance.
Premises and Equipment - Building, furniture, banking equipment and leasehold
improvements are stated at cost less accumulated depreciation and amortization.
Depreciation and amortization is computed using the straight-line method over
the estimated useful lives or estimated lease terms including expected lease
renewals, ranging from three to fifty years, of the respective assets for
financial reporting purposes and using an accelerated
43
<PAGE>
method for income tax purposes. Additions and major improvements are
capitalized, while routine maintenance and repairs and gain or loss on
dispositions are recognized currently.
Mortgage Origination Fees - The Company originates mortgage loans on behalf of
third parties. Such loans are originated pursuant to commitments from third
parties to acquire the loans that are in place prior to extension of a
commitment to make the loan. In connection therewith, the Company generally
charges certain origination fees to borrowers and may be paid amounts by
purchasers that exceed the Company's basis in the loan (for example, a servicing
release premium). Net cash gains from those activities are reported as mortgage
origination fees in the accompanying consolidated statements of income when the
loans are closed.
Income Taxes - Deferred tax assets and liabilities arise from timing differences
in the recognition of revenues and expenses for income tax and financial
reporting purposes. They are reflected at currently enacted income tax rates
applicable to the period in which the deferred tax assets or liabilities are
expected to be realized or settled. As changes in tax laws or rates are enacted,
deferred tax assets and liabilities are adjusted through the provision for
income taxes.
Stock Splits and Dividends - The company declared a ten percent stock dividend
in 1994, a two-for-one stock split in July, 1995 in the form of a 100% stock
dividend and a three-for-two stock split in the form of a 50% stock dividend
effective February 24, 1997. All 1996 and 1995 per share data and weighted
average share and stock option information has been restated for the effect of
these stock dividends and splits. The 1996 and 1995 consolidated balance sheets
and statements of changes in shareholders' equity have not been restated for the
stock splits.
Earnings Per Share - In February, 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Accounting Standard ("SFAS") No. 128 "Earnings Per
Share". SFAS No. 128 replaces the presentation of primary and fully diluted
earnings per share with a presentation of basic and diluted earnings per share.
The Company adopted SFAS No. 128 as of the year ended December 31, 1997. Basic
earnings per share are calculated based on weighted average number of shares of
common stock outstanding. Diluted earnings per share is calculated based on the
weighted average number of shares of common stock outstanding and common stock
equivalents, consisting of outstanding stock options (See Note 9). Common stock
equivalents are determined using the treasury method for diluted shares
outstanding adjusted for the stock splits and stock dividend, referred to above.
The weighted average common shares outstanding used in the computation of basic
earnings per share were 1,708,000, 1,701,000, and 1,711,000 in 1997, 1996 and
1995, respectively. The weighted average common and common equivalent diluted
shares outstanding used in the computation of diluted earnings per share were
1,802,000, 1,763,000, and 1,747,000 in 1997, 1996 and 1995, respectively. The
difference between diluted and basic shares outstanding are common stock
equivalents from stock options outstanding in the years ended December 31, 1997,
1996 and 1995.
Note 2 - Securities Available for Sale
The aggregate amortized cost and fair value of securities available for sale as
of December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997
------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Investment securities:
U. S. Treasury securities $ 12,141 $ 3 $ - $ 12,144
U. S. Government agencies 11,700 43 - 11,743
Mortgage-backed securities 995 - (7) 988
State and municipal 3,377 150 - 3,527
Other taxable securities 1,087 11 - 1,098
---------- ----------- ---------- ---------
$ 29,300 $ 207 $ (7) $ 29,500
========== =========== ========== =========
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
1996
-------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Investment securities:
U. S. Treasury securities $ 16,236 $ - $ (26) $ 16,210
U. S. Government agencies 6,988 - (42) 6,946
Mortgage-backed securities 1,927 - (15) 1,912
State and municipal 3,125 61 - 3,186
Other taxable securities 1,020 17 - 1,037
---------- ----------- ---------- ---------
$ 29,296 $ 78 $ (83) $ 29,291
========== =========== ========== =========
</TABLE>
Proceeds from the sale of investment securities were $603, $992 and $2,405 in
1997, 1996 and 1995, respectively. There was no gain or loss in 1997 or 1996 and
a loss of $90 in 1995.
The distribution of securities by maturity at December 31, 1997 is shown below.
Amortized
Cost Fair Value
Securities available for sale: --------- ----------
Due in one year or less $ 8,995 $ 9,016
Due after one year through five years 16,665 16,695
Due after five years through ten years 2,928 3,077
Due after ten years 712 712
--------- ----------
Total investment securities $29,300 $29,500
========= ==========
At December 31, 1997 and 1996, investment securities with a carrying value of
$19,803 and $20,827 respectively, were pledged as collateral to secure public
funds and securities sold under repurchase agreements.
Note 3 - Loans
The composition of the loan portfolio at December 31, 1997 and 1996 is presented
below.
<TABLE>
<CAPTION>
Percent Percent
1997 of Total 1996 of Total
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Commercial $ 18,754 17.7% $ 14,904 16.8%
Real estate - rental, constr-
uction and development 20,100 19.0 13,535 15.3
Real estate - mortgage 56,022 52.8 50,067 56.5
Installment and consumer 11,145 10.5 10,143 11.4
--------- --------- --------- ---------
Total Loans $106,021 100.0% $ 88,649 100.0%
========= ========= ========= =========
</TABLE>
At December 31, 1997 and 1996, there were $185 and $23 in non-performing assets.
The allowance for loan losses is allocated by loan category based on
management's assessment of risk within the various categories of loans. Changes
in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Balance at the beginning of the year $1,240 $1,061 $ 899
Provision for loan losses 300 195 172
Charge-offs (71) (23) (10)
Recoveries 11 7 -
------ ------ ------
Balance at the end of the year $1,480 $1,240 $1,061
====== ====== ======
</TABLE>
The Bank has granted loans to certain directors of the Bank and to their
associates. The aggregate amounts of loans were $4,663 and $3,158 at December
31, 1997 and 1996, respectively. During 1997, $4,396 of new loans were made, and
repayments totaled $2,891. Unused lines of credit available to related parties
aggregated $998 and $595 at December 31, 1997 and 1996, respectively. Related
party loans are made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
unrelated persons and do not involve more than normal risk of collectibility.
45
<PAGE>
Note 4 - Premises and Equipment
Bank premises and equipment at December 31, 1997 and 1996, are summarized as
follows:
Depreciable 1997 1996
Lives ------ ------
Land - $ 327 $ 327
Buildings 39 - 50 1,134 618
Furniture and banking equipment 5 - 15 1,718 1,401
Leasehold improvements 10 - 39 874 875
------ ------
4,053 3,221
Less accumulated depreciation 1,122 853
------ ------
Premises and equipment, net $2,931 $2,368
====== ======
Depreciation of premises and equipment was $269, $237 and $188 in 1997, 1996 and
1995, respectively.
Note 5 - Credit Arrangements
At December 31, 1997 federal funds line of credit arrangements aggregating $6.5
million were available to the Bank from correspondent banking institutions.
There are no commitment fees, and compensating balances are not required. These
unused lines principally serve as liquidity back-up lines. The Bank is also a
shareholder of the Federal Home Loan Bank of Atlanta (FHLB) and has access to
borrowings from the FHLB.
Note 6 - Deposits
Total time deposits maturing in one to five years are as follow: 1998 - $51,421;
1999 - $5,255; 2000 - $5,413; 2001 - $1,121; and 2002 - $2,081.
The following table indicates the amount of the Bank's time certificates of
deposit of $100,000 or more at December 31, 1997 by time remaining until
maturity.
Maturity Period Amount
---------------------------- -------
Three months or less $ 7,639
Over three through six months 6,571
Over six through twelve months 6,996
Over twelve months 3,444
-------
Total $24,650
=======
Note 7 - Short-Term Borrowings
As of December 31, 1997 and 1996, the Bank had short-term borrowings totaling
$3,250 and $1,850, respectively. The average interest rates were 5.04% and 5.13%
for the years ended 1997 and 1996. Short-term borrowings at December 31, 1997
and 1996 consists of securities sold under agreement to repurchase and federal
funds purchased. The maximum amount outstanding at the end of any month was
$3,543 and $1,911 during 1997 and 1996, respectively.
Note 8 - Income Taxes
The provision for income taxes is composed of the following for each of the
years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current federal $864 $768 $763
Current state 100 82 80
---- ---- ----
Total current 964 850 843
---- ---- ----
Deferred federal (26) (38) (122)
Deferred state (6) (6) (22)
---- ---- ----
Total deferred (32) (44) (144)
---- ---- ----
Provision for income taxes $932 $806 $699
==== ==== ====
</TABLE>
46
<PAGE>
A deferred tax liability of $76 in 1997 and a deferred tax asset of $2 in 1996
have been recognized for the tax effect of the change in the valuation account
for unrealized gains and losses on available for sale securities which are
recorded net of tax in the equity section in accordance with SFAS No. 115.
A reconciliation between the amount computed by applying the U.S. federal tax
rate of 34% to income before income taxes is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Tax provision at 34% $913 $786 $647
State tax, net of federal tax benefit 66 50 39
Tax-exempt interest, net (57) (43) (22)
Other 10 13 35
---- ---- ----
Provision for income taxes $932 $806 $699
==== ==== ====
</TABLE>
Deferred income tax assets (liabilities) are comprised of the following at
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
Deferred tax assets: 1997 1996
----- -----
<S> <C> <C>
Allowance for loan losses $470 $379
Deferred compensation 19 13
Unrealized losses on securities - 2
----- -----
Total deferred tax assets 489 394
----- -----
Deferred tax liabilities:
Unrealized gains on securities (76) -
Depreciation (145) (68)
Market discount on bonds (11) (23)
----- -----
Total deferred tax liabilities (232) (91)
----- -----
Net deferred tax assets $257 $303
===== =====
</TABLE>
Note 9 - Stock Option Plan and Benefit Plans
In 1990, the Company granted options to the organizers permitting each organizer
to purchase up to 4,125 shares of Common Stock (74,250 shares in the aggregate)
at an option price of $6.06 per share. They may be exercised after the third
year and before the end of the tenth year following the date the options were
granted (April 10, 1990). In the event that the Company is required to raise
additional capital for the Bank, the options must be either forfeited or
exercised immediately for a price per share equal to the lesser of $6.06 or the
then book value per share of the Common Stock.
The Company also has an Incentive Stock Option Plan that provides for the
granting of stock options to certain key officers for the purchase of shares at
the fair market value of the stock at the date of the grant. There are 16,500
remaining options authorized under this plan at December 31, 1997. Under this
plan in April 1995, 44,550 options were granted with an exercise price of $7.50
for a period of ten years commencing April 18, 1995. In January 1996, another
44,550 options were granted under this plan with an exercise price of $13.33 for
a period of ten years commencing January 2, 1996. In April 1996, 9,000
additional options were granted to other key officers at an exercise price of
$13.33 per share. The April 1996 options vest over five years and are
exercisable over ten years. In July and August 1997, 9,000 and 3,000 options
were granted to key officers at an exercise price of $21.50 and 21.63 per share,
respectively. The July and August 1997 options also vest over five years and are
exercisable over ten years.
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- ---------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- ------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at the
beginning of year 172,350 $8.69 118,800 $ 6.60 74,250 $ 6.06
Granted 12,000 21.53 53,550 13.33 44,550 7.50
Exercised (8,250) 6.06 - - - -
------- ------- -------
Outstanding at end of year 176,100 9.69 172,350 8.69 118,800 6.60
------- ------- -------
Exercisable at end of year 156,900 8.62 163,350 8.43 118,800 6.60
======= ======= =======
</TABLE>
47
<PAGE>
During 1997, 1996 and 1995, the weighted average fair value of options granted
was $8.84, $5.08 and $3.01 per option, respectively.
The Company has chosen to continue to account for its options under the
provisions of Accounting Principles Board Statement No. 25, "Accounting for
Stock Issued to Employees" and thus has adopted the disclosure-only provisions
of SFAS No. 123, "Accounting for Stock-Based Compensation." Accordingly, no
compensation cost has been recognized for the stock option plans. Had
compensation cost for the options granted in 1997, 1996 and 1995 been determined
based on fair value at the grant date for awards in 1997, 1996 and 1995
consistent with the provisions of SFAS No. 123, the Corporation's net income and
net income per share would have been reduced to the pro forma amounts as shown
in the following table:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Net Income - as reported $1,753 $1,507 $1,204
Net Income - pro forma $1,733 $1,277 $1,070
Net Income per share - basic - as reported $1.03 $.89 $.70
Net Income per share - pro forma $1.02 $.76 $.63
Net Income per share - diluted - as reported $.97 $.85 $.69
Net Income per share - diluted - pro forma $.96 $.72 $.63
</TABLE>
The assumptions regarding the stock options issued to executives in 1997 are
that the options shares vest equally between 1998-2002. The assumptions
regarding the stock options issued to executives in 1996 are that 100% of such
options vested on grant date, except for the 9,000 granted in April, 1996 shares
which vest equally between 1997-2001. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following assumptions. In 1997: dividend yield of .64%; expected volatility
of 0.19%; risk free interest rate of 6.37% and expected life of options of 8
years. In 1996: dividend yield of .5%; expected volatility of 0.19%; risk free
interest rate of 5.59% and expected life of options of 8 years. In 1995:
dividend yield of .89%; expected volatility of 0.19%; risk free interest rate of
7.1% and expected life of options of 8 years.
The Company sponsors a 401(k) employee savings and profit-sharing plan in which
substantially all full-time employees are eligible to participate. This plan
allows eligible employees to save a portion of their salary on a pre-tax basis.
Contributions to the plan are discretionary. Contributions and administrative
expenses related to the plan aggregated $68 and $58 for the years ended December
31, 1997 and 1996, respectively.
Note 10 - Capital Ratios and Dividend Restrictions
The Office of Comptroller of the Currency (OCC) has adopted capital requirements
that specify the minimum level for which no prompt corrective action is
required. In addition, the Federal Deposit Insurance Corporation (FDIC) has
adopted FDIC insurance assessment rates based on certain "well-capitalized"
risk-based and equity capital ratios. Failure to meet minimum capital
requirements can result in the initiation of certain actions by the regulators
that, if undertaken, could have a material effect on the Company's and the
Bank's financial statements. Management believes as of December 31, 1997, that
the Company and the Bank meet all capital adequacy requirements to which they
are subject. The following table shows these capital ratios for the Company, the
Bank, the regulatory minimum and the "well-capitalized" capital ratios at
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
Capital Ratios: Company Bank Company Bank
Qualifying Capital
<S> <C> <C> <C> <C>
Tier 1 capital $ 14,852 $ 14,831 $ 13,289 $ 13,225
Total capital $ 16,212 $ 16,191 $ 14,408 $ 14,344
Average assets for the year $143,543 $143,548 $125,154 $125,159
Adjusted risk-weighted assets $109,005 $109,005 $ 89,489 $ 89,489
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
Mini- Well
Leverage Ratios: Mum Capitalized
<S> <C> <C> <C> <C> <C> <C>
Tier 1 capital to average
assets 10.35% 10.33% 10.62% 10.57% 4.0% 5.0%
Risk-based Ratios
Tier 1 capital to risk-weighted
assets 13.63% 13.61% 14.85% 14.78% 4.0% 6.0%
Total capital to risk-weighted
assets 14.87% 14.85% 16.10% 6.03% 8.0% 10.0%
</TABLE>
As of December 31, 1997, the most recent notification from the Federal Deposit
Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk based, Tier 1 risk-based,
Tier 1 leverage ratios. There are no conditions or events since that
notification that management believes have changed the institution's category.
OCC regulations restrict the amount of dividends that the Bank may pay without
obtaining prior approval. Based on such regulatory restrictions, the Bank is
limited from paying dividends in a calendar year which exceed the current year's
book net income combined with the retained net profits of the preceding two
years. At December 31, 1997, $4,031 in retained earnings of the Bank was
available for the payment of dividends, subject to maintaining adequate capital
ratios in the Bank. The Company is not subject to any regulatory restrictions on
the payment of dividends to its shareholders.
Note 11 - Leases and Commitments
Future minimum payments under noncancelable land and office space operating
leases with remaining terms in excess of one year are presented as follows: 1998
- - $234; 1999 - $180; 2000 - $132; 2001 - $137; 2002 - $94 and $477 thereafter.
The land and office space leases contain customary escalation clauses.
Additionally, the Bank has entered into a non-cancelable data processing
servicing agreement which provides for minimum payments as follows: 1998 - $96;
1999 - $98; 2000 - $102; 2001 - $105; 2002 - $54. The agreement includes a
termination clause where the Company can buyout the remainder of the contract
for 60% of the current monthly contract times the remaining months.
The net rental expense for all office space operating leases amounted to $210 in
1997, $183 in 1996, and $167 in 1995. The leases on the office space have five
or ten year renewal options and require increased rentals under cost of living
escalation clauses.
Note 12 - Other Operating Expenses
The components of other operating expenses for the years ended December 31,
1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Outside data processing $ 258 $ 218 $ 151
Advertising and sales promotion 164 148 170
Professional and directors fees 134 133 128
Stationery and supplies 112 100 76
Regulatory exams and audit fees 106 90 91
Postage and courier 103 95 65
Taxes and licenses 75 65 63
Telephone 56 41 33
Dues and subscriptions 41 29 27
Insurance 32 32 35
Correspondent bank charges 20 16 16
FDIC insurance 14 2 90
Other expense 57 68 58
------ ------ ------
Total other operating expenses $1,172 $1,037 $1,003
====== ====== ======
</TABLE>
49
<PAGE>
Note 13 - Financial Instruments with Off-Balance Sheet Risk
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 balance sheets. The
contract amounts of these instruments reflect the extent of involvement the Bank
has in particular classes of financial instruments. The Company is not a party
to any off-balance sheet derivative financial instruments.
The Bank's exposure to credit losses in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amounts of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet instruments.
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. At December 31, 1997, unfunded commitments to extend
credit were $18,991. None of these commitments to extend credit exceeded one
year in duration. The Bank evaluates each customer's credit worthiness 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
borrower. Collateral varies, but may include accounts receivable, inventory,
property, plant and equipment and income-producing commercial properties.
Letters of credit are conditional commitments issued by the Bank to guarantee
the performance of a customer to a third party. At December 31, 1997 and 1996,
commitments under letters of credit aggregated approximately $289 and $30,
respectively. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
Collateral varies but may include accounts receivable, inventory, equipment,
marketable securities and property. Since most of the letters of credit are
expected to expire without being drawn upon, they do not necessarily represent
future cash requirements.
Most of the Bank's business activity is with customers located within the
Chatham County area. As of December 31, 1997, the Bank had a concentration of
credit risk aggregating $76,122 on loans secured by real estate. This amount was
comprised of $56,022 of real estate in which the source of repayment is
primarily cash flow from commercial businesses and consumers. The remaining
$20,100 is to finance investment real estate in which the primary source of
repayment is cash flow from sales proceeds and lease payments of income
producing real estate. The Bank has no exposure to highly leveraged transactions
and has no foreign credits in its loan portfolio.
Note 14 - Fair Value of Financial Instruments
For the Company, as with most financial institutions, the majority of its assets
and liabilities are considered financial instruments. Many of the financial
instruments, however, lack an available trading market as characterized by a
willing buyer and willing seller engaging in an exchange transaction. Therefore,
significant estimations and present value calculations are used for the purpose
of this disclosure. Such estimations involve judgements as to economic
conditions, risk characteristics and future expected loss experience of various
financial instruments and other factors that cannot be determined with
precision.
Cash and due from banks, federal funds sold, variable rate loans, all deposits
except time deposits with remaining maturities over six months and other
borrowings have carrying amounts which approximate fair value primarily because
of the short repricing opportunities of these instruments.
Following is a description of the methods and assumptions used by the Company to
estimate the fair value of its financial instruments:
Investment Securities: Fair value is based upon quoted market prices, if
available. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar securities.
Loans: The fair value for various types of fixed rate loans is estimated by
discounting the expected future cash flows using the Bank's current interest
rates at which loans would be made to borrowers with similar credit risk. As the
discount rates are based on current loan rates, as well as management estimates,
the fair values presented may not necessarily be indicative of the value
negotiated in an actual sale. The estimated fair value of the Bank's
off-balance-sheet commitments is nominal since the committed rates approximate
current rates offered for
50
<PAGE>
commitments with similar rate and maturity characteristics and since the
estimated credit risk associated with such commitments is not significant.
Deposit liabilities: The fair value of fixed-maturity time deposits is estimated
using the rates currently offered for deposits of similar remaining maturities.
The carrying amounts and estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1997
-------------------------
Estimated
Carrying Fair
Value Value
---------- ---------
<S> <C> <C>
Financial assets:
Cash and federal funds sold $ 25,116 $ 25,116
Securities available for sale 29,500 29,500
Loans 106,021 105,926
Financial liabilities:
Deposits $144,464 $144,643
Securities sold under repurchase
agreements 2,292 2,292
Federal funds purchased 958 958
</TABLE>
Note 15 - Subsequent Event
On February 10, 1998, the Company signed a definitive agreement to merge with
Bryan Bancorp of Georgia, Inc. ("Bryan"), a bank holding company for Bryan Bank
& Trust Company. Bryan is located in Richmond Hill and Bryan County
approximately twenty miles south of Savannah. The Company intends to acquire
Bryan in a tax-free stock-for-stock merger, to be accounted for as a pooling of
interests by issuing shares of common stock of the Company. The merger agreement
specifies that each share of Bryan stock will be exchanged for 1.85 shares of
the Company's stock. The value of the stock to be issued is approximately $24
million based on the $25.50 per share market value on the day prior to the
announcement. The consummation of the merger is contingent upon the transaction
qualifying for pooling of interests accounting treatment and is subject to
customary closing conditions, including regulatory and shareholder approvals.
51
<PAGE>
Note 16 - The Savannah Bancorp, Inc. (Parent Company Only) Financial Information
The following is a condensed statement of condition of the Parent Company at
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
Assets 1997 1996
--------- ---------
<S> <C> <C>
Cash on deposit $ 3 $ 3
Interest-bearing deposits in bank 36 79
Investment in subsidiary 14,955 13,221
Other assets - 3
--------- ---------
Total assets $14,994 $13,306
========= =========
Liabilities
Other liabilities $ 18 $ 21
--------- ---------
Shareholders' Equity
Common stock 1,783 1,188
Capital surplus 8,924 9,519
Treasury stock (504) (554)
Unrealized gains (losses) on available
for sale securities, net of tax 124 (3)
Retained earnings 4,649 3,135
--------- ---------
Total liabilities and
shareholders' equity $14,994 $13,306
========= =========
</TABLE>
The operating results of the Parent Company are shown below for the three years
ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Dividend income $ 190 $ 150 $ 400
Interest income 1 2 3
Interest expense - - 1
-------- -------- --------
Net interest & dividend income 191 152 402
Total expenses 69 56 63
-------- -------- --------
Income before income taxes and
equity in undistributed net
income of subsidiary 122 96 339
Credit for income taxes 24 19 22
-------- -------- --------
Income before equity in
undistributed net income of
subsidiary 146 115 361
Equity in undistributed net
income of subsidiary 1,607 1,392 843
-------- -------- --------
Net income $1,753 $1,507 $1,204
======== ======== ========
</TABLE>
52
<PAGE>
The cash flows of the Parent Company are shown below for the three years ended
December 31:
1997 1996 1995
--------- -------- ---------
Operating Activities
Net income $1,753 $1,507 $1,204
Adjustments to reconcile net
income to cash used
for operations:
Equity in undistributed net
income of subsidiary (1,607) (1,392) (843)
Decrease in other
assets 3 6 1
(Decrease) increase in
accrued expenses (3) (3) 7
--------- -------- ---------
Net cash provided by
operating activities 146 118 369
--------- -------- ---------
Investing Activities
Decrease in interest-
bearing bank balances 43 2 100
--------- -------- ---------
Net cash provided by
investing activities 43 2 100
--------- -------- ---------
Financing Activities
Re-issuance (purchase)
of treasury stock 50 - (348)
Dividends paid (239) (131) (114)
--------- -------- ---------
Net cash used in
financing activities (189) (131) (462)
--------- -------- ---------
Increase (decrease) in cash
and cash equivalents - (11) 7
Cash at January 1 3 14 7
--------- -------- ---------
Cash at December 31 $ 3 $ 3 $ 14
========= ======== =========
The Parent Company financial statements include the following inter-company
items: interest-bearing deposits on the balance sheet; dividend income, interest
income and $14 of fees paid each year to the Bank in other expenses on the
income statement.
53
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On March 27, 1996, the Company's Board of Directors made the decision to change
the Company's independent auditors from Price Waterhouse LLP to Arthur Andersen
LLP. Arthur Andersen LLP was formally engaged in April 1996. During the periods
in which Price Waterhouse LLP audited the books and records of the Company, none
of the reports issued by such firm on the financial statements of the Company
contained an adverse opinion or disclaimer of opinion, or was qualified or
modified as to uncertainty, audit scope or accounting principles. The Company
has never had any disagreements with Price Waterhouse LLP or Arthur Andersen LLP
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure that would have caused either firm to
make reference to the subject matter of such disagreement in connection with
their reports.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
The following table sets forth the name of each nominee and each director
continuing in office; a description of his or her positions and offices with the
Company (other than as a director), if any; a brief description of his or her
principal occupation and business experience during at least the last five
years; directorships presently held by him or her in other companies with
registered securities; and certain other information including his or her and
how long she or he has served as a director.
The Company entered into a definitive merger agreement on February 10, 1998 with
Bryan Bancorp of Georgia, Inc. ("Bryan"). The agreement specifies that the
Company's Board of Directors shall be expanded to add five directors from Bryan
at the time the merger is consummated. The 1998 Annual Meeting will be delayed
for approximately two months until June 1998, at which time two director
nominations will be added to each of the first and second classes and one
director will be added to the third class.
All reports required pursuant to the insider trading regulations were filed
timely with the exception of shares issued to all directors and officers in the
February, 1997 three-for-two stock split. Also, Director Wirth had beneficial
shares owned by an adult child and a former spouse that ceased to be
beneficially owned shares during the year. The cessation of beneficial ownership
was not timely reported. The three-for-two stock split shares were properly
reported in the 1997 Proxy for the Annual Meeting of Shareholders, however, the
Form 5's were filed delinquent, just prior to the filing of this Form 10-KSB.
54
<PAGE>
NAME, AGE AND YEAR FIRST ELECTED A DIRECTOR OF THE COMPANY AND INFORMATION ABOUT
THE DIRECTOR
ROBERT H. DEMERE, JR., 49, has been a director since 1989. Mr. Demere is
President of Colonial Group, Inc., a petroleum marketing company in Savannah,
Georgia. He has been employed by Colonial since 1974.
ROBERT W. GROVES III, 48, has been a director since 1989. Mr. Groves is Chairman
of the Board of Strachan Shipping Company, Savannah, Georgia, a stevedoring and
ship agency. He has been employed by Strachan Shipping Company since 1973.
J. CURTIS LEWIS III, 45, has been a director since 1989. Mr. Lewis is Secretary
of the Company and the Bank. Since 1980 Mr. Lewis has been a partner in the law
firm of Hunter, Lewis & Brannon LLP in Savannah, Georgia. He is also President
of LP Media, Inc.
M. LANE MORRISON, 52, has been a director since 1989. Mr. Morrison is a partner
in the law firm of Hunter, Maclean, Exley & Dunn PC. From 1993 through 1995 he
was a partner in the law firm of Miller, Simpson and Tatum.
RUSSELL W. CARPENTER, 57, has been a director since 1989. Mr. Carpenter is the
President of Minis & Co., an investment advisory firm in Savannah, Georgia. Mr.
Carpenter has been with this firm since 1972.
J. WILEY ELLIS, 57, has been a director since 1989. Mr. Ellis is the Chairman of
the Board of Directors of the Company and the Bank and also serves as its
general counsel. He has been a partner in the law firm of Ellis, Painter,
Ratteree & Bart LLP since March 1, 1996. He was President of the law firm of
Adams & Ellis, P.C., Savannah, Georgia, from 1982 through February, 1996.
AARON M. LEVY, 57, has been a director since 1989. Mr. Levy is President of Levy
Jewelers, a chain of four jewelry stores in Savannah, Georgia, and has been
employed by Levy Jewelers since 1962.
PENELOPE S. WIRTH, 55, has been a director since 1989. Mrs. Wirth has been the
owner and principal broker of Investment Real Estate Company, Savannah, Georgia,
since 1978. The company deals with commercial and investment properties.
ARCHIE H. DAVIS, 56, has been a director since 1989. Mr. Davis is President and
Chief Executive Officer of the Bank and the Company. Mr. Davis is also a
director of Thomaston Mills, Inc., an integrated textile company headquartered
in Thomaston, Georgia and the Savannah Electric and Power Company, a subsidiary
of the Southern Company.
JULIUS EDEL, 68, has been a director since 1989. Mr. Edel has been President of
Alexander Brothers Co., Savannah, Georgia, previously a work clothes
manufacturing company and since 1985 a holding company for various investments.
55
<PAGE>
JACK M. JONES, 61, has been a director since 1989. Mr. Jones is presently a
private investor.
JACK W. SHEAROUSE, 67, has been a director since 1989. Mr. Shearouse is the
President of Shearouse Lumber Company, a wholesale and retail lumber company in
Pooler, Georgia.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES The Board of
Directors of the Company held four meetings during 1997. All directors attended
at least 75%. All of the directors attended at least 75% of the aggregate total
number of meetings of committees of the Board on which they served.
AUDIT COMMITTEE. The Audit Committee serves as a liaison between the Board of
Directors and the independent accountants of the Company. The Committee approves
the overall scope of the audit, reviews the results of the audit and reviews the
systems of internal control of the Company. During the fiscal year ended
December 31, 1997, the Audit Committee met three times. The Committee is
composed of Messrs. J. Curtis Lewis III, Chairman, Robert H. Demere, Jr., Julius
Edel, Robert W. Groves III, Jack M. Jones, M. Lane Morrison, Jack W. Shearouse
and Penelope S. Wirth.
COMPENSATION COMMITTEE. The Compensation Committee reviews and approves proposed
direct compensation of officers; reviews and recommends to the Board incentive
plans and benefit plans; and reviews generally compensation and benefits policy.
The members of the Compensation Committee are Messrs. Jack M. Jones, Chairman,
Russell W. Carpenter, Julius Edel, Robert W. Groves III, J. Curtis Lewis and
Jack W. Shearouse. The Compensation Committee held four meetings in 1997.
The following contains certain information about executive officers of the
Company and the Bank who are not directors.
NAME AND YEAR FIRST
ELECTED AN OFFICER OF THE POSITIONS HELD AND PRINCIPAL
COMPANY AND THE BANK AGE OCCUPATION LAST FIVE YEARS
R. Stephen Stramm 48 Executive Vice President -
1990 Lending of the Bank
Robert B. Briscoe 46 Chief Financial Officer of
1990 the Company and Executive
Vice President and Chief
Financial Officer of the
Bank.
There are no family relationships between directors and / or executive officers.
56
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The tables below set forth certain information concerning compensation paid to
the most highly compensated executive officers whose cash compensation exceeded
$100,000 for services in all capacities during the years ended December 31,
1997, 1996 and 1995. There were no options or stock appreciation rights granted
in 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation (1) Awards Payouts
---------------------------------- ------------------ -------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name and Annual Restricted All Other
Principal Compen- Stock Options LTIP (5) Compen-
Position (2) Year Salary Bonus sation)(3) Awards SARs(4) Payouts sation(6)
- ---------------- ---- -------- ------- --------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Archie H. Davis 1997 $145,000 $21,048 $8,253 0 0 0 $5,600
President & CEO 1996 $135,000 $19,900 $7,527 0 24,750 0 $4,650
1995 $135,000 $20,250 $3,908 0 24,750 0 $4,500
R. Stephen Stramm 1997 $ 97,500 $14,124 $2,475 0 0 0 $5,309
Executive Vice 1996 $ 90,000 $13,300 $2,324 0 12,375 0 $4,902
President 1995 $ 85,000 $12,750 $2,299 0 12,375 0 $4,612
</TABLE>
(1) No compensation has been deferred.
(2) Only two executive officers have compensation that exceeds $100,000.
(3) Includes club dues, directors' fees and excess premiums on group life
insurance.
(4) Amounts shown represent the number of shares underlying stock options
granted each year.
(5) LTIP is the abbreviation for "long-term incentive plan."
(6) The Company contributed these amounts on behalf of Mssrs. Davis and Stramm
for the Company's Savings and Profit Sharing Plan.
The Company entered into Change in Control agreements in February 1996 with each
of Mr. Davis, Mr. Stramm and Mr. Briscoe. Each of said agreements provides that
the employee shall continue to receive the same level of compensation for a
period of one (1) year after a "Change in Control" occurs, and if terminated
without cause during the one (1) year period immediately following a "Change in
Control", shall continue to receive the same level of compensation for a period
of one year after such termination without cause. A "Change in Control" is a
sale of all, or a substantial portion of, the Company's assets, a merger or
other reorganization whereby the Company is not the surviving entity, or a
change in control as defined by the Office of the Comptroller of the Currency.
The Company does not have a written employment agreement with any officer.
57
<PAGE>
The Company also has an incentive compensation arrangement with Messrs. Davis,
Stramm and Briscoe in which they can earn a performance bonus up to 15% of their
annual compensation if the Company achieves certain specified earnings, growth
and expense control objectives set forth by the Board of Directors.
AGGREGATED YEAR-END OPTION VALUES
Shown below is information with respect to unexercised options to purchase
Common Stock held by the Named Executive Officers at December 31, 1997.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
# of Shares Options / SARs Options / SARs
Acquired Value at Year - End (#) at Year-End ($)
Name on Exercise Realized($) Exercisable Unexercisable Exercisable(1) Unexercisable
- ---------- ----------- ---------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Davis 0 0 53,625 0 $ 712,944 0
Mr. Stramm 0 0 24,750 0 $ 320,760 0
</TABLE>
(1) the value is based on the December 31, 1997 closing market value of $23.375
per share.
Directors were paid $500 per month as director fees and no committee fees. The
Chairman of the Board received an extra $500 per month and the Secretary
received an extra $250 per month for their additional responsibilities.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of February 27, 1998, with
respect to ownership of the outstanding common stock of the Company by (i) all
persons known to the Company to own beneficially more than 5% of the outstanding
shares of common stock of the Company, (ii) each director of the Company, and
(iii) all executive officers and directors of the Company as a group.
58
<PAGE>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS (2)
- ------------------- ----------------------- --------------------
Russell W. Carpenter 20,625 1.20%
Archie H. Davis (12) 102,473 (3) 5.81%
Robert H. Demere, Jr. 29,199 (4) 1.70%
Julius Edel 34,995 (5) 2.04%
J. Wiley Ellis 23,265 (6) 1.36%
Robert W. Groves III 20,625 1.20%
Jack M. Jones 16,425 (7) 0.96%
Aaron M. Levy 21,450 (8) 1.25%
J. Curtis Lewis III 39,165 (9) 2.29%
M. Lane Morrison 25,575 (10) 1.49%
Jack W. Shearouse 32,725 1.91%
Penelope S. Wirth 28,875 1.68%
R. Stephen Stramm 31,377 (11) 1.81%
All directors and executive
officers as a group (14 persons) 447,381 24.21%
All shareholders received a three-for-two stock split in the form of a 50
percent stock dividend that was paid on February 24, 1997. The new shares issued
to each director are reflected in the table above.
(1) Information relating to beneficial ownership by directors is based upon
information furnished by each director using beneficial "ownership" concepts set
forth in rules promulgated by the Securities and Exchange Commission under
Section 13(d) of the Securities and Exchange Act of 1934. If not footnoted, the
shares are owned with voting and dispositive rights. Each directors shares
include 4,125 option shares granted in April 1990 and exercisable through April
10, 2000 in conjunction with the initial public offering.
(2) The percent of class is calculated on the assumption that a person's options
have been exercised and that the total number of issued and outstanding shares
of the Company have been increased correspondingly.
(3) Includes 4,125 options and 49,500 incentive stock options. Of the remaining
shares beneficially owned by Mr. Davis, 24,750 are owned individually, 16,410
are in his IRA, 5,250 are owned by children, 1,305 are owned by his wife and
1,133 shares are in his 401K balance.
(4) Of the 29,199 shares beneficially owned by Mr. Demere, 18,150 are owned
individually, 1,650 shares are in his IRA, 5,274 are owned by his children and
4,125 shares represent the options.
59
<PAGE>
(5) Of the 34,995 shares beneficially owned by Mr. Edel, 21,300 are owned
individually, 9,570 shares are in his IRA, and 4,125 shares represent the
options.
(6) Of the 23,265 shares beneficially owned by Mr. Ellis, 6,765 are owned
individually, 12,375 shares are in his IRA, and 4,125 shares represent the
options.
(7) Of the 16,425 shares beneficially owned by Mr. Jones, 12,300 shares are in
his IRA, and 4,125 shares represent the options.
(8) Of the 21,450 shares beneficially owned by Mr. Levy, 4,125 are owned
individually, 12,375 shares are in his company, 825 shares are owned by his wife
and 4,125 shares represent the options.
(9) Of the 39,165 shares beneficially owned by Mr. Lewis, 20,460 are owned
individually, 9,750 shares are in his IRA and money purchase retirement plan,
4,830 are owned by his children and 4,125 shares represent the options.
(10) Of the 25,575 shares beneficially owned by Mr. Morrison, 10,725 are owned
individually, 4,125 shares are in his IRA, 6,600 share in a income trust for his
benefit and 4,125 shares represent the options.
(11) Includes 24,750 incentive stock options. Of the remaining shares
beneficially owned by Mr. Stramm, 15 are owned individually, 4,455 are in his
IRA and 2,157 shares are in his 401K balance.
(12) Mr. Davis' address is PO Box 188, Savannah, GA 31402.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Bank has granted loans to certain directors of the Bank and to their
associates. The aggregate amounts of loans were $4.663 million and $3.158
million at December 31, 1997 and 1996, respectively. During 1997, $4.396 million
of new loans were made, and repayments totaled $2.891 million. Unused lines of
credit available to related parties aggregated $.998 million and $.595 million
at December 31, 1997 and 1996, respectively. Related party loans are made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unrelated persons and
does not involve more than normal risk of collectibility. No other related party
transactions or services rendered to the Company or the Bank exceeded $60,000.
during 1997.
60
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit
Number Description
------- --------------
2.1 Agreement and Plan of Merger with Bryan Bancorp
of Georgia, Inc. as of February 10, 1998
3.1 * Articles of Incorporation
3.2 * By-laws as amended
10.1 * Lease for Bank Site at 25 Bull Street and Assumption of
Lease
10.2 Change in Control Agreement with Archie H. Davis dated
February 20, 1996
10.3 Change in Control Agreement with R. Stephen Stramm dated
February 20, 1996
10.4 Change in Control Agreement with Robert B. Briscoe dated
February 20, 1996
10.5 * Form of Organizers' Stock Option Agreement
10.6 * Lease for Mall Boulevard Office dated February 14, 1992
10.7 The Savannah Bancorp, Inc. Incentive Stock Option Plan
approved by shareholders on April 18, 1995.
10.8 Amendment to The Savannah Bancorp, Inc. Incentive Stock
Option Plan approved by shareholders on April 16, 1996.
11 Computation of Per Share Earnings
21 * Subsidiaries of Registrant
23.1 Report of Predecessor Independent Accountants -
Price Waterhouse LLP
27 Financial Data Schedule
*Items 3.1, 3.2, 10.1, 10.5, 10.6 and 21 were previously filed by the Company as
Exhibits (with the same respective Exhibit Numbers as indicated herein) to the
Company's Registration Statement (Registration No. 33-33405) filed in February,
1990 and such documents are incorporated herein by reference. Item 10.6 was
filed as an exhibit with the 1992 Annual Report on Form 10-K in March, 1993.
(b) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the fourth quarter of the year
ended December 31, 1997.
61
<PAGE>
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 March
16, 1998 by the undersigned, thereunto duly authorized.
THE SAVANNAH BANCORP, INC.
By: /s/ Archie H. Davis
Archie H. Davis, President and
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the following persons in the capacities indicated have signed this
report on March 16, 1998.
By: /s/ Archie H. Davis
Archie H. Davis, President and
Chief Executive Officer
(Principal Executive Officer)
/s/ Robert B. Briscoe
Robert B. Briscoe, Chief
Financial Officer
(Principal Financial and Accounting Officer)
Directors:
/s/ J. Wiley Ellis
J. Wiley Ellis
Chairman of the Board
/s/ Russell W. Carpenter
Russell W. Carpenter
Robert H. Demere, Jr.
/s/ Julius Edel
Julius Edel
(continued)
62
<PAGE>
Page Two of the Signature Page.
/s/ Robert W. Groves III
Robert W. Groves III
/s/ Jack M. Jones
Jack M. Jones
/s/ Aaron M. Levy
Aaron M. Levy
/s/ J. Curtis Lewis
J. Curtis Lewis
/s/ M. Lane Morrison
M. Lane Morrison
/s/ Jack W. Shearouse
Jack W. Shearouse
Penelope S. Wirth
63
<PAGE>
2-1
EXHIBIT 2.1 -AGREEMENT AND PLAN OF MERGER WITH BRYAN BANCORP OF GEORGIA, INC.
DATED FEBRUARY 10, 1998
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
THE SAVANNAH BANCORP, INC.
AND
BRYAN BANCORP OF GEORGIA, INC.
Dated as of February 11, 1998
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
and entered into as of February 11, 1998, by and between THE SAVANNAH BANCORP,
INC. ("Savannah"), a Georgia corporation; and BRYAN BANCORP OF GEORGIA, INC.
("Bryan"), a Georgia corporation.
Preamble
The respective Boards of Directors of Bryan and Savannah are
of the opinion that the transactions described herein are in the best interests
of the parties to this Agreement and their respective shareholders. This
Agreement provides for the merger of Bryan with and into Savannah. At the
effective time of such merger, the outstanding shares of the capital stock of
Bryan shall be converted into the right to receive shares of the common stock of
Savannah (except as provided herein). As a result, shareholders of Bryan shall
become shareholders of Savannah and Savannah shall continue to conduct the
business and operations of Bryan. The transactions described in this Agreement
are subject to the approvals of the shareholders of Bryan, the shareholders of
Savannah, the Board of Governors of the Federal Reserve System, Department of
Banking and Finance of the State of Georgia, and the satisfaction of certain
other conditions described in this Agreement. It is the intention of the parties
to this Agreement that the Merger for federal income tax purposes shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code, and for accounting purposes shall qualify for treatment as a
pooling of interests.
Immediately after the execution and delivery of this
Agreement, as a condition and inducement to Savannah's willingness to enter into
this Agreement, Bryan and Savannah are entering into a stock option agreement
pursuant to which Bryan is granting to Savannah an option to purchase shares of
Bryan Common Stock. Immediately after the execution and delivery of this
Agreement, as a condition and inducement to Bryan's willingness to enter into
this Agreement, Savannah and Bryan are entering into a stock option agreement
pursuant to which Savannah is granting to Bryan an option to purchase shares of
Savannah Common Stock.
Certain terms used in this Agreement are defined in Section
11.1 of this Agreement.
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2-2
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, Bryan shall be merged with and into Savannah
in accordance with the provisions of Section 14-2-1101 of the GBCC and with the
effect provided in Sections 14-2-1106 and 14-2-1107 of the GBCC (the "Merger").
Savannah shall be the Surviving Corporation resulting from the Merger and shall
continue to be governed by the Laws of the State of Georgia. The Merger shall be
consummated pursuant to the terms of this Agreement, which has been approved and
adopted by the respective Boards of Directors of Bryan and Savannah.
1.2 Time and Place of Closing. The closing of the transactions
contemplated hereby (the "Closing") will take place at 9:00 A.M. on the date
that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties,
acting through their authorized officers, may mutually agree. The Closing shall
be held at such location as may be mutually agreed upon by the Parties.
1.3 Effective Time. The Merger and other transactions
contemplated by this Agreement shall become effective on the date and at the
time the Certificate of Merger reflecting the Merger shall become effective with
the Secretary of State of the State of Georgia (the "Effective Time"). Subject
to the terms and conditions hereof, unless otherwise mutually agreed upon in
writing by the authorized officers of each Party, the Parties shall use their
reasonable efforts to cause the Effective Time to occur on or before the fifth
business day following the last to occur of (i) the effective date (including
expiration of any applicable waiting period) of the last required Consent of any
Regulatory Authority having authority over and approving or exempting the
Merger, and (ii) the date on which the shareholders of Bryan and Savannah
approve this Agreement to the extent such approval is required by applicable
Law.
1.4 Execution of Stock Option Agreements.[A&B1] Simultaneously
with the execution of this Agreement by the Parties and as a condition thereto,
Bryan is executing and delivering to Savannah a stock option agreement (the
"Bryan Stock Option Agreement"), in substantially the form of Exhibit 1 hereto,
pursuant to which Bryan is granting to Savannah an option to purchase shares of
Bryan Common Stock, and Savannah is executing and delivering to Bryan a stock
option agreement (the "Savannah Stock Option Agreement"), in substantially the
form of Exhibit 2 hereto, pursuant to which Savannah is granting to Bryan an
option to purchase shares of Savannah Common Stock.
ARTICLE 2
TERMS OF MERGER
2.1 Charter. The Articles of Incorporation of Savannah in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until duly amended or repealed.
2.2 Bylaws. The Bylaws of Savannah in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation until
duly amended or repealed.
2.3 Directors and Officers. The directors of Savannah in
office immediately prior to the Effective Time, together with E. James Burnsed
and four other directors of Bryan selected by the Bryan Board of Directors prior
to the Effective Time, shall serve as the initial directors of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation. The officers of Savannah in office immediately prior
to the Effective Time, together with such additional persons as may thereafter
be elected, shall serve as the officers of the Surviving Corporation from and
after the Effective Time in accordance with the Bylaws of the Surviving
Corporation; provided, that E. James Burnsed shall be elected Vice Chairman of
the Surviving Corporation. Of the five directors of Bryan who shall serve as
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directors of the Surviving Corporation, two shall be elected for an initial term
of one year, two shall be elected for an initial term of two years, and E. James
Burnsed shall be elected for an initial term of three years.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this
Article 3, at the Effective Time, by virtue of the Merger and without any action
on the part of Savannah, Bryan, or the shareholders of either of the foregoing,
the shares of the constituent corporations shall be converted as follows:
(a) Each share of capital stock of Savannah issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
(b) Each share of Bryan Common Stock (excluding shares held by
any Bryan Entity or any Savannah Entity, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, and excluding shares
held by shareholders who perfect their statutory dissenters' rights as provided
in Section 3.4) issued and outstanding immediately prior to the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive 1.85 shares of Savannah Common Stock (the "Exchange Ratio").
3.2 Anti-Dilution Provisions. In the event Savannah changes
the number of shares of Savannah Common Stock issued and outstanding prior to
the Effective Time as a result of a stock split, stock dividend, or similar
recapitalization with respect to such stock and the record date therefor (in the
case of a stock dividend) or the effective date thereof (in the case of a stock
split or similar recapitalization for which a record date is not established)
shall be prior to the Effective Time, the Exchange Ratio shall be
proportionately adjusted (to the nearest one-thousandth of a share).
3.3 Shares Held by Bryan or Savannah. Each of the shares of
Bryan Common Stock held by any Bryan Entity or by any Savannah Entity, in each
case other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
3.4 Dissenting Shareholders. Any holder of shares of Bryan
Common Stock who perfects his dissenters' rights in accordance with and as
contemplated by Article 13, Part 2 of Title 14 of the GBCC shall be entitled to
receive the value of such shares in cash as determined pursuant to such
provision of Law; provided, that no such payment shall be made to any dissenting
shareholder unless and until such dissenting shareholder has complied with the
applicable provisions of the GBCC and surrendered to Bryan the certificate or
certificates representing the shares for which payment is being made. In the
event that after the Effective Time a dissenting shareholder of Bryan fails to
perfect, or effectively withdraws or loses, his right to appraisal and of
payment for his shares, Savannah shall issue and deliver the consideration to
which such holder of shares of Bryan Common Stock is entitled under this Article
3 (without interest) upon surrender by such holder of the certificate or
certificates representing shares of Bryan Common Stock held by him. If and to
the extent required by applicable Law, Bryan will establish (or cause to be
established) an escrow account with an amount sufficient to satisfy the maximum
aggregate payment that may be required to be paid to dissenting shareholders.
Upon satisfaction of all claims of dissenting shareholders, the remaining
escrowed amount, reduced by payment of the fees and expenses of the escrow
agent, will be returned to the Surviving Corporation.
3.5 Fractional Shares. Notwithstanding any other provision of
this Agreement, each holder of shares of Bryan Common Stock exchanged pursuant
to the Merger who would otherwise have been entitled to receive a fraction of a
share of Savannah Common Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Savannah
Common Stock multiplied by the market value of one share of Savannah Common
Stock at the Effective Time. The market value of one share of Savannah Common
Stock at the Effective Time shall be the last sale price of such common stock on
the Nasdaq National Market (as reported by The Wall Street Journal or, if not
reported thereby, any other authoritative source selected by Savannah) on the
last trading day preceding the Effective Time. No such holder will be entitled
to dividends, voting rights, or any other rights as a shareholder in respect of
any fractional shares.
<PAGE>
2-4
3.6 Conversion of Stock Options.
(a) At the Effective Time, each option or other Equity Right
to purchase shares of Bryan Common Stock pursuant to stock options ("Bryan
Options") granted by Bryan, which are outstanding at the Effective Time, whether
or not exercisable, shall be converted into and become rights with respect to
Savannah Common Stock, and Savannah shall assume each Bryan Option, in
accordance with the terms of the stock option agreement by which it is
evidenced, except that from and after the Effective Time, (i) Savannah and its
Compensation Committee shall be substituted for Bryan and the Committee of
Bryan's Board of Directors (including, if applicable, the entire Board of
Directors of Bryan) administering such Bryan Options, (ii) each Bryan Option
assumed by Savannah may be exercised solely for shares of Savannah Common Stock
(or cash, if so provided under the terms of such Bryan Option), (iii) the number
of shares of Savannah Common Stock subject to such Bryan Option shall be equal
to the number of shares of Bryan Common Stock subject to such Bryan Option
immediately prior to the Effective Time multiplied by the Exchange Ratio, and
(iv) the per share exercise price under each such Bryan Option shall be adjusted
by dividing the per share exercise price under each such Bryan Option by the
Exchange Ratio and rounding up to the nearest cent. Notwithstanding the
provisions of clause (iii) of the preceding sentence, Savannah shall not be
obligated to issue any fraction of a share of Savannah Common Stock upon
exercise of Bryan Options and any fraction of a share of Savannah Common Stock
that otherwise would be subject to a converted Bryan Option shall represent the
right to receive a cash payment upon exercise of such converted Bryan Option
equal to the product of such fraction and the difference between the market
value of one share of Savannah Common Stock at the time of exercise of such
Option and the per share exercise price of such Option. The market value of one
share of Savannah Common Stock at the time of exercise of an Option shall be the
last sale price of such common stock on the Nasdaq National Market (as reported
by The Wall Street Journal or, if not reported thereby, any other authoritative
source selected by Savannah) on the last trading day preceding the date of
exercise. In addition, notwithstanding the provisions of clauses (iii) and (iv)
of the first sentence of this Section 3.6, each Bryan Option which is an
"incentive stock option" shall be adjusted as required by Section 424 of the
Internal Revenue Code, and the regulations promulgated thereunder, so as not to
constitute a modification, extension or renewal of the option, within the
meaning of Section 424(h) of the Internal Revenue Code. Each of Bryan and
Savannah agrees to take all necessary steps to effectuate the foregoing
provisions of this Section 3.6, including using its reasonable efforts to obtain
from each holder of a Bryan Option any Consent or Contract that may be deemed
necessary or advisable in order to effect the transactions contemplated by this
Section 3.6. Anything in this Agreement to the contrary notwithstanding,
Savannah shall have the right, in its sole discretion, not to deliver the
consideration provided in this Section 3.6 to a former holder of a Bryan Option
who has not delivered such Consent or Contract.
(b) As soon as practicable after the Effective Time, Savannah
shall deliver to each holder of a Bryan Option an appropriate notice setting
forth such holder's rights pursuant thereto and the grants subject to such Bryan
Option shall continue in effect on the same terms and conditions (subject to the
adjustments required by Section 3.6(a) after giving effect to the Merger). At or
prior to the Effective Time, Savannah shall take all corporate action necessary
to reserve for issuance sufficient shares of Savannah Common Stock for delivery
upon exercise of Bryan Options assumed by it in accordance with this Section
3.6.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time,
Savannah and Bryan shall cause Reliance Trust Company, Savannah's transfer
agent, acting as the exchange agent (the "Exchange Agent"), to mail to each
holder of record of a certificate or certificates which represented shares of
Bryan Common Stock immediately prior to the Effective Time (the "Certificates")
appropriate transmittal materials and instructions (which shall specify that
delivery shall be effected, and risk of loss and title to such Certificates
shall pass, only upon proper delivery of such Certificates to the Exchange
Agent). The Certificate or Certificates of Bryan Common Stock so delivered shall
be duly endorsed as the Exchange Agent may require. In the event of a transfer
of ownership of shares of Bryan Common Stock represented by Certificates that
are not registered in the transfer records of Bryan, the consideration provided
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2-5
in Section 3.1 may be issued to a transferee if the Certificates representing
such shares are delivered to the Exchange Agent, accompanied by all documents
required to evidence such transfer and by evidence satisfactory to the Exchange
Agent that any applicable stock transfer taxes have been paid. If any
Certificate shall have been lost, stolen, mislaid or destroyed, upon receipt of
(i) an affidavit of that fact from the holder claiming such Certificate to be
lost, mislaid, stolen or destroyed, (ii) such bond, security or indemnity as
Savannah and the Exchange Agent may reasonably require and (iii) any other
documents necessary to evidence and effect the bona fide exchange thereof, the
Exchange Agent shall issue to such holder the consideration into which the
shares represented by such lost, stolen, mislaid or destroyed Certificate shall
have been converted. The Exchange Agent may establish such other reasonable and
customary rules and procedures in connection with its duties as it may deem
appropriate. After the Effective Time, each holder of shares of Bryan Common
Stock (other than shares to be canceled pursuant to Section 3.3 or as to which
statutory dissenters' rights have been perfected as provided in Section 3.4)
issued and outstanding at the Effective Time shall surrender the Certificate or
Certificates representing such shares to the Exchange Agent and shall promptly
upon surrender thereof receive in exchange therefor the consideration provided
in Section 3.1, together with all undelivered dividends or distributions in
respect of such shares (without interest thereon) pursuant to Section 4.2. To
the extent required by Section 3.5, each holder of shares of Bryan Common Stock
issued and outstanding at the Effective Time also shall receive, upon surrender
of the Certificate or Certificates, cash in lieu of any fractional share of
Savannah Common Stock to which such holder may be otherwise entitled (without
interest). Savannah shall not be obligated to deliver the consideration to which
any former holder of Bryan Common Stock is entitled as a result of the Merger
until such holder surrenders such holder's Certificate or Certificates for
exchange as provided in this Section 4.1. Any other provision of this Agreement
notwithstanding, neither Savannah nor the Exchange Agent shall be liable to a
holder of Bryan Common Stock for any amounts paid or property delivered in good
faith to a public official pursuant to any applicable abandoned property,
escheat or similar Law.
4.2 Rights of Former Bryan Shareholders. At the Effective
Time, the stock transfer books of Bryan shall be closed as to holders of Bryan
Common Stock immediately prior to the Effective Time and no transfer of Bryan
Common Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 4.1, each
Certificate theretofore representing shares of Bryan Common Stock (other than
shares to be canceled pursuant to Sections 3.3 and 3.4) shall from and after the
Effective Time represent for all purposes only the right to receive the
consideration provided in Sections 3.1 and 3.5 in exchange therefor, subject,
however, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which
have been declared or made by Bryan in respect of such shares of Bryan Common
Stock in accordance with the terms of this Agreement and which remain unpaid at
the Effective Time. To the extent permitted by Law, former shareholders of
record of Bryan shall be entitled to vote after the Effective Time at any
meeting of Savannah shareholders the number of whole shares of Savannah Common
Stock into which their respective shares of Bryan Common Stock are converted,
regardless of whether such holders have exchanged their Certificates for
certificates representing Savannah Common Stock in accordance with the
provisions of this Agreement. Whenever a dividend or other distribution is
declared by Savannah on the Savannah Common Stock, the record date for which is
at or after the Effective Time, the declaration shall include dividends or other
distributions on all shares of Savannah Common Stock issuable pursuant to this
Agreement, but no dividend or other distribution payable to the holders of
record of Savannah Common Stock as of any time subsequent to the Effective Time
shall be delivered to the holder of any Certificate until such holder surrenders
such Certificate for exchange as provided in Section 4.1. However, upon
surrender of such Certificate, both the Savannah Common Stock certificate
(together with all such undelivered dividends or other distributions without
interest) and any undelivered dividends and cash payments payable hereunder
(without interest) shall be delivered and paid with respect to each share
represented by such Certificate.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BRYAN
Bryan hereby represents and warrants to Savannah as follows:
5.1 Organization, Standing, and Power. Bryan is a corporation
duly organized, validly existing, and in good standing under the Laws of the
State of Georgia, and has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its material Assets.
Bryan is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Bryan Material
Adverse Effect. The minute book and other organizational documents for Bryan
have been made available to Savannah for its review and, except as disclosed in
Section 5.1 of the Bryan Disclosure Memorandum, are true and complete in all
material respects as in effect as of the date of this Agreement and accurately
reflect in all material respects all amendments thereto and all proceedings of
the Board of Directors and shareholders thereof.
5.2 Authority of Bryan; No Breach By Agreement.
(a) Bryan has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of Bryan,
subject to the approval of this Agreement by the holders of two-thirds of the
outstanding shares of Bryan Common Stock, which is the only shareholder vote
required for approval of this Agreement and consummation of the Merger by Bryan.
Subject to such requisite shareholder approval, this Agreement represents a
legal, valid, and binding obligation of Bryan, enforceable against Bryan in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by
Bryan, nor the consummation by Bryan of the transactions contemplated hereby,
nor compliance by Bryan with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of Bryan's Articles of Incorporation
or Bylaws or the certificate or articles of incorporation or bylaws of any Bryan
Subsidiary or any resolution adopted by the board of directors or the
shareholders of any Bryan Entity, or (ii) except as disclosed in Section 5.2 of
the Bryan Disclosure Memorandum, constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of any Bryan Entity under, any Contract or Permit of any Bryan Entity,
where such Default or Lien, or any failure to obtain such Consent, is reasonably
likely to have, individually or in the aggregate, a Bryan Material Adverse
Effect, or, (iii) subject to receipt of the requisite Consents referred to in
Section 9.1(b), constitute or result in a Default under, or require any Consent
pursuant to, any Law or Order applicable to any Bryan Entity or any of their
respective material Assets (including any Savannah Entity or any Bryan Entity
becoming subject to or liable for the payment of any Tax or any of the Assets
owned by any Savannah Entity or any Bryan Entity being reassessed or revalued by
any Taxing authority).
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(c) Other than in connection or compliance with the provisions
of the Securities Laws, applicable state corporate and securities Laws, and
other than Consents required from Regulatory Authorities, and other than notices
to or filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, and other than Consents,
filings, or notifications which, if not obtained or made, are not reasonably
likely to have, individually or in the aggregate, a Bryan Material Adverse
Effect, no notice to, filing with, or Consent of, any public body or authority
is necessary for the consummation by Bryan of the Merger and the other
transactions contemplated in this Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of Bryan consists of
10,000,000 shares of Bryan Common Stock, of which 528,258 shares are issued,
503,008 shares are outstanding and 25,250 shares are held in treasury as of the
date of this Agreement. All of the issued and outstanding shares of capital
stock of Bryan are duly and validly issued and outstanding and are fully paid
and nonassessable under the GBCC. None of the outstanding shares of capital
stock of Bryan has been issued in violation of any preemptive rights of the
current or past shareholders of Bryan.
(b) Except as set forth in Section 5.3(a), or as provided in
the Bryan Stock Option Agreement, or as disclosed in Section 5.3(b) of the Bryan
Disclosure Memorandum, there are no shares of capital stock or other equity
securities of Bryan outstanding and no outstanding Equity Rights relating to the
capital stock of Bryan.
5.4 Bryan Subsidiaries. Bryan has disclosed in Section 5.4 of
the Bryan Disclosure Memorandum all of the Bryan Subsidiaries that are
corporations (identifying its jurisdiction of incorporation, each jurisdiction
in which in which the character of its Assets or the nature or conduct of its
business requires it to be qualified and/or licensed to transact business, and
the number of shares owned and percentage ownership interest represented by such
share ownership) and all of the Bryan Subsidiaries that are general or limited
partnerships, limited liability companies, or other non-corporate entities
(identifying the Law under which such entity is organized, each jurisdiction in
which the character of its Assets or the nature or conduct of its business
requires it to be qualified and/or licensed to transact business, and the amount
and nature of the ownership interest therein). Except as disclosed in Section
5.4 of the Bryan Disclosure Memorandum, Bryan or one of its wholly owned
Subsidiaries owns all of the issued and outstanding shares of capital stock (or
other equity interests) of each Bryan Subsidiary. No capital stock (or other
equity interest) of any Bryan Subsidiary is or may become required to be issued
(other than to another Bryan Entity) by reason of any Equity Rights, and there
are no Contracts by which any Bryan Subsidiary is bound to issue (other than to
another Bryan Entity) additional shares of its capital stock (or other equity
interests) or Equity Rights or by which any Bryan Entity is or may be bound to
transfer any shares of the capital stock (or other equity interests) of any
Bryan Subsidiary (other than to another Bryan Entity). There are no Contracts
relating to the rights of any Bryan Entity to vote or to dispose of any shares
of the capital stock (or other equity interests) of any Bryan Subsidiary. All of
the shares of capital stock (or other equity interests) of each Bryan Subsidiary
held by a Bryan Entity are fully paid and (except pursuant to 12 USC Section 55
in the case of national banks and comparable, applicable state Law, if any, in
the case of state depository institutions) nonassessable and are owned by the
Bryan Entity free and clear of any Lien. Except as disclosed in Section 5.4 of
the Bryan Disclosure Memorandum, each Bryan Subsidiary is either a bank or a
corporation, and each such Subsidiary is duly organized, validly existing, and
(as to corporations) in good standing under the Laws of the jurisdiction in
which it is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease, and operate its Assets and to carry on its
business as now conducted. Each Bryan Subsidiary is duly qualified or licensed
to transact business as a foreign corporation in good standing in the States of
the United States and foreign jurisdictions where the character of its Assets or
the nature or conduct of its business requires it to be so qualified or
licensed, except for such jurisdictions in which the failure to be so qualified
or licensed is not reasonably likely to have, individually or in the aggregate,
a Bryan Material Adverse Effect. Each Bryan Subsidiary that is a depository
institution is an "insured institution" as defined in the Federal Deposit
Insurance Act and applicable regulations thereunder.
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5.5 SEC Filings; Financial Statements.
(a) Bryan has timely filed and made available to Savannah all
SEC Documents required to be filed by Bryan since December 31, 1994 (the "Bryan
SEC Reports"). The Bryan SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Laws and
other applicable Laws and (ii) did not, at the time they were filed (or, if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated in such Bryan SEC Reports or
necessary in order to make the statements in such Bryan SEC Reports, in light of
the circumstances under which they were made, not misleading. No Bryan
Subsidiary is required to file any SEC Documents.
(b) Each of the Bryan Financial Statements (including, in each
case, any related notes) contained in the Bryan SEC Reports, including any Bryan
SEC Reports filed after the date of this Agreement until the Effective Time,
complied as to form in all material respects with the applicable published rules
and regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly
presented in all material respects the consolidated financial position of Bryan
and its Subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in amount
or effect.
5.6 Absence of Undisclosed Liabilities. No Bryan Entity has
any Liabilities of a nature required to be reflected on a balance sheet prepared
in accordance with GAAP that are reasonably likely to have, individually or in
the aggregate, a Bryan Material Adverse Effect, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Bryan as of
December 31, 1997, included in the Bryan Financial Statements delivered prior to
the date of this Agreement or reflected in the notes thereto. No Bryan Entity
has incurred or paid any Liability since December 31, 1997, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, a Bryan Material Adverse Effect or (ii) in
connection with the transactions contemplated by this Agreement.
5.7 Absence of Certain Changes or Events. Since December 31,
1997, except as disclosed in the Bryan Financial Statements delivered prior to
the date of this Agreement or as disclosed in Section 5.7 of the Bryan
Disclosure Memorandum, (i) there have been no events, changes, or occurrences
which have had, or are reasonably likely to have, individually or in the
aggregate, a Bryan Material Adverse Effect, and (ii) the Bryan Entities have not
taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement,
would represent or result in a material breach or violation of any of the
covenants and agreements of Bryan provided in Article 7.
5.8 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of
any of the Bryan Entities have been timely filed or requests for extensions have
been timely filed, granted, and have not expired for periods ended on or before
December 31, 1996, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Bryan
Material Adverse Effect, and all Tax Returns filed are complete and accurate in
all material respects. All Taxes shown on filed Tax Returns have been paid.
There is no audit examination, deficiency, or refund Litigation with respect to
any Taxes that is reasonably likely to result in a determination that would
have, individually or in the aggregate, a Bryan Material Adverse Effect, except
as reserved against in the Bryan Financial Statements delivered prior to the
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date of this Agreement or as disclosed in Section 5.8 of the Bryan Disclosure
Memorandum. Bryan's federal income Tax Returns have not been audited by the IRS.
All Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid. There are no Liens with
respect to Taxes upon any of the Assets of the Bryan Entities, except for any
such Liens which are not reasonably likely to have a Bryan Material Adverse
Effect.
(b) None of the Bryan Entities has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due (excluding such statutes that relate to years currently under examination by
the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) The provision for any Taxes due or to become due for any
of the Bryan Entities for the period or periods through and including the date
of the respective Bryan Financial Statements that has been made and is reflected
on such Bryan Financial Statements is sufficient to cover all such Taxes.
(d) Deferred Taxes of the Bryan Entities have been provided
for in accordance with GAAP.
(e) Except for a Tax Allocation Agreement between Bryan and
Bryan Bank & Trust, none of the Bryan Entities is a party to any Tax allocation
or sharing agreement and none of the Bryan Entities has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was Bryan) or has any Liability for Taxes of
any Person (other than Bryan and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor or by Contract or otherwise.
(f) Each of the Bryan Entities is in compliance with, and its
records contain all information and documents (including properly completed IRS
Forms W-9) necessary to comply with, all applicable information reporting and
Tax withholding requirements underfederal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code, except for such instances of
noncompliance and such omissions as are not reasonably likely to have,
individually or in the aggregate, a Bryan Material Adverse Effect.
(g) Except as disclosed in Section 5.8 of the Bryan Disclosure
Memorandum, none of the Bryan Entities has made any payments, is obligated to
make any payments, or is a party to any Contract that could obligate it to make
any payments that would be disallowed as a deduction under Section 280G or
162(m) of the Internal Revenue Code.
(h) There has not been an ownership change, as defined in
Internal Revenue Code Section 382(g), of the Bryan Entities that occurred during
or after any Taxable Period in which the Bryan Entities incurred a net operating
loss that carries over to any Taxable Period ending after December 31, 1996.
5.9 Allowance for Possible Loan Losses. In the opinion of
management of Bryan, the allowance for possible loan or credit losses (the
"Allowance") shown on the consolidated balance sheets of Bryan included in the
most recent Bryan Financial Statements dated prior to the date of this Agreement
was, and the Allowance shown on the consolidated balance sheets of Bryan
included in the Bryan Financial Statements as of dates subsequent to the
execution of this Agreement will be, as of the dates thereof, adequate (within
the meaning of GAAP and applicable regulatory requirements or guidelines) to
provide for all known or reasonably anticipated losses relating to or inherent
in the loan and lease portfolios (including accrued interest receivables) of the
Bryan Entities and other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by the Bryan Entities as of the
dates thereof, except where the failure of such Allowance to be so adequate is
not reasonably likely to have a Bryan Material Adverse Effect.
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5.10 Assets.
(a) Except as disclosed in Section 5.10 of the Bryan
Disclosure Memorandum or as disclosed or reserved against in the Bryan Financial
Statements delivered prior to the date of this Agreement, the Bryan Entities
have good and marketable title, free and clear of all Liens, to all of their
respective Assets, except for any such Liens or other defects of title which are
not reasonably likely to have a Bryan Material Adverse Effect. All tangible
properties used in the businesses of the Bryan Entities are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business consistent with Bryan's past practices.
(b) All Assets which are material to Bryan's business on a
consolidated basis, held under leases or subleases by any of the Bryan Entities,
are held under valid Contracts enforceable in accordance with their respective
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other Laws affecting the enforcement
of creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
Contract is in full force and effect.
(c) The Bryan Entities currently maintain insurance similar in
amounts, scope, and coverage to that maintained by other peer banking
organizations. None of the Bryan Entities has received notice from any insurance
carrier that (i) any policy of insurance will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. There are presently
no claims for amounts exceeding in any individual case $10,000 pending under
such policies of insurance and no notices of claims in excess of such amounts
have been given by any Bryan Entity under such policies.
(d) The Assets of the Bryan Entities include all Assets
required to operate the business of the Bryan Entities as presently conducted.
5.11 Intellectual Property. Each Bryan Entity owns or has a
license to use all of the Intellectual Property used by such Bryan Entity in the
course of its business. Each Bryan Entity is the owner of or has a license to
any Intellectual Property sold or licensed to a third party by such Bryan Entity
in connection with such Bryan Entity's business operations, and such Bryan
Entity has the right to convey by sale or license any Intellectual Property so
conveyed. No Bryan Entity is in Default under any of its Intellectual Property
licenses. No proceedings have been instituted, or are pending or to the
Knowledge of Bryan threatened, which challenge the rights of any Bryan Entity
with respect to Intellectual Property used, sold or licensed by such Bryan
Entity in the course of its business, nor has any person claimed or alleged any
rights to such Intellectual Property. The conduct of the business of the Bryan
Entities does not infringe any Intellectual Property of any other person. Except
as disclosed in Section 5.11 of the Bryan Disclosure Memorandum, no Bryan Entity
is obligated to pay any recurring royalties to any Person with respect to any
such Intellectual Property. Except as disclosed in Section 5.11 of the Bryan
Disclosure Memorandum, no officer, director or employee of any Bryan Entity is
party to any Contract which restricts or prohibits such officer, director or
employee from engaging in activities competitive with any Person, including any
Bryan Entity.
5.12 Environmental Matters.
(a) To the Knowledge of Bryan, each Bryan Entity, its
Participation Facilities, and its Operating Properties are, and have been, in
compliance with all Environmental Laws, except for violations which are not
reasonably likely to have, individually or in the aggregate, a Bryan Material
Adverse Effect.
(b) To the Knowledge of Bryan, there is no Litigation pending
or threatened before any court, governmental agency, or authority or other forum
in which any Bryan Entity or any of its Operating Properties or Participation
Facilities (or Bryan in respect of such Operating Property or Participation
Facility) has been or, with respect to threatened Litigation, may be named as a
defendant (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release, discharge, spillage, or
disposal into the environment of any Hazardous Material, whether or not
occurring at, on, under,
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adjacent to, or affecting (or potentially affecting) a site owned, leased, or
operated by any Bryan Entity or any of its Operating Properties or Participation
Facilities, except for such Litigation pending or threatened that is not
reasonably likely to have, individually or in the aggregate, a Bryan Material
Adverse Effect, nor is there any reasonable basis for any Litigation of a type
described in this sentence, except such as is not reasonably likely to have,
individually or in the aggregate, a Bryan Material Adverse Effect.
(c) During the period of (i) any Bryan Entity's ownership or
operation of any of their respective current properties, (ii) any Bryan Entity's
participation in the management of any Participation Facility, or (iii) any
Bryan Entity's holding of a security interest in a Operating Property, there
have been no releases, discharges, spillages, or disposals of Hazardous Material
in, on, under, adjacent to, or affecting (or potentially affecting) such
properties, except such as are not reasonably likely to have, individually or in
the aggregate, a Bryan Material Adverse Effect. Prior to the period of (i) any
Bryan Entity's ownership or operation of any of their respective current
properties, (ii) any Bryan Entity's participation in the management of any
Participation Facility, or (iii) any Bryan Entity's holding of a security
interest in a Operating Property, to the Knowledge of Bryan, there were no
releases, discharges, spillages, or disposals of Hazardous Material in, on,
under, or affecting any such property, Participation Facility or Operating
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Bryan Material Adverse Effect.
5.13 Compliance with Laws. Bryan is duly registered as a bank
holding company under the BHC Act. Each Bryan Entity has in effect all Permits
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Bryan
Material Adverse Effect, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Bryan Material Adverse Effect. Except as
disclosed in Section 5.13 of the Bryan Disclosure Memorandum, none of the Bryan
Entities:
(a) is in Default under any of the provisions of its Articles
of Incorporation or Bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Permits
applicable to its business or employees conducting its business, except for
Defaults which are not reasonably likely to have, individually or in the
aggregate, a Bryan Material Adverse Effect; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting that
any Bryan Entity is not in compliance with any of the Laws or Orders which such
governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the aggregate, a
Bryan Material Adverse Effect, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Bryan Material Adverse Effect, or (iii) requiring any Bryan Entity
to enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment, or memorandum of understanding, or to
adopt any Board resolution or similar undertaking, which restricts materially
the conduct of its business or in any manner relates to its capital adequacy,
its credit or reserve policies, its management, or the payment of dividends.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to
Savannah.
5.14 Labor Relations. No Bryan Entity is the subject of any
Litigation asserting that it or any other Bryan Entity has committed an unfair
labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to compel it or any other Bryan Entity to
bargain with any labor organization as to wages or conditions of employment, nor
is any Bryan Entity party to any collective bargaining agreement, nor is there
any strike or other labor dispute involving any Bryan Entity, pending or
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threatened, or to the Knowledge of Bryan, is there any activity involving any
Bryan Entity's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.15 Employee Benefit Plans.
(a) Bryan has disclosed in Section 5.15 of the Bryan
Disclosure Memorandum, and has delivered or made available to Savannah prior to
the execution of this Agreement copies in each case of, all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by any Bryan Entity or ERISA Affiliate
thereof for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "Bryan Benefit
Plans"). Any of the Bryan Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "Bryan ERISA Plan." Each Bryan ERISA Plan which is also a "defined benefit
plan" (as defined in Section 414(j) of the Internal Revenue Code) is referred to
herein as a "Bryan Pension Plan." No Bryan Pension Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) All Bryan Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Bryan Material Adverse Effect. Each Bryan
ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and Bryan is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. No Bryan Entity
has engaged in a transaction with respect to any Bryan Benefit Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
would subject any Bryan Entity to a Tax imposed by either Section 4975 of the
Internal Revenue Code or Section 502(i) of ERISA in amounts which are reasonably
likely to have, individually or in the aggregate, a Bryan Material Adverse
Effect.
(c) No Bryan Pension Plan has any "unfunded current
liability," as that term is defined in Section 302(d)(8)(A) of ERISA, based on
actuarial assumptions set forth for such plan's most recent actuarial valuation.
Since the date of the most recent actuarial valuation, there has been (i) no
material change in the financial position of any Bryan Pension Plan, (ii) no
change in the actuarial assumptions with respect to any Bryan Pension Plan, and
(iii) no increase in benefits under any Bryan Pension Plan as a result of plan
amendments or changes in applicable Law which is reasonably likely to have,
individually or in the aggregate, a Bryan Material Adverse Effect or materially
adversely affect the funding status of any such plan. Neither any Bryan Pension
Plan nor any "single-employer plan," within the meaning of Section 4001(a)(15)
of ERISA, currently or formerly maintained by any Bryan Entity, or the
single-employer plan of any entity which is considered one employer with Bryan
under Section 4001 of ERISA or Section 414 of the Internal Revenue Code or
Section 302 of ERISA (whether or not waived) (an "ERISA Affiliate") has an
"accumulated funding deficiency" within the meaning of Section 412 of the
Internal Revenue Code or Section 302 of ERISA, which is reasonably likely to
have a Bryan Material Adverse Effect. No Bryan Entity has provided, or is
required to provide, security to a Bryan Pension Plan or to any single-employer
plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Internal
Revenue Code.
(d) Within the six-year period preceding the Effective Time,
no Liability under Subtitle C or D of Title IV of ERISA has been or is expected
to be incurred by any Bryan Entity with respect to any ongoing, frozen, or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have a Bryan Material Adverse
Effect. No Bryan Entity has incurred any withdrawal Liability with respect to a
multiemployer plan under Subtitle B of Title IV of ERISA (regardless of whether
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based on contributions of an ERISA Affiliate), which Liability is reasonably
likely to have a Bryan Material Adverse Effect. No notice of a "reportable
event," within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed for any
Bryan Pension Plan or by any ERISA Affiliate within the 12-month period ending
on the date hereof.
(e) Except as disclosed in Section 5.15 of the Bryan
Disclosure Memorandum, no Bryan Entity has any Liability for retiree health and
life benefits under any of the Bryan Benefit Plans and there are no restrictions
on the rights of such Bryan Entity to amend or terminate any such retiree health
or benefit Plan without incurring any Liability thereunder, which Liability is
reasonably likely to have a Bryan Material Adverse Effect.
(f) Except as disclosed in Section 5.15 of the Bryan
Disclosure Memorandum, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any Bryan Entity from
any Bryan Entity under any Bryan Benefit Plan or otherwise, (ii) increase any
benefits otherwise payable under any Bryan Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit, where such
payment, increase, or acceleration is reasonably likely to have, individually or
in the aggregate, a Bryan Material Adverse Effect.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any Bryan Entity and their respective beneficiaries, other
than entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the Bryan Financial Statements to the extent
required by and in accordance with GAAP.
5.16 Material Contracts. Except as disclosed in Section 5.16
of the Bryan Disclosure Memorandum or otherwise reflected in the Bryan Financial
Statements, none of the Bryan Entities, nor any of their respective Assets,
businesses, or operations, is a party to, or is bound or affected by, or
receives benefits under, (i) any employment, severance, termination, consulting,
or retirement Contract, (ii) any Contract relating to the borrowing of money by
any Bryan Entity or the guarantee by any Bryan Entity of any such obligation
(other than Contracts evidencing deposit liabilities, purchases of federal
funds, fully-secured repurchase agreements, and Federal Home Loan Bank advances
of depository institution Subsidiaries, trade payables and Contracts relating to
borrowings or guarantees made in the ordinary course of business), (iii) any
Contract which prohibits or restricts any Bryan Entity from engaging in any
business activities in any geographic area, line of business or otherwise in
competition with any other Person, (iv) any Contract between or among Bryan
Entities, (v) any Contract involving Intellectual Property (other than Contracts
entered into in the ordinary course with customers and "shrink-wrap" software
licenses), (vi) any Contract relating to the provision of data processing,
network communication, or other technical services to or by any Bryan Entity,
(vii) any Contract relating to the purchase or sale of any goods or services
(other than Contracts entered into in the ordinary course of business and
involving payments under any individual Contract not in excess of $25,000),
(viii) any exchange-traded or over-the-counter swap, forward, future, option,
cap, floor, or collar financial Contract, or any other interest rate or foreign
currency protection Contract not included on its balance sheet which is a
financial derivative Contract, and (ix) any other Contract or amendment thereto
that would be required to be filed as an exhibit to a Form 10-KSB filed by Bryan
with the SEC as of the date of this Agreement that has not been filed as an
exhibit to Bryan's Form 10-K filed for the fiscal year ended December 31, 1996,
or in an SEC Document and identified to Savannah (together with all Contracts
referred to in Sections 5.10 and 5.15(a), the "Bryan Contracts"). With respect
to each Bryan Contract and except as disclosed in Section 5.16 of the Bryan
Disclosure Memorandum: (i) the Contract is in full force and effect; (ii) no
Bryan Entity is in Default thereunder, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a Bryan Material
Adverse Effect; (iii) no Bryan Entity has repudiated or waived any material
provision of any such Contract; and (iv) no other party to any such Contract is,
to the Knowledge of Bryan, in Default in any respect, other than Defaults which
are not reasonably likely to have, individually or in the aggregate, a Bryan
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Material AdverseEffect, or has repudiated or waived any material provision
thereunder. All of the indebtedness of any Bryan Entity for money borrowed is
prepayable at any time by such Bryan Entity without penalty or premium.
5.17 Legal Proceedings. There is no Litigation instituted or
pending, or, to the Knowledge of Bryan, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any Bryan Entity, or against any
director, employee or employee benefit plan of any Bryan Entity, or against any
Asset, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Bryan Material Adverse Effect, nor are there
any Orders of any Regulatory Authorities, other governmental authorities, or
arbitrators outstanding against any Bryan Entity, that are reasonably likely to
have, individually or in the aggregate, a Bryan Material Adverse Effect. Section
5.17 of the Bryan Disclosure Memorandum contains a summary of all Litigation as
of the date of this Agreement to which any Bryan Entity is a party and which
names a Bryan Entity as a defendant or cross-defendant or for which any Bryan
Entity has any potential Liability.
5.18 Reports. Since January 1, 1993, or the date of
organization if later, each Bryan Entity has timely filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with Regulatory Authorities (except, in
the case of state securities authorities, failures to file which are not
reasonably likely to have, individually or in the aggregate, a Bryan Material
Adverse Effect). As of their respective dates, each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its respective
date, each such report and document did not, in all material respects, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
5.19 Statements True and Correct. None of the information
supplied or to be supplied by any Bryan Entity or any Affiliate thereof for
inclusion in the Registration Statement to be filed by Savannah with the SEC
will, when the Registration Statement becomes effective, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein not misleading. None of the information supplied
or to be supplied by any Bryan Entity or any Affiliate thereof for inclusion in
the Joint Proxy Statement to be mailed to each Party's shareholders in
connection with the Shareholders' Meetings, and any other documents to be filed
by a Bryan Entity or any Affiliate thereof with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and with respect to the Joint Proxy
Statement, when first mailed to the shareholders of Bryan and Savannah, be false
or misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Joint Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Shareholders' Meetings, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for the
Shareholders' Meetings. All documents that any Bryan Entity or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
5.20 Accounting, Tax and Regulatory Matters. No Bryan Entity
or any Affiliate thereof has taken or agreed to take any action or has any
Knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the Merger from qualifying for pooling-of-interests accounting treatment or as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
5.21 State Takeover Laws. Each Bryan Entity has taken all
necessary action to exempt the transactions contemplated by this Agreement from,
or if necessary to challenge the validity or applicability of, any applicable
"moratorium," "fair price," "business combination," "control share," or other
anti-takeover Laws (collectively, "Takeover Laws"), including Sections 14-2-1111
and 14-2-1132 of the GBCC.
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2-15
5.22 Charter Provisions. Each Bryan Entity has taken all
action so that the entering into of this Agreement and the Bryan Stock Option
Agreement and the consummation of the Merger and the other transactions
contemplated hereby and thereby, including the acquisition of shares pursuant
to, or other exercise of rights under, the Bryan Stock Option Agreement, do not
and will not result in the grant of any rights to any Person under the Articles
of Incorporation, Bylaws or other governing instruments of any Bryan Entity or
restrict or impair the ability of Savannah or any of its Subsidiaries to vote,
or otherwise to exercise the rights of a shareholder with respect to, shares of
any Bryan Entity that may be directly or indirectly acquired or controlled by
them.
5.23 Directors' Agreements. Each of the directors of Bryan
(except Charles Stafford) has executed and delivered to Savannah an agreement in
substantially the form of Exhibit 3 (the "Bryan Directors' Agreements"). In the
event Savannah removes, or fails to re-elect a director to the board of Bryan
Bank during the 24 month period following the Closing Date, Savannah will pay
such director, immediately, an amount equal to the directors fees he or she
would have earned during the remainder of such 24 month period.
5.24 Board Recommendation. The Board of Directors of Bryan, at
a meeting duly called and held, has by unanimous vote of the directors present
(who constituted all of the directors then in office) (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, and
the Bryan Stock Option Agreement and the Bryan Directors' Agreements and the
transactions contemplated thereby, taken together, are fair to and in the best
interests of the shareholders and (ii) resolved to recommend that the holders of
the shares of Bryan Common Stock approve this Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SAVANNAH
Savannah hereby represents and warrants to Bryan as follows:
6.1 Organization, Standing, and Power. Savannah is a
corporation duly organized, validly existing, and in good standing under the
Laws of the State of Georgia, and has the corporate power and authority to carry
on its business as now conducted and to own, lease and operate its material
Assets. Savannah is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Savannah Material
Adverse Effect. The minute book and other organizational documents for Savannah
have been made available to Bryan for its review and, except as disclosed in
Section 6.1 of the Savannah Disclosure Memorandum, are true and complete in all
material respects as in effect as of the date of this Agreement and accurately
reflect in all material respects all amendments thereto and all proceedings of
the Board of Directors and shareholders thereof.
6.2 Authority; No Breach By Agreement.
(a) Savannah has the corporate power and authority necessary
to execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of Savannah,
subject to approval of the issuance of the shares of Savannah Common Stock
pursuant to the Merger by a majority of the votes cast at the Savannah
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Shareholders' Meeting, which is the only shareholder vote required for approval
of this Agreement and consummation of the Merger by Savannah. Subject to such
requisite shareholder approval, this Agreement represents a legal, valid, and
binding obligation of Savannah, enforceable against Savannah in accordance with
its terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by
Savannah, nor the consummation by Savannah of the transactions contemplated
hereby, nor compliance by Savannah with any of the provisions hereof, will (i)
conflict with or result in a breach of any provision of Savannah's Articles of
Incorporation or Bylaws or the certificate or articles of incorporation or
bylaws of any Savannah Subsidiary or any resolution adopted by the board of
directors or the shareholders of any Savannah Entity, or (ii) except as
disclosed in Section 6.2 of the Savannah Disclosure Memorandum, constitute or
result in a Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any Asset of any Savannah Entity under, any Contract or
Permit of any Savannah Entity, where such Default or Lien, or any failure to
obtain such Consent, is reasonably likely to have, individually or in the
aggregate, a Savannah Material Adverse Effect, or, (iii) subject to receipt of
the requisite Consents referred to in Section 9.1(b), constitute or result in a
Default under, or require any Consent pursuant to, any Law or Order applicable
to any Savannah Entity or any of their respective material Assets (including any
Savannah Entity or any Bryan Entity becoming subject to or liable for the
payment of any Tax or any of the Assets owned by any Savannah Entity or any
Bryan Entity being reassessed or revalued by any Taxing authority).
(c) Other than in connection or compliance with the provisions
of the Securities Laws, applicable state corporate and securities Laws, and
rules of the Nasdaq National Market, and other than Consents required from
Regulatory Authorities, and other than notices to or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, and other than Consents, filings, or notifications
which, if not obtained or made, are not reasonably likely to have, individually
or in the aggregate, a Savannah Material Adverse Effect, no notice to, filing
with, or Consent of, any public body or authority is necessary for the
consummation by Savannah of the Merger and the other transactions contemplated
in this Agreement.
6.3 Capital Stock.
(a) The authorized capital stock of Savannah consists of (i)
20,000,000 shares of Savannah Common Stock, of which 1,782,598 shares are
issued, 1,709,548 shares are outstanding and 73,050 shares are held in treasury
as of the date of this Agreement, and (ii) 10,000,000 shares of preferred stock,
none of which are issued and outstanding. All of the issued and outstanding
shares of Savannah Common Stock are, and all of the shares of Savannah Common
Stock to be issued in exchange for shares of Bryan Common Stock upon
consummation of the Merger, when issued in accordance with the terms of this
Agreement, will be, duly and validly issued and outstanding and fully paid and
nonassessable under the GBCC. None of the outstanding shares of Savannah Common
Stock has been, and none of the shares of Savannah Common Stock to be issued in
exchange for shares of Bryan Common Stock upon consummation of the Merger will
be, issued in violation of any preemptive rights of the current or past
shareholders of Savannah.
(b) Except as set forth in Section 6.3(a), or as provided in
the Savannah Stock Option Agreement, or as disclosed in Section 6.3 of the
Savannah Disclosure Memorandum, there are no shares of capital stock or other
equity securities of Savannah outstanding and no outstanding Equity Rights
relating to the capital stock of Savannah
6.4 Savannah Subsidiaries. Savannah has disclosed in Section
6.4 of the Savannah Disclosure Memorandum all of the Savannah Subsidiaries as of
the date of this Agreement that are corporations (identifying its jurisdiction
of incorporation, each jurisdiction in which the character of its Assets or the
nature or conduct of its business requires it to be qualified and/or licensed to
transact business, and the number of shares owned and percentage ownership
interest represented by such share ownership) and all of the Savannah
Subsidiaries that are general or limited partnerships, limited liability
companies, or other non-corporate entities (identifying the
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Law under which such entity is organized, each jurisdiction in which the
character of its Assets or the nature or conduct of its business requires it to
be qualified and/or licensed to transact business, and the amount and nature of
the ownership interest therein). Except as disclosed in Section 6.4 of the
Savannah Disclosure Memorandum, Savannah or one of its wholly owned Subsidiaries
owns all of the issued and outstanding shares of capital stock (or other equity
interests) of each Savannah Subsidiary. No capital stock (or other equity
interest) of any Savannah Subsidiary are or may become required to be issued
(other than to another Savannah Entity) by reason of any Equity Rights, and
there are no Contracts by which any Savannah Subsidiary is bound to issue (other
than to another Savannah Entity) additional shares of its capital stock (or
other equity interests) or Equity Rights or by which any Savannah Entity is or
may be bound to transfer any shares of the capital stock (or other equity
interests) of any Savannah Subsidiary (other than to another Savannah Entity).
There are no Contracts relating to the rights of any Savannah Entity to vote or
to dispose of any shares of the capital stock (or other equity interests) of any
Savannah Subsidiary. All of the shares of capital stock (or other equity
interests) of each Savannah Subsidiary held by a Savannah Entity are fully paid
and (except pursuant to 12 USC Section 55 in the case of national banks and
comparable, applicable state Law, if any, in the case of state depository
institutions) nonassessable and are owned by the Savannah Entity free and clear
of any Lien. Except as disclosed in Section 6.4 of the Savannah Disclosure
Memorandum, each Savannah Subsidiary is either a bank or a corporation, and each
such Subsidiary is duly organized, validly existing, and (as to corporations) in
good standing under the Laws of the jurisdiction in which it is incorporated or
organized, and has the corporate power and authority necessary for it to own,
lease and operate its Assets and to carry on its business as now conducted. Each
Savannah Subsidiary is duly qualified or licensed to transact business as a
foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Savannah Material
Adverse Effect. Each Savannah Subsidiary that is a depository institution is an
"insured institution" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder.
6.5 SEC Filings; Financial Statements.
(a) Savannah has timely filed and made available to Bryan all
SEC Documents required to be filed by Savannah since December 31, 1994 (the
"Savannah SEC Reports"). The Savannah SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Laws and other applicable Laws and (ii) did not, at the time they
were filed (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such
Savannah SEC Reports or necessary in order to make the statements in such
Savannah SEC Reports, in light of the circumstances under which they were made,
not misleading. No Savannah Subsidiary is required to file any SEC Documents.
(b) Each of the Savannah Financial Statements (including, in
each case, any related notes) contained in the Savannah SEC Reports, including
any Savannah SEC Reports filed after the date of this Agreement until the
Effective Time, complied as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited interim statements, as permitted by Form 10-Q of
the SEC), and fairly presented in all material respects the consolidated
financial position of Savannah and its Subsidiaries as
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at the respective dates and the consolidated results of operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount or effect.
6.6 Absence of Undisclosed Liabilities. No Savannah Entity has
any Liabilities of a nature required to be reflected on a balance sheet prepared
in accordance with GAAP that are reasonably likely to have, individually or in
the aggregate, a Savannah Material Adverse Effect, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Savannah as of
December 31, 1997, included in the Savannah Financial Statements delivered prior
to the date of this Agreement or reflected in the notes thereto. No Savannah
Entity has incurred or paid any Liability since December 31, 1997, except for
such Liabilities incurred or paid (i) in the ordinary course of business
consistent with past business practice and which are not reasonably likely to
have, individually or in the aggregate, a Savannah Material Adverse Effect or
(ii) in connection with the transactions contemplated by this Agreement.
6.7 Absence of Certain Changes or Events. Since December 31,
1997, except as disclosed in the Savannah Financial Statements delivered prior
to the date of this Agreement or as disclosed in Section 6.7 of the Savannah
Disclosure Memorandum, (i) there have been no events, changes or occurrences
which have had, or are reasonably likely to have, individually or in the
aggregate, a Savannah Material Adverse Effect, and (ii) the Savannah Entities
have not taken any action, or failed to take any action, prior to the date of
this Agreement, which action or failure, if taken after the date of this
Agreement, would represent or result in a material breach or violation of any of
the covenants and agreements of Savannah provided in Article 7.
6.8 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of
any of the Savannah Entities have been timely filed or requests for extensions
have been timely filed, granted, and have not expired for periods ended on or
before December 31, 1996, and on or before the date of the most recent fiscal
year end immediately preceding the Effective Time, except to the extent that all
such failures to file, taken together, are not reasonably likely to have a
Savannah Material Adverse Effect, and all Tax Returns filed are complete and
accurate in all material respects. All Taxes shown on filed Tax Returns have
been paid. There is no audit examination, deficiency, or refund Litigation with
respect to any Taxes that is reasonably likely to result in a determination that
would have, individually or in the aggregate, a Savannah Material Adverse
Effect, except as reserved against in the Savannah Financial Statements
delivered prior to the date of this Agreement or as disclosed in Section 6.8 of
the Savannah Disclosure Memorandum. Savannah's federal income Tax Returns have
not been audited by the IRS. All Taxes and other Liabilities due with respect to
completed and settled examinations or concluded Litigation have been paid. There
are no Liens with respect to Taxes upon any of the Assets of the Savannah
Entities, except for any such Liens which are not reasonably likely to have a
Savannah Material Adverse Effect.
(b) None of the Savannah Entities has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due (excluding such statutes that relate to years currently under examination by
the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) The provision for any Taxes due or to become due for any
of the Savannah Entities for the period or periods through and including the
date of the respective Savannah Financial Statements that has been made and is
reflected on such Savannah Financial Statements is sufficient to cover all such
Taxes.
(d) Deferred Taxes of the Savannah Entities have been provided
for in accordance with GAAP.
(e) None of the Savannah Entities is a party to any Tax
allocation or sharing agreement and none of the Savannah Entities has been a
member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was Savannah) or has any
Liability for Taxes of any Person (other than Savannah and its Subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign Law) as a transferee or successor or by Contract or otherwise.
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(f) Each of the Savannah Entities is in compliance with, and
its records contain all information and documents (including properly completed
IRS Forms W-9) necessary to comply with, all applicable information reporting
and Tax withholding requirements under federal, state, and local Tax Laws, and
such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code, except for such
instances of noncompliance and such omissions as are not reasonably likely to
have, individually or in the aggregate, a Savannah Material Adverse Effect.
(g) Except as disclosed in Section 6.8 of the Savannah
Disclosure Memorandum, none of the Savannah Entities has made any payments, is
obligated to make any payments, or is a party to any Contract that could
obligate it to make any payments that would be disallowed as a deduction under
Section 280G or 162(m) of the Internal Revenue Code.
(h) There has not been an ownership change, as defined in
Internal Revenue Code Section 382(g), of the Savannah Entities that occurred
during or after any Taxable Period in which the Savannah Entities incurred a net
operating loss that carries over to any Taxable Period ending after December 31,
1996.
6.9 Allowance for Possible Loan Losses. In the opinion of
management of Savannah, the Allowance shown on the consolidated balance sheets
of Savannah included in the most recent Savannah Financial Statements dated
prior to the date of this Agreement was, and the Allowance shown on the
consolidated balance sheets of Savannah included in the Savannah Financial
Statements as of dates subsequent to the execution of this Agreement will be, as
of the dates thereof, adequate (within the meaning of GAAP and applicable
regulatory requirements or guidelines) to provide for all known or reasonably
anticipated losses relating to or inherent in the loan and lease portfolios
(including accrued interest receivables) of the Savannah Entities and other
extensions of credit (including letters of credit and commitments to make loans
or extend credit) by the Savannah Entities as of the dates thereof, except where
the failure of such Allowance to be so adequate is not reasonably likely to have
a Savannah Material Adverse Effect.
6.10 Assets.
(a) Except as disclosed in Section 6.10 of the Savannah
Disclosure Memorandum or as disclosed or reserved against in the Savannah
Financial Statements delivered prior to the date of this Agreement, the Savannah
Entities have good and marketable title, free and clear of all Liens, to all of
their respective Assets, except for any such Liens or other defects of title
which are not reasonably likely to have a Savannah Material Adverse Effect. All
tangible properties used in the businesses of the Savannah Entities are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with Savannah's past practices.
(b) All Assets which are material to Savannah's business on a
consolidated basis, held under leases or subleases by any of the Savannah
Entities, are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect.
(c) The Savannah Entities currently maintain insurance similar
in amounts, scope and coverage to that maintained by other peer banking
organizations. None of the Savannah Entities has received notice from any
insurance carrier that (i)any policy of insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policies of insurance will be substantially increased. There are
presently no claims pending under such policies of insurance for amounts
exceeding in any individual case $20,000 pending under such policies of
insurance and no notices of claims in excess of such amounts have been given by
any Savannah Entity under such policies.
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(d) The Assets of the Savannah Entities include all assets
required to operate the business of the Savannah Entities as presently
conducted.
6.11 Intellectual Property. Each Savannah Entity owns or has a
license to use all of the Intellectual Property used by such Savannah Entity in
the course of its business. Each Savannah Entity is the owner of or has a
license to any Intellectual Property sold or licensed to a third party by such
Savannah Entity in connection with such Savannah Entity's business operations,
and such Savannah Entity has the right to convey by sale or license any
Intellectual Property so conveyed. No Savannah Entity is in Default under any of
its Intellectual Property licenses. No proceedings have been instituted, or are
pending or to the Knowledge of Savannah threatened, which challenge the rights
of any Savannah Entity with respect to Intellectual Property used, sold or
licensed by such Savannah Entity in the course of its business, nor has any
person claimed or alleged any rights to such Intellectual Property. The conduct
of the business of the Savannah Entities does not infringe any Intellectual
Property of any other person. Except as disclosed in Section 6.11 of the
Savannah Disclosure Memorandum, no Savannah Entity is obligated to pay any
recurring royalties to any Person with respect to any such Intellectual
Property. Except as disclosed in Section 6.11 of the Savannah Disclosure
Memorandum, no officer, director or employee of any Savannah Entity is party to
any Contract which restricts or prohibits such officer, director or employee
from engaging in activities competitive with any Person, including any Savannah
Entity.
6.12 Environmental Matters.
(a) To the Knowledge of Savannah, each Savannah Entity, its
Participation Facilities, and its Operating Properties are, and have been, in
compliance with all Environmental Laws, except for violations which are not
reasonably likely to have, individually or in the aggregate, a Savannah Material
Adverse Effect.
(b) To the Knowledge of Savannah, there is no Litigation
pending or threatened before any court, governmental agency, or authority or
other forum in which any Savannah Entity or any of its Operating Properties or
Participation Facilities (or Savannah in respect of such Operating Property or
Participation Facility) has been or, with respect to threatened Litigation, may
be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release,
discharge, spillage, or disposal into the environment of any Hazardous Material,
whether or not occurring at, on, under, adjacent to, or affecting (or
potentially affecting) a site owned, leased, or operated by any Savannah Entity
or any of its Operating Properties or Participation Facilities, except for such
Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a Savannah Material Adverse Effect, nor is
there any reasonable basis for any Litigation of a type described in this
sentence, except such as is not reasonably likely to have, individually or in
the aggregate, a Savannah Material Adverse Effect.
(c) During the period of (i) any Savannah Entity's ownership
or operation of any of their respective current properties, (ii) any Savannah
Entity's participation in the management of any Participation Facility, or (iii)
any Savannah Entity's holding of a security interest in a Operating Property,
there have been no releases, discharges, spillages, or disposals of Hazardous
Material in, on, under, adjacent to, or affecting (or potentially affecting)
such properties, except such as are not reasonably likely to have, individually
or in the aggregate, a Savannah Material Adverse Effect. Prior to the period of
(i) any Savannah Entity's ownership or operation of any of their respective
current properties, (ii) any Savannah Entity's participation in the management
of any Participation Facility, or (iii) any Savannah Entity's holding of a
security interest in a Operating Property, to the Knowledge of Savannah, there
were no releases, discharges, spillages, or disposals of Hazardous Material in,
on, under, or affecting any such property, Participation Facility or Operating
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Savannah Material Adverse Effect.
6.13 Compliance with Laws. Savannah is duly registered as a
bank holding company under the BHC Act. Each Savannah Entity has in effect all
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Permits necessary for it to own, lease or operate its material Assets and to
carry on its business as now conducted, except for those Permits the absence of
which are not reasonably likely to have, individually or in the aggregate, a
Savannah Material Adverse Effect, and there has occurred no Default under any
such Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Savannah Material Adverse Effect. Except as
disclosed in Section 6.13 of the Savannah Disclosure Memorandum, none of the
Savannah Entities:
(a) is in Default under any of the provisions of its Articles
of Incorporation or Bylaws (or other governing instruments); or
(b) is in Default under any Laws, Orders or Permits applicable
to its business or employees conducting its business, except for Defaults which
are not reasonably likely to have, individually or in the aggregate, a Savannah
Material Adverse Effect; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting that
any Savannah Entity is not in compliance with any of the Laws or Orders which
such governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have, individually or in the aggregate, a
Savannah Material Adverse Effect, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Savannah Material Adverse Effect, or (iii) requiring any Savannah
Entity to enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment or memorandum of understanding, or to
adopt any Board resolution or similar undertaking, which restricts materially
the conduct of its business, or in any manner relates to its capital adequacy,
its credit or reserve policies, its management, or the payment of dividends.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to Bryan.
6.14 Labor Relations. No Savannah Entity is the subject of any
Litigation asserting that it or any other Savannah Entity has committed an
unfair labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to compel it or any other Savannah Entity to
bargain with any labor organization as to wages or conditions of employment, nor
is any Savannah Entity party to any collective bargaining agreement, nor is
there any strike or other labor dispute involving any Savannah Entity, pending
or threatened, or to the Knowledge of Savannah, is there any activity involving
any Savannah Entity's employees seeking to certify a collective bargaining unit
or engaging in any other organization activity.
6.15 Employee Benefit Plans.
(a) Savannah has disclosed in Section 6.15 of the Savannah
Disclosure Memorandum, and has delivered or made available to Bryan prior to the
execution of this Agreement copies in each case of all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by any Savannah Entity or ERISA
Affiliate thereof for the benefit of employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries and under which
employees, retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries are eligible to participate (collectively, the "Savannah
Benefit Plans"). Any of the Savannah Benefit Plans which is an "employee pension
benefit plan," as that term is defined in Section 3(2) of ERISA, is referred to
herein as a "Savannah ERISA Plan." Each Savannah ERISA Plan which is also a
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"defined benefit plan" (as defined in Section 414(j) of the Internal Revenue
Code) is referred to herein as a "Savannah Pension Plan." No Savannah Pension
Plan is or has been a multiemployer plan within the meaning of Section 3(37) of
ERISA.
(b) All Savannah Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Savannah Material Adverse Effect. Each
Savannah ERISA Plan which is intended to be qualified under Section 401(a) of
the Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and Savannah is not aware of any circumstances likely
to result in revocation of any such favorable determination letter. No Savannah
Entity has engaged in a transaction with respect to any Savannah Benefit Plan
that, assuming the taxable period of such transaction expired as of the date
hereof, would subject any Savannah Entity to a Tax imposed by either Section
4975 of the Internal Revenue Code or Section 502(i) of ERISA in amounts which
are reasonably likely to have, individually or in the aggregate, a Savannah
Material Adverse Effect.
(c) No Savannah Pension Plan has any "unfunded current
liability," as that term is defined in Section 302(d)(8)(A) of ERISA, based on
actuarial assumptions set forth for such plan's most recent actuarial valuation.
Since the date of the most recent actuarial valuation, there has been (i) no
material change in the financial position of a Savannah Pension Plan, (ii) no
change in the actuarial assumptions with respect to any Savannah Pension Plan,
and (iii) no increase in benefits under any Savannah Pension Plan as a result of
plan amendments or changes in applicable Law which is reasonably likely to have,
individually or in the aggregate, a Savannah Material Adverse Effect or
materially adversely affect the funding status of any such plan. Neither any
Savannah Pension Plan nor any "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any Savannah
Entity, or the single-employer plan of any ERISA Affiliate has an "accumulated
funding deficiency" within the meaning of Section 412 of the Internal Revenue
Code or Section 302 of ERISA, which is reasonably likely to have a Savannah
Material Adverse Effect. No Savannah Entity has provided, or is required to
provide, security to a Savannah Pension Plan or to any single-employer plan of
an ERISA Affiliate pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) Within the six-year period preceding the Effective Time,
no Liability under Subtitle C or D of Title IV of ERISA has been or is expected
to be incurred by any Savannah Entity with respect to any ongoing, frozen or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have a Savannah Material
Adverse Effect. No Savannah Entity has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate), which
Liability is reasonably likely to have a Savannah Material Adverse Effect. No
notice of a "reportable event," within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived, has been required to
be filed for any Savannah Pension Plan or by any ERISA Affiliate within the
12-month period ending on the date hereof.
(e) Except as disclosed in Section 6.15 of the Savannah
Disclosure Memorandum, no Savannah Entity has any Liability for retiree health
and life benefits under any of the Savannah Benefit Plans and there are no
restrictions on the rights of such Savannah Entity to amend or terminate any
such retiree health or benefit Plan without incurring any Liability thereunder,
which Liability is reasonably likely to have a Savannah Material Adverse Effect.
(f) Except as disclosed in Section 6.15 of the Savannah
Disclosure Memorandum, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any Savannah Entity
from any Savannah Entity under any Savannah Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any Savannah Benefit Plan, or
(iii) result in any acceleration of the time of payment or vesting of any such
benefit, where such payment, increase, or acceleration is reasonably likely to
have, individually or in the aggregate, a Savannah Material Adverse Effect.
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(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any Savannah Entity and their respective beneficiaries,
other than entitlements accrued pursuant to funded retirement plans subject to
the provisions of Section 412 of the Internal Revenue Code or Section 302 of
ERISA, have been fully reflected on the Savannah Financial Statements to the
extent required by and in accordance with GAAP.
6.16 Material Contracts. Except as disclosed in Section 6.16
of the Savannah Disclosure Memorandum or otherwise reflected in the Savannah
Financial Statements, none of the Savannah Entities, nor any of their respective
Assets, businesses, or operations, is a party to, or is bound or affected by, or
receives benefits under, (i) any employment, severance, termination, consulting
or retirement Contract, (ii) any Contract relating to the borrowing of money by
any Savannah Entity or the guarantee by any Savannah Entity of any such
obligation (other than Contracts evidencing deposit liabilities, purchases of
federal funds, fully-secured repurchase agreements, and Federal Home Loan Bank
advances of depository institution Subsidiaries, trade payables and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
or (iii) any Contract which prohibits or restricts any Savannah Entity from
engaging in any business activities in any geographic area, line of business or
otherwise in competition with any other Person, (iv) any Contract between or
among Savannah Entities, (v) any Contract involving Intellectual Property (other
than Contracts entered into in the ordinary course with customers and
"shrink-wrap" software licenses), (vi) any Contract relating to the provision of
data processing, network communication, or other technical services to or by any
Savannah Entity, (vii) any Contract relating to the purchase or sale of any
goods or services (other than Contracts entered into in the ordinary course of
business and involving payments under any individual Contract not in excess of
$25,000), (viii) any exchange-traded or over-the-counter swap, forward, future,
option, cap, floor, or collar financial Contract, or any other interest rate or
foreign currency protection Contract not included on its balance sheet which is
a financial derivative Contract, and (ix) any other Contract or amendment
thereto that would be required to be filed as an exhibit to a Form 10-K filed by
Savannah with the SEC as of the date of this Agreement that has not been filed
as an exhibit to Savannah's Form 10-KSB filed for the fiscal year ended December
31, 1996, or in an SEC Document and identified to Bryan (together with all
Contracts referred to in Sections 6.10 and 6.15(a), the "Savannah Contracts").
With respect to each Savannah Contract and except as disclosed in Section 6.16
of the Savannah Disclosure Memorandum: (i) the Contract is in full force and
effect; (ii) no Savannah Entity is in Default thereunder, other than Defaults
which are not reasonably likely to have, individually or in the aggregate, a
Savannah Material Adverse Effect; (iii) no Savannah Entity has repudiated or
waived any material provision of any such Contract; and (iv) no other party to
any such Contract is, to the Knowledge of Savannah, in Default in any respect,
other than Defaults which are not reasonably likely to have, individually or in
the aggregate, a Savannah Material Adverse Effect, or has repudiated or waived
any material provision thereunder. All of the indebtedness of any Savannah
Entity for money borrowed is prepayable at any time by such Savannah Entity
without penalty or premium.
6.17 Legal Proceedings. There is no Litigation instituted or
pending, or, to the Knowledge of Savannah, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against any Savannah Entity,
or against any director, employee or employee benefit plan of any Savannah
Entity, or against any Asset, interest, or right of any of them, that is
reasonably likely to have, individually or in the aggregate, a Savannah Material
Adverse Effect, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any Savannah
Entity, that are reasonably likely to have, individually or in the aggregate, a
Savannah Material Adverse Effect. Section 6.17 of the Savannah Disclosure
Memorandum contains a summary of all Litigation as of the date of this Agreement
to which any Savannah Entity is a party and which names a Savannah Entity as a
defendant or cross-defendant or for which any Savannah Entity has any potential
Liability.
6.18 Reports. Since January 1, 1993, or the date of
organization if later, each Savannah Entity has timely filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with Regulatory Authorities (except, in
the case of state securities authorities, failures to file which are not
reasonably likely to have, individually or in the aggregate, a Savannah Material
Adverse Effect). As of their respective dates, each of such reports and
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2-24
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its respective
date, each such report and document did not, in all material respects, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
6.19 Statements True and Correct. None of the information
supplied or to be supplied by any Savannah Entity or any Affiliate thereof for
inclusion in the Registration Statement to be filed by Savannah with the SEC,
will, when the Registration Statement becomes effective, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein not misleading. None of the information supplied
or to be supplied by any Savannah Entity or any Affiliate thereof for inclusion
in the Joint Proxy Statement to be mailed to each Party's shareholders in
connection with the Shareholders' Meetings, and any other documents to be filed
by any Savannah Entity or any Affiliate thereof with the SEC or any other
Regulatory Authority in connection with the transactions contemplated hereby,
will, at the respective time such documents are filed, and with respect to the
Joint Proxy Statement, when first mailed to the shareholders of Bryan and
Savannah, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case of
the Joint Proxy Statement or any amendment thereof or supplement thereto, at the
time of the Shareholders' Meetings, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Shareholders' Meetings. All documents that any Savannah Entity or
any Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
6.20 Accounting, Tax and Regulatory Matters. No Savannah
Entity or any Affiliate thereof has taken or agreed to take any action or has
any Knowledge of any fact or circumstance that is reasonably likely to (i)
prevent the Merger from qualifying for pooling-of-interests accounting treatment
or as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, or (ii) materially impede or delay receipt of any Consents of
Regulatory Authorities referred to in Section 9.1(b) or result in the imposition
of a condition or restriction of the type referred to in the last sentence of
such Section.
6.21 State Takeover Laws. Each Savannah Entity has taken all
necessary action to exempt the transactions contemplated by this Agreement from,
or if necessary to challenge the validity or applicability of, any applicable
"moratorium," "fair price," "business combination," "control share," or other
anti-takeover Laws (collectively, "Takeover Laws"), including Sections 14-2-1111
and 14-2-1132 of the GBCC.
6.22 Charter Provisions. Each Savannah Entity has taken all
action so that the entering into of this Agreement and the Savannah Stock Option
Agreement and the consummation of the Merger and the other transactions
contemplated hereby and thereby, including the acquisition of shares pursuant
to, or other exercise of rights under, the Savannah Stock Option Agreement, do
not and will not result in the grant of any rights to any Person under the
Articles of Incorporation, Bylaws or other governing instruments of any Savannah
Entity or restrict or impair the ability of Bryan or any Bryan shareholder to
vote, or otherwise to exercise the rights of a shareholder with respect to,
shares of Savannah Common Stock that may be directly or indirectly acquired or
controlled by them.
6.23 Board Recommendation. The Board of Directors of Savannah,
at a meeting duly called and held, has by unanimous vote of the directors
present (who constituted all of the directors then in office) (i) determined
that this Agreement and the transactions contemplated hereby, including the
Merger, and the Savannah Stock Option Agreement and the transactions
contemplated thereby, taken together, are fair to and in the best interests of
the shareholders and (ii) resolved to recommend that the holders of the shares
of Savannah Common Stock approve this Agreement.
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ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Each Party. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written consent of the other Party shall have been
obtained, and except as otherwise expressly contemplated herein, each Party
shall and shall cause each of its Subsidiaries to (a) operate its business only
in the usual, regular, and ordinary course, (b) preserve intact its business
organization and Assets and maintain its rights and franchises, and (c) take no
action which would (i) materially adversely affect the ability of either Party
to obtain any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentences of Section 9.1(b) or 9.1(c), or (ii) materially adversely affect the
ability of either Party to perform its covenants and agreements under this
Agreement.
7.2 Negative Covenants of Bryan. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written consent of Savannah shall have been
obtained, which consent shall not be unreasonably withheld, and except as
otherwise expressly contemplated herein, Bryan covenants and agrees that it will
not do or agree or commit to do, or permit any of its Subsidiaries to do or
agree or commit to do, any of the following:
(a) amend the Articles of Incorporation, Bylaws or other
governing instruments of any Bryan Entity, or
(b) incur any additional debt obligation or other obligation
for borrowed money (other than indebtedness of a Bryan Entity to another Bryan
Entity) in excess of an aggregate of $50,000 (for the Bryan Entities on a
consolidated basis) except in the ordinary course of the business of Bryan
Subsidiaries consistent with past practices (which shall include, for Bryan
Subsidiaries that are depository institutions, creation of deposit liabilities,
purchases of federal funds, advances from the Federal Reserve Bank or Federal
Home Loan Bank, and entry into repurchase agreements fully secured by U.S.
government or agency securities), or impose, or suffer the imposition, on any
Asset of any Bryan Entity of any Lien or permit any such Lien to exist (other
than in connection with deposits, repurchase agreements, bankers acceptances,
"treasury tax and loan" accounts established in the ordinary course of business,
the satisfaction of legal requirements in the exercise of trust powers, and
Liens in effect as of the date hereof that are disclosed in the Bryan Disclosure
Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange
(other than exchanges in the ordinary course under employee benefit plans),
directly or indirectly, any shares, or any securities convertible into any
shares, of the capital stock of any Bryan Entity, or declare or pay any dividend
or make any other distribution in respect of Bryan's capital stock; provided,
that Bryan may (to the extent legally and contractually permitted to do so), but
shall not be obligated to, declare and pay a regular annual cash dividend on the
shares of Bryan Common Stock in accordance with pas practice disclosed in
Section 7.2(c) of the Bryan Disclosure Memorandum, but not in excess of $1.00
per share of Bryan Common Stock; or
(d) except for this Agreement, or pursuant to the Bryan Stock
Option Agreement, or pursuant to the exercise of stock options outstanding as of
the date hereof and pursuant to the terms thereof in existence on the date
hereof, or as disclosed in Section 7.2(d) of the Bryan Disclosure Memorandum,
issue, sell, pledge, encumber, authorize the issuance of, enter into any
Contract to issue, sell, pledge, encumber, or authorize the issuance of, or
otherwise permit to become outstanding, any additional shares of Bryan Common
Stock or any other capital stock of any Bryan Entity, or any stock appreciation
rights, or any option, warrant, or other Equity Right; or
(e) adjust, split, combine or reclassify any shares of Bryan
Common Stock or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of Bryan Common Stock, or sell, lease,
mortgage or otherwise dispose of or otherwise encumber (x) any shares of capital
stock of any Bryan Subsidiary (unless any such shares of stock are sold or
otherwise transferred to another Bryan Entity) or (y) any Asset having a book
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2-26
value in excess of $25,000 other than in the ordinary course of business for
reasonable and adequate consideration; or
(f) except for purchases of U.S. Treasury securities, U.S.
Government agency securities or obligations of the State of Georgia, or any
subdivisions thereof, which have maturities of seven years or less, purchase any
securities or make any material investment, either by purchase of stock of
securities, contributions to capital, Asset transfers, or purchase of any
Assets, in any Person other than a wholly owned Bryan Subsidiary, or otherwise
acquire direct or indirect control over any Person, other than in connection
with (i) internal reorganizations or consolidations involving existing
Subsidiaries, (ii) foreclosures in the ordinary course of business, (iii)
acquisitions of control by a depository institution Subsidiary in its fiduciary
capacity, or (iv)the creation of new wholly owned Subsidiaries organized to
conduct or continue activities otherwise permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the
employees or officers of any Bryan Entity, except in accordance with past
practice disclosed in Section 7.2(g) of the Bryan Disclosure Memorandum or as
required by Law; pay any severance or termination pay or any bonus other than
pursuant to written policies or written Contracts in effect on the date of this
Agreement and disclosed in Section 7.2(g) of the Bryan Disclosure Memorandum;
and enter into or amend any severance agreements with officers of any Bryan
Entity; grant any material increase in fees or other increases in compensation
or other benefits to directors of any Bryan Entity except in accordance with
past practice disclosed in Section 7.2(g) of the Bryan Disclosure Memorandum; or
voluntarily accelerate the vesting of any stock options or other stock-based
compensation or employee benefits or other Equity Rights; or
(h) enter into or amend any employment Contract between any
Bryan Entity and any Person (unless such amendment is required by Law) that the
Bryan Entity does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time on
or after the Effective Time; or
(i) adopt any new employee benefit plan of any Bryan Entity or
terminate or withdraw from, or make any material change in or to, any existing
employee benefit plans of any Bryan Entity other than any such change that is
required by Law or that, in the opinion of counsel, is necessary or advisable to
maintain the tax qualified status of any such plan, or make any distributions
from such employee benefit plans, except as required by Law, the terms of such
plans or consistent with past practice; or
(j) make any significant change in any Tax or accounting
methods or systems of internal accounting controls, except as may be appropriate
to conform to changes in Tax Laws or regulatory accounting requirements or GAAP;
or
(k) commence any Litigation other than in accordance with past
practice, or settle any Litigation involving any Liability of any Bryan Entity
for material money damages or restrictions upon the operations of any Bryan
Entity; or
(l) except in the ordinary course of business, enter into,
modify, amend or terminate any material Contract (including any loan Contract
with an unpaid balance exceeding $25,000) or waive, release, compromise or
assign any material rights or claims.
7.3 Negative Covenants of Savannah. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written consent of Bryan shall have been obtained,
which consent shall not be unreasonably withheld, and except as otherwise
expressly contemplated herein, Savannah covenants and agrees that it will not do
or agree or commit to do, or permit any of its Subsidiaries to do or agree or
commit to do, any of the following:
(a) amend the Articles of Incorporation or Bylaws of Savannah,
in each case, in any manner adverse to the holders of Bryan Common Stock, or
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2-27
(b) incur any additional debt obligation or other obligation
for borrowed money (other than indebtedness of a Savannah Entity to another
Savannah Entity) in excess of an aggregate of $100,000 (for the Savannah
Entities on a consolidated basis) except in the ordinary course of the business
of Savannah Subsidiaries consistent with past practices (which shall include,
for Savannah Subsidiaries that are depository institutions, creation of deposit
liabilities, purchases of federal funds, advances from the Federal Reserve Bank
or Federal Home Loan Bank, and entry into repurchase agreements fully secured by
U.S. government or agency securities), or impose, or suffer the imposition, on
any Asset of any Savannah Entity of any Lien or permit any such Lien to exist
(other than in connection with deposits, repurchase agreements, bankers
acceptances, "treasury tax and loan" accounts established in the ordinary course
of business, the satisfaction of legal requirements in the exercise of trust
powers, and Liens in effect as of the date hereof that are disclosed in the
Savannah Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange
(other than exchanges in the ordinary course under employee benefit plans),
directly or indirectly, any shares, or any securities convertible into any
shares, of the capital stock of any Savannah Entity, or declare or pay any
dividend or make any other distribution in respect of Savannah's capital stock,
provided that Savannah may (to the extent legally and contractually permitted to
do so), but shall not be obligated to, declare and pay regular quarterly cash
dividends on the shares of Savannah Common Stock in accordance with past
practice disclosed in Section 7.3(c) of the Savannah Disclosure Memorandum, but
not in excess of $0.12 per share of Savannah Common Stock; or
(d) except for this Agreement, or pursuant to the Savannah
Stock Option Agreement, or pursuant to the exercise of stock options outstanding
as of the date hereof and pursuant to the terms thereof in existence on the date
hereof, or as disclosed in Section 7.3(d) of the Savannah Disclosure Memorandum,
issue, sell, pledge, encumber, authorize the issuance of, enter into any
Contract to issue, sell, pledge, encumber, or authorize the issuance of, or
otherwise permit to become outstanding, any additional shares of Savannah Common
Stock or any other capital stock of any Savannah Entity, or any stock
appreciation rights, or any option, warrant, conversion, or other Equity Right;
or
(e) adjust, split, combine or reclassify any shares of
Savannah Common Stock or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of Savannah Common Stock or sell,
lease, mortgage or otherwise dispose of or otherwise encumber any shares of
capital stock of any Savannah Subsidiary (unless any such shares of stock are
sold or otherwise transferred to another Savannah Entity) or any Asset having a
book value in excess of $25,000 other than in the ordinary course of business
for reasonable and adequate consideration; or
(f) except for purchases of U.S. Treasury securities, U.S.
Government agency securities or obligations of the State of Georgia, or any
subdivisions thereof, which have maturities of seven years or less, purchase any
securities or make any material investment, either by purchase of stock of
securities, contributions to capital, Asset transfers, or purchase of any
Assets, in any Person other than a wholly owned Savannah Subsidiary, or
otherwise acquire direct or indirect control over any Person, other than in
connection with (i) internal reorganizations or consolidations involving
existing Subsidiaries, (ii) foreclosures in the ordinary course of business,
(iii) acquisitions of control by a depository institution Subsidiary in its
fiduciary capacity, or (iv) the creation of new wholly owned Subsidiaries
organized to conduct or continue activities otherwise permitted by this
Agreement; or
(g) grant any increase in compensation or benefits to the
employees or officers of any Savannah Entity, except in accordance with past
practice disclosed in Section 7.3(g) of the Savannah Disclosure Memorandum or as
required by Law; pay any severance or termination pay or any bonus other than
pursuant to written policies or written Contracts in effect on the date of this
Agreement and disclosed in Section 7.3(g) of the Savannah Disclosure Memorandum
or the provisions of any applicable program or plan adopted by its Board of
Directors prior to the date of this Agreement; enter into or amend any severance
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2-28
agreements with officers of any Savannah Entity; grant any material increase in
fees or other increases in compensation or other benefits to directors of any
Savannah Entity except in accordance with past practice disclosed in Section
7.3(g) of the Savannah Disclosure Memorandum; or voluntarily accelerate the
vesting of any stock options or other stock-based compensation or employee
benefits or other Equity Rights; or
(h) enter into or amend any employment Contract between any
Savannah Entity and any Person (unless such amendment is required by Law) that
the Savannah Entity does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time on
or after the Effective Time;
(i) adopt any new employee benefit plan of any Savannah Entity
or terminate or withdraw from, or make any material change in or to, any
existing employee benefit plans of any Savannah Entity other than any such
change that is required by Law or that, in the opinion of counsel, is necessary
or advisable to maintain the tax qualified status of any such plan, or make any
distributions from such employee benefit plans except as required by Law, the
terms of such plans, or consistent with past practice; or
(j) make any significant change in any Tax or accounting
methods or systems of internal accounting controls, except as may be appropriate
to conform to changes in applicable Tax Laws or regulatory accounting
requirements or GAAP; or
(k) commence any Litigation other than in accordance with past
practice, or settle any Litigation involving any Liability of any Savannah
Entity for material money damages or restrictions upon the operations of any
Savannah Entity; or
(l) except in the ordinary course of business, enter into,
modify, amend or terminate any material Contract (including any loan Contract
with an unpaid balance exceeding $25,000) or waive, release, compromise or
assign any material rights or claims.
7.4 Adverse Changes in Condition. Each Party agrees to give
written noticepromptly to the other Party upon becoming aware of the occurrence
or impending occurrence of any event or circumstance relating to it or any of
its Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Bryan Material Adverse Effect or a Savannah Material Adverse
Effect, as applicable, or (ii) would cause or constitute a material breach of
any of its representations, warranties, or covenants contained herein, and to
use its reasonable efforts to prevent or promptly to remedy the same.
7.5 Reports. Each Party and its Subsidiaries shall file all
reports required to be filed by it with Regulatory Authorities between the date
of this Agreement and the Effective Time and shall deliver to the other Party
copies of all such reports promptly after the same are filed. If financial
statements are contained in any such reports filed with the SEC, such financial
statements will fairly present the consolidated financial position of the entity
filing such statements as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows for the periods then
ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not material). As
of their respective dates, such reports filed with the SEC will comply in all
material respects with the Securities Laws and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Shareholder
Approval. As soon as reasonably practicable after execution of this Agreement,
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2-29
Savannah shall prepare and file the Registration Statement with the SEC, and
shall use its reasonable efforts to cause the Registration Statement to become
effective under the 1933 Act and take any action required to be taken under the
applicable state Blue Sky or securities Laws in connection with the issuance of
the shares of Savannah Common Stock upon consummation of the Merger. Bryan shall
cooperate in the preparation and filing of the Registration Statement and shall
furnish all information concerning it and the holders of its capital stock as
Savannah may reasonably request in connection with such action. Bryan shall call
a Shareholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and such other related matters as it
deems appropriate. Savannah shall call a Shareholders' Meeting, to be held as
soon as reasonably practicable after the Registration Statement is declared
effective by the SEC, for the purpose of voting upon approval of the issuance of
shares of Savannah Common Stock pursuant to the Merger and such other related
matters as it deems appropriate. In connection with the Shareholders' Meetings,
(i) Bryan and Savannah shall prepare and file with the SEC a Joint Proxy
Statement and mail such Joint Proxy Statement to their respective shareholders,
(ii) the Parties shall furnish to each other all information concerning them
that they may reasonably request in connection with such Joint Proxy Statement,
(iii) the Board of Directors of Bryan and Savannah shall recommend to their
respective shareholders the approval of the matters submitted for approval, and
(iv) the Board of Directors and officers of Bryan and Savannah shall use their
reasonable efforts to obtain such shareholders' approval. Savannah and Bryan
shall make all necessary filings with respect to the Merger under the Securities
Laws.
8.2 Exchange Listing. Savannah shall use its reasonable
efforts to list, prior to the Effective Time, on the Nasdaq National Market the
shares of Savannah Common Stock to be issued to the holders of Bryan Common
Stock pursuant to the Merger, and Savannah shall give all notices and make all
filings with the Nasdaq National Market required in connection with the
transactions contemplated herein.
8.3 Applications. Savannah shall prepare and file, and Bryan
shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement. The
Parties shall deliver to each other copies of all filings, correspondence and
orders to and from all Regulatory Authorities in connection with the
transactions contemplated hereby.
8.4 Filings with State Offices. Upon the terms and subject to
the conditions of this Agreement, Savannah shall execute and file the
Certificate of Merger with the Secretary of State of the State of Georgia in
connection with the Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the
terms and conditions of this Agreement, each Party agrees to use, and to cause
its Subsidiaries to use, its reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement or the respective Stock
Option Agreements. Each Party shall use, and shall cause each of its
Subsidiaries to use, its reasonable efforts to obtain all Consents necessary or
desirable for the consummation of the transactions contemplated by this
Agreement.
8.6 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party shall keep the
other Party advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
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2-30
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be reasonably
related to the transactions contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall affect
the representations and warranties of the other Party.
(b) In addition to the Parties' respective obligations under
the Confidentiality Agreement, which is hereby reaffirmed and adopted, and
incorporated by reference herein each Party shall, and shall cause its advisers
and agents to, maintain the confidentiality of all confidential information
furnished to it by the other Party concerning its and its Subsidiaries'
businesses, operations, and financial positions and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return or certify the destruction of
all documents and copies thereof, and all work papers containing confidential
information received from the other Party.
(c) Each Party agrees to give the other Party notice as soon
as practicable after any determination by it of any fact or occurrence relating
to the other Party which it has discovered through the course of its
investigation and which represents, or is reasonably likely to represent, either
a material breach of any representation, warranty, covenant or agreement of the
other Party or which has had or is reasonably likely to have a Bryan Material
Adverse Effect or a Savannah Material Adverse Effect, as applicable.
8.7 Press Releases. Prior to the Effective Time, Bryan and
Savannah shall consult with each other as to the form and substance of any press
release or other public disclosure materially related to this Agreement or any
other transaction contemplated hereby; provided, that nothing in this Section
8.7 shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.8 Certain Actions. Except with respect to this Agreement and
the transactions contemplated hereby, neither Party nor any Affiliate thereof
nor any Representatives thereof retained by either Party shall directly or
indirectly solicit any Acquisition Proposal by any Person. Neither Party nor any
Affiliate or Representative thereof shall furnish any non-public information
that it is not legally obligated to furnish, negotiate with respect to, or enter
into any Contract with respect to, any Acquisition Proposal, but a Party may
communicate information about such an Acquisition Proposal to its shareholders
if and to the extent that it is required to do so in order to comply with
obligations under Section 14 of the 1934 Act. Each Party shall promptly advise
the other Party following the receipt of any Acquisition Proposal and the
details thereof, and advise the other Party of any developments with respect to
such Acquisition Proposal promptly upon the occurrence thereof.
8.9 Accounting and Tax Treatment. Each of the Parties
undertakes and agrees to use its reasonable efforts to cause the Merger, and to
take no action which would cause the Merger not, to qualify for treatment as a
pooling of interests for accounting purposes or as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code for federal income tax
purposes.
8.10 State Takeover Laws. Each Bryan Entity shall take all
necessary steps to exempt the transactions contemplated by this Agreement from,
or if necessary to challenge the validity or applicability of, any applicable
Takeover Law, including Sections 14-2-1111 and 14-2-1132 of the GBCC.
8.11 Charter Provisions. Each Bryan Entity shall take all
necessary action to ensure that the entering into of this Agreement and the
Bryan Stock Option Agreement and the consummation of the Merger and the other
transactions contemplated hereby do not and will not result in the grant of any
rights to any Person under the Articles of Incorporation, Bylaws or other
governing instruments of any Bryan Entity or restrict or impair the ability of
Savannah or any of its Subsidiaries to vote, or otherwise to exercise the rights
of a shareholder with respect to, shares of any Bryan Entity that may be
directly or indirectly acquired or controlled by them.
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2-31
8.12 Agreement of Affiliates. Bryan has disclosed in Section
8.12 of the Bryan Disclosure Memorandum all Persons whom it reasonably believes
is an "affiliate" of Bryan for purposes of Rule 145 under the 1933 Act. Bryan
shall use its reasonable efforts to cause each such Person to deliver to
Savannah not later than 30 days after the date of this Agreement, a written
agreement, substantially in the form of Exhibit 4, providing that such Person
will not sell, pledge, transfer, or otherwise dispose of the shares of Bryan
Common Stock held by such Person except as contemplated by such agreement or by
this Agreement and will not sell, pledge, transfer, or otherwise dispose of the
shares of Savannah Common Stock to be received by such Person upon consummation
of the Merger except in compliance with applicable provisions of the 1933 Act
and the rules and regulations thereunder and, if the Merger is accounted for by
the pooling-of-interests method of accounting, until such time as financial
results covering at least 30 days of combined operations of Savannah and Bryan
have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies. If the Merger is accounted for
using the pooling-of-interests method of accounting, shares of Savannah Common
Stock issued to such affiliates of Bryan in exchange for shares of Bryan Common
Stock shall not be transferable until such time as financial results covering at
least 30 days of combined operations of Savannah and Bryan have been published
within the meaning of Section 201.01 of the SEC's Codification of Financial
Reporting Policies, regardless of whether each such affiliate has provided the
written agreement referred to in this Section 8.12 (and Savannah shall be
entitled to place restrictive legends upon certificates for shares of Savannah
Common Stock issued to affiliates of Bryan pursuant to this Agreement to enforce
the provisions of this Section 8.12). Savannah shall not be required to maintain
the effectiveness of the Registration Statement under the 1933 Act for the
purposes of resale of Savannah Common Stock by such affiliates.
8.13 Employee Benefits and Contracts. Following the Effective
Time, Savannah shall provide generally to officers and employees of the Bryan
Entities employee benefits under employee benefit and welfare plans (other than
stock option or other plans involving the potential issuance of Savannah Common
Stock), on terms and conditions which when taken as a whole are substantially
similar to those currently provided by the Savannah Entities to their similarly
situated officers and employees. For purposes of participation, vesting and
(except in the case of Savannah retirement plans) benefit accrual under
Savannah's employee benefit plans, the service of the employees of the Bryan
Entities prior to the Effective Time shall be treated as service with a Savannah
Entity participating in such employee benefit plans. Savannah also shall, and
shall cause its Subsidiaries to, honor in accordance with their terms all
employment, severance, consulting and other compensation Contracts disclosed in
Section 8.13 of the Bryan Disclosure Memorandum between any Bryan Entity and any
current or former director, officer, or employee thereof, and all provisions for
vested benefits or other vested amounts earned or accrued through the Effective
Time under the Bryan Benefit Plans.
8.14 Indemnification.
(a) For a period of six years after the Effective Time,
Savannah shall indemnify, defend and hold harmless the present and former
directors, officers, employees and agents of the Bryan Entities (each, an
"Indemnified Party") against all Liabilities arising out of actions or omissions
arising out of the Indemnified Party's service or services as directors,
officers, employees or agents of Bryan or, at Bryan's request, of another
corporation, partnership, joint venture, trust or other enterprise occurring at
or prior to the Effective Time (including the transactions contemplated by this
Agreement) to the fullest extent permitted under Georgia Law and by Bryan's
Articles of Incorporation and Bylaws as in effect on the date hereof, including
provisions relating to advances of expenses incurred in the defense of any
Litigation and whether or not any Savannah Entity is insured against any such
matter. Without limiting the foregoing, in any case in which approval by the
Surviving Corporation is required to effectuate any indemnification, the
Surviving Corporation shall direct, at the election of the Indemnified Party,
that the determination of any such approval shall be made by independent counsel
mutually agreed upon between Savannah and the Indemnified Party.
(b) Savannah shall use its reasonable efforts (and Bryan shall
cooperate prior to the Effective Time in these efforts) to maintain in effect
for a period of three years after the Effective Time Bryan's existing directors'
and officers' liability insurance policy (provided that Savannah may substitute
therefor (i) policies of at least the same coverage and amounts containing terms
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and conditions which are substantially no less advantageous or (ii) with the
consent of Bryan given prior to the Effective Time, any other policy) with
respect to claims arising from facts or events which occurred prior to the
Effective Time and covering persons who are currently covered by such insurance;
provided, that the Surviving Corporation shall not be obligated to make
aggregate premium payments for such three-year period in respect of such policy
(or coverage replacing such policy) which exceed, for the portion related to
Bryan's directors and officers, 150% of the annual premium payments on Bryan's
current policy in effect as of the date of this Agreement (the "Maximum
Amount"). If the amount of the premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, Savannah shall use its reasonable
efforts to maintain the most advantageous policies of directors' and officers'
liability insurance obtainable for a premium equal to the Maximum Amount.
(d) If the Surviving Corporation or any successors or assigns
shall consolidate with or merge into any other Person and shall not be the
continuing or surviving Person of such consolidation or merger or shall transfer
all or substantially all of its assets to any Person, then and in each case,
proper provision shall be made so that the successors and assigns of the
Surviving Corporation shall assume the obligations set forth in this Section
8.14.
(e) The provisions of this Section 8.14 are intended to be for
the benefit of and shall be enforceable by, each Indemnified Party and their
respective heirs and representatives.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by both Parties pursuant to Section
11.6:
(a) Shareholder Approval. The shareholders of Bryan shall have
approved this Agreement, and the consummation of the transactions contemplated
hereby, including the Merger, as and to the extent required by Law, by the
provisions of any governing instruments, or by the rules of the Nasdaq National
Market. The shareholders of Savannah shall have approved the issuance of shares
of Savannah Common Stock pursuant to the Merger, as and to the extent required
by Law, by the provisions of any governing instruments, or by the rules of the
Nasdaq National Market.
(b) Regulatory Approvals. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities required
for consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner (including requirements relating to the raising of
additional capital or the disposition of Assets) which in the reasonable
judgment of the Board of Directors of either Party would so materially adversely
impact the economic or business benefits of the transactions contemplated by
this Agreement that, had such condition or requirement been known, such Party
would not, in its reasonable judgment, have entered into this Agreement.
(c) Consents and Approvals. Each Party shall have obtained any
and all Consents required for consummation of the Merger (other than those
referred to in Section 9.1(b)) or for the preventing of any Default under any
Contract or Permit of such Party which, if not obtained or made, is reasonably
likely to have, individually or in the aggregate, a Bryan Material Adverse
Effect or a Savannah Material Adverse Effect, as applicable. No Consent so
obtained which is necessary to consummate the transactions contemplated hereby
shall be conditioned or restricted in a manner which in the reasonable judgment
of the Board of Directors of either Party would so materially adversely impact
the economic or business benefits of the transactions contemplated by this
Agreement that, had such condition or requirement been known, such Party would
not, in its reasonable judgment, have entered into this Agreement.
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2-33
(d) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether temporary, preliminary or
permanent) or taken any other action which prohibits, restricts or makes illegal
consummation of the transactions contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall
be effective under the 1933 Act, no stop orders suspending the effectiveness of
the Registration Statement shall have been issued, no action, suit, proceeding
or investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of Savannah Common Stock issuable pursuant to the Merger shall have been
received.
(f) Exchange Listing. The shares of Savannah Common Stock
issuable pursuant to the Merger shall have been approved for listing on the
Nasdaq National Market.
(g) Pooling Letters. Each of the Parties shall have received
letters, dated as of the date of filing of the Registration Statement with the
SEC and as of the Effective Time, addressed to Savannah, in form and substance
reasonably acceptable to Savannah, from Arthur Andersen LLP to the effect that
the Merger will qualify for pooling-of-interests accounting treatment. Each of
the Parties also shall have received letters, dated as of the date of filing of
the Registration Statement with the SEC and as of the Effective Time, addressed
to Savannah, in form and substance reasonably acceptable to Savannah, from
Tiller, Stewart & Company, LLC to the effect that such firm is not aware of any
matters relating to Bryan and its Subsidiaries which would preclude the Merger
from qualifying for pooling-of-interests accounting treatment.
(h) Tax Matters. Each Party shall have received a written
opinion of counsel from Alston & Bird LLP, in form reasonably satisfactory to
such Parties (the "Tax Opinion"), to the effect that (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, (ii) the exchange in the Merger of Bryan Common Stock for Savannah
Common Stock will not give rise to gain or loss to the shareholders of Bryan
with respect to such exchange (except to the extent of any cash received), and
(iii) none of Bryan or Savannah will recognize gain or loss as a consequence of
the Merger (except for amounts resulting from any required change in accounting
methods and any income and deferred gain recognized pursuant to Treasury
regulations issued under Section 1502 of the Internal Revenue Code). In
rendering such Tax Opinion, such counsel shall be entitled to rely upon
representations of officers of Bryan and Savannah reasonably satisfactory in
form and substance to such counsel.
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9.2 Conditions to Obligations of Savannah. The obligations of
Savannah to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Savannah pursuant to Section 11.6(a):
(a) Representations and Warranties. For purposes of this
Section 9.2(a), the accuracy of the representations and warranties of Bryan set
forth in this Agreement shall be assessed as of the date of this Agreement and
as of the Effective Time with the same effect as though all such representations
and warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties set forth in
Section 5.3 shall be true and correct (except for inaccuracies which are de
minimus in amount). The representations and warranties set forth in Sections
5.20, 5.21, and 5.22 shall be true and correct in all material respects. There
shall not exist inaccuracies in the representations and warranties of Bryan set
forth in this Agreement (including the representations and warranties set forth
in Sections 5.3, 5.20, 5.21, and 5.22) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a Bryan Material Adverse
Effect; provided that, for purposes of this sentence only, those representations
and warranties which are qualified by references to "material" or "Material
Adverse Effect" or to the "Knowledge" of any Person shall be deemed not to
include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of
the agreements and covenants of Bryan to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) Certificates. Bryan shall have delivered to Savannah (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.1 as relates to Bryan and in Section 9.2(a)
and 9.2(b) have been satisfied, and (ii) certified copies of resolutions duly
adopted by Bryan's Board of Directors and shareholders evidencing the taking of
all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Savannah and its counsel
shall request.
(d) Affiliates Agreements. Savannah shall have received from
each affiliate of Bryan the affiliates letter referred to in Section 8.12, to
the extent necessary to assure in the reasonable judgment of Savannah that the
transactions contemplated hereby will qualify for pooling-of-interests
accounting treatment.
9.3 Conditions to Obligations of Bryan. The obligations of
Bryan to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Bryan pursuant to Section 11.6(b):
(a) Representations and Warranties. For purposes of this
Section 9.3(a), the accuracy of the representations and warranties of Savannah
set forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective Time
(provided that representations and warranties which are confined to a specified
date shall speak only as of such date). The representations and warranties of
Savannah set forth in Section 6.3 shall be true and correct (except for
inaccuracies which are de minimus in amount). The representations and warranties
of Savannah set forth in Section 6.20 shall be true and correct in all material
respects. There shall not exist inaccuracies in the representations and
warranties of Savannah set forth in this Agreement (including the
representations and warranties set forth in Sections 6.3 and 6.20) such that the
aggregate effect of such inaccuracies has, or is reasonably likely to have, a
Savannah Material Adverse Effect; provided that, for purposes of this sentence
only, those representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.
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2-35
(b) Performance of Agreements and Covenants. Each and all of
the agreements and covenants of Savannah to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby prior to
the Effective Time shall have been duly performed and complied with in all
material respects.
(c) Certificates. Savannah shall have delivered to Bryan (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.1 as relates to Savannah and in Section 9.3(a)
and 9.3(b) have been satisfied, and (ii) certified copies of resolutions duly
adopted by Savannah's Board of Directors and shareholders evidencing the taking
of all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Bryan and its counsel
shall request.
(d) Employment Agreements. Savannah has executed employment
agreements with E. James Burnsed and George Michael Odom, Jr. in the form
attached hereto as Exhibit 9.3(d).
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of Bryan and Savannah or both, this Agreement may be terminated and
the Merger abandoned at any time prior to the Effective Time:
(a) By mutual consent of Savannah and Bryan; or
(b) By either Party (provided that the terminating Party is
not then in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by the
other Party of any representation or warranty contained in this Agreement which
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching Party of such breach and which breach is reasonably
likely, in the opinion of the non-breaching Party, to have, individually or in
the aggregate, a Bryan Material Adverse Effect or a Savannah Material Adverse
Effect, as applicable, on the breaching Party; or
(c) By either Party (provided that the terminating Party is
not then in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by the
other Party of any covenant or agreement contained in this Agreement which
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching Party of such breach; or
(d) By either Party (provided that the terminating Party is
not then in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event (i) any Consent of any
Regulatory Authority required for consummation of the Merger and the other
transactions contemplated hereby shall have been denied by final nonappealable
action of such authority or if any action taken by such authority is not
appealed within the time limit for appeal, or (ii) the shareholders of Bryan or
Savannah fail to vote their approval of the matters relating to this Agreement
and the transactions contemplated hereby at the Shareholders' Meetings where
such matters were presented to such shareholders for approval and voted upon; or
(e) By either Party in the event that the Merger shall not
have been consummated by September 30, 1998, if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by any
breach of this Agreement by the Party electing to terminate pursuant to this
Section 10.1(e); or
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(f) By either Party (provided that the terminating Party is
not then in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event that any of the conditions
precedent to the obligations of such Party to consummate the Merger cannot be
satisfied or fulfilled by the date specified in Section 10.1(e).
10.2 Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section 10.1, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
10.2 and Article 11 and Section 8.6(b) shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 10.1(b), 10.1(c) or
10.1(f) shall not relieve the breaching Party from Liability for an uncured
willful breach of a representation, warranty, covenant, or agreement giving rise
to such termination. The Stock Option Agreements shall be governed by its own
terms as to its termination.
10.3 Non-Survival of Representations and Covenants. The
respective representations, warranties, obligations, covenants, and agreements
of the Parties shall not survive the Effective Time except this Section 10.3 and
Articles 1, 2, 3, 4 and 11 and Sections 8.12, 8.13 and 8.14.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms
set forth below shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Acquisition Proposal" with respect to a Party shall mean any
tender offer or exchange offer or any proposal for a merger, acquisition of
all of the stock or assets of, or other business combination involving the
acquisition of such Party or any of its Subsidiaries or the acquisition of a
substantial equity interest in, or a substantial portion of the assets of, such
Party or any of its Subsidiaries.
"Affiliate" of a Person shall mean: (i) any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person; (ii) any officer,
director, partner, employer, or direct or indirect beneficial owner of any 10%
or greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"Agreement" shall mean this Agreement and Plan of Merger,
including the Exhibits delivered pursuant hereto and incorporated herein by
reference.
"Assets" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the books
and records of such Person, and whether or not owned in the name of such Person
or any Affiliate of such Person and wherever located.
"BHC Act" shall mean the federal Bank Holding Company Act of
1956, as amended.
"Bryan Common Stock" shall mean the $1.00 par value common
stock of Bryan.
"Bryan Disclosure Memorandum" shall mean the written
information entitled "Bryan Bancorp of Georgia, Inc. Disclosure Memorandum"
delivered prior to the date of this Agreement to Savannah describing in
reasonable detail the matters contained therein and, with respect to each
disclosure made therein, specifically referencing each Section of this Agreement
under which such disclosure is being made. Information disclosed with respect to
one Section shall not be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto.
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"Bryan Entities" shall mean, collectively, Bryan and all Bryan
Subsidiaries.
"Bryan Financial Statements" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of Bryan as of
December 31, 1996 and 1995, and the related statements of income, changes in
shareholders' equity, and cash flows (including related notes and schedules, if
any) for each of the three fiscal years ended December 31, 1996, 1995 and 1994,
as filed by Bryan in SEC Documents, (ii) the consolidated balance sheets
(including related notes and schedules, if any) of Bryan as of December 31, 1997
and 1996, and the related statements of income, changes in shareholders' equity,
and cash flows (including related notes and schedules, if any) for each of the
three fiscal years ended December 31, 1997, 1996 and 1995, as delivered by Bryan
to Savannah prior to execution of this Agreement, and (iii) the consolidated
balance sheets of Bryan (including related notes and schedules, if any) and
related statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) included in SEC Documents
(including financial statements covering the periods in clause (ii) above) filed
with respect to periods ended subsequent to September 30, 1997.
"Bryan Material Adverse Effect" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of Bryan and its Subsidiaries, taken as a
whole, or (ii) the ability of Bryan to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement, provided that "Material Adverse Effect" shall not be deemed to
include the impact of (a) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental authorities,
(b) changes in generally accepted accounting principles or regulatory accounting
principles generally applicable to banks and their holding companies, (c)
actions and omissions of Bryan (or any of its Subsidiaries) taken with the prior
informed written Consent of Savannah in contemplation of the transactions
contemplated hereby, and (d) the direct effects of compliance with this
Agreement on the operating performance of Bryan, including expenses incurred by
Bryan in consummating the transactions contemplated by this Agreement.
"Bryan Subsidiaries" shall mean the Subsidiaries of Bryan,
which shall include the Bryan Subsidiaries described in Section 5.4 and any
corporation, bank, savings association, or other organization acquired as a
Subsidiary of Bryan in the future and held as a Subsidiary by Bryan at the
Effective Time.
"Certificate of Merger" shall mean the Certificate of Merger
to be executed by Savannah and filed with the Secretary of State of the State of
Georgia relating to the Merger as contemplated by Section 1.1.
"Closing Date"shall mean the date on which the Closing occurs.
"Confidentiality Agreement" shall mean that certain
Confidentiality Agreement, dated January 30, 1998, between Bryan and Savannah.
"Consent" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person pursuant to
any Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement,
arrangement, authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of any
kind or character, or other document to which any Person is a party or that is
binding on any Person or its capital stock, Assets or business.
"Default" shall mean (i) any breach or violation of, default
under, contravention of, or conflict with, any Contract, Law, Order, or Permit,
(ii) any occurrence of any event that with the passage of time or the giving of
notice or both would constitute a breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time or
the giving of notice would give rise to a right of any Person to exercise any
remedy or obtain any relief under, terminate or revoke, suspend, cancel, or
modify or change the current terms of, or renegotiate, or to accelerate the
maturity or performance of, or to increase or impose any Liability under, any
Contract, Law, Order, or Permit.
"Environmental Laws" shall mean all Laws relating to pollution
or protection of human health or the environment (including ambient air, surface
water, ground water, land surface, or subsurface strata) and which are
administered, interpreted, or enforced by the United States Environmental
Protection Agency and state and local agencies with jurisdiction over, and
including common law in respect of, pollution or protection of the environment,
including the Comprehensive Environmental Response Compensation and Liability
Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other Laws
relating to emissions, discharges, releases, or threatened releases of any
Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of any
Hazardous Material.
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"Equity Rights" shall mean all arrangements, calls,
commitments, Contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for, shares of the
capital stock of a Person or by which a Person is or may be bound to issue
additional shares of its capital stock or other Equity Rights.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Exhibits" 1 through 4, inclusive, shall mean the Exhibits so
marked, copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be referred to
in this Agreement and any other related instrument or document without being
attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"Hazardous Material" shall mean (i) any hazardous substance,
hazardous material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"Intellectual Property" shall mean copyrights, patents,
trademarks, service marks, service names, trade names, applications therefor,
technology rights and licenses, computer software (including any source or
object codes therefor or documentation relating thereto), trade secrets,
franchises, know-how, inventions, and other intellectual property rights.
"Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended, and the rules and regulations promulgated thereunder.
"Joint Proxy Statement" shall mean the proxy statement used by
Bryan and Savannah to solicit the approval of their respective shareholders of
the transactions contemplated by this Agreement, which shall include the
prospectus of Savannah relating to the issuance of the Savannah Common Stock to
holders of Bryan Common Stock.
"Knowledge" as used with respect to a Person (including
references to such Person being aware of a particular matter) shall mean the
personal knowledge after due inquiry of the chairman, president, chief financial
officer, chief accounting officer, chief operating officer, chief credit
officer, general counsel, any assistant or deputy general counsel, or any
senior, executive or other vice president of such Person and the knowledge of
any such persons obtained or which would have been obtained from a reasonable
investigation.
"Law" shall mean any code, law (including common law),
ordinance, regulation, reporting or licensing requirement, rule, or statute
applicable to a Person or its Assets, Liabilities, or business, including those
promulgated, interpreted or enforced by any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or expense
(including costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of notes,
bills, checks, and drafts presented for collection or deposit in the ordinary
course of business) of any type, whether accrued, absolute or contingent,
liquidated or unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
and payable, (ii) for depository institution Subsidiaries of a Party, pledges to
secure deposits and other Liens incurred in the ordinary course of the banking
business, and (iii) Liens which do not materially impair the use of or title to
the Assets subject to such Lien.
"Litigation" shall mean any action, arbitration, cause of
action, claim, complaint, criminal prosecution, governmental or other
examination or investigation, hearing, administrative or other proceeding
relating to or affecting a Party, its business, its Assets (including Contracts
related to it), or the transactions contemplated by this Agreement, but shall
not include regular, periodic examinations of depository institutions and their
Affiliates by Regulatory Authorities.
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"Material" for purposes of this Agreement shall be determined
in light of the facts and circumstances of the matter in question; provided that
any specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"Nasdaq National Market" shall mean the National Market System
of The Nasdaq Stock Market, Inc.
"Operating Property" shall mean any property owned, leased, or
operated by the Party in question or by any of its Subsidiaries or in which such
Party or Subsidiary holds a security interest or other interest (including an
interest in a fiduciary capacity), and, where required by the context, includes
the owner or operator of such property, but only with respect to such property.
"Order" shall mean any administrative decision or award,
decree, injunction, judgment, order, quasi-judicial decision or award, ruling,
or writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"Participation Facility" shall mean any facility or property
in which the Party in question or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such facility or
property.
"Party" shall mean either Bryan or Savannah, and "Parties"
shall mean both Bryan and Savannah.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing, franchise,
license, notice, permit, or right to which any Person is a party or that is or
may be binding upon or inure to the benefit of any Person or its securities,
Assets, or business.
"Person" shall mean a natural person or any legal, commercial
or governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"Registration Statement" shall mean the Registration Statement
on Form S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by Savannah
under the 1933 Act with respect to the shares of Savannah Common Stock to be
issued to the shareholders of Bryan in connection with the transactions
contemplated by this Agreement.
"Regulatory Authorities" shall mean, collectively, the SEC,
the Nasdaq National Market the Federal Trade Commission, the United States
Department of Justice, the Board of the Governors of the Federal Reserve System,
the Office of the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, the Department of Banking and Finance of the State of Georgia, and
all other federal, state, county, local or other governmental or regulatory
agencies, authorities (including self-regulatory authorities),
instrumentalities, commissions, boards or bodies having jurisdiction over the
Parties and their respective Subsidiaries.
"Representative" shall mean any investment banker, financial
advisor, attorney, accountant, consultant, or other representative engaged by a
Person.
"Savannah Common Stock" shall mean the $1.00 par value common
stock of Savannah.
"Savannah Disclosure Memorandum" shall mean the written
information entitled "The Savannah Bancorp, Inc. Disclosure Memorandum"
delivered prior to the date of this Agreement to Bryan describing in reasonable
detail the matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under which
such disclosure is being made. Information disclosed with respect to one Section
shall not be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto.
"Savannah Entities" shall mean, collectively, Savannah and all
Savannah Subsidiaries.
"Savannah Financial Statements" shall mean (i) the
consolidated balance sheets (including related notes and schedules, if any) of
Savannah as of December 31, 1996 and 1995, and the related statements of income,
changes in shareholders' equity, and cash flows (including
<PAGE>
2-40
related notes and schedules, if any) for each of the three fiscal years ended
December 31, 1996, 1995 and 1994, as filed by Savannah in SEC Documents, (ii)
the consolidated balance sheets (including related notes and schedules, if any)
of Savannah as of December 31, 1997 and 1996, and the related statements of
income, changes in shareholders' equity, and cash flows (including related notes
and schedules, if any) for each of the three fiscal years ended December 31,
1997, 1996 and 1995, as delivered by Savannah to Bryan prior to execution of
this Agreement, and (iii) the consolidated balance sheets of Savannah (including
related notes and schedules, if any) and related statements of income, changes
in shareholders' equity, and cash flows (including related notes and schedules,
if any) included in SEC Documents (including financial statements covering the
periods in clause (ii) above) filed with respect to periods ended subsequent to
September 30, 1997.
"Savannah Material Adverse Effect" shall mean an event, change
or occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of Savannah and its Subsidiaries, taken as a
whole, or (ii) the ability of Savannah to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement, provided that "Material Adverse Effect" shall not be deemed to
include the impact of (a) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental authorities,
(b) changes in generally accepted accounting principles or regulatory accounting
principles generally applicable to banks and their holding companies, (c)
actions and omissions of Savannah (or any of its Subsidiaries) taken with the
prior informed written Consent of Bryan in contemplation of the transactions
contemplated hereby, and (d) the direct effects of compliance with this
Agreement on the operating performance of Savannah, including expenses incurred
by Savannah in consummating the transactions contemplated by this Agreement.
"Savannah Subsidiaries" shall mean the Subsidiaries of
Savannah, which shall include the Savannah Subsidiaries described in Section 6.4
and any corporation, bank, savings association, or other organization acquired
as a Subsidiary of Savannah in the future and held as a Subsidiary by Savannah
at the Effective Time.
"SEC Documents" shall mean all forms, proxy statements,
registration statements, reports, schedules, and other documents filed, or
required to be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of 1940,
as amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"Shareholders' Meetings" shall mean the respective meetings of
the shareholders of Bryan and Savannah to be held pursuant to Section 8.1,
including any adjournment or adjournments thereof.
"Subsidiaries" shall mean all those corporations,
associations, or other business entities of which the entity in question either
(i) owns or controls 50% or more of the outstanding equity securities either
directly or through an unbroken chain of entities as to each of which 50% or
more of the outstanding equity securities is owned directly or indirectly by its
parent (provided, there shall not be included any such entity the equity
securities of which are owned or controlled in a fiduciary capacity), (ii) in
the case of partnerships, serves as a general partner, (iii) in the case
of a limited liability company, serves as a managing member, or (iv) otherwise
has the ability to elect a majority of the directors, trustees or managing
members thereof.
"Surviving Corporation" shall mean Savannah as the surviving
corporation resulting from the Merger.
"Tax Return" shall mean any report, return, information
return, or other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes a Party or its Subsidiaries.
"Tax" or "Taxes" shall mean any federal, state, county, local,
or foreign taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties, capital
stock, paid-up capital, profits, withholding, Social Security, single business
and unemployment, disability, real property, personal property, registration, ad
valorem, value added, alternative or add-on minimum, estimated, or other tax or
governmental fee of any kind whatsoever, imposes or required to be withheld by
the United States or any state, county, local or foreign government or
subdivision or agency thereof, including any interest, penalties, and additions
imposed thereon or with respect thereto.
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(b) The terms set forth below shall have the meanings ascribed
thereto in the referenced sections:
Allowance Section 5.9
Bryan Benefit Plans Section 5.15
Bryan Contracts Section 5.16
Bryan ERISA Plan Section 5.15
Bryan Options Section 3.6
Bryan Pension Plan Section 5.15
Bryan SEC Reports Section 5.5(a)
Bryan Stock Option Agreement Section 1.4
Closing Section 1.2
Directors' Agreements Section 5.23
Effective Time Section 1.3
ERISA Affiliate Section 5.15(b)
Exchange Agent Section 4.1
Exchange Ratio Section 3.1(c)
Maximum Amount Section 8.14
Merger Section 1.1
Savannah Benefit Plans Section 6.15
Savannah Contracts Section 6.16
Savannah ERISA Plan Section 6.15
Savannah Pension Plan Section 6.15
Savannah SEC Reports Section 6.5(a)
Savannah Stock Option Agreement Section 1.4
Takeover Laws Section 5.21
Tax Opinion Section 9.1(h)
(c) Any singular term in this Agreement shall be deemed to
include the plural, and any plural term the singular. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed followed by the words "without limitation."
11.2 Expenses.
(a) Except as otherwise provided in this Section 11.2, each of
the Parties shall bear and pay all direct costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, except that each of the Parties shall bear and pay
one-half of the filing fees payable in connection with the Registration
Statement and the Joint Proxy Statement and printing costs incurred in
connection with the printing of the Registration Statement and the Joint Proxy
Statement.
(b) Notwithstanding the foregoing,
(i) if this Agreement is terminated by Savannah pursuant to
any of Sections 10.1(b), 10.1(c), 10.1(d)(ii) (as relates to approval of Bryan's
shareholders) or 10.1(f) (but only on the basis of the failure of Bryan to
satisfy any of the conditions enumerated in Section 9.2), or
(ii) if the Merger is not consummated as a result of the
failure of Bryan to satisfy any of the conditions set forth in Section 9.2,
then Bryan shall promptly pay Savannah all the out-of-pocket costs and expenses
of Savannah, including costs of counsel, investment bankers, actuaries and
accountants up to but not exceeding an additional $100,000, excluding percentage
based fees payable to a consultant or broker retained by Savannah.
(c) Notwithstanding the foregoing,
(i) if this Agreement is terminated by Bryan pursuant to
either of Sections 10.1(b), 10.1(c), 10.1(d)(ii) (as relates to approval of
Savannah's shareholders), or 10.1(f) (but only on the basis of the failure of
<PAGE>
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Savannah to satisfy any of the conditions enumerated in Section 9.3), or
(ii) if the Merger is not consummated as a result of the
failure of Savannah to satisfy any of the conditions set forth in Section 9.3,
then Savannah shall promptly pay Bryan all the out-of-pocket costs and expenses
of Bryan, including costs of counsel, investment bankers, actuaries and
accountants up to but not exceeding an additional $100,000, excluding percentage
based fees payable to a consultant or broker retained by Bryan.
(d) In addition to the foregoing, if, after the date of this
Agreement and within twelve (12) months following
(i) any termination of this Agreement
(1) by Savannah pursuant to Sections 10.1(b), 10.1(c), 10.1(f)
(but only on the basis of the failure of Bryan to satisfy any of the conditions
enumerated in Section 9.2), or
(2) by either Party pursuant to Section 10.1(d)(ii) (with
respect to approval of the shareholders of Bryan), or
(ii) failure to consummate the Merger by reason of any failure
of Bryan to satisfy the conditions enumerated in Section 9.2 or in Section
9.1(a) (as such section relates to approval by the shareholders of Bryan),
any third-party shall acquire, merge with, combine with, purchase a significant
amount of Assets of, or engage in any other business combination with, or
purchase any equity securities involving an acquisition of 20% or more of the
voting stock of, Bryan, or enter into any binding agreement to do any of the
foregoing (collectively, a "Business Combination"), such third-party that is a
party to the Business Combination shall pay to Savannah, prior to the earlier of
consummation of the Business Combination or execution of any letter of intent or
definitive agreement with Bryan relating to such Business Combination, an amount
in cash equal to the sum of
(x) the direct costs and expenses or portion thereof referred
to in subsection (a) above incurred by or on behalf of Savannah in connection
with the transactions contemplated by this Agreement, plus
(y) 5% of the aggregate fair market value of the consideration
received by the shareholders of Bryan in such Business Combination, less
(z) any amounts previously paid by Bryan to Savannah pursuant
to subsection (b) of this Section 11.2,
which sum represents additional compensation for Savannah's loss as the result
of the transactions contemplated by this Agreement not being consummated. In the
event such third-party shall refuse to pay such amounts within ten days of
demand therefor by Savannah, the amounts shall be an obligation of Bryan and
shall be paid by Bryan promptly upon notice to Bryan by Savannah.
(e) In addition to the foregoing, if, after the date of this
Agreement and within twelve (12) months following
(i) any termination of this Agreement
(1) by Bryan pursuant to Sections 10.1(b), 10.1(c), 10.1(f)
(but only on the basis of the failure of Savannah to satisfy any of the
conditions enumerated in Section 9.3), or
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2-43
(2) by either Party pursuant to Section 10.1(d)(ii) (with
respect to approval of the shareholders of Savannah), or
(ii) failure to consummate the Merger by reason of any failure
of Savannah to satisfy the conditions enumerated in Section 9.3 or in Section
9.1(a) (as such section relates to approval by the shareholders of Savannah),
any third-party shall acquire, merge with, combine with, purchase a significant
amount of Assets of, or engage in any other business combination with, or
purchase any equity securities involving an acquisition of 20% or more of the
voting stock of, Savannah, or enter into any binding agreement to do any of the
foregoing (collectively, a "Business Combination"), such third-party that is a
party to the Business Combination shall pay to Bryan, prior to the earlier of
consummation of the Business Combination or execution of any letter of intent or
definitive agreement with Savannah relating to such Business Combination, an
amount in cash equal to the sum of
(x) the direct costs and expenses or portion thereof referred
to in subsection (a) above incurred by or on behalf of Bryan in connection with
the transactions contemplated by this Agreement, plus
(y) 5% of the aggregate fair market value of the consideration
received by the shareholders of Savannah in such Business Combination, less
(z) any amounts previously paid by Savannah to Bryan pursuant
to subsection (c) of this Section 11.2,
which sum represents additional compensation for Bryan's loss as the result of
the transactions contemplated by this Agreement not being consummated. In the
event such third-party shall refuse to pay such amounts within ten days of
demand therefor by Bryan, the amounts shall be an obligation of Savannah and
shall be paid by Savannah promptly upon notice to Savannah by Bryan.
(f) The Parties acknowledge that the loss to either Party
resulting from breach of this Agreement by the other Party or other failure of
the Merger to be consummated is not susceptible of ready measurement and,
therefore, that the payments provided in this Section 11.2 are intended by the
Parties to constitute liquidated damages for any breach by a Party of the terms
of this Agreement, and not a penalty.
11.3 Brokers and Finders. Except for T. Stephen Johnson &
Associates, Inc. as to Savannah, each of the Parties represents and warrants
that neither it nor any of its officers, directors, employees, or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection with this Agreement or the transactions contemplated
hereby. In the event of a claim by any broker or finder based upon his or its
representing or being retained by or allegedly representing or being retained by
Bryan or by Savannah, each of Bryan and Savannah, as the case may be, agrees to
indemnify and hold the other Party harmless of and from any Liability in respect
of any such claim.
11.4 Entire Agreement. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral (except, as to Section
8.6(b), for the Confidentiality Agreement). Nothing in this Agreement expressed
or implied, is intended to confer upon any Person, other than the Parties or
their respective successors, any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, other than as provided in Section 8.14.
11.5 Amendments. To the extent permitted by Law, this
Agreement may be amended by a subsequent writing signed by each of the Parties
upon the approval of each of the Parties, whether before or after shareholder
<PAGE>
2-44
approval of this Agreement has been obtained; provided, that after any such
approval by the holders of Bryan Common Stock, there shall be made no amendment
that pursuant to Section 14-2-1106 of the GBCC requires further approval by such
shareholders without the further approval of such shareholders; and further
provided, that after any such approval by the holders of Savannah Common Stock,
the provisions of this Agreement relating to the manner or basis in which shares
of Bryan Common Stock will be exchanged for shares of Savannah Common Stock
shall not be amended after the Savannah Shareholders' Meeting in a manner
adverse to the holders of Savannah Common Stock without any requisite approval
of the holders of the issued and outstanding shares of Savannah Common Stock
entitled to vote thereon.
11.6 Waivers.
(a) Prior to or at the Effective Time, Savannah, acting
through its Board of Directors, chief executive officer or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by Bryan, to waive or extend the time for the compliance
or fulfillment by Bryan of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of
Savannah under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of Savannah.
(b) Prior to or at the Effective Time, Bryan, acting through
its Board of Directors, chief executive officer or other authorized officer,
shall have the right to waive any Default in the performance of any term of this
Agreement by Savannah, to waive or extend the time for the compliance or
fulfillment by Savannah of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of Bryan
under this Agreement, except any condition which, if not satisfied, would result
in the violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of Bryan.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
11.8 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
by hand, by facsimile transmission, by registered or certified mail, postage
pre-paid, or by courier or overnight carrier, to the persons at the addresses
set forth below (or at such other address as may be provided hereunder), and
shall be deemed to have been delivered as of the date so delivered:
Bryan: Bryan Bancorp of Georgia, Inc.
9971 Ford Avenue
Richmond Hill, Georgia 31324
Telecopy Number: (912) 756-4617
Attention: E. James Burnsed
With a copy to: Martin, Snow, Grant & Napier, LLP
240 Third Street
P.O. Box 1606
Macon, Georgia 31202
Telecopy Number: (912) 743-4204
Attention: Edward J. Harrell
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2-45
Savannah: The Savannah Bancorp, Inc.
25 Bull Street
Savannah, Georgia 31401
Telecopy Number: (912) 651-4141
Attention: Archie H. Davis,
President and Chief Executive Officer
With copies to: Ellis, Painter, Ratterree & Bart, LLP
Two East Bryan Street
Tenth Floor
Savannah, Georgia 31401
Telecopy Number: (912) 233-2281
Attention: J. Wiley Ellis
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-4777
Attention: David E. Brown, Jr.
11.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Georgia, without regard to
any applicable conflicts of Laws.
11.10 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
11.11 Captions; Articles and Sections. The captions contained
in this Agreement are for reference purposes only and are not part of this
Agreement. Unless otherwise indicated, all references to particular Articles or
Sections shall mean and refer to the referenced Articles and Sections of this
Agreement.
11.12 Interpretations. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against any
party, whether under any rule of construction or otherwise. No party to this
Agreement shall be considered the draftsman. The parties acknowledge and agree
that this Agreement has been reviewed, negotiated, and accepted by all parties
and their attorneys and shall be construed and interpreted according to the
ordinary meaning of the words used so as fairly to accomplish the purposes and
intentions of all parties hereto.
11.13 Enforcement of Agreement. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
<PAGE>
2-46
11.14 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
IN WITNESS WHEREOF, each of the Parties has caused this
Agreement to be executed on its behalf by its duly authorized officers as of the
day and year first above written.
THE SAVANNAH BANCORP, INC.
By: /S/ ARCHIE H. DAVIS
-----------------------
President
BRYAN BANCORP OF GEORGIA, INC.
By: /S/ E. JAMES BURNSED
------------------------
President
TABLE OF CONTENTS
Page
PARTIES 1
PREAMBLE 1
ARTICLE 1 - TRANSACTIONS AND TERMS OF MERGER 1
1.1 Merger 1
1.2 Time and Place of Closing 2
1.3 Effective Time 2
1.4 Execution of Stock Option Agreements 2
ARTICLE 2 - TERMS OF MERGER 2
2.1 Charter 2
2.2 Bylaws 2
2.3 Directors and Officers 2
ARTICLE 3 - MANNER OF CONVERTING SHARES 3
3.1 Conversion of Shares 3
3.2 Anti-Dilution Provisions 3
3.3 Shares Held by Bryan or Savannah 3
3.4 Dissenting Shareholders 4
3.5 Fractional Shares 4
3.6 Conversion of Stock Options 4
ARTICLE 4 - EXCHANGE OF SHARES 5
4.1 Exchange Procedures 5
4.2 Rights of Former Bryan Shareholders 6
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF BRYAN 7
5.1 Organization, Standing, and Power 7
5.2 Authority of Bryan; No Breach By Agreement 7
5.3 Capital Stock 8
5.4 Bryan Subsidiaries 9
5.5 SEC Filings; Financial Statements 9
5.6 Absence of Undisclosed Liabilities 10
5.7 Absence of Certain Changes or Events 10
5.8 Tax Matters 10
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2-47
5.9 Allowance for Possible Loan Losses 12
5.10 Assets 12
5.11 Intellectual Property 13
5.12 Environmental Matters 13
5.13 Compliance with Laws 14
5.14 Labor Relations 14
5.15 Employee Benefit Plans 15
5.16 Material Contracts 16
5.17 Legal Proceedings 17
5.18 Reports 18
5.19 Statements True and Correct 18
5.20 Accounting, Tax and Regulatory Matters 18
5.21 State Takeover Laws 18
5.22 Charter Provisions 19
5.23 Directors' Agreements 19
5.24 Board Recommendation 19
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF SAVANNAH 19
6.1 Organization, Standing, and Power 19
6.2 Authority; No Breach By Agreement 20
6.3 Capital Stock 21
6.4 Savannah Subsidiaries 21
6.5 SEC Filings; Financial Statements 22
6.6 Absence of Undisclosed Liabilities 22
6.7 Absence of Certain Changes or Events 23
6.8 Tax Matters 23
6.9 Allowance for Possible Loan Losses 24
6.10 Assets 24
6.11 Intellectual Property 25
6.12 Environmental Matters 25
6.13 Compliance With Laws 26
6.14 Labor Relations 27
6.15 Employee Benefit Plans 27
6.16 Material Contracts 29
6.17 Legal Proceedings 30
6.18 Reports 30
6.19 Statements True and Correct 30
6.20 Accounting, Tax and Regulatory Matters 31
6.21 State Takeover Laws 31
6.22 Charter Provisions 31
6.23 Board Recommendation 31
ARTICLE 7 - CONDUCT OF BUSINESS PENDING CONSUMMATION 32
7.1 Affirmative Covenants of Each Party 32
7.2 Negative Covenants of Bryan 32
7.3 Negative Covenants of Savannah 34
7.4 Adverse Changes in Condition 36
7.5 Reports 36
ARTICLE 8 - ADDITIONAL AGREEMENTS 37
8.1 Registration Statement;Proxy Statement;Shareholder Approval 37
8.2 Exchange Listing 37
8.3 Applications 38
8.4 Filings with State Offices 38
8.5 Agreement as to Efforts to Consummate 38
8.6 Investigation and Confidentiality 38
8.7 Press Releases 39
8.8 Certain Actions 39
8.9 Accounting and Tax Treatment 39
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8.10 State Takeover Laws 39
8.11 Charter Provisions 39
8.12 Agreements of Affiliates 40
8.13 Employee Benefits and Contracts 40
8.14 Indemnification 40
ARTICLE 9 - CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE 42
9.1 Conditions to Obligations of Each Party 42
9.2 Conditions to Obligations of Savannah 44
9.3 Conditions to Obligations of Bryan 44
ARTICLE 10 - TERMINATION 45
10.1 Termination 45
10.2 Effect of Termination 46
10.3 Non-Survival of Representations and Covenants 47
ARTICLE 11 - MISCELLANEOUS 47
11.1 Definitions 47
11.2 Expenses 55
11.3 Brokers and Finders 58
11.4 Entire Agreement 58
11.5 Amendments 58
11.6 Waivers 59
11.7 Assignment 59
11.8 Notices 59
11.9 Governing Law 60
1.10 Counterparts 60
11.11 Captions; Articles and Sections 60
11.12 Interpretations 61
11.13 Enforcement of Agreement 61
11.14 Severability 61
SIGNATURES 61
LIST OF EXHIBITS
Exhibit Number Description
1. Form of Bryan Stock Option Agreement. (SS 1.4).
2. Form of Savannah Stock Option Agreement. (SS 1.4).
3. Form of Directors' Agreement. (SS 5.23).
4. Form of agreement of affiliates of Bryan. (SS 8.12, 9.2(d)).
5. Form of Employment Agreements with E. James Burnsed and
George Michael Odom, Jr.
Page: 2
[A&B1]Sections 1.4, 6.8 and 11.2(b) through (d) of this Agreement illustrate
various "lock-up" or "bust-up" techniques, including a "lock-up" option,
"no-shop" covenant and termination provision, and expense reimbursement. These
may be thought of as a "Chinese menu" and there should be no implication that
all (or any) of these should (or may prudently) be used on a single transaction.
This is an area that requires careful consideration. Where decision is made to
use a "lock-up" provision, current interpretation of Delaware law requires an
express "fiduciary out" for directors to respond to alternative offers,
including (in the view of some) an express right to terminate the Agreement to
go with another transaction. Termination in order to go with another transaction
may entitle AC to compensation. See Section 11.2(d).
- - 3 -
AD980300.210
<PAGE>
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EXHIBIT 1
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into
as of February 11, 1998, by and between Bryan Bancorp of Georgia, Inc., a
Georgia corporation ("Issuer"), and The Savannah Bancorp, Inc., a Georgia
corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement
and Plan of Merger, dated as of February 11, 1998 (the "Merger Agreement"),
providing for, among other things, the merger of Issuer with and into Grantee,
with Grantee as the surviving entity; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has agreed,
to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 100,098 shares (as adjusted as set forth herein, the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of common stock, $1.00 par value per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (subject to adjustment
as set forth herein, the "Purchase Price") equal to the product of 1.85 and the
closing price per share of the common stock of Grantee on February 11, 1998, as
reported on Nasdaq.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter
defined), as applicable, shall not be in material breach of its agreements or
covenants contained in this Agreement or the Merger Agreement, and (ii) no
preliminary or permanent injunction or other order against the delivery of
shares covered by the Option issued by any court of competent jurisdiction in
the United States shall be in effect, Holder may exercise the Option, in whole
or in part, at any time and from time to time following the occurrence of a
Purchase Event; provided that the Option shall terminate and be of no further
force and effect upon the earliest to occur of (A) the Effective Time, (B)
termination of the Merger Agreement in accordance with the terms thereof prior
to the occurrence of a Purchase Event or a Preliminary Purchase Event (other
than a termination of the Merger Agreement by Grantee pursuant to Section
10.1(b) (but only if such termination was a result of a willful breach by
Issuer) or Section 10.1(c) thereof or by Grantee and Issuer pursuant to Section
10.1(a) thereof if Grantee shall at that time have been entitled to terminate
the Merger Agreement pursuant to Section 10.1(b) (but only if such termination
was a result of a willful breach by Issuer) or Section 10.1(c) thereof (each a
"Default Termination")), (C) 12 months after a Default Termination (provided,
that if, within 12 months after such termination of the Merger Agreement, a
Purchase Event or a Preliminary Purchase Event shall occur, then notwithstanding
anything to the contrary contained herein (including clause (D) of this
sentence), this Option shall terminate 12 months after the first occurrence of
such an event), and (D) 12 months after any termination of the Merger Agreement
(other than a Default Termination) following the occurrence of a Purchase Event
or a Preliminary Purchase Event; provided further, that any purchase of shares
upon exercise of the Option shall be subject to compliance with applicable law.
The term "Holder" shall mean the holder or holders of the Option from time to
time, and which initially is the Grantee. The rights set forth in Section 8
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shall terminate when the right to exercise the Option terminates (other than as
a result of a complete exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the
following events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed or publicly announced an intention to
authorize, recommend or propose, or entered into an agreement with any person
(other than Grantee or any Subsidiary of Grantee) to effect an Acquisition
Transaction (as defined below). As used herein, the term Acquisition Transaction
shall mean (A) a merger, consolidation or similar transaction involving Issuer
or any of its Subsidiaries (other than transactions solely between Issuer's
Subsidiaries), (B) except as permitted pursuant to Section 7.1 of the Merger
Agreement, the disposition, by sale, lease, exchange or otherwise, of Assets of
Issuer or any of its Subsidiaries representing in either case 25% or more of the
consolidated assets of Issuer and its Subsidiaries, or (C) the issuance, sale or
other disposition of (including by way of merger, consolidation, share exchange
or any similar transaction) securities representing 25% or more of the voting
power of Issuer or any of its Subsidiaries (any of the foregoing, an
"Acquisition Transaction"); or
(ii) any person (other than Grantee or any Subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is defined in
Rule 13d-3 promulgated under the Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under the
Exchange Act), other than a group of which Grantee or any of its Subsidiaries of
Grantee is a member, shall have been formed which beneficially owns or has the
right to acquire beneficial ownership of, 25% or more of the then-outstanding
shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any
of the following events:
(i) any person (other than Grantee or any Subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall have filed a registration statement under the Securities
Act with respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would own or control 25% or more of the then-outstanding shares of Issuer Common
Stock (such an offer being referred to herein as a "Tender Offer" or an
"Exchange Offer," respectively); or
(ii) the holders of Issuer Common Stock shall not have
approved the Merger Agreement at the meeting of such shareholders held for the
purpose of voting on the Merger Agreement, such meeting shall not have been held
or shall have been canceled prior to termination of the Merger Agreement, or
Issuer's Board of Directors shall have withdrawn or modified in a manner adverse
to Grantee the recommendation of Issuer's Board of Directors with respect to the
Merger Agreement, in each case after any person (other than Grantee or any
Subsidiary of Grantee) shall have (A) made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction, (B) commenced a Tender Offer
or filed a registration statement under the Securities Act with respect to an
Exchange Offer, or (C) filed an application (or given a notice), whether in
draft or final form, under any federal or state statute or regulation (including
a notice filed under the HSR Act) seeking the Consent to an Acquisition
Transaction from any federal or state governmental or regulatory authority or
agency.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Holder wishes to exercise the Option, it
shall send to Issuer a written notice (the date of which being herein referred
to as the "Notice Date") specifying (i) the total number of Option Shares it
intends to purchase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 15 business days from the Notice
Date for the closing (the "Closing") of such purchase (the "Closing Date"). If
prior Consent of any governmental or regulatory agency or authority is required
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in connection with such purchase, Issuer shall cooperate with Holder in the
filing of the required notice or application for such Consent and the obtaining
of such Consent and the Closing shall occur immediately following receipt of
such Consents (and expiration of any mandatory waiting periods).
(e) Notwithstanding any other provision of this Agreement to
the contrary, in no event shall:
(i) Holder's (taking into account all other Holders) Total
Profit (as defined below) exceed $2,000,000 and, if it otherwise would exceed
such amount, Holder, at its sole election, shall either (A) reduce the number of
shares of Issuer Common Stock subject to the Option, (B) deliver to Issuer for
cancellation without consideration Option Shares previously purchased by Holder,
(C) pay cash to Issuer, or (D) any combination of the foregoing, so that
Holder's actually realized Total Profit (together with the Total Profit realized
by all other Holders) shall not exceed $2,000,000 after taking into account the
foregoing actions; and
(ii) the Option be exercised for a number of shares of Issuer
Common Stock as would, as of the date of exercise, result in Holder's (taking
into account all other Holders) Notional Total Profit (as defined below) of more
than $2,000,000; provided, that nothing in this clause (ii) shall restrict any
exercise of the Option permitted hereby on any subsequent date.
As used in this Agreement, the term "Total Profit" shall mean the
aggregate sum (prior to the payment of taxes) of the following: (i) the amount
received by Holder pursuant to Issuer's repurchase of the Option (or any portion
thereof) pursuant to Section 8; (ii) (x) the amount received by Holder pursuant
to Issuer's repurchase of Option Shares pursuant to Section 8, less (y) Holder's
purchase price for such Option Shares; (iii) (x) the net cash amounts received
by Holder pursuant to the sale of Option Shares (or any other securities into
which such Option Shares shall be converted or exchanged) to any unaffiliated
person, less (y) Holder's purchase price of such Option Shares; and (iv) any
amounts received by Grantee on the transfer of the Option (or any portion
thereof) to any unaffiliated person.
As used in this Agreement, the term "Notional Total Profit" with
respect to any number of shares of Issuer Common Stock as to which Holder may
propose to exercise the Option shall be the Total Profit determined as of the
date of such proposed exercise, assuming that the Option were exercised on such
date for such number of shares and assuming that such shares, together with all
other Option Shares held by Holder and its affiliates as of such date, were sold
for cash at the closing sale price per share of Issuer Common Stock as quoted on
the Nasdaq National Market (or, if Issuer Common Stock is not then quoted on the
Nasdaq National Market, the highest bid price per share as quoted on the
principal trading market or securities exchange on which such shares are traded
as reported by a recognized source chosen by Holder) as of the close of business
on the preceding trading day (less customary brokerage commissions).
The provisions of this Section 3(e) shall apply to any Substitute
Option (as defined below).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date, and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in Section 12(f)
hereof.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a), (i) Issuer shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever and subject to no pre-emptive rights, and
(B) if the Option is exercised in part only, an executed new agreement with the
same terms as this Agreement evidencing the right to purchase the balance of the
shares of Issuer Common Stock purchasable hereunder, and (ii) Holder shall
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deliver to Issuer a letter agreeing that Holder shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF FEBRUARY __, 1998. A COPY
OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON
RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Issuer.
This Agreement has been duly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue, and, at all times from the date
hereof until the obligation to deliver Issuer Common Stock upon the exercise of
the Option terminates, will have reserved for issuance, upon exercise of the
Option, the number of shares of Issuer Common Stock necessary for Holder to
exercise the Option, and Issuer will take all necessary corporate action to
authorize and reserve for issuance all additional shares of Issuer Common Stock
or other securities which may be issued pursuant to Section 7 upon exercise of
the Option. The shares of Issuer Common Stock to be issued upon due exercise of
the Option, including all additional shares of Issuer Common Stock or other
securities which may be issuable pursuant to Section 7, upon issuance pursuant
hereto, shall be duly and validly issued, fully paid, and nonassessable, and
shall be delivered free and clear of all liens, claims, charges, and
encumbrances of any kind or nature whatsoever, including any preemptive rights
of any stockholder of Issuer.
6. Representations and Warrants of Grantee. Grantee hereby represents
and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) This Option is not being, and any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be, acquired with a
view to the public distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from registration under
the Securities Laws.
7. Adjustment upon Changes in Capitalization, etc.
(a) In the event of any change in Issuer Common Stock by
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reason of a stock dividend, stock split, split-up, recapitalization,
combination, exchange of shares or similar transaction, the type and number of
shares or securities subject to the Option, and the Purchase Price therefor,
shall be adjusted appropriately, and proper provision shall be made in the
agreements governing such transaction so that Holder shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Holder would have received in respect of Issuer Common Stock if
the Option had been exercised immediately prior to such event, or the record
date therefor, as applicable. If any additional shares of Issuer Common Stock
are issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 7(a)), the number of shares of
Issuer Common Stock subject to the Option shall be adjusted so that, after such
issuance, it, together with any shares of Issuer Common Stock previously issued
pursuant hereto, equals 19.9% of the number of shares of Issuer Common Stock
then issued and outstanding, without giving effect to any shares subject to or
issued pursuant to the Option.
(b) In the event that Issuer shall enter into an agreement:
(i) to consolidate with or merge into any person, other than Grantee or one of
its Subsidiaries, and shall not be the continuing or surviving corporation of
such consolidation or merger; (ii) to permit any person, other than Grantee or
one of its Subsidiaries, to merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged for
stock or other securities of Issuer or any other person or cash or any other
property or the outstanding shares of Issuer Common Stock immediately prior to
such merger shall after such merger represent less than 50% of the outstanding
shares and share equivalents of the merged company; or (iii) to sell or
otherwise transfer all or substantially all of its Assets to any person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of Holder, of either (x) the
Acquiring Corporation (as defined below), (y) any person that controls the
Acquiring Corporation, or (z) in the case of a merger described in clause (ii),
the Issuer (in each case, such person being referred to as the "Substitute
Option Issuer").
(c) The Substitute Option shall have the same terms as the
Option, provided that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to Holder. The Substitute Option Issuer shall
also enter into an agreement with each Holder of the Substitute Option in
substantially the same form as this Agreement, which shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for such number
of shares of the Substitute Common Stock (as hereinafter defined) as is equal to
the Assigned Value (as hereinafter defined) multiplied by the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Purchase Price multiplied by a
fraction in which the numerator is the number of shares of the Issuer Common
Stock for which the Option was theretofore exercisable and the denominator is
the number of shares for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other than
Issuer), (y) Issuer in a merger in which Issuer is the continuing or surviving
person, and (z) the transferee of all or any substantial part of the Issuer's
assets (or the Assets of its Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock
having the greatest voting rights to be issued by the Substitute Option Issuer
upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the highest of (x) the price
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per share of the Issuer Common Stock at which a Tender Offer or Exchange Offer
therefor has been made by any person (other than Grantee or any Subsidiary of
Grantee), (y) the price per share of the Issuer Common Stock to be paid by any
person (other than Grantee or any Subsidiary of Grantee) pursuant to an
agreement with Issuer, and (z) the highest closing sales price per share of
Issuer Common Stock quoted on the Nasdaq National Market (or if Issuer Common
Stock is not quoted on the Nasdaq National Market, the highest bid price per
share on any day as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a recognized source
chosen by Holder) within the six-month period immediately preceding the
agreement; provided, that in the event of a sale of less than all of Issuer's
assets, the Assigned Value shall be the sum of the price paid in such sale for
such assets and the current market value of the remaining assets of Issuer as
determined by a nationally recognized investment banking firm selected by Holder
(or by a majority in interest of the Holders if there shall be more than one
Holder (a "Holder Majority")), divided by the number of shares of the Issuer
Common Stock outstanding at the time of such sale. In the event that an exchange
offer is made for the Issuer Common Stock or an agreement is entered into for a
merger or consolidation involving consideration other than cash, the value of
the securities or other property issuable or deliverable in exchange for the
Issuer Common Stock shall be determined by a nationally recognized investment
banking firm mutually selected by Holder and Issuer (or if applicable, Acquiring
Corporation), provided that if a mutual selection cannot be made as to such
investment banking firm, it shall be selected by Holder. (If there shall be more
than one Holder, any such selection shall be made by a Holder Majority.)
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of the Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect to a share
of common stock issued by Issuer, the person merging into Issuer or by any
company which controls or is controlled by such merger person, as Holder may
elect.
(f) In no event pursuant to any of the foregoing paragraphs
shall the Substitute Option be exercisable for more than 19.9% of the aggregate
of the shares of the Substitute Common Stock outstanding prior to exercise of
the Substitute Option. In the event that the Substitute Option would be
exercisable for more than 19.9% of the aggregate of the shares of Substitute
Common Stock but for this clause (f), the Substitute Option Issuer shall make a
cash payment to Holder equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause (f) over (ii) the
value of the Substitute Option after giving effect to the limitation in this
clause (f). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Holder (or a Holder Majority).
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the shares of Substitute
Common Stock are in no way distinguishable from or have lesser economic value
than other shares of common stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9 and 10 shall apply, with
appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in such
sections to "Issuer," "Option," "Purchase Price" and "Issuer Common Stock" shall
be deemed to be references to "Substitute Option Issuer," "Substitute Option,"
"Substitute Purchase Price" and "Substitute Common Stock," respectively.
8. Repurchase at the Option of Holder.
(a) Subject to Section 3(e) and the last sentence of Section
3(a), at the request of Holder at any time commencing upon the first occurrence
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of a Purchase Event and ending 12 months immediately thereafter, Issuer shall
repurchase from Holder the Option and all shares of Issuer Common Stock
purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares
of Issuer Common Stock acquired by Holder pursuant to the Option with respect to
which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or, in the
case of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Holder for each share of Issuer
Common Stock with respect to which the Option has been exercised and with
respect to which Holder then has beneficial ownership, multiplied by the number
of such shares.
(b) If Holder exercises its rights under this Section 8,
Issuer shall, within ten business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common Stock purchased
thereunder with respect to which Holder then has beneficial ownership, and
Holder shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all liens, claims, charges
and encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or Consent of any governmental or regulatory
agency or authority is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited from paying
and promptly file the required notice or application for Consent and
expeditiously process the same (and each party shall cooperate with the other in
the filing of any such notice or application and the obtaining of any such
Consent). If any governmental or regulatory agency or authority disapproves of
any part of Issuer's proposed repurchase pursuant to this Section 8, Issuer
shall promptly give notice of such fact to Holder. If any governmental or
regulatory agency or authority prohibits the repurchase in part but not in
whole, then Holder shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such agency or authority, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased. Holder
shall notify Issuer of its determination under the preceding sentence within
five business days of receipt of notice of disapproval of the repurchase.
(c) For purposes of this Agreement, the "Applicable Price"
means the highest of (i) the highest price per share of Issuer Common Stock paid
for any such share by the person or groups described in Section 8(d)(i), (ii)
the price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq
National Market (or if Issuer Common Stock is not quoted on the Nasdaq National
Market, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded as reported by a
recognized source chosen by Holder) during the 60 business days preceding the
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Request Date; provided, however, that in the event of a sale of less than all of
Issuer's Assets, the Applicable Price shall be the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by an independent nationally recognized investment banking
firm selected by Holder and reasonably acceptable to Issuer (which determination
shall be conclusive for all purposes of this Agreement), divided by the number
of shares of the Issuer Common Stock outstanding at the time of such sale. If
the consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally
recognized investment banking firm selected by Holder and reasonably acceptable
to Issuer, which determination shall be conclusive for all purposes of this
Agreement.
9. Registration Rights.
(a) Following termination of the Merger Agreement, Issuer
shall, subject to the conditions of subparagraph (c) below, if requested by any
Holder, including Grantee and any permitted transferee ("Selling Holder"), as
expeditiously as possible prepare and file a registration statement under the
Securities Laws if necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to Selling Holder upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by
Holder in such request, including, without limitation, a "shelf" registration
statement under Rule 415 under the Securities Act or any successor provision,
and Issuer shall use its best efforts to qualify such shares or other securities
for sale under any applicable state securities laws.
(b) If Issuer at any time after the exercise of the Option
proposes to register any shares of Issuer Common Stock under the Securities Laws
in connection with an underwritten public offering of such Issuer Common Stock,
Issuer will promptly give written notice to Holder of its intention to do so
and, upon the written request of Holder given within 30 days after receipt of
any such notice (which request shall specify the number of shares of Issuer
Common Stock intended to be included in such underwritten public offering by
Selling Holder), Issuer will cause all such shares, the holders of which shall
have requested participation in such registration, to be so registered and
included in such underwritten public offering; provided, that Issuer may elect
to not cause any such shares to be so registered (i) if the underwriters in good
faith object for valid business reasons, or (ii) in the case of a registration
solely to implement a dividend reinvestment or similar plan, an employee benefit
plan or a registration filed on Form S-4 or any successor form, or a
registration filed on a form which does not permit registrations of resales;
provided, further, that such election pursuant to clause (i) may only be made
two times. If some but not all the shares of Issuer Common Stock, with respect
to which Issuer shall have received requests for registration pursuant to this
subparagraph (b), shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Selling Holders and any
other person (other than Issuer or any person exercising demand registration
rights in connection with such registration) who or which is permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each Selling Holder bears to the total number of shares
requested to be registered by all persons then desiring to have Issuer Common
Stock registered for sale.
(c) Issuer shall use all reasonable efforts to cause each
registration statement referred to in subparagraph (a) above to become effective
and to obtain all consents or waivers of other parties which are required
therefor and to keep such registration statement effective, provided, that
Issuer may delay any registration of Option Shares required pursuant to
subparagraph (a) above for a period not exceeding 90 days provided Issuer shall
in good faith determine that any such registration would adversely affect an
offering or contemplated offering of other securities by Issuer, and Issuer
shall not be required to register Option Shares under the Securities Laws
pursuant to subparagraph (a) above:
(i) prior to the earliest of (a) termination of the Merger
Agreement pursuant to Section 10.1 thereof, (b) failure to obtain the requisite
stockholder approval pursuant to Section 9.1(a) of the Merger Agreement, and (c)
a Purchase Event or a Preliminary Purchase Event;
(ii) on more than two occasions;
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(iii) more than once during any calendar year;
(iv) within 90 days after the effective date of a registration
referred to in subparagraph (b) above pursuant to which the Selling Holders
concerned were afforded the opportunity to register such shares under the
Securities Laws and such shares were registered as requested; and
(v) unless a request therefor is made to Issuer by Selling
Holders holding at least 25% or more of the aggregate number of Option Shares
then outstanding.
In addition to the foregoing, Issuer shall not be
required to maintain the effectiveness of any registration statement after the
expiration of nine months from the effective date of such registration
statement. Issuer shall use all reasonable efforts to make any filings, and take
all steps, under all applicable state securities laws to the extent necessary to
permit the sale or other disposition of the Option Shares so registered in
accordance with the intended method of distribution for such shares, provided,
that Issuer shall not be required to consent to general jurisdiction or qualify
to do business in any state where it is not otherwise required to so consent to
such jurisdiction or to so qualify to do business.
(d) Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and xpenses (including the fees and expenses
of counsel), accounting expenses, legal expenses including the reasonable fees
and expenses of one counsel to the Selling Holders, printing expenses, expenses
of underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to subparagraph (a) or (b) above (including the
related offerings and sales by Selling Holders) and all other qualifications,
notifications or exemptions pursuant to subparagraph (a) or (b) above.
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Selling Holders and any other expenses incurred
by such Selling Holders in connection with any such registration shall be borne
by such Selling Holders.
(e) In connection with any registration under subparagraph (a)
or (b) above Issuer hereby indemnifies the Selling Holders, and each underwriter
thereof, including each person, if any, who controls such holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission,
or alleged omission, to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue statement
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Selling Holder, or by such underwriter, as the case may be,
for all such expenses, losses, claims, damages and liabilities caused by any
untrue, or alleged untrue, statement, that was included by Issuer in any such
registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon, and in
conformity with, information furnished in writing to Issuer by such holder or
such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this
subparagraph (e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this subparagraph (e), such indemnified
party shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not relieve it
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of any liability which it may otherwise have to any indemnified party under this
subparagraph (e). In case notice of commencement of any such action shall be
given to the indemnifying party as above provided, the indemnifying party shall
be entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (i) the indemnifying party either
agrees to pay the same, (ii) the indemnifying party falls to assume the defense
of such action with counsel' satisfactory to the indemnified party, or (iii) the
indemnified party has been advised by counsel that one or more legal defenses
may be available to the indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this subparagraph
(e) is unavailable to a party otherwise entitled to be indemnified in respect of
any expenses, losses, claims, damages or liabilities referred to herein, then
the indemnifying party, in lieu of indemnifying such party otherwise entitled to
be indemnified, shall contribute to the amount paid or payable by such party to
be indemnified as a result of such expenses, losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative
benefits received by Issuer, all selling shareholders and the underwriters from
the offering of the securities and also the relative fault of Issuer, all
selling shareholders and the underwriters in connection with the statements or
omissions which resulted in such expenses, losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The amount
paid or payable by a party as a result of the expenses, losses, claims, damages
and liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim; provided, that in no case shall
any Selling Holder be responsible, in the aggregate, for any amount in excess of
the net offering proceeds attributable to its Option Shares included in the
offering. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Any
obligation by any holder to indemnify shall be several and not joint with other
holders.
In connection with any registration pursuant to
subparagraph (a) or (b) above, Issuer and each Selling Holder (other than
Grantee) shall enter into an agreement containing the indemnification provisions
of this subparagraph (e).
(f) Issuer shall comply with all reporting requirements and
will do all such other things as may be necessary to permit the expeditious sale
at any time of any Option Shares by Holder in accordance with and to the extent
permitted by any rule or regulation promulgated by the SEC from time to time,
including, without limitation, Rules 144 and 144A. Issuer shall at its expense
provide Holder with any information necessary in connection with the completion
and filing of any reports or forms required to be filed by them under the
Securities Laws, or required pursuant to any state securities laws or the rules
of any stock exchange.
(g) Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on the Nasdaq National Market or any other securities
exchange or any automated quotations system maintained by a self-regulatory
organization, Issuer, upon the request of Holder, will promptly file an
application, if required, to authorize for quotation or trading or listing the
shares of Issuer Common Stock or other securities to be acquired upon exercise
of the Option on the Nasdaq National Market or any other securities exchange or
any automated quotations system maintained by a self-regulatory organization and
will use its best efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.
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11. Division of Option. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 10, each
of the parties hereto shall bear and pay all costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may
be waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability. This Agreement,
together with the Merger Agreement and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (a) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and (b) is not intended to confer upon any person other than the parties hereto
(other than any transferees of the Option Shares or any permitted transferee of
this Agreement pursuant to Section 12(h)) any rights or remedies hereunder. If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction or a federal or state governmental or regulatory
agency or authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
If for any reason such court or regulatory agency determines that the Option
does not permit Holder to acquire, or does not require Issuer to repurchase, the
full number of shares of Issuer Common Stock as provided in Sections 3 and 8 (as
adjusted pursuant to Section 7), it is the express intention of Issuer to allow
Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Georgia without regard to
any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to the parties at the addresses set forth in the Merger
Agreement(or at such other address for a party as shall be specified by like
notice).
(g) Counterparts. This Agreement and any amendments hereto may
be executed in two counterparts, each of which shall be considered one and the
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same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned Subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) Further Assurances. In the event of any exercise of the
Option by Holder, Issuer and Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
ATTEST: BRYAN BANCORP OF GEORGIA, INC.
By:.____________________ By: ___________________________
[CORPORATE SEAL]
ATTEST: THE SAVANNAH BANCORP, INC.
By:.____________________ By: ___________________________
[CORPORATE SEAL]
- - 6 -
AD980400.314
<PAGE>
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EXHIBIT 2
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into
as of February 11, 1998, by and between The Savannah Bancorp, Inc., a Georgia
corporation ("Issuer"), and Bryan Bancorp of Georgia, Inc., a Georgia
corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement
and Plan of Merger, dated as of February 11, 1998 (the "Merger Agreement"),
providing for, among other things, the merger of Grantee with and into Issuer,
with Issuer as the surviving entity; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has required that Issuer agree, and Issuer has agreed,
to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 340,200 shares (as adjusted as set forth herein, the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of common stock, $1.00 par value per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (subject to adjustment
as set forth herein, the "Purchase Price") equal to the closing price per share
of the common stock of Grantee on February 11, 1998, as reported on Nasdaq.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter
defined), as applicable, shall not be in material breach of its agreements or
covenants contained in this Agreement or the Merger Agreement, and (ii) no
preliminary or permanent injunction or other order against the delivery of
shares covered by the Option issued by any court of competent jurisdiction in
the United States shall be in effect, Holder may exercise the Option, in whole
or in part, at any time and from time to time following the occurrence of a
Purchase Event; provided that the Option shall terminate and be of no further
force and effect upon the earliest to occur of (A) the Effective Time, (B)
termination of the Merger Agreement in accordance with the terms thereof prior
to the occurrence of a Purchase Event or a Preliminary Purchase Event (other
than a termination of the Merger Agreement by Grantee pursuant to Section
10.1(b) (but only if such termination was a result of a willful breach by
Issuer) or Section 10.1 (c) thereof or by Grantee and Issuer pursuant
to Section 10.1(a) thereof if Grantee shall at that time have been entitled to
terminate the Merger Agreement pursuant to Section 10.1(b) (but only if such
termination was a result of a willful breach by Issuer) or Section 10.1(c)
thereof (each a "Default Termination")), (C) 12 months after a Default
Termination (provided, that if, within 12 months after such termination of the
Merger Agreement, a Purchase Event or a Preliminary Purchase Event shall occur,
then notwithstanding anything to the contrary contained herein (including clause
(D) of this sentence), this Option shall terminate 12 months after the first
occurrence of such an event), and (D) 12 months after any termination of the
Merger Agreement (other than a Default Termination) following the occurrence of
a Purchase Event or a Preliminary Purchase Event; provided further, that any
purchase of shares upon exercise of the Option shall be subject to compliance
with applicable law. The term "Holder" shall mean the holder or holders of the
Option from time to time, and which initially is the Grantee. The rights set
forth in Section 8 shall terminate when the right to exercise the Option
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terminates (other than as a result of a complete exercise of the Option) as set
forth herein.
(b) As used herein, a "Purchase Event" means any of the
following events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed or publicly announced an intention to
authorize, recommend or propose, or entered into an agreement with any person
(other than Grantee or any Subsidiary of Grantee) to effect an Acquisition
Transaction (as defined below). As used herein, the term Acquisition Transaction
shall mean (A) a merger, consolidation or similar transaction involving Issuer
or any of its Subsidiaries (other than transactions solely between Issuer's
Subsidiaries), (B) except as permitted pursuant to Section 7.1 of the Merger
Agreement, the disposition, by sale, lease, exchange or otherwise, of Assets of
Issuer or any of its Subsidiaries representing in either case 25% or more of the
consolidated assets of Issuer and its Subsidiaries, or (C) the issuance, sale or
other disposition of (including by way of merger, consolidation, share exchange
or any similar transaction) securities representing 25% or more of the voting
power of Issuer or any of its Subsidiaries (any of the foregoing, an
"Acquisition Transaction"); or
(ii) any person (other than Grantee or any Subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is defined in
Rule 13d-3 promulgated under the Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under the
Exchange Act), other than a group of which Grantee or any of its Subsidiaries of
Grantee is a member, shall have been formed which beneficially owns or has the
right to acquire beneficial ownership of, 25% or more of the then-outstanding
shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any
of the following events:
(i) any person (other than Grantee or any Subsidiary of Grantee) shall have
commenced (as such term is defined in Rule 14d-2 under the Exchange Act), or
shall have filed a registration statement under the Securities Act with respect
to, a tender offer or exchange offer to purchase any shares of Issuer Common
Stock such that, upon consummation of such offer, such person would own or
control 25% or more of the then-outstanding shares of Issuer Common Stock (such
an offer being referred to herein as a "Tender Offer" or an "Exchange Offer,"
respectively); or
(ii) the holders of Issuer Common Stock shall not have
approved the Merger Agreement at the meeting of such shareholders held for the
purpose of voting on the Merger Agreement, such meeting shall not have been held
or shall have been canceled prior to termination of the Merger Agreement, or
Issuer's Board of Directors shall have withdrawn or modified in a manner adverse
to Grantee the recommendation of Issuer's Board of Directors with respect to the
Merger Agreement, in each case after any person (other than Grantee or any
Subsidiary of Grantee) shall have (A) made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction, (B) commenced a Tender Offer
or filed a registration statement under the Securities Act with respect to an
Exchange Offer, or (C) filed an application (or given a notice), whether in
draft or final form, under any federal or state statute or regulation (including
a notice filed under the HSR Act) seeking the Consent to an Acquisition
Transaction from any federal or state governmental or regulatory authority or
agency.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Holder wishes to exercise the Option, it
shall send to Issuer a written notice (the date of which being herein referred
to as the "Notice Date") specifying (i) the total number of Option Shares it
intends to purchase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 15 business days from the Notice
Date for the closing (the "Closing") of such purchase (the "Closing Date"). If
prior Consent of any governmental or regulatory agency or authority is required
in connection with such purchase, Issuer shall cooperate with Holder in the
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filing of the required notice or application for such Consent and the obtaining
of such Consent and the Closing shall occur immediately following receipt of
such Consents (and expiration of any mandatory waiting periods).
(e) Notwithstanding any other provision of this Agreement to
the contrary, in no event shall:
(i) Holder's (taking into account all other Holders) Total
Profit (as defined below) exceed $2,000,000 and, if it otherwise would exceed
such amount, Holder, at its sole election, shall either (A) reduce the number of
shares of Issuer Common Stock subject to the Option, (B) deliver to Issuer for
cancellation without consideration Option Shares previously purchased by Holder,
(C) pay cash to Issuer, or (D) any combination of the foregoing, so that
Holder's actually realized Total Profit (together with the Total Profit realized
by all other Holders) shall not exceed $2,000,000 after taking into account the
foregoing actions; and
(ii) the Option be exercised for a number of shares of Issuer Common Stock
as would, as of the date of exercise, result in Holder's (taking into account
all other Holders) Notional Total Profit (as defined below) of more than
$2,000,000; provided, that nothing in this lause (ii) shall restrict any
exercise of the Option permitted hereby on any subsequent date.
As used in this Agreement, the term "Total Profit" shall mean the
aggregate sum (prior to the payment of taxes) of the following: (i) the amount
received by Holder pursuant to Issuer's repurchase of the Option (or any portion
thereof) pursuant to Section 8; (ii) (x) the amount received by Holder pursuant
to Issuer's repurchase of Option Shares pursuant to Section 8, less (y) Holder's
purchase price for such Option Shares; (iii) (x) the net cash amounts received
by Holder pursuant to the sale of Option Shares (or any other securities into
which such Option Shares shall be converted or exchanged) to any unaffiliated
person, less (y) Holder's purchase price of such Option Shares; and (iv) any
amounts received by Grantee on the transfer of the Option (or any portion
thereof) to any unaffiliated person.
As used in this Agreement, the term "Notional Total Profit" with
respect to any number of shares of Issuer Common Stock as to which Holder may
propose to exercise the Option shall be the Total Profit determined as of the
date of such proposed exercise, assuming that the Option were exercised on such
date for such number of shares and assuming that such shares, together with all
other Option Shares held by Holder and its affiliates as of such date, were sold
for cash at the closing sale price per share of Issuer Common Stock as quoted on
the Nasdaq National Market (or, if Issuer Common Stock is not then quoted on the
Nasdaq National Market, the highest bid price per share as quoted on the
principal trading market or securities exchange on which such shares are traded
as reported by a recognized source chosen by Holder) as of the close of business
on the preceding trading day (less customary brokerage commissions).
The provisions of this Section 3(e) shall apply to any Substitute
Option (as defined below).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date, and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in Section 12(f)
hereof.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a), (i) Issuer shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever and subject to no pre-emptive rights, and
(B) if the Option is exercised in part only, an executed new agreement with the
same terms as this Agreement evidencing the right to purchase the balance of the
shares of Issuer Common Stock purchasable hereunder, and (ii) Holder shall
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deliver to Issuer a letter agreeing that Holder shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF FEBRUARY __, 1998. A COPY
OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON
RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act.
5. Representations and Warranties o Issuer. Issuer hereby
represents and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Issuer.
This Agreement has been duly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue, and, at all times from the date
hereof until the obligation to deliver Issuer Common Stock upon the exercise of
the Option terminates, will have reserved for issuance, upon exercise of the
Option, the number of shares of Issuer Common Stock necessary for Holder to
exercise the Option, and Issuer will take all necessary corporate action to
authorize and reserve for issuance all additional shares of Issuer Common Stock
or other securities which may be issued pursuant to Section 7 upon exercise of
the Option. The shares of Issuer Common Stock to be issued upon due exercise of
the Option, including all additional shares of Issuer Common Stock or other
securities which may be issuable pursuant to Section 7, upon issuance pursuant
hereto, shall be duly and validly issued, fully paid, and nonassessable, and
shall be delivered free and clear of all liens, claims, charges, and
encumbrances of any kind or nature whatsoever, including any preemptive rights
of any stockholder of Issuer.
6. Representations and Warrants of Grantee. Grantee hereby represents
and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) This Option is not being, and any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be, acquired with a
view to the public distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from registration under
the Securities Laws.
7. Adjustment upon Changes in Capitalization, etc.
(a) In the event of any change in Issuer Common Stock by
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reason of a stock dividend, stock split, split-up, recapitalization,
combination, exchange of shares or similar transaction, the type and number of
shares or securities subject to the Option, and the Purchase Price therefor,
shall be adjusted appropriately, and proper provision shall be made in the
agreements governing such transaction so that Holder shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Holder would have received in respect of Issuer Common Stock if
the Option had been exercised immediately prior to such event, or the record
date therefor, as applicable. If any additional shares of Issuer Common Stock
are issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 7(a)), the number of shares of
Issuer Common Stock subject to the Option shall be adjusted so that, after such
issuance, it, together with any shares of Issuer Common Stock previously issued
pursuant hereto, equals 19.9% of the number of shares of Issuer Common Stock
then issued and outstanding, without giving effect to any shares subject to or
issued pursuant to the Option.
(b) In the event that Issuer shall enter into an agreement:
(i) to consolidate with or merge into any person, other than Grantee or one of
its Subsidiaries, and shall not be the continuing or surviving corporation of
such consolidation or merger; (ii) to permit any person, other than Grantee or
one of its Subsidiaries, to merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged for
stock or other securities of Issuer or any other person or cash or any other
property or the outstanding shares of Issuer Common Stock immediately prior to
such merger shall after such merger represent less than 50% of the outstanding
shares and share equivalents of the merged company; or (iii) to sell or
otherwise transfer all or substantially all of its Assets to any person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of Holder, of either (x) the
Acquiring Corporation (as defined below), (y) any person that controls the
Acquiring Corporation, or (z) in the case of a merger described in clause (ii),
the Issuer (in each case, such person being referred to as the "Substitute
Option Issuer").
(c) The Substitute Option shall have the same terms as the
Option, provided that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to Holder. The Substitute Option Issuer shall
also enter into an agreement with each Holder of the Substitute Option in
substantially the same form as this Agreement, which shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for such number
of shares of the Substitute Common Stock (as hereinafter defined) as is equal to
the Assigned Value (as hereinafter defined) multiplied by the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Purchase Price multiplied by a
fraction in which the numerator is the number of shares of the Issuer Common
Stock for which the Option was theretofore exercisable and the denominator is
the number of shares for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other than
Issuer), (y) Issuer in a merger in which Issuer is the continuing or surviving
person, and (z) the transferee of all or any substantial part of the Issuer's
assets (or the Assets of its Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock
having the greatest voting rights to be issued by the Substitute Option Issuer
upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the highest of (x) the price
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per share of the Issuer Common Stock at which a Tender Offer or Exchange Offer
therefor has been made by any person (other than Grantee or any Subsidiary of
Grantee), (y) the price per share of the Issuer Common Stock to be paid by any
person (other than Grantee or any Subsidiary of Grantee) pursuant to an
agreement with Issuer, and (z) the highest closing sales price per share of
Issuer Common Stock quoted on the Nasdaq National Market (or if Issuer Common
Stock is not quoted on the Nasdaq National Market, the highest bid price per
share on any day as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a recognized source
chosen by Holder) within the six-month period immediately preceding the
agreement; provided, that in the event of a sale of less than all of Issuer's
assets, the Assigned Value shall be the sum of the price paid in such sale for
such assets and the current market value of the remaining assets of Issuer as
determined by a nationally recognized investment banking firm selected by Holder
(or by a majority in interest of the Holders if there shall be more than one
Holder (a "Holder Majority")), divided by the number of shares of the Issuer
Common Stock outstanding at the time of such sale. In the event that an exchange
offer is made for the Issuer Common Stock or an agreement is entered into for a
merger or consolidation involving consideration other than cash, the value of
the securities or other property issuable or deliverable in exchange for the
Issuer Common Stock shall be determined by a nationally recognized investment
banking firm mutually selected by Holder and Issuer (or if applicable, Acquiring
Corporation), provided that if a mutual selection cannot be made as to such
investment banking firm, it shall be selected by Holder. (If there shall be more
than one Holder, any such selection shall be made by a Holder Majority.)
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of the Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect to a share
of common stock issued by Issuer, the person merging into Issuer or by any
company which controls or is controlled by such merger person, as Holder may
elect.
(f) In no event pursuant to any of the foregoing paragraphs
shall the Substitute Option be exercisable for more than 19.9% of the aggregate
of the shares of the Substitute Common Stock outstanding prior to exercise of
the Substitute Option. In the event that the Substitute Option would be
exercisable for more than 19.9% of the aggregate of the shares of Substitute
Common Stock but for this clause (f), the Substitute Option Issuer shall make a
cash payment to Holder equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause (f) over (ii) the
value of the Substitute Option after giving effect to the limitation in this
clause (f). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Holder (or a Holder Majority).
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the shares of Substitute
Common Stock are in no way distinguishable from or have lesser economic value
than other shares of common stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9 and 10 shall apply, with
appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in such
sections to "Issuer," "Option," "Purchase Price" and "Issuer Common Stock" shall
be deemed to be references to "Substitute Option Issuer," "Substitute Option,"
"Substitute Purchase Price" and "Substitute Common Stock," respectively.
8. Repurchase at the Option of Holder.
(a) Subject to Section 3(e) and the last sentence of Section
3(a), at the request of Holder at any time commencing upon the first occurrence
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of a Purchase Event and ending 12 months immediately thereafter, Issuer shall
repurchase from Holder the Option and all shares of Issuer Common Stock
purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares
of Issuer Common Stock acquired by Holder pursuant to the Option with respect to
which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or, in the
case of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Holder for each share of Issuer
Common Stock with respect to which the Option has been exercised and with
respect to which Holder then has beneficial ownership, multiplied by the number
of such shares.
(b) If Holder exercises its rights under this Section 8,
Issuer shall, within ten business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common Stock purchased
thereunder with respect to which Holder then has beneficial ownership, and
Holder shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all liens, claims, charges
and encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or Consent of any governmental or regulatory
agency or authority is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited from paying
and promptly file the required notice or application for Consent and
expeditiously process the same (and each party shall cooperate with the other in
the filing of any such notice or application and the obtaining of any such
Consent). If any governmental or regulatory agency or authority disapproves of
any part of Issuer's proposed repurchase pursuant to this Section 8, Issuer
shall promptly give notice of such fact to Holder. If any governmental or
regulatory agency or authority prohibits the repurchase in part but not in
whole, then Holder shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such agency or authority, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased. Holder
shall notify Issuer of its determination under the preceding sentence within
five business days of receipt of notice of disapproval of the repurchase.
(c) For purposes of this Agreement , the "Applicable Price"
means the highest of (i) the highest price per share of Issuer Common Stock paid
for any such share by the person or groups described in Section 8(d)(i), (ii)
the price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq
National Market (or if Issuer Common Stock is not quoted on the Nasdaq National
Market, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded as reported by a
recognized source chosen by Holder) during the 60 business days preceding the
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Request Date; provided, however, that in the event of a sale of less than all of
Issuer's Assets, the Applicable Price shall be the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by an independent nationally recognized investment banking
firm selected by Holder and reasonably acceptable to Issuer (which determination
shall be conclusive for all purposes of this Agreement), divided by the number
of shares of the Issuer Common Stock outstanding at the time of such sale. If
the consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally
recognized investment banking firm selected by Holder and reasonably acceptable
to Issuer, which determination shall be conclusive for all purposes of this
Agreement.
9. Registration Rights.
(a) Following termination of the Merger Agreement, Issuer
shall, subject to the conditions of subparagraph (c) below, if requested by any
Holder, including Grantee and any permitted transferee ("Selling Holder"), as
expeditiously as possible prepare and file a registration statement under the
Securities Laws if necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to Selling Holder upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by
Holder in such request, including, without limitation, a "shelf" registration
statement under Rule 415 under the Securities Act or any successor provision,
and Issuer shall use its best efforts to qualify such shares or other securities
for sale under any applicable state securities laws.
(b) If Issuer at any time after the exercise of the Option
proposes to register any shares of Issuer Common Stock under the Securities Laws
in connection with an underwritten public offering of such Issuer Common Stock,
Issuer will promptly give written notice to Holder of its intention to do so
and, upon the written request of Holder given within 30 days after receipt of
any such notice (which request shall specify the number of shares of Issuer
Common Stock intended to be included in such underwritten public offering by
Selling Holder), Issuer will cause all such shares, the holders of which shall
have requested participation in such registration, to be so registered and
included in such underwritten public offering; provided, that Issuer may elect
to not cause any such shares to be so registered (i) if the underwriters in good
faith object for valid business reasons, or (ii) in the case of a registration
solely to implement a dividend reinvestment or similar plan, an employee benefit
plan or a registration filed on Form S-4 or any successor form, or a
registration filed on a form which does not permit registrations of resales;
provided, further, that such election pursuant to clause (i) may only be made
two times. If some but not all the shares of Issuer Common Stock, with respect
to which Issuer shall have received requests for registration pursuant to this
subparagraph (b), shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Selling Holders and any
other person (other than Issuer or any person exercising demand registration
rights in connection with such registration) who or which is permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each Selling Holder bears to the total number of shares
requested to be registered by all persons then desiring to have Issuer Common
Stock registered for sale.
(c) Issuer shall use all reasonable efforts to cause each
registration statement referred to in subparagraph (a) above to become effective
and to obtain all consents or waivers of other parties which are required
therefor and to keep such registration statement effective, provided, that
Issuer may delay any registration of Option Shares required pursuant to
subparagraph (a) above for a period not exceeding 90 days provided Issuer shall
in good faith determine that any such registration would adversely affect an
offering or contemplated offering of other securities by Issuer, and Issuer
shall not be required to register Option Shares under the Securities Laws
pursuant to subparagraph (a) above:
(i) prior to the earliest of (a) termination of the Merger
Agreement pursuant to Section 10.1 thereof, (b) failure to obtain the requisite
stockholder approval pursuant to Section 9.1(a) of the Merger Agreement, and (c)
a Purchase Event or a Preliminary Purchase Event;
(ii) on more than two occasions;
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(iii) more than once during any calendar year;
(iv) within 90 days after the effective date of a registration
referred to in subparagraph (b) above pursuant to which the Selling Holders
concerned were afforded the opportunity to register such shares under the
Securities Laws and such shares were registered as requested; and
(v) unless a request therefor is made to Issuer by Selling
Holders holding at least 25% or more of the aggregate number of Option Shares
then outstanding.
In addition to the foregoing, Issuer shall not be
required to maintain the effectiveness of any registration statement after the
expiration of nine months from the effective date of such registration
statement. Issuer shall use all reasonable efforts to make any filings, and take
all steps, under all applicable state securities laws to the extent necessary to
permit the sale or other disposition of the Option Shares so registered in
accordance with the intended method of distribution for such shares, provided,
that Issuer shall not be required to consent to general jurisdiction or qualify
to do business in any state where it is not otherwise required to so consent to
such jurisdiction or to so qualify to do business.
(d) Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and xpenses (including the fees and expenses
of counsel), accounting expenses, legal expenses including the reasonable fees
and expenses of one counsel to the Selling Holders, printing expenses, expenses
of underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to subparagraph (a) or (b) above (including the
related offerings and sales by Selling Holders) and all other qualifications,
notifications or exemptions pursuant to subparagraph (a) or (b) above.
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Selling Holders and any other expenses incurred
by such Selling Holders in connection with any such registration shall be borne
by such Selling Holders.
(e) In connection with any registration under subparagraph (a)
or (b) above Issuer hereby indemnifies the Selling Holders, and each underwriter
thereof, including each person, if any, who controls such holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission,
or alleged omission, to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue statement
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Selling Holder, or by such underwriter, as the case may be,
for all such expenses, losses, claims, damages and liabilities caused by any
untrue, or alleged untrue, statement, that was included by Issuer in any such
registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon, and in
conformity with, information furnished in writing to Issuer by such holder or
such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this
subparagraph (e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this subparagraph (e), such indemnified
party shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not relieve it
of any liability which it may otherwise have to any indemnified party under this
subparagraph (e). In case notice of commencement of any such action shall be
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given to the indemnifying party as above provided, the indemnifying party shall
be entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (i) the indemnifying arty either
agrees to pay the same, (ii) the indemnifying party falls to assume the defense
of such action with counsel' satisfactory to the indemnified party, or (iii) the
indemnified party has been advised by counsel that one or more legal defenses
may be available to the indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this subparagraph
(e) is unavailable to a party otherwise entitled to be indemnified in respect of
any expenses, losses, claims, damages or liabilities referred to herein, then
the indemnifying party, in lieu of indemnifying such party otherwise entitled to
be indemnified, shall contribute to the amount paid or payable by such party to
be indemnified as a result of such expenses, losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative
benefits received by Issuer, all selling shareholders and the underwriters from
the offering of the securities and also the relative fault of Issuer, all
selling shareholders and the underwriters in connection with the statements or
omissions which resulted in such expenses, losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The amount
paid or payable by a party as a result of the expenses, losses, claims, damages
and liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim; provided, that in no case shall
any Selling Holder be responsible, in the aggregate, for any amount in excess of
the net offering proceeds attributable to its Option Shares included in the
offering. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Any
obligation by any holder to indemnify shall be several and not joint with other
holders.
In connection with any registration pursuant to
subparagraph (a) or (b) above, Issuer and each Selling Holder (other than
Grantee) shall enter into an agreement containing the indemnification provisions
of this subparagraph (e).
(f) Issuer shall comply with all reporting requirements and
will do all such other things as may be necessary to permit the expeditious sale
at any time of any Option Shares by Holder in accordance with and to the extent
permitted by any rule or regulation promulgated by the SEC from time to time,
including, without limitation, Rules 144 and 144A. Issuer shall at its expense
provide Holder with any information necessary in connection with the completion
and filing of any reports or forms required to be filed by them under the
Securities Laws, or required pursuant to any state securities laws or the rules
of any stock exchange.
(g) Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other
securities to be acquired upon exercise of the Option are then authorized for
quotation or trading or listing on the Nasdaq National Market or any other
securities exchange or any automated quotations system maintained by a
self-regulatory organization, Issuer, upon the request of Holder, will promptly
file an application, if required, to authorize for quotation or trading or
listing the shares of Issuer Common Stock or other securities to be acquired
upon exercise of the Option on the Nasdaq National Market or any other
securities exchange or any automated quotations system maintained by a
self-regulatory organization and will use its best efforts to obtain approval,
if required, of such quotation or listing as soon as practicable.
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11. Division of Option. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 10, each
of the parties hereto shall bear and pay all costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may
be waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary;
Severability. This Agreement, together with the Merger Agreement and the other
documents and instruments referred to herein and therein, between Grantee and
Issuer (a) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof and (b) is not intended to confer upon any person
other than the parties hereto (other than any transferees of the Option Shares
or any permitted transferee of this Agreement pursuant to Section 12(h)) any
rights or remedies hereunder. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or a federal or
state governmental or regulatory agency or authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Option does not permit Holder to acquire,
or does not require Issuer to repurchase, the full number of shares of Issuer
Common Stock as provided in Sections 3 and 8 (as adjusted pursuant to Section
7), it is the express intention of Issuer to allow Holder to acquire or to
require Issuer to repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Georgia without regard to
any applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to the parties at the addresses set forth in the Merger
Agreement(or at such other address for a party as shall be specified by like
notice).
(g) Counterparts. This Agreement and any amendments hereto may
be executed in two counterparts, each of which shall be considered one and the
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same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned Subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) Further Assurances. In the event of any exercise of the
Option by Holder, Issuer and Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
ATTEST: THE SAVANNAH BANCORP, INC.
By:.____________________ By: ___________________________
[CORPORATE SEAL]
ATTEST: BRYAN BANCORP OF GEORGIA, INC.
By:.____________________ By: ___________________________
[CORPORATE SEAL]
- - 6 -
AD980410.274
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EXHIBIT 3
DIRECTOR'S AGREEMENT
THIS DIRECTOR'S AGREEMENT ("Agreement") is made and entered
into as of the 11th day of February, 1998, by and between the undersigned,
______________, a resident of __________, Georgia, and The Savannah Bancorp,
Inc., a corporation organized and existing under the laws of the State of
Georgia ("Savannah").
On even date herewith, Savannah and Bryan Bancorp of Georgia,
Inc., a corporation organized and existing under the laws of the State of
Georgia ("Bryan"), have entered into an Agreement and Plan of Merger (the
"Merger Agreement"). The Merger Agreement generally provides for the merger of
Bryan with and into Savannah ("Merger"), and the conversion of the issued and
outstanding shares of the $1.00 par value common stock of Bryan ("Bryan Common
Stock") into shares of the $1.00 par value common stock of Savannah. The
transactions contemplated by the Merger Agreement are subject to the affirmative
vote of the shareholders of Bryan, the affirmative vote of the shareholders of
Savannah, the receipt of certain regulatory approvals and the satisfaction of
other conditions.
The undersigned is a member of the Board of Directors of Bryan
and is the owner of _________ shares of Bryan Common Stock and has rights by
option or otherwise to acquire _________ additional shares of Bryan Common Stock
("Shares"). In order to induce Savannah to enter into the Merger Agreement, the
undersigned is entering into this Agreement with Savannah to set forth certain
terms and conditions governing the actions to be taken by the undersigned with
respect to the Shares until consummation of the Merger.
NOW, THEREFORE, in consideration of the transactions
contemplated by the Merger Agreement and the mutual promises and covenants
contained herein, the parties agree as follows:
1. Without the prior written consent of Savannah, the
undersigned shall not transfer, sell, assign, convey or encumber any of the
Shares during the term of this Agreement except to Savannah pursuant to the
terms of the Merger Agreement. Without limiting the generality of the foregoing,
the undersigned shall not grant to any party any option or right to purchase the
Shares or any interest therein. Further, except with respect to the Merger, the
undersigned shall not approve or ratify any agreement or contract pursuant to
which the Shares would be transferred to any other party as a result of a
consolidation, merger, reorganization or acquisition.
2. The undersigned intends to, and will, vote all of the
Shares beneficially owned by him (and with respect to which he has sole voting
power) in favor of the Merger. The undersigned will also recommend that the
shareholders of Bryan approve the Merger when the same is presented to the
shareholders for consideration in properly prepared proxy materials, subject
only to the undersigned's legal obligations (if any) as a director of Bryan, and
will use his or her best efforts to effect consummation of the Merger and the
other transactions contemplated by the Merger Agreement . Further, the
undersigned intends to, and will, surrender the certificate or certificates
representing his or her Shares which are beneficially owned by him (and with
respect to which he has sole dispositive power) to Savannah upon consummation of
the Merger as described in the Merger Agreement.
3. The undersigned covenants and agrees with Savannah that for
a period of two years after the effective time of the Merger, the undersigned
shall not, without the prior written consent of Savannah, directly or indirectly
serve as a consultant to, serve as a management official of, or be or become a
major shareholder of any financial institution having an office in Bryan County,
Georgia or Chatham County, Georgia. It is expressly understood that the
covenants contained in this paragraph 4 do not apply to (i) "management
official" positions which the undersigned holds with financial institutions
other than Bryan and its subsidiary as of the date of this Agreement, (ii)
securities holdings which cause the undersigned to be deemed a major shareholder
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of a financial institution, other than Bryan and its subsidiary, as of the date
of this Agreement, or (iii) advisory relationships with a financial institution
which the undersigned has as of the date of this Agreement or may have after the
date hereof solely in the capacity as legal counsel. For the purposes of the
covenants contained in this paragraph 4, the following terms shall have the
following respective meanings:
(a) The term "management official" shall refer to service of
any type which gives the undersigned the authority to participate, directly or
indirectly, in policy-making functions of the financial institution. This
includes, but is not limited to, service as an organizer, officer, director, or
advisory director of the financial institution. It is expressly understood that
the undersigned may be deemed a management official of the financial
institution, whether or not he holds any official, elected, or appointed
position with such financial institution.
(b) The term "financial institution" shall refer to any bank
or savings association which engages in the business of accepting deposits or
which owns or controls a company which engages in the business of accepting
deposits.
(c) The term "major shareholder" shall refer to the beneficial
ownership of 2% or more of any class of voting securities of such company or the
ownership of 2% of the total equity interest in such company, however
denominated.
In the case of an undersigned who is as of the date of this Agreement an officer
or director of Bryan, the provisions of this paragraph 3 shall be of no further
force and effect if the undersigned is not offered employment as an officer or
director of Savannah or any of its subsidiaries at the effective time of the
Merger or, if the undersigned is so employed, the undersigned's employment is
involuntarily terminated by Savannah after the effective time of the Merger
other than for cause.
4. The undersigned acknowledges and agrees that Savannah could
not be made whole by monetary damages in the event of any default by the
undersigned of the terms and conditions set forth in this Agreement. It is
accordingly agreed and understood that Savannah in addition to any other remedy
which it may have at law or in equity, shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and specifically to enforce
the terms and provisions hereof in any action instituted in any court of the
United States or in any state having appropriate jurisdiction.
5. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
6. Except with respect to the covenants contained in paragraph
3, which shall be governed by the terms set forth therein and shall be effective
only upon consummation of the Merger, the covenants and obligations set forth in
this Agreement shall expire and be of no further force and effect on the later
of September 30, 1998, or the date upon which the Board of Directors of Bryan
shall have the right to terminate the Merger Agreement and the transactions
contemplated thereby if the Merger is not consummated by such date.
IN WITNESS WHEREOF, this Agreement has been duly executed
under seal and delivered by the undersigned as of the day and year first above
written.
As to the Undersigned, signed in the presence of:
________________________ _______________________________(SEAL)
Name:__________________________
(Please print or type)
<PAGE>
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ATTEST: THE SAVANNAH BANCORP, INC.
By:______________________ By:_____________________________________
Secretary President and Chief Executive Officer
[CORPORATE SEAL]
- - 3 -
AD980330.100
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EXHIBIT 4
AFFILIATE AGREEMENT
The Savannah Bancorp, Inc.
25 Bull Street
Savannah, Georgia 31401
Attention: Archie H. Davis
President and Chief Executive Officer
Gentlemen:
The undersigned is a shareholder of Bryan Bancorp of Georgia, Inc.
("Bryan"), a corporation organized and existing under the laws of the State of
Georgia, and will become a shareholder of The Savannah Bancorp, Inc.
("Savannah"), a corporation organized and existing under the laws of the State
of Georgia, pursuant to the transactions described in the Agreement and Plan of
Merger, dated as of February 11, 1998 (the "Agreement"), by and between Savannah
and Bryan. Under the terms of the Agreement, Bryan will be merged into and with
Savannah (the "Merger"), and the shares of the $1.00 par value common stock of
Bryan ("Bryan Common Stock") will be converted into and exchanged for shares of
the $1.00 par value common stock of Savannah ("Savannah Common Stock"). This
Affiliate Agreement represents an agreement between the undersigned and Savannah
regarding certain rights and obligations of the undersigned in connection with
the shares of Savannah to be received by the undersigned as a result of the
Merger.
In consideration of the Merger and the mutual covenants contained
herein, the undersigned and Savannah hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to
Bryan he is an "affiliate" under Rule 145(c) as defined in Rule 405 of the Rules
and Regulations of the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended ("1933 Act"), and the undersigned anticipates
that he will be such an "affiliate" at the time of the Merger.
2. Initial Restriction on Disposition. The undersigned agrees that he
will not sell, transfer, or otherwise dispose of his interests in, or reduce his
risk relative to, any of the shares of Savannah Common Stock into which his
shares of Bryan Common Stock are converted upon consummation of the Merger until
such time as Savannah notifies the undersigned that the requirements of SEC
Accounting Series Release Nos. 130 and 135 ("ASR 130 and 135") have been met.
The undersigned understands that ASR 130 and 135 relate to publication of
financial results of post-Merger combined operations of Savannah and Bryan.
Savannah agrees that it will publish such results within 45 days after the end
of the first fiscal quarter of Savannah containing the required period of
post-Merger combined operations and that it will notify the undersigned promptly
following such publication.
3. Covenants and Warranties of Undersigned.The undersigned represents,
warrants and agrees that:
(a) The Savannah Common Stock received by the undersigned as a result
of the Merger will be taken for his own account and not for others, directly or
indirectly, in whole or in part.
(b) Savannah has informed the undersigned that any distribution by the
undersigned of Savannah Common Stock has not been registered under the 1933 Act
and that shares of Savannah Common Stock received pursuant to the Merger can
only be sold by the undersigned (1) following registration under the 1933 Act,
or (2) in conformity with the volume and other requirements of Rule 145(d)
promulgated by the SEC as the same now exist or may hereafter be amended, or (3)
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to the extent some other exemption from registration under the 1933 Act might be
available. The undersigned understands that Savannah is under no obligation to
file a registration statement with the SEC covering the disposition of the
undersigned's shares of Savannah Common Stock or to take any other action
necessary to make compliance with an exemption from such registration available.
(c) The undersigned will, and will cause each of the other parties
whose shares are deemed to be beneficially owned by the undersigned pursuant to
Section 8 hereof to, have all shares of Bryan Common Stock beneficially owned by
the undersigned registered in the name of the undersigned or such parties, as
applicable, prior to the effective date of the Merger and not in the name of any
bank, broker-dealer, nominee or clearinghouse.
(d) During the 30 days immediately preceding the Effective Time of the
Merger, the undersigned will not sell, transfer, or otherwise dispose of his
interests in, or reduce his risk relative to, any of the shares of Bryan Common
Stock beneficially owned by the undersigned as of the record date for
determination of shareholders entitled to vote at the Shareholders' Meeting of
Bryan held to approve the Merger.
4. Restrictions on Transfer. The undersigned understands and agrees
that stop transfer instructions with respect to the shares of Savannah Common
Stock received by the undersigned pursuant to the Merger will be given to
Savannah's Transfer Agent and that there will be placed on the certificates for
such shares, or shares issued in substitution thereof, a legend stating in
substance:
"The shares represented by this certificate were issued pursuant to a business
combination which is accounted for as a "pooling of interests" and may not be
sold, nor may the owner thereof reduce his risks relative thereto in any way,
until such time as The Savannah Bancorp, Inc. ("Savannah") has published the
financial results covering at least 30 days of combined operations after the
effective date of the merger through which the business combination was
effected. In addition, the shares represented by this certificate may not be
sold, transferred or otherwise disposed of except or unless (1) covered by an
effective registration statement under the Securities Act of 1933, as amended,
(2) in accordance with (i) Rule 145(d) (in the case of shares issued to an
individual who is not an affiliate of Savannah) or (ii) Rule 144 (in the case of
shares issued to an individual who is an affiliate of Savannah) of the Rules and
Regulations of such Act, or (3) in accordance with a legal opinion satisfactory
to counsel for Savannah that such sale or transfer is otherwise exempt from the
registration requirements of such Act."
Such legend will also be placed on any certificate representing Savannah
securities issued subsequent to the original issuance of the Savannah Common
Stock pursuant to the Merger as a result of any transfer of such shares or any
stock dividend, stock split, or other recapitalization as long as the Savannah
Common Stock issued to the undersigned pursuant to the Merger has not been
transferred in such manner to justify the removal of the legend therefrom. Upon
the request of the undersigned, Savannah shall cause the certificates
representing the shares of Savannah Common Stock issued to the undersigned in
connection with the Merger to be reissued free of any legend relating to
restrictions on transfer by virtue of ASR 130 and 135 as soon as practicable
after the requirements of ASR 130 and 135 have been met. In addition, if the
provisions of Rules 144 and 145 are amended to eliminate restrictions applicable
to the Savannah Common Stock received by the undersigned pursuant to the Merger,
or at the expiration of the restrictive period set forth in Rule 145(d),
Savannah, upon the request of the undersigned, will cause the certificates
representing the shares of Savannah Common Stock issued to the undersigned in
connection with the Merger to be reissued free of any legend relating to the
restrictions set forth in Rules 144 and 145(d) upon receipt by Savannah of an
opinion of its counsel to the effect that such legend may be removed.
5. Understanding of Restrictions on Dispositions. The undersigned has
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his ability to sell, transfer, or otherwise dispose
of the shares of Savannah Common Stock received by the undersigned, to the
extent he believes necessary, with his counsel or counsel for Bryan.
6. Filing of Reports by Savannah. Savannah agrees, for a period of
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three years after the effective date of the Merger, to file on a timely basis
all reports required to be filed by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, so that the public information provisions of
Rule 145(d) promulgated by the SEC as the same are presently in effect will be
available to the undersigned in the event the undersigned desires to transfer
any shares of Savannah Common Stock issued to the undersigned pursuant to the
Merger.
7. Transfer Under Rule 145(d). If the undersigned desires to sell or
otherwise transfer the shares of Savannah Common Stock received by him in
connection with the Merger at any time during the restrictive period set forth
in Rule 145(d), the undersigned will provide the necessary representation letter
to the transfer agent for Savannah Common Stock together with such additional
information as the transfer agent may reasonably request. If Savannah's counsel
concludes that such proposed sale or transfer complies with the requirements of
Rule 145(d), Savannah shall cause such counsel to provide such opinions as may
be necessary to Savannah's Transfer Agent so that the undersigned may complete
the proposed sale or transfer.
8. Acknowledgments. The undersigned recognizes and agrees that the
foregoing provisions also apply to all shares of the capital stock of Bryan and
Savannah that are deemed to be beneficially owned by the undersigned pursuant to
applicable federal securities laws, which the undersigned agrees may include,
without limitation, shares owned or held in the name of (i) the undersigned's
spouse, (ii) any relative of the undersigned or of the undersigned's spouse who
has the same home as the undersigned, (iii) any trust or estate in which the
undersigned, the undersigned's spouse, and any such relative collectively own at
least a 10% beneficial interest or of which any of the foregoing serves as
trustee, executor, or in any similar capacity, and (iv) any corporation or other
organization in which the undersigned, the undersigned's spouse and any such
relative collectively own at least 10% of any class of equity securities or of
the equity interest. The undersigned further recognizes that, in the event that
the undersigned is a director or officer of Savannah or becomes a director or
officer of Savannah upon consummation of the Merger, among other things, any
sale of Savannah Common Stock by the undersigned within a period of less than
six months following the effective time of the Merger may subject the
undersigned to liability pursuant to Section 16(b) of the Securities Exchange
Act of 1934, as amended.
9. Miscellaneous. This Affiliate Agreement is the complete agreement
between Savannah and the undersigned concerning the subject matter hereof. Any
notice required to be sent to any party hereunder shall be sent by registered or
certified mail, return receipt requested, using the addresses set forth herein
or such other address as shall be furnished in writing by the parties. This
Affiliate Agreement shall be governed by the laws of the State of
Georgia/Georgia.
This Affiliate Agreement is executed as of the ____ day of February,
1998.
Very truly yours,
- ---------------------------
Signature
- ---------------------------
Print Name
- ---------------------------
- ---------------------------
- ---------------------------
Address
[add below the signatures of all registered owners
of shares deemed beneficially owned by the affiliate]
- ---------------------------
Name:
<PAGE>
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- ---------------------------
Name:
- ---------------------------
Name:
AGREED TO AND ACCEPTED as of
February __, 1998
THE SAVANNAH BANCORP, INC.
By:_________________________
- - 5 -
AD980330.104
<PAGE>
2-80
"Executive"
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of
____________________, 1998, by and between BRYAN BANK & TRUST, a Georgia state
Bank (the "Bank") and SAVANNAH BANCORP, INC. ("Savannah") (Bank and Savannah
collectively referred to as "Employers"), and E. JAMES BURNSED, a resident of
the State of Georgia (the "Executive").
WHEREAS, Savannah, a Georgia corporation, has acquired all of the equity
interest of Bank by means of a merger (the "Merger") pursuant to an Agreement
and Plan of Merger between Savannah and Bryan Bancorp, Inc. dated as of February
___, 1998 (the "Merger Agreement");
WHEREAS, the Executive was the President and Chief Executive Officer of the
Bank and desires to continue as the President of the Bank and Vice Chairman of
the Board of Directors of Savannah;
WHEREAS, the Employers desire that the Executive serve in such
capacities; and
WHEREAS, the Employers and the Executive, in conjunction with and pursuant
to the terms of the Merger Agreement, desire to set forth in writing the terms
and conditions of the Executive's Employment.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Employment and Duties.
(a)The Employers hereby agree to employ the Executive and Executive agrees
to serve as the President of the Bank and Vice Chairman of the Board of Savannah
and to act in accordance with the terms and conditions set forth herein. During
the term of this Agreement, the Executive agrees that he will serve the Bank
faithfully and to the best of his ability and that he will devote his full
business time, attention and skills to the operation of the business of the
Employers, subject to reasonable absences for vacation and illness, and that he
will perform such duties, unctions and responsibilities in connection with such
position and consistent with the foregoing as are from time to time delegated to
the Executive by the Boards of Directors of the Employers (the "Boards") or the
CEO of Savannah; provided, however, that the foregoing shall not be deemed to
restrict the Executive from devoting a reasonable amount of time and attention
to the management of his personal affairs and investments, so long as such
activities do not interfere with the responsible performance of the Executive's
duties hereunder. The Executive shall provide the Boards and the CEO of Savannah
with periodic reports on, and keep it informed on a current basis concerning,
the business and affairs of the Bank.
<PAGE>
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(b)The Bank shall provide the Executive with a private office, secretarial
and administrative assistance, office equipment, supplies and other facilities
and services suitable to the Executive's position to be located at 9971 Ford
Avenue, Richmond Hill, Georgia or at a comparable location within Bryan County,
Georgia.
2.Term. The term ("Term") of this Agreement shall commence on the date
hereof and shall continue until the first anniversary of the date hereof unless
earlier terminated pursuant to Section 4 hereof.
3.Compensation. In consideration of the services to be rendered by the
Executive to the Employers hereunder, the Employers hereby agree to pay or
otherwise provide the Executive the following compensation and benefits, it
being understood that the Bank shall have the right to deduct therefrom all
taxes which may be required to be deducted or withheld under any provision of
applicable law (including, without limitation, Social Security payments, income
tax withholding and other required deductions now in effect or which may become
effective by law any time during the Term):
(a)Salary. The Executive shall receive an annual salary of ("Salary") from
the Bank of $90,000.00 to be paid in equal installments in accordance with the
Bank's salary payment practices in effect from time to time for executives of
the Bank. The Bank may consider and declare from time to time increases in the
Salary.
(b)Compensation Pursuant to Plans. During the Term, the Executive shall be
included as a participant in all present and future employee benefit, retirement
and compensation plans generally available to employees of the Bank, consistent
with his Salary and his position with the Employers.
(c)Expenses. The Executive shall be entitled to receive reimbursement for
all reasonable expenses incurred by him in connection with the fulfillment of
his duties hereunder. Upon receipt of appropriate vouchers therefor, provided
that the Executive has complied with all reasonable policies and procedures
relating to the reimbursement of such expenses as shall, from time to time, be
established by the Bank.
(d)Vacation and Perquisites. For so long as the Executive is employed by
the Bank hereunder, the Executive shall be entitled to such paid vacation, sick
leave and such perquisites as are provided to other executive officers of
Savannah's banking subsidiaries.
(e)Change in Control Agreement. Employers, by executing this Agreement,
assume the obligations of Bryan Bancorp of Georgia, Inc. under the Change in
Control Agreement with Executive dated May 22, 1996 ("Agreement"). Executive, by
executing this Agreement, agrees to waive any rights under the Agreement to
payments resulting from the merger between Savannah and Bryan Bancorp of
Georgia, Inc. and agrees to accept the benefits of this Agreement in full
payment in lieu of rights under the Agreement, except in the event of a Change
in Control of Savannah.
<PAGE>
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(f)Stock Options. To the extent not exercised, Savannah agrees to assume
the Stock Option Agreement granting options to purchase 16,000 shares of Bryan
Bancorp stock to E. James Burnsed at a price of $9.93 per share for 4,000
shares, $10.66 per share for 4,000 shares, $11.75 per share for 4,000 shares,
and $10.65 per share for 4,000 shares, pursuant to the terms of the Merger
Agreement between Savannah and Bryan Bancorp of Georgia, Inc. Savannah further
agrees to grant to Executive pursuant to the Savannah Incentive Stock Option
Plan options to purchase 10,000 shares of Savannah stock at market price on the
same terms and conditions as other Savannah executives.
(g)Life Insurance. Employers agrees to provide for Executive life
insurance in addition to life insurance provided in the benefit package
described in paragraph (b) above necessary to increase the total life insurance
provided by Employers to total $575,000; provided however, the additional
premium to increase theinsurance above that otherwise provided in the standard
employee benefit package shall not exceed $2,000.
(h)Automobile. Executive, during his employment, shall have the use of the
vehicle now in his possession and all expenses relating to the operation of the
vehicle until December 31, 2000 and thereafter shall have the same automobile
privileges as other executives of Savannah's banking subsidiaries and on
December 31, 2000, Executive shall have the right to purchase the vehicle now in
his possession at the depreciated book value that the vehicle is shown on the
books of Bryan Bank & Trust on said date.
(i)Cash Incentive Plan. Savannah agrees for the term of this Agreement and
for any extended term of this Agreement to provide Executive with a cash
incentive payable under the same terms and conditions as were payable under
Bryan Bank & Trust Officer's Cash Incentive Plan in effect at the time of
execution of the definitive agreement.
4. Termination.
(a)This Agreement shall terminate on the earliest to occur of the first
anniversary of the date hereof or the occurrence of any of the following events:
(i) the mutual agreement of the Employees and the Executive; (ii) the death or
Disability (as hereinafter defined) of the Executive or Executive's voluntary
retirement; or (iii) immediate upon either of Employers giving written notice to
the Executive of termination for Cause (as defined herein).
(b)The Bank may terminate the Executive's employment under this Agreement
at any time for Cause. The termination shall be evidenced by written notice to
the Executive, which shall specify the cause for termination. "Cause" shall
exist if: (i) the Executive is convicted of (from which no appeal may be taken),
or pleads guilty to, any act of fraud, misappropriation or embezzlement, or any
felony; (ii) in the reasonable determination of the Boards of Employers, the
Executive has engaged in conduct or activity materially damaging to the business
of the Employers (it being understood however, that unintentional physical
damage to any property of the Employers by the Executive shall not be a ground
for such a determination by the Board); or (iii) the Executive has failed,
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without reasonable cause, to devote his full business time and best efforts to
the business of the Bank as provided in Section 1(a) hereof and, after written
notice from the Bank of such failure, the Executive at any time thereafter again
so fails.
(c)The Executive may terminate his employment under this Agreement at any
time for Good Reason. For purposes of this Agreement, "Good Reason" shall mean
(i) the assignment to the Executive of duties or responsibilities which are
materially inconsistent with the responsibilities of an executive officer
holding the office of the Executive; (ii) a material breach by the Bank of any
of the material provisions of this Agreement; (iii) reduction of Executive's
salary or benefits; or (iv) Employers requiring the Executive to be based at any
place outside a fifty mile radius from Richmond Hill, Georgia, except for
reasonably required travel on the Employers' business.
(d)In the event that the Executive's employment hereunder is terminated
during the initial term or any extended term of this Agreement by Executive for
reason of Good Cause or by the Employers other than for Cause, the Executive
shall be entitled to receive the Salary, health insurance benefits, and life
insurance benefits provided under this Agreement for a period of one year after
the date of such termination. For purposes of this Agreement, "Disability" shall
mean the absence of the Executive from the Executive's duties hereunder on a
full-time basis for 120 consecutive business days (or such shorter period as
will suffice for the Executive to qualify for full disability benefits under the
applicable disability insurance policy or policies of the Employers) as a result
of incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Employers or its insurers and
reasonably acceptable to the Executive or the Executive's legal representative.
5. Representations and Warranties.
(a)The Executive represents and warrants to the Employers that: (i) he has
the full power and authority to execute, deliver and perform this Agreement and
that he has taken all actions necessary to secure all approvals required in
connection herewith; (ii) this Agreement has been duly authorized, executed and
delivered by him and constitutes his valid and binding agreement, enforceable
against him in accordance with its terms; and (iii) the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not, with the passage of time or the giving of notice
or both, violate or conflict with, constitute a breach of or default under,
result in the loss of any material benefit under, or permit the acceleration of
or entitle any party to accelerate any obligation under or pursuant to, any
material mortgage, lien, leases, agreement, instrument, order, arbitration
award, judgment or decree to which he is a party or by which he or any of his
assets are bound.
(b)the Employers hereby represent and warrant to the Executive that: (i)
this Agreement has been duly authorized, executed and delivered by it and
constitutes the valid and binding agreement of it, enforceable against it in
accordance with its terms; (ii) it has the full power and authority to execute,
deliver and perform this Agreement and has taken all necessary action to secure
all approvals required in connection herewith; and (iii) the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will not, with the passage of time or the giving of notice
or both, violate or conflict with, constitute a breach of or default under,
result in the loss of any material benefit under, or permit the acceleration of
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or entitle any party to accelerate any obligation under or pursuant to, its
charter or bylaws or any material mortgage, lien, lease, agreement, instrument,
order, arbitration award, judgment or decree to which it is a party or by which
it or any of its assets are bound.
6.Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and deemed to have been given when delivered
in person or when dispatched by telegram or electronic facsimile transfer
(confirmed in writing by mail, registered or certified, return receipt
requested, postage prepaid, simultaneously dispatched) to the addresses
specified below.
If to the Executive:E. James Burnsed
Bryan Bank & Trust
9971 Ford Avenue
Richmond Hill, GA 31224
Facsimile No.: (912) 756-4617
If to the EmployersSavannah Bancorp, Inc.
25 Bull Street
Savannah, GA 31401
Facsimile No.: (912) 651-4141
Attention: President
or to such other address or fax number as either party may from time to time
designate in writing to the other.
7.Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto relating to the subject matter hereof, and supersedes
all prior agreements and understandings, whether oral or written, with respect
to the same. No modification, alteration, amendment or rescission of or
supplement to this Agreement shall be valid or effective unless the same is in
writing and signed by both parties hereto.
8.Governing Law. This Agreement and the rights and duties of the parties
hereunder shall be governed by, construed under and enforced in accordance with
the laws of the State of Georgia.
9.Assignment. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, personal representatives,
successors and permitted assigns. The rights, duties and obligations under this
Agreement are assignable by the Employers to a successor of all or substantially
all of the business or assets of the Employers. The rights, duties and
obligations of the Executive under this Agreement shall not be assignable.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
delivered, and the Executive has executed and delivered this Agreement, all as
of the day and year first above written.
SAVANNAH BANCORP, INC.
BY:/S/ Archie H. Davis
Its: President & CEO
BRYAN BANK & TRUST
BY:/S/ E. James Burnsed
Its: President & CEO
<PAGE>
2-85
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of
____________________, 1998, by and between BRYAN BANK & TRUST, a Georgia state
Bank (the "Bank") and SAVANNAH BANCORP, INC. ("Savannah) (Bank and Savannah
collectively referred to as "Employers"), and GEORGE MICHAEL ODOM, JR., a
resident of the State of Georgia (the "Executive").
WHEREAS, Savannah, a Georgia corporation, has acquired all of the equity
interest of Bank by means of a merger (the "Merger") pursuant to an Agreement
and Plan of Merger between Savannah and Bryan Bancorp, Inc. dated as of February
___, 1998 (the "Merger Agreement");
WHEREAS, the Executive was the Executive Vice President of the Bank and
desires to continue as the Executive Vice President of the Bank;
WHEREAS, the Employers desire that the Executive serve in such
capacities; and
WHEREAS, the Employers and the Executive, in conjunction with and pursuant
to the terms of the Merger Agreement, desire to set forth in writing the terms
and conditions of the Executive's Employment.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Employment and Duties.
(a)The Employers hereby agree to employ the Executive and Executive agrees
to serve as the Executive Vice President of the Bank and to act in accordance
with the terms and conditions set forth herein. During the term of this
Agreement, the Executive agrees that he will serve the Bank faithfully and to
the best of his ability and that he will devote his full business time,
attention and skills to the operation of the business of the Employers, subject
to reasonable absences for vacation and illness, and that he will perform such
duties, functions and responsibilities in connection with such position and
consistent with the foregoing as are from time to time delegated to the
Executive by the Boards of Directors of the Employers (the "Boards") or the CEO
of the Bank; provided, however, that the foregoing shall not be deemed to
restrict the Executive from devoting a reasonable amount of time and attention
to the management of his personal affairs and investments, so long as such
activities do not interfere with the responsible performance of the Executive's
duties hereunder. The Executive shall provide the Boards and the CEO of the Bank
with periodic reports on, and keep it informed on a current basis concerning,
the business and affairs of the Bank.
<PAGE>
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(b)The Bank shall provide the Executive with a private office, secretarial
and administrative assistance, office equipment, supplies and other facilities
and services suitable to the Executive's position to be located at 9971 Ford
Avenue, Richmond Hill, Georgia or at a comparable location within Bryan County,
Georgia.
2.Term. The term ("Term") of this Agreement shall commence on the date
hereof and shall continue until the first anniversary of the date hereof unless
earlier terminated pursuant to Section 4 hereof.
3.Compensation. In consideration of the services to be rendered by the
Executive to the Employers hereunder, the Employers hereby agree to pay or
otherwise provide the Executive the following compensation and benefits, it
being understood that the Bank shall have the right to deduct therefrom all
taxes which may be required to be deducted or withheld under any provision of
applicable law (including, without limitation, Social Security payments, income
tax withholding and other required deductions now in effect or which may become
effective by law any time during the Term):
(a)Salary. The Executive shall receive an annual salary of ("Salary") from
the Bank of $80,000.00 to be paid in equal installments in accordance with the
Bank's salary payment practices in effect from time to time for executives of
the Bank. The Bank may consider and declare from time to time increases in the
Salary.
(b)Compensation Pursuant to Plans. During the Term, the Executive shall be
included as a participant in all present and future employee benefit, and
retirement plans generally available to employees of the Bank, consistent with
his Salary and his position with the Employers.
(c)Expenses. The Executive shall be entitled to receive reimbursement for
all reasonable expenses incurred by him in connection with the fulfillment of
his duties hereunder. Upon receipt of appropriate vouchers therefor, provided
that the Executive has complied with all reasonable policies and procedures
relating to the reimbursement of such expenses as shall, from time to time, be
established by the Bank.
(d)Vacation and Perquisites. For so long as the Executive is employed by
the Bank hereunder, the Executive shall be entitled to such paid vacation, sick
leave and such perquisites as are provided to other executive officers of
Savannah's banking subsidiaries.
(e)Change in Control Agreement. Employers, by executing this Agreement,
assume the obligations of Bryan Bancorp of Georgia, Inc. under the Change in
Control Agreement with Executive dated May 22, 1996 ("Agreement"). Executive, by
executing this Agreement, agrees to waive any rights under the Agreement to
payments resulting from the merger between Savannah and Bryan Bancorp of
Georgia, Inc. and agrees to accept the benefits of this Agreement in full
payment in lieu of rights under the Agreement, except in the event of a Change
in Control of Savannah.
<PAGE>
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(f)Stock Options. Savannah agrees to assume the Stock Option Agreement
granting options to purchase 5,000 shares of Bryan Bancorp stock to George
Michael Odom, Jr. at a price of $19.00 a share under the 1997 Incentive Stock
Option Plan of Bryan Bancorp of Georgia, Inc., pursuant to the terms of the
Merger Agreement between Savannah and Bryan Bancorp of Georgia, Inc. Savannah
further agrees to assume the Stock Option Agreement pursuant to the Bryan
Bancorp of Georgia, Inc. 1997 Incentive Stock Option Plan dated February 10,
1998 granting to Executive the option to purchase 2,500 shares at a price of
$47.17 per share.
(g)Life Insurance. Employers agrees to provide for Executive life
insurance in addition to life insurance provided in the benefit package
described in paragraph (b) above necessary to increase the total life insurance
provided by Employers to total $450,000; provided however, the additional
premium to increase the insurance above that otherwise provided in the standard
employee benefit package shall not exceed $1,500.
(h)Automobile. Executive, during his employment, shall have the use of the
Ford Explorer vehicle now in his possession and all expenses relating to the
operation of the vehicle until December 31, 2000 and thereafter shall have the
same automobile privileges as other executives of Savannah's banking
subsidiaries and on December 31, 2000, Executive shall have the right to
purchase the Ford Explorer at the depreciated book value that the vehicle is
shown on the books of Bryan Bank & Trust on said date.
(i)Cash Incentive Plan. Savannah agrees for the term of this Agreement and
for any extended term of this Agreement to provide Executive with a cash
incentive payable under the same terms and conditions as were payable under
Bryan Bank & Trust Officer's Cash Incentive Plan in effect at the time of
execution of the definitive agreement.
4. Termination.
(a)This Agreement shall terminate on the earliest to occur of the first
anniversary of the date hereof or the occurrence of any of the following events:
(i) the mutual agreement of the Employees and the Executive; (ii) the death or
Disability (as hereinafter defined) of the Executive or Executive's voluntary
retirement; or (iii) immediate upon either of Employers giving written notice to
the Executive of termination for Cause (as defined herein).
(b)The Bank may terminate the Executive's employment under this Agreement
at any time for Cause. The termination shall be evidenced by written notice to
the Executive, which shall specify the cause for termination. "Cause" shall
exist if: (i) the Executive is convicted of (from which no appeal may be taken),
or pleads guilty to, any act of fraud, misappropriation or embezzlement, or any
felony; (ii) in the reasonable determination of the Boards of Employers, the
Executive has engaged in conduct or activity materially damaging to the business
of the Employers (it being understood however, that unintentional physical
damage to any property of the Employers by the Executive shall not be a ground
for such a determination by the Board); or (iii) the Executive has failed,
without reasonable cause, to devote his full business time and best efforts to
the business of the Bank as provided in Section 1(a) hereof and, after written
notice from the Bank of such failure, the Executive at any time thereafter again
so fails.
<PAGE>
2-88
(c)The Executive may terminate his employment under this Agreement at any
time for Good Reason. For purposes of this Agreement, "Good Reason" shall mean
(i) the assignment to the Executive of duties or responsibilities which are
materially inconsistent with the responsibilities of an executive officer
holding the office of the Executive; (ii) a material breach by the Bank of any
of the material provisions of this Agreement; (iii) reduction of Executive's
salary or benefits; or (iv) Employers requiring the Executive to be based at any
place outside a fifty mile radius from Richmond Hill, Georgia, except for
reasonably required travel on the Employers' business.
(d)In the event that the Executive's employment hereunder is terminated
during the initial term or any extended term of this Agreement by Executive for
reason of Good Cause or by the Employers other than for Cause, the Executive
shall be entitled to receive the Salary, health insurance benefits, and life
insurance benefits provided under this Agreement for a period of one year after
the date of such termination. For purposes of this Agreement, "Disability" shall
mean the absence of the Executive from the Executive's duties hereunder on a
full-time basis for 120 consecutive business days (or such shorter period as
will suffice for the Executive to qualify for full disability benefits under the
applicable disability insurance policy or policies of the Employers) as a result
of incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Employers or its insurers and
reasonably acceptable to the Executive or the Executive's legal representative.
5. Representations and Warranties.
(a)The Executive represents and warrants to the Employers that: (i) he has
the full power and authority to execute, deliver and perform this Agreement and
that he has taken all actions necessary to secure all approvals required in
connection herewith; (ii) this Agreement has been duly authorized, executed and
delivered by him and constitutes his valid and binding agreement, enforceable
against him in accordance with its terms; and (iii) the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not, with the passage of time or the giving of notice
or both, violate or conflict with, constitute a breach of or default under,
result in the loss of any material benefit under, or permit the acceleration of
or entitle any party to accelerate any obligation under or pursuant to, any
material mortgage, lien, leases, agreement, instrument, order, arbitration
award, judgment or decree to which he is a party or by which he or any of his
assets are bound.
(b)the Employers hereby represent and warrant to the Executive that: (i)
this Agreement has been duly authorized, executed and delivered by it and
constitutes the valid and binding agreement of it, enforceable against it in
accordance with its terms; (ii) it has the full power and authority to execute,
deliver and perform this Agreement and has taken all necessary action to secure
all approvals required in connection herewith; and (iii) the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will not, with the passage of time or the giving of notice
or both, violate or conflict with, constitute a breach of or default under,
result in the loss of any material benefit under, or permit the acceleration of
or entitle any party to accelerate any obligation under or pursuant to, its
charter or bylaws or any material mortgage, lien, lease, agreement, instrument,
order, arbitration award, judgment or decree to which it is a party or by which
it or any of its assets are bound.
<PAGE>
2-89
6.Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and deemed to have been given when delivered
in person or when dispatched by telegram or electronic facsimile transfer
(confirmed in writing by mail, registered or certified, return receipt
requested, postage prepaid, simultaneously dispatched) to the addresses
specified below.
If to the Executive:George Michael Odom, Jr.
Bryan Bank & Trust
9971 Ford Avenue
Richmond Hill, GA 31224
Facsimile No.: (912) 756-4617
If to the EmployersSavannah Bancorp, Inc.
25 Bull Street
Savannah, GA 31401
Facsimile No.: (912) 651-4141
Attention: President
or to such other address or fax number as either party may from time to time
designate in writing to the other.
7.Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto relating to the subject matter hereof, and supersedes
all prior agreements and understandings, whether oral or written, with respect
to the same. No modification, alteration, amendment or rescission of or
supplement to this Agreement shall be valid or effective unless the same is in
writing and signed by both parties hereto.
8.Governing Law. This Agreement and the rights and duties of the parties
hereunder shall be governed by, construed under and enforced in accordance with
the laws of the State of Georgia.
9.Assignment. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, personal representatives,
successors and permitted assigns. The rights, duties and obligations under this
Agreement are assignable by the Employers to a successor of all or substantially
all of the business or assets of the Employers. The rights, duties and
obligations of the Executive under this Agreement shall not be assignable.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
delivered, and the Executive has executed and delivered this Agreement, all as
of the day and year first above written.
SAVANNAH BANCORP, INC.
BY: /S/ Archie H. Davis
Its: President & CEO
BRYAN BANK & TRUST
BY:/S/ George Michael Odum, Jr.
Its:Executive Vice President
<PAGE>
EXHIBIT 10.2 - CHANGE IN CONTROL AGREEMENT WITH ARCHIE H. DAVIS DATED
FEBRUARY 20, 1996
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT made this 20th day of February, 1996 between THE
SAVANNAH BANCORP, INC., a Georgia Corporation (hereinafter, the "Company"), and
ARCHIE H. DAVIS, an employee of the Company or one or more of its subsidiaries
(hereinafter, the "Employee").
WHEREAS, the Employee is employed by the Company and has agreed to
continue to work for the Company on the terms and conditions set forth
hereinafter;
WHEREAS, the Company and the Employee agree that this Agreement shall
be relied on by each party in continuing the employment relationship described
herein and that the execution of this Agreement is a condition precedent to the
Employee's continued employment with the Company.
NOW, THEREFORE, for and in consideration of the premises and promises
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Employee hereby
agree as follows:
1. Termination. (a) If there occurs a Change In Control (hereinafter
defined) during the Employee's employment with the Company and the Employee's
employment with the Company or a Successor Entity (hereinafter defined) is
terminated by the Company or Successor Entity Without Cause (hereinafter
defined) during the one (1) year period immediately following the date of the
Change In Control, then, notwithstanding such termination, the Employee shall
continue to receive compensation at that rate which the Employee was entitled to
receive as of the date of Change In Control for the one (1) year period
immediately following the date the Employee's employment with the Company or a
Successor Entity is terminated by the Company or a Successor Entity Without
Cause.
(b) If there occurs a Change in Control during the Employee's
employment with the Company and the Employee voluntarily terminates his
employment with the Company or a Successor Entity during the one (1) year period
immediately following the date of the
10-1
<PAGE>
Change in Control, then, notwithstanding such termination, the Employee shall
continue to receive compensation at that rate which the Employee was entitled to
receive as of the date of the Change In Control for the remainder of the one (1)
year period immediately following the
date of the Change in Control.
2. Involuntary Reduction in Benefits. If there occurs a Change In
Control (hereinafter defined) during the Employee's employment with the Company
and the Employee's rate of compensation is decreased by the Company or a
Successor Entity (hereinafter defined) from that rate which the Employee was
entitled to receive as of the date of the Change In Control without the
Employee's written consent during the one (1) year period immediately following
the date of the Change In Control, then, notwithstanding such reduction, the
Employee shall continue to receive compensation at that rate which the Employee
was entitled to receive as of the date of Change In Control for the one (1) year
period immediately following the date the Employee's rate of compensation is
decreased by the Company or a Successor Entity.
3. Change In Control. A "Change In Control" is defined as (i) the sale
of all, or a substantial portion of, the assets of the Company, (ii) a merger or
other reorganization whereby the Company is not the surviving entity, or (iii) a
change in control of the Company as defined or determined by the Office of the
Comptroller of the Currency and whether by acquisition of stock or assets of the
Company. A Change in Control shall be deemed to have occurred on the final
closing date of the transaction, or series of transactions, resulting in the
Change in Control.
4. Successor Entity. A "Successor Entity" is defined as a person or
entity, other than the Company, which acquires all, or substantially all of, the
stock or assets of the Company as a result of a transaction or series of
transactions which resulted in a Change In Control.
5. Without Cause. The Employee will be deemed to have been terminated
Without Cause if he is terminated for any reason other than:
(a) the Employee being convicted of, being found guilty of,
pleading guilty to, pleading nolo contendere to, or taking
first offender treatment to a felony or any crime involving
moral turpitude; or
(b) the Employee engaging in any misappropriation, embezzlement or
other intentional fraud upon the Company.
6. Disclosure by Company. The Employee agrees that the Company may
disclose the covenants contained in this Agreement to any person or entity who,
at any time, considers purchasing all, or substantially all of, the assets of
the Company or a majority of the issued and outstanding stock of the Company.
10-2
<PAGE>
7. Breach. In the event a breach of this Agreement occurs and the
non-breaching party retains an attorney for enforcement of his rights hereunder
or other action (whether suit be brought or not), the non-breaching party shall
be entitled to reimbursement on demand of all costs and expenses associated
therewith, including reasonable attorney's fees.
8. Entire Agreement; Modification; Binding Effect.. This Agreement
constitutes the entire and complete agreement between the parties hereto and
supersedes any prior oral or written agreement between the parties with respect
to the obligations and covenants contemplated hereunder. It is expressly agreed
that there are no verbal understandings or agreements which in any way change
the terms, covenants, and conditions herein set forth, and that no modification
of this Agreement shall be effective unless made in writing and duly executed by
all parties hereto. This Agreement shall inure to the benefit of and be binding
upon the respective assigns, successors, heirs, estates, and legal and personal
representatives of the parties hereto.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as set forth below.
THE COMPANY:
THE SAVANNAH BANCORP, INC.
By: /s/ J. Wiley Ellis
Attest: /s/ Robert B. Briscoe
[SEAL]
THE EMPLOYEE:
/s/ Archie H. Davis (L.S.)
Archie H. Davis
10-3
<PAGE>
EXHIBIT 10.3 - CHANGE IN CONTROL AGREEMENT WITH R.STEPHEN STRAMM DATED FEBRUARY
20, 1996.
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT made this 20th day of February, 1996 between THE
SAVANNAH BANCORP, INC., a Georgia Corporation (hereinafter, the "Company"), and
R. STEPHEN STRAMM, an employee of the Company or one or more of its subsidiaries
(hereinafter, the "Employee").
WHEREAS, the Employee is employed by the Company and has agreed to
continue to work for the Company on the terms and conditions set forth
hereinafter;
WHEREAS, the Company and the Employee agree that this Agreement shall
be relied on by each party in continuing the employment relationship described
herein and that the execution of this Agreement is a condition precedent to the
Employee's continued employment with the Company.
NOW, THEREFORE, for and in consideration of the premises and promises
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Employee hereby
agree as follows:
1. Termination. (a) If there occurs a Change In Control (hereinafter
defined) during the Employee's employment with the Company and the Employee's
employment with the Company or a Successor Entity (hereinafter defined) is
terminated by the Company or Successor Entity Without Cause (hereinafter
defined) during the one (1) year period immediately following the date of the
Change In Control, then, notwithstanding such termination, the Employee shall
continue to receive compensation at that rate which the Employee was entitled to
receive as of the date of Change In Control for the one (1) year period
immediately following the date the Employee's employment with the Company or a
Successor Entity is terminated by the Company or a Successor Entity Without
Cause.
(b) If there occurs a Change in Control during the Employee's
employment with the Company and the Employee voluntarily terminates his
employment with the Company or a Successor Entity during the one (1) year period
immediately following the date of the Change in Control, then, notwithstanding
such termination, the Employee shall continue to receive compensation at that
rate which the Employee was entitled to receive as of the date of the Change In
Control for the remainder of the one (1) year period immediately following the
date of the Change in Control.
2. Involuntary Reduction in Benefits. If there occurs a Change In
Control (hereinafter defined) during the Employee's employment with the Company
and the Employee's rate of compensation is decreased by the Company or a
Successor Entity (hereinafter defined) from that rate which the Employee was
entitled to receive as of the
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<PAGE>
date of the Change In Control without the Employee's written consent during the
one (1) year period immediately following the date of the Change In Control,
then, notwithstanding such reduction, the Employee shall continue to receive
compensation at that rate which the Employee was entitled to receive as of the
date of Change In Control for the one (1) year period immediately following the
date the Employee's rate of compensation is decreased by the Company or a
Successor Entity.
3. Change In Control. A "Change In Control" is defined as (i) the sale
of all, or a substantial portion of, the assets of the Company, (ii) a merger or
other reorganization whereby the Company is not the surviving entity, or (iii) a
change in control of the Company as defined or determined by the Office of the
Comptroller of the Currency and whether by acquisition of stock or assets of the
Company. A Change in Control shall be deemed to have occurred on the final
closing date of the transaction, or series of transactions, resulting in the
Change in Control.
4. Successor Entity. A "Successor Entity" is defined as a person or
entity, other than the Company, which acquires all, or substantially all of, the
stock or assets of the Company as a result of a transaction or series of
transactions which resulted in a Change In Control.
5. Without Cause. The Employee will be deemed to have been
terminated Without Cause if he is terminated for any reason
other than:
(a) the Employee being convicted of, being found guilty of,
pleading guilty to, pleading nolo contendere to, or taking
first offender treatment to a felony or any crime involving
moral turpitude; or
(b) the Employee engaging in any misappropriation,
embezzlement or other intentional fraud upon the Company.
6. Disclosure by Company. The Employee agrees that the Company may
disclose the covenants contained in this Agreement to any person or entity who,
at any time, considers purchasing all, or substantially all of, the assets of
the Company or a majority of the issued and outstanding stock of the Company.
7. Breach. In the event a breach of this Agreement occurs and the
non-breaching party retains an attorney for enforcement of his rights hereunder
or other action (whether suit be brought or not), the non-breaching party shall
be entitled to reimbursement on demand of all costs and expenses associated
therewith, including reasonable attorney's fees.
8. Entire Agreement; Modification; Binding Effect.. This Agreement
constitutes the entire and complete agreement between the parties hereto and
supersedes any prior oral or written agreement between the parties with respect
to the obligations and covenants contemplated hereunder. It is expressly agreed
that there are no verbal understandings or agreements which in any way change
the terms, covenants, and conditions herein set forth,
10-5
<PAGE>
and that no modification of this Agreement shall be effective unless made in
writing and duly executed by all parties hereto. This Agreement shall inure to
the benefit of and be binding upon the respective assigns, successors, heirs,
estates, and legal and personal representatives of the parties hereto.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as set forth below.
THE COMPANY:
THE SAVANNAH BANCORP, INC.
By: /s/ Archie H. Davis
Attest: /s/ Sheron R. Montgomery
[SEAL]
THE EMPLOYEE:
/s/ R. Stephen Stramm (L.S.)
R. Stephen Stramm
10-6
<PAGE>
EXHIBIT 10.4 - CHANGE IN CONTROL AGREEMENT WITH ROBERT B. BRISCOE DATED
FEBRUARY 20, 1996
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT made this 20th day of February, 1996 between THE
SAVANNAH BANCORP, INC., a Georgia Corporation (hereinafter, the "Company"), and
ROBERT B. BRISCOE, an employee of the Company or one or more of its subsidiaries
(hereinafter, the "Employee").
WHEREAS, the Employee is employed by the Company and has agreed to
continue to work for the Company on the terms and conditions set forth
hereinafter;
WHEREAS, the Company and the Employee agree that this Agreement shall
be relied on by each party in continuing the employment relationship described
herein and that the execution of this Agreement is a condition precedent to the
Employee's continued employment with the Company.
NOW, THEREFORE, for and in consideration of the premises and promises
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Employee hereby
agree as follows:
1. Termination. (a) If there occurs a Change In Control (hereinafter
defined) during the Employee's employment with the Company and the Employee's
employment with the Company or a Successor Entity (hereinafter defined) is
terminated by the Company or Successor Entity Without Cause (hereinafter
defined) during the one (1) year period immediately following the date of the
Change In Control, then, notwithstanding such termination, the Employee shall
continue to receive compensation at that rate which the Employee was entitled to
receive as of the date of Change In Control for the one (1) year period
immediately following the date the Employee's employment with the Company or a
Successor Entity is terminated by the Company or a Successor Entity Without
Cause.
(b) If there occurs a Change in Control during the Employee's
employment with the Company and the Employee voluntarily terminates his
employment with the Company or a Successor Entity during the one (1) year period
immediately following the date of the Change in Control, then, notwithstanding
such termination, the Employee shall continue to receive compensation at that
rate which the Employee was entitled to receive as of the date of the Change In
Control for the remainder of the one (1) year period immediately following the
date of the Change in Control.
2. Involuntary Reduction in Benefits. If there occurs a Change In
Control (hereinafter defined) during the Employee's employment with the Company
and the
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<PAGE>
Employee's rate of compensation is decreased by the Company or a Successor
Entity (hereinafter defined) from that rate which the Employee was entitled to
receive as of the date of the Change In Control without the Employee's written
consent during the one (1) year period immediately following the date of the
Change In Control, then, notwithstanding such reduction, the Employee shall
continue to receive compensation at that rate which the Employee was entitled to
receive as of the date of Change In Control for the one (1) year period
immediately following the date the Employee's rate of compensation is decreased
by the Company or a Successor Entity.
3. Change In Control. A "Change In Control" is defined as (i) the sale
of all, or a substantial portion of, the assets of the Company, (ii) a merger or
other reorganization whereby the Company is not the surviving entity, or (iii) a
change in control of the Company as defined or determined by the Office of the
Comptroller of the Currency and whether by acquisition of stock or assets of the
Company. A Change in Control shall be deemed to have occurred on the final
closing date of the transaction, or series of transactions, resulting in the
Change in Control.
4. Successor Entity. A "Successor Entity" is defined as a person or
entity, other than the Company, which acquires all, or substantially all of, the
stock or assets of the Company as a result of a transaction or series of
transactions which resulted in a Change In Control.
5. Without Cause. The Employee will be deemed to have been
terminated Without Cause if he is terminated for any reason
other than:
(a) the Employee being convicted of, being found guilty of,
pleading guilty to, pleading nolo contendere to, or taking
first offender treatment to a felony or any crime involving
moral turpitude; or
(b) the Employee engaging in any misappropriation,
embezzlement or other intentional fraud upon the Company.
6. Disclosure by Company. The Employee agrees that the Company may
disclose the covenants contained in this Agreement to any person or entity who,
at any time, considers purchasing all, or substantially all of, the assets of
the Company or a majority of the issued and outstanding stock of the Company.
7. Breach. In the event a breach of this Agreement occurs and the
non-breaching party retains an attorney for enforcement of his rights hereunder
or other action (whether suit be brought or not), the non-breaching party shall
be entitled to reimbursement on demand of all costs and expenses associated
therewith, including reasonable attorney's fees.
8. Entire Agreement; Modification; Binding Effect.. This Agreement
constitutes the entire and complete agreement between the parties hereto and
supersedes any prior oral or written agreement between the parties with respect
to the obligations and covenants
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<PAGE>
contemplated hereunder. It is expressly agreed that there are no verbal
understandings or agreements which in any way change the terms, covenants, and
conditions herein set forth, and that no modification of this Agreement shall be
effective unless made in writing and duly executed by all parties hereto. This
Agreement shall inure to the benefit of and be binding upon the respective
assigns, successors, heirs, estates, and legal and personal representatives of
the parties hereto.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as set forth below.
THE COMPANY:
THE SAVANNAH BANCORP, INC.
By: /s/ Archie H. Davis
Attest: /s/ Sheron R. Montgomery
[SEAL]
THE EMPLOYEE:
/s/ Robert B. Briscoe (L.S.)
Robert B. Briscoe
10-9
<PAGE>
EXHIBIT 10.7 - THE SAVANNAH BANCORP, INC. INCENTIVE STOCK PLAN APPROVED BY
SHAREHOLDERS ON APRIL 18, 1995
THE SAVANNAH BANCORP, INC.
INCENTIVE STOCK OPTION PLAN
SECTION 1
Purchase
The purpose of the Plan is to advance the interests of The Savannah Bancorp,
Inc. (the "Company") and its Subsidiaries and its shareholders by providing an
incentive to key employees, upon whom major responsibilities for the successful
operation, administration and management of the Company rest and whose present
and potential contributions are important to the continued success of the
Company and enabling the Company to attract and retain in its employ highly
qualified persons for the successful conduct of its business. These objectives
are intended to be effected by encouraging these employees to secure or increase
on reasonable terms their stock ownership in the Company through the granting of
Incentive Stock Options as provided in the Plan.
SECTION 2
Definitions
(a) The "Company" means the Savannah Bancorp, Inc., a Georgia
Corporation.
(b) "Subsidiary" shall have the meaning given it by Section
425(f) of the Internal Revenue Code.
(c) "Common Stock" or "Stock" means the $1.00 par value common
stock of the Company.
(d) "Board" means the Board of Directors of the Company.
(e) "Plan" means this Incentive Stock Option Plan authorizing the
granting of Incentive Stock Options.
(f) "Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended.
(g) "Fair Market Value" of the Company's common stock on a
certain date means the average of the bid and ask prices at the
close of business for such date as reported by NASDAQ (the
National Association of Securities Dealers Automated Quotation
System).
(h) "Incentive Stock Option" (sometimes hereinafter referred to as
"Option") means a right granted pursuant to this Plan to
purchase Common Stock at a price to be determined in
accordance with Section 6 of the Plan.
(i) "Permanent and Total Disability", as defined by Section
22(e)(3) of the Internal Revenue Code, means the inability to
engage in any substantial gainful activity by reason of any
medically determinable physical or
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<PAGE>
mental impairment which can
be expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than 12
months.
(j) "Retirement" means termination of service at the conclusion of
an employee's career with the Company if such employee is
eligible to receive retirement benefits under the Company's
then existing and applicable retirement or profit-sharing
plan.
SECTION 3
Shares Subject to the Plan
Subject to adjustments pursuant to Section 8 of this Plan, [no more than
Twenty-Nine Thousand Seven Hundred (29,700) shares in the aggregate] of the
Company's (the "Reserved Shares") Common Stock may be issued pursuant to the
Plan to employees who are eligible to become participants. The number of
Reserved Shares shall be reduced by the number of Incentive Stock Options
granted under the Plan.
SECTION 4
Eligibility
Any key employee regularly employed on a salaried basis by the Company or any
Subsidiary shall be eligible to receive options hereunder; provided, however,
that such individual, at the time the option is granted, does not own stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the employer corporation or of tits parent or subsidiary
corporation. This "10-percent shareholder rule" shall not apply if at the time
the option is granted, the option price is at least one hundred ten percent
(110%) of the Fair Market Value of the stock subject to the option and such
option, by its terms, is not exercisable after the expiration of five (5) years
from the date such option is granted.
SECTION 5
Administration of the Plan
The plan shall be administered by the Board in accordance with applicable laws
and regulations of governmental agencies.
The Board shall have full authority to:
(a) (i) determine the key employees to whom Incentive Stock Options under
the Plan will be granted;
(ii) determine the number of Incentive Stock Options to be
granted to each
10-11
<PAGE>
employee; and (iii) grant Incentive Stock Options under the
Plan to such employee (the "employee" or "Optionee");
(b) interpret, construe and implement the provisions of the Plan and
any agreements executed thereunder; and (c) establish, amend
and rescind appropriate rules and regulations relating to the Plan.
All determinations of the Board shall be by a majority of its members. Any
interpretation by the Board of the terms and conditions of the Plan shall be
final.
SECTION 6
Incentive Stock Options
Incentive Stock Options shall be evidenced by written Incentive Stock Option
agreements (the "Agreements") consistent with the terms of this Plan which shall
be executed by the Company and the Optionee. The Agreements, in such form as the
Board shall from time to time approve, shall incorporate the following terms and
conditions:
(a) Exercise of Incentive Stock Options.
(1) Time of Exercise. No Incentive Stock Option will be
exercisable until the first anniversary of the date
it is granted. On the first anniversary of the date
of the grant, an Incentive Stock Option will become
exercisable in full. Each Incentive Stock Option will
expire ten (10) years after the date of its grant.
(2) Purchase Price. The purchase price per share of
Common Stock deliverable upon the exercise of an
Incentive Stock Option shall in no event be less than
the Fair Market Value of the Common Stock on the date
the Option is granted, as determined by the Board
pursuant to Paragraph (g) of Section 2.
(3) Method of Exercise. In order to exercise an Incentive
Stock Option in whole or in part, the Optionee shall
give written notice to the Company's Chief Financial
Officer at Savannah, Georgia, of such exercise,
stating the number of shares with respect to which
the Incentive Stock Option is being exercised. The
exercise date of the Incentive Stock Option shall be
the date the Company receives such notice.
(4) Payment of Purchase Price. Full payment of the
purchase price shall be made by the end of the third
(3rd) business day after notice of exercise is given.
Payment shall be in cash, or in whole shares of
Common Stock, valued at Fair Market Value on such
exercise
10-12
<PAGE>
date, equal to the purchase price of such
shares (or in a combination of cash and whole shares
of Common Stock). Upon receipt of payment the Company
shall issue to the Optionee a certificate or
certificates for such shares.
(5) Effect of Termination (Including Retirement),
Permanent and Total Disability or Death.
(i) In the event that the Optionee's employment
with the Company or one of its Subsidiaries
terminates for any reason other than
Permanent and Total Disability or death dur-
ing the period that any Incentive Stock
Options granted to him under the Plan could
be exercised, all rights to purchase Common
Stock not exercisable (in accordance with
Section 6(a)(1) above) at the date of termi-
nation under the provisions of this Plan
shall be forfeited on the date of termi-
nation. The Optionee shall have a three-
month period from said termination date
ending on the day numerically corresponding
to the date of termination in the third
month following the month of termination to
exercise any Incentive Stock Option not
theretofore forfeited. Any rights unexer-
cised on or after such last day are then
forfeited.
(ii) (A) In the event that the Optionee, while an
active employee of the Company or one of its
Subsidiaries, sustains a Permanent and Total
Disability or dies, all Incentive Stock
Options theretofore granted to him under the
Plan shall become 100% exercisable on the
date of his Permanent and Total Disability
or his death; such rights may be exercised
by the Optionee or his estate only before
the last day of the one-year period
beginning on his last day of employment.
(B) In the event of the Optionee's death
before the end of the one-month period
described in Section 6(a)(5)(i), his vested
rights under any Incentive Stock Option
Agreement may be exercised within one year
from said termination date, by his estate.
(iii) Notwithstanding the periods provided for in
Sections 6(a)(5)(i) and (ii) above, no
Incentive Stock Option shall be exercisable
after the date that Option expires by its
terms.
10-13
<PAGE>
(b) Repurchase of Incentive Stock Options. Upon the approval of
the Board, the Company is authorized to repurchase a
previously granted Incentive Stock Option from an employee by
mutual agreement with such employee before such Option has
been exercised, by payment to the employee of the amount by
which the Fair Market Value of the shares under option at the
time of such repurchase exceeds the Fair Market Value of the
shares at the time the Option was granted.
(c) Outstanding Incentive Stock Options. The Option may not be
exercised while there is outstanding any incentive stock
option which was granted, before the granting of such Option,
to the employee to purchase stock in the Company or of any
other Corporation which, at the time of granting such Option,
was a parent (within the meaning of Section 425(e) of the
Internal Revenue Code) or Subsidiary of the Company, or any
predecessor of any of these corporations. Any incentive stock
option shall be considered outstanding until exercised in full
or until it expires by lapse of time.
(d) Additional Terms and Conditions. The Agreements may contain
such other terms, provisions and conditions consistent with
the Plan and applicable provisions of the Internal Revenue
Code as may be determined by the Board of Directors of the
Company.
SECTION 7
Non-Transferability of Options and Rights
Incentive Stock Options granted under the Plan are not transferable or
assignable by an employee other than by will or the laws of descent and
distribution and are exercisable during the employee's lifetime only by him.
SECTION 8
Adjustments in the Event of Changes in the
Capital Structure or Reorganization
(a) Changes in Capital Structure. In the event of a change in the
corporate structure or shares of the Company, the Board of
Directors (subject to any required action by the shareholders)
shall make such equitable adjustments designed to protect
against dilution as it may deem appropriate in the number and
kind of shares authorized by the Plan and, with respect to
outstanding Options, in the number and kind of shares covered
thereby and in the exercise price of such Options on the dates
granted.
10-14
<PAGE>
(b) Reorganization--Termination of the Plan. In the event of a
dissolution, liquidation, reorganization, merger,
consolidation, transfer of assets or transfer of shares, in
which the Company is not the surviving corporation, the
Optionee of any outstanding option shall have 30 days from
written notice of such transaction in which to exercise any
rights to purchase shares exercisable under Section 6(a)(i)
and all other rights under such option are terminated
immediately on the giving of such notice. If such transaction
is not consummated, all rights under such option are restored.
SECTION 9
General Restrictions
Each Incentive Stock Option shall be subject to the requirement that, if at any
time the Board of Directors shall determine, in its discretion, that the
listing, registration or qualification of the shares or other securities subject
to such Incentive Stock Option upon any securities exchange or under any state
or federal law, or the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting
thereof or the issue or purchase of shares or payments of any amounts
thereunder, such Incentive Stock Option may not be exercised in whole or in part
and no amounts may be received thereunder unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions unacceptable to the Board of Directors.
SECTION 10
Rights as Shareholders
An employee shall have no rights whatsoever as a shareholder of the Company with
respect to any shares covered by an Incentive Stock Option until the date of the
issuance of a stock certificate to him pursuant to the exercise of the Incentive
Stock Option.
SECTION 11
Employment
Nothing in this Plan shall be deemed to grant any right of continued employment
to a participating employee or to limit or waive any rights of the Company to
terminate such employment at any time, with or without cause.
10-15
<PAGE>
SECTION 12
Amendment
The Board of Directors of the Company shall have the power to amend or revise
the terms of the Plan or any part thereof without further action of the
shareholders; provided, however, that no such amendment shall, without
shareholder approval:
(a) impair any Option or deprive any employee of shares that may have
been granted to him under the Plan;
(b) increase the aggregate number of Reserved Shares for the purpose
of the Plan;
(c) change the class of employees eligible to receive Options under
the Plan; or
(d) extend the period during which any Option may be granted or
exercised.
SECTION 13
Effective Date and Termination of Plan
(a) Effective Date. The effective date of the Plan shall be
April 18, 1995, upon approval of the Plan by the shareholders
of the Company.
(b) Termination. The Board of Directors of the Company may
terminate the Plan at any time with respect to any shares that
are not subject to Incentive Stock Options. Unless terminated
earlier by the Board of Directors, the Plan shall terminate
ten (10) years after the earlier of the date this Plan is
adopted and the date this Plan is approved by the shareholders
of the Company and no Incentive Stock Options shall be granted
under this Plan after it has been terminated. Termination of
this Plan shall not affect the rights and obligations of any
employee with respect to Incentive Stock Options granted prior
to termination.
SECTION 14
Qualification
This Plan is adopted pursuant to, and is intended to comply with the applicable
provisions of the Internal Revenue Code and the regulations thereunder. To the
extent permitted by Section 422 (d) of the Internal Revenue Code, the options
issued pursuant to this Plan are intended to be an "incentive stock options" as
that term is defined in Section 422 of the Internal Revenue Code and the
regulations thereunder. In the event this Plan or any option granted pursuant to
this Plan is in any way inconsistent with the applicable legal requirements of
the Internal Revenue Code or the regulations thereunder, this Plan and any
option granted pursuant to this Plan shall be deemed automatically amended as of
the
10-16
<PAGE>
date hereof to conform to such legal requirements, if such conformity can be
achieved by amendment. To the extent however, that the aggregate fair market
value of stock to which incentive stock options are exercisable for the first
time by any employee during any calendar year exceeds $100,000, such options
shall be treated, for federal income tax purposes, as options which are not
incentive stock options as defined in Section 422 of the Internal Revenue Code.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
10-17
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT made this __ day of ________ , 19 __ between THE SAVANNAH
BANCORP, INC., a Georgia Corporation, herein called "Company", and _________ an
employee of the Company or one or more of its subsidiaries, herein called
"Employee".
WHEREAS, the Company desires to afford the Employee the opportunity of
purchasing its $1.00 par value common stock, herein called "Common Stock"
pursuant to the Incentive Stock Option Plan adopted by its shareholders on April
18, 1995, herein called the "Plan";
NOW, THEREFORE, in consideration of the premises and the mutual promises of
the Parties to this Agreement, they do hereby covenant and agree as follows:
1. Grant of Option. The Company hereby irrevocably grants to the
Employee the right and option, herein called the "Option", to purchase all or
any part of an aggregate of __ shares of its Common Stock subject to the terms
of this Agreement and the Plan.
2. Purchase Price. The purchase price of the Common Stock
covered by the Option has been determined in accordance with the Plan and shall
be $_______ per share.
3. Terms and Conditions of Plan. All of the terms and conditions of the
Plan, a copy of which has been supplied to Employee, are hereby incorporated by
reference and shall have the same force and effect as if expressly set forth
herein.
IN WITNESS WHEREOF, the Parties have signed and sealed this Agreement
the day and year first above written.
THE SAVANNAH BANCORP, INC.
By:-----------------------------------
Attest:-------------------------------
Secretary
------------------------------------(L.S.)
Employee
10-18
<PAGE>
EXHIBIT 10.8 - AMENDMENT TO THE SAVANNAH BANCORP, INC. INCENTIVE STOCK OPTION
PLAN APPROVED BY SHAREHOLDERS ON APRIL 16, 1996.
INCENTIVE STOCK OPTION PLAN
In 1995, the shareholders of the Company approved an Incentive Stock Option Plan
(the "ISO Plan") under which 29,700 shares (adjusted to 59,400 shares after the
two-for-one stock split) of the Company's Common Stock could be issued to
eligible employees. Pursuant to the ISO Plan, incentive stock options for all
59,400 shares were issued by the Company as follows: (I) on April 18, 1995,
incentive stock options of 16,500 shares, 8,250 shares 4,950 shares at a
purchase price of $11.25 per share were granted to Messrs. Davis, Stramm and
Briscoe, respectively; (II) Also, on January 2, 1996, incentive stock options of
16,500 shares, 8,250 shares 4,950 shares at a purchase price of $20 per share
were granted to Messrs. Davis, Stramm and Briscoe, respectively, pursuant to the
Company's meeting the 1995 performance objectives approved by the Board of
Directors and the shareholders. The options issued during 1995 pursuant to the
ISO Plan were issued after the cancellation of options agreements entered into
in 1989 with Mr. Davis and in 1990 with Messrs. Stramm and Briscoe, covering an
equivalent number of shares.
The Board of Directors proposes to amend the ISO Plan by increasing the
aggregate number of Reserved Shares which may be issued pursuant to the ISO Plan
by an additional Twenty-five Thousand (25,000) shares of the Company's Common
Stock. This proposed amendment requires the approval of the Company's
shareholders. Upon approval by the shareholders, the Company will grant to
certain officers of the Company, other than Messrs. Davis, Stramm and Mr.
Briscoe, incentive stock options for the purchase of a total of Six Thousand
(6,000) shares of the Company's Common Stock. The Company presently has no
specific plans for the grant of options for the remaining Nineteen Thousand
(19,000) shares.
10-19
<PAGE>
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Basic Earnings Per Share 1997 1996 1995
- ------------------------ ------ ------ ------
<S> <C> <C> <C>
Weighted-average shares outstanding 1,708 1,701 1,711
====== ====== ======
Net Income 1,753 1,507 1,204
====== ====== ======
Basic earnings per share $1.03 $0.89 $0.70
====== ====== ======
Diluted Earnings Per Share 1997 1996 1995
- ------------------------- ------ ------ ------
Weighted-average shares outstanding 1,708 1,701 1,711
------ ------ ------
Average options outstanding 176 172 118
Average exercise price $ 9.69 $ 8.69 $ 6.60
------ ------ ------
Proceeds from assumed exercise of
options outstanding 1,705 1,494 784
Average market price per share $20.71 $13.55 $ 9.65
------ ------ ------
Assumed shares repurchased 82 110 82
------ ------ ------
Common stock equivalents of
options outstanding 94 62 36
------ ------ ------
Weighted-average shares outstanding
(including common stock equivalents) 1,802 1,763 1,747
====== ====== ======
Net income 1,753 1,507 1,204
====== ====== ======
Diluted earnings per share $0.97 $0.85 $0.69
====== ====== ======
</TABLE>
11-1
<PAGE>
EXHIBIT 23.1 - CONSENT OF PREDECESSOR INDEPENDENT ACCOUNTANTS
(Price Waterhouse LLP Letterhead)
January 17, 1996
To the Board of Directors and Shareholders
of The Savannah Bancorp, Inc.
In our opinion, the consolidated statements of income, of changes in
shareholders' equity and of cash flows for the year ended December 31, 1995
(appearing on pages 38 through 53 of The Savannah Bancorp, Inc. 1997 Annual
Report on Form 10-KSB) present fairly, in all material respects, the financial
position, results of operations and cash flows of The Savannah Bancorp, Inc. and
its subsidiary for the year ended December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above. We have not audited the
consolidated financial statements of The Savannah Bancorp, Inc. for any period
subsequent to December 31, 1995.
/s/ PRICE WATERHOUSE LLP
<TABLE> <S> <C>
<ARTICLE>9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE FINANCIAL
STATEMENTS OF SAVANNAH BANCORP, INC. FOR THE YEAR ENDED DECEMBER 31,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<NAME>SAVANNAH BANCORP, INC
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