INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the registrant /x/
Filed by a party other than the registrant / /
Check the appropriate box:
/x/ Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SUMMIT BANCORP
- ------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
SUMMIT BANCORP
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/x/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or Rule
14a-6(i)(2).
/ / $500 per each party per Exchange Act Rule 14a-6(i)(3), or Rule
14a-6(i)(2).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
<PAGE>
[SUMMIT LOGO]
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey
08543-2066
(609) 987-3200
T. JOSEPH SEMROD
Chairman of the Board and
Chief Executive Officer
April 12, 1996
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Summit Bancorp scheduled to be held on Monday, May 20, 1996, at 3:00 p.m. at
The Hyatt Regency Princeton, 201 Carnegie Center, Route 1 at Alexander Road,
Princeton, New Jersey. Your Board of Directors and senior management look
forward to personally greeting those shareholders able to attend.
At the meeting, shareholders will be asked to elect ten directors, to approve
the amended Summit Bancorp 1993 Incentive Stock and Option Plan and to ratify
the selection of KPMG Peat Marwick LLP, independent certified public
accountants, to audit the accounts of Summit for 1996. We will also report to
you on Summit's current operations and outlook. Members of the Board and
management will be available to respond to any questions you may have.
Regardless of the number of shares you own, it is important that they be
represented and voted at the meeting. Please sign, date and mail the enclosed
proxy in the return envelope provided. Your prompt cooperation is appreciated.
On behalf of your Board of Directors, thank you for your continued support.
Sincerely,
[Signature]
T. JOSEPH SEMROD
<PAGE>
[SUMMIT LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MONDAY, MAY 20, 1996
TO OUR SHAREHOLDERS:
The Annual Meeting of the shareholders of Summit Bancorp. is scheduled to
be held at The Hyatt Regency Princeton, 102 Carnegie Center, Route 1 at
Alexander Road, Princeton, New Jersey, on Monday, May 20, 1996 at 3:00 p.m. for
the following purposes:
1. To elect ten Directors.
2. To approve the amended Summit Bancorp. 1993 Incentive Stock and Option
Plan.
3. To ratify the selection of KPMG Peat Marwick LLP, independent
certified public accountants, to audit the consolidated financial
statements of Summit Bancorp. and its subsidiaries for the year ending
December 31, 1996.
4. To transact such other business as may properly come before the
meeting and any adjournment thereof.
The Board of Directors by resolution has fixed the close of business on
March 27, 1996 as the record date and hour for the determination of shareholders
entitled to notice of, and to vote at, the Annual Meeting and at any adjournment
thereof.
It is important that your shares be represented and voted at the Annual
Meeting. Whether or not you plan to attend, please sign, date and promptly mail
the enclosed white Proxy. Please act today.
By order of the Board of Directors
RICHARD F. OBER, JR.
Secretary
April 12, 1996
PLEASE SIGN, DATE AND PROMPTLY MAIL THE ENCLOSED WHITE PROXY IN THE
POSTAGE-PAID ENVELOPE PROVIDED. IF YOU PLAN ON ATTENDING THE ANNUAL MEETING
PLEASE SO INDICATE ON YOUR PROXY.
IMPORTANT NOTICE: ALL SHAREHOLDERS PLANNING TO ATTEND THE ANNUAL MEETING
SHOULD REFER TO THE BACK COVER FOR DIRECTIONS TO THE ANNUAL MEETING SITE AND FOR
IMPORTANT INFORMATION REGARDING PROCEDURES FOR ADMITTANCE TO THE ANNUAL MEETING.
<PAGE>
PROXY STATEMENT
The mailing address of the corporate headquarters of Summit Bancorp.
("Summit" or the "Corporation") is P.O. Box 2066, Princeton, New Jersey
08543-2066, and the telephone number is (609) 987-3700.
This Proxy Statement and the enclosed proxy are being sent to shareholders
on approximately April 12, 1996. A copy of the 1995 Annual Report to
Shareholders, including financial statements, is enclosed.
The following information is furnished in connection with a solicitation of
proxies by the Board of Directors for the Annual Meeting. Except for matters
described in this Proxy Statement, the Board of Directors does not know of any
matter that will or may be presented at the Annual Meeting. With respect to any
proposals that may be presented at the Annual Meeting not currently known to the
Board of Directors, the persons named as proxies intend to vote the shares they
represent in accordance with their judgment.
A white proxy card is enclosed. Your vote is important and you are
encouraged to return it by mail today. Each proxy submitted will be voted as
directed; however, if not otherwise specified, proxies solicited by the Board of
Directors will be voted for the Director nominees named herein and for the
second and third proposals set forth in the Notice of Annual Meeting of
Shareholders and this Proxy Statement.
If a shareholder is participating in Summit's Dividend Reinvestment and
Stock Purchase Plan (the "Dividend Reinvestment Plan"), the shareholder will
receive a single proxy covering both the shares of Summit common stock, par
value $1.20 per share (the "Common Stock"), held by the shareholder in
certificate form and the shares of Common Stock held in the shareholder's
Dividend Reinvestment Plan account by the Dividend Reinvestment Plan
Administrator. If a proxy is not returned, shares of Common Stock represented by
the proxy, including any held under the Dividend Reinvestment Plan, will not be
voted.
Individuals who hold Common Stock through participation in Summit's Savings
Incentive Plan (the "Savings Plan") will receive a separate card for use in
providing voting instructions to the Savings Plan's Trustee. Full shares held by
the Savings Plan will be voted by the Trustee in accordance with instructions
received from participants. Full shares held by the Savings Plan for which no
voting instructions are received will be voted by the Trustee in a manner deemed
to be in the best interests of the beneficial owners of such shares.
Individuals who hold Common Stock through participation in the Profit
Sharing Plan of the former Summit Bancorporation (the "Profit Sharing Plan")
will receive a separate card for use in providing voting instructions to the
Trustee of the Profit Sharing Plan. Full shares held by the Profit Sharing Plan
will be voted by the Trustee in accordance with instructions received from
participants. The Trustee will not vote shares held by the Profit Sharing Plan
for which no voting instructions are received.
A proxy may be revoked by the person giving the proxy at any time prior to
the close of voting. Prior to the Annual Meeting a proxy may be revoked by
filing with the Secretary of Summit a written revocation or a duly executed
proxy bearing a later date. During the Annual Meeting a proxy may be revoked by
filing a written revocation or a duly executed proxy bearing a later date with
the secretary of the Annual Meeting prior to the close of voting. Any
shareholder of record may attend the Annual Meeting and vote in person, whether
or not a proxy has previously been given.
The close of business of Summit on March 27, 1996 has been fixed by the
Board of Directors as the record date and hour for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting. On that
date, there were XX,XXX,XXX shares of Common Stock issued and outstanding, and
there were no other voting securities of Summit outstanding. Each share of
Common Stock is entitled to one vote at the Annual Meeting.
Shareholders of the former Summit Bancorporation, Flemington National Bank
and Trust Company and Garden State Bancshares, Inc. (the "Predecessor
Corporations") who as of the record date for the Annual Meeting had not become
shareholders of record of Summit Bancorp. by reason of their failure, as of that
date, to exchange certificates of the Predecessor Corporations for certificates
representing the Common Stock of Summit Bancorp. will still receive proxy
materials with respect to the Annual Meeting and be entitled to vote the shares
of Summit Stock into which their Predecessor Corporation stock is convertible.
However, Summit Bancorp. certificates, checks in lieu of fractional shares and
Summit Bancorp. dividends will continue to be withheld from such individuals
until certificates for the Predecessor Corporations are exchanged.
In a Report on Schedule 13G for the year ended December 31, 1995 filed with
the Securities and Exchange Commission under the Securities Exchange Act of 1934
("Exchange Act") by Delaware Management Holdings, Inc. ("Delaware Management"),
2005 Market Street, Philadelphia, Pennsylvania 19103, an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940, Delaware
Management reported ownership of 5,753,807 shares of Summit Common Stock on
behalf of the several investment companies registered under Section 8 of the
<PAGE>
Investment Company Act of 1940 known collectively as the Delaware Group of Funds
(the "Delaware Group"), representing 6.3% of the shares of Summit Common Stock
outstanding on March 27, 1996. Delaware Management reported it held the
following voting and investment powers over the shares beneficially owned by the
Delaware Group:
Sole Voting Power .................................... 432,266
Shared Voting Power .................................. 3,320
Sole Investment Power ................................ 5,527,707
Shared Investment Power .............................. 226,100
The foregoing information is furnished in reliance upon the information
contained in the Report on Schedule 13G referred to above. To Summit's
knowledge, there is no other person (as defined in Section 13(d)(3) of the
Exchange Act) who owns five percent or more of the outstanding voting securities
of Summit as of March 27, 1996.
The following companies are subsidiaries of Summit and are sometimes
referred to by means of the listed abbreviations:
First Valley--First Valley Corporation
FVBank--First Valley Bank
UJBank--United Jersey Bank
SumBank--Summit Bank
1. ELECTION OF DIRECTORS
The Restated Certificate of Incorporation of Summit contains a provision
adopted by a vote of the shareholders which divides the Summit Board of
Directors into three classes, with each class of Directors serving a staggered
term of three years. Each class of Directors must consist, as nearly as
possible, of one third of the number of Directors constituting the entire Board
of Directors. Presently there are four Directors in Class I, five Directors in
Class II and four Directors in Class III. Six Directors are being designated
into classes in connection with their nominations at the 1996 Annual Meeting.
Ten Directors are standing for election at the 1996 Annual Meeting. Four of
the Director nominees constitute the entire current membership of Class III of
the Board of Directors. The terms of the Directors in Class III expire at the
1996 Annual Meeting. Accordingly, at the 1996 Annual Meeting, four Class III
Directors are to be elected to serve until the 1999 Annual Meeting and until
their successors are elected and qualified, except that, in accordance with the
Summit policy on inside director retirements described under "CORPORATE
GOVERNANCE OF SUMMIT--Nominations to Summit's Board", Mr. Howell is expected to
retire from the Board in 1998. The six Directors standing for election not
currently members of Class III were elected to the Board in connection with the
March 1, 1996 merger of The Summit Bancorporation into UJB Financial Corp. under
the name Summit Bancorp (the "Summit/UJB Merger"). Three of these Director
nominees are being nominated to Class I of the Board, one to Class II of the
Board and two to Class III of the Board. They are to be elected to serve until,
respectively, the 1997 Annual Meeting, the 1998 Annual Meeting and the 1999
Annual Meeting and until their successors are elected and qualified.
Set forth below, with respect to the nominees for election as Directors and
the continuing members of the Board, are their names, ages, the year in which
each first became a Director, their principal occupations during the past ten
years and other positions. Each Director nominee is at present available for
election as a member of the Board. If for any reason a Director nominee becomes
unavailable for election, the proxies solicited by the Board of Directors will
be voted for a substitute Director nominee selected by the Board of Directors
or, at its option, the Board of Directors may reduce the number of Directors
constituting the entire Board.
In accordance with the long-standing practice of Summit's Board of
Directors, more than two-thirds of the members of Summit's Board consists of
nonemployee directors. Currently, of the nineteen members of the Board of
Directors, fifteen are not employees of Summit or its subsidiaries. In addition
to attendance at Board meetings (the Board met nine times during 1995) and
Committee and Subcommittees meetings as described below (Committees and
Subcommittees held 17 meetings in 1995), Directors discharge their
responsibilities throughout the year by personal meetings and frequent telephone
contact with Summit's executive officers and others regarding the business and
affairs of Summit and its subsidiaries. All nineteen Directors additionally
serve on one or more of the Boards of Directors of Summit's bank and nonbank
subsidiaries.
To permit the Board of Summit to more efficiently discharge its duties,
Summit has six standing Board committees which held meetings in 1995 as follows:
the Executive Committee (five meetings), the Audit Committee (two meetings), the
Nominating Committee (did not meet in 1995 but met February 1996), the
Compensation Committee (four meetings), the Capital and Dividend Committee
(three meetings) and the Acquisition Committee (two meetings, with its Pricing
Subcommittee meeting once).
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CLASS III -- DIRECTOR NOMINEES
TERM EXPIRING IN 1999
S. Rodgers Benjamin, 69, Director since March 1, 1996. Chairman of the
Board (since 1992) and Chief Executive Officer (since 1962) of Flemington Fur
Co., Inc. (retailer). Formerly Director (1982-1996) of The Summit
Bancorporation. Director of SumBank (since 1982). Member of the Audit and
Capital and Dividend Committees.
Robert L. Boyle, 60, Director since 1986. Representative (since 1987) with
the William H. Hintelmann Firm (realty and insurance) and Publisher Emeritus
(since 1978) of The Dispatch (newspaper). Regent of St. Peter's College. Member
of the State of New Jersey Supreme Court Disciplinary Oversight Committee.
Trustee of Monmouth Chemical Dependency Corp., Oceanic Free Library, Parents
Support Group of New Jersey and Director of UJBank (since 1964). Member of the
Executive, Compensation, Audit and Acquisition Committees.
Robert G. Cox, 55, Director since March 1, 1996. President (since March 1,
1996) of Summit. Chairman of the Board (since 1994), President (since 1980) and
Chief Executive Officer (since 1983) of SumBank. Formerly Director (1981-1996),
President (19XX-1996) and Chief Executive Officer (19XX-1996) of The Summit
Bancorporation. Director of New Jersey Manufacturers Insurance Company. Member
of the Acquisition Committee.
Elinor J. Ferdon, 59, Director since 1984. Volunteer professional. Director
(since 1974), First Vice President (since 1993) and former Vice President
(1987-1993) of the Girl Scouts of U.S.A. Trustee and President (since 1991) of
World Foundation for Girl Guides and Girl Scouts, Inc. Vice Chair of Liberty
Science Center and Hall of Technology. Trustee of Fairleigh Dickinson University
and the National Urban League. Chair, Trustee Emeriti of Stoneleigh Bumham
School. Director of UJBank (since 1976). Chair of the Audit Committee. Member of
the Executive, Compensation and Capital and Dividend Committees.
John R. Howell, 62, Director since 1988. Vice Chairman of the Board (since
1988) of Summit. Chairman of the Board (since 1983) and Director and Chief
Executive Officer (since 1976) of First Valley. Chairman of the Board (since
1988), Director (since 1976) and Chief Executive Officer (1976-1990,
1994-present) of FVBank. Trustee of Moravian College and the Allentown Art
Museum. Chairman of the Board of First Valley Life Insurance Company and Lehigh
Securities Corporation. Member of the Acquisition Committee.
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<PAGE>
Joseph M. Tabak, 63, Director since 1987. President and Chief Executive
Officer (since 1991) of JPC Enterprises, Inc. (distributor of paper and plastic
disposable products). Former Chairman (1988-1989) and former President
(1971-1988) of Bunzl Distribution USA, Inc., Northeastern Division and
predecessor Jersey Paper Company (distributor of paper and plastic disposable
products). Trustee of St. Peter's Hospital Foundation and Highland Park
Conservative Temple. Director of UJBank (since 1981). Chair of the Acquisition
Committee. Member of the Executive, Compensation and Nominating Committees.
CLASS I -- DIRECTOR NOMINEES
TERM EXPIRING IN 1997
James C. Brady, Jr., 60, Director since March 1, 1996. General Partner
(since 1972) of Mill House Associates, L.P. (real estate investment). Formerly
Vice Chairman of the Board (1978-1989) of Somerset Trust Company. Formerly
Director (1989-1996) of The Summit Bancorporation. Director of SumBank (since
1989). Member of the Executive and Capital and Dividend Committees.
Thomas D. Sayles, Jr., 64, Director since March 1, 1996. Formerly Chairman
of the Board (1974-1996) and Chief Executive Officer (1974-1994) of The Summit
Bancorporation. Director (since 1968) and former Chairman (1977-1994) of
SumBank. Director of Selective Insurance Group, Inc. Member of the Capital and
Dividend Committee.
Douglas G. Watson, 51, Director since March 1, 1996. President and Chief
Executive Officer (since 1996) of Ciba-Geigy Corporation (pharmaceutical
products) and former President (1986-1996) of the Pharmaceuticals Division,
Ciba-Geigy Corporation. Former Director (1988-1996) of The Summit
Bancorporation. Director of Engelhard Corporation and SumBank (since 1986).
Member of the Audit and Nominating Committees.
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CLASS I -- INCUMBENT DIRECTORS
TERM EXPIRING IN 1997
T.J. Dermot Dunphy, 63, Director since 1984. Director, Chief Executive
Officer and President (since 1971) of Sealed Air Corporation (protective
packaging products and systems). Trustee of the Partnership for New Jersey.
Sponsor, "I Have A Dream" Program, Paterson, New Jersey. Director of Public
Service Enterprise Group, Inc. and UJBank (since 1981). Chair of the Executive
and Compensation Committees. Member of the Acquisition and Nominating
Committees.
Fred G. Harvey, 67, Director since 1988. Director and Vice President (since
1983) of E & E Corporation (engineering consulting services). General Manager
(1977-1983) of Bethlehem Steel Corporation. Director of the Retired Employee
Benefit Coalition (REBCO) and FVBank (since 1981). Chair of the Capital and
Dividend Committee. Member of the Audit and Nominating Committees.
Francis J. Mertz, 58, Director since 1986. Trustee (since 1991) and
President (since 1990) of Fairleigh Dickinson University. Trustee of the St.
James Foundation, Independent College Fund of New Jersey. Director of Liberty
Science Center and Hall of Technology, Association of Independent Colleges and
Universities in New Jersey, National Association of Independent Colleges and
Universities and UJBank (since 1973). Chair of the Nominating Committee. Member
of the Executive, Compensation, Audit and Capital and Dividend Committees.
T. Joseph Semrod, 59, Director since 1981. Chairman of the Board and Chief
Executive Officer (since 1981) and former President (1981-1996) of Summit.
Chairman of the Board (since 1981) and President and Chief Executive Officer
(since 1994) of UJBank. Former Director (1984-1986) of Federal Reserve Bank of
New York. Chairman of International Financial Conference. Trustee of the
National Urban League. Trustee and former Chairman of The Partnership for New
Jersey. Vice-Chairman of New Jersey State Chamber of Commerce. Member of the
Executive Committee.
CLASS II -- DIRECTOR NOMINEE
TERM EXPIRING IN 1998
Orin R. Smith, 60, Director since March 1, 1996. Chairman of the Board
(since 1995) and Chief Executive Officer (since 1984) of Engelhard Corporation
(specialty chemical and metallurgical products). Formerly Director (1984-1996)
of The Summit Bancorporation. Director of Vulcan Materials Company, New Jersey
Manufacturers Insurance Company, Louisiana Land and Exploration Company and
SumBank (since 1981). Member of the Executive and Acquisition Committees.
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CLASS II -- INCUMBENT DIRECTORS
TERM EXPIRING IN 1998
John G. Collins, 59, Director since 1986. Vice Chairman of the Board of
Summit (since 1986) and UJBank (since 1994). Formerly Chairman of the Board
(1983-1986), Director, President and Chief Executive Officer (1982-1986) of
Commercial Bancshares, Inc. Trustee and former Chairman of the Board of Trustees
(1992-1994) of St. Peter's College. Chairman of the Board of Hudson County Tax
Research Council and UJB Financial Service Corporation. Director of Collier
Services and UJBank (1978-1990, 1994-present). Trustee of Independent College
Fund of New Jersey and Collier Services Foundation. Current honorary Chairman
and former Chairman (1993-1994) of the New Jersey Bankers Association. Member of
the Capital and Dividend Committee.
Anne Evans Estabrook, 51, Director since 1994. Sole proprietor (since 1984)
of Elberon Development Co. (real estate), President (since 1983) of David O.
Evans, Inc. (real estate) and Director (since 1985) and Vice President (since
1987) of E'town Corporation (parent company of regulated water utility and real
estate company). Former Director of Constellation Bancorp (1985-1994) and of
National State Bank (1978-1994). Director of E'town Properties, Inc. (since
1987) and UJBank (since 1994). Trustee of Cornell University. Member of the
Executive, Compensation and Capital and Dividends Committees.
George L. Miles, Jr, 54, Director since 1994. President and Chief Executive
Officer (since 1994) of QED Communications, Inc. (television and radio
broadcasting and magazine publishing). Formerly Executive Vice President and
Chief Operating Officer (1984-1994) of Thirteen/WNET (television broadcasting).
Vice Chairman of the Board of Trustees of the Association of America's Public
Television Stations. Trustee of Fairleigh Dickinson University. Director of
Foundation for Minority Interests in Media, Inc. Member of the Audit,
Acquisition and Nominating Committees.
Henry S. Patterson II, 73, Director since 1971. Director and President
(since 1985) of E'town Corporation (parent company of regulated water utility
and real estate company). Director (since 1959) and former President (1973-1986)
of Elizabethtown Water Company. Former Chairman (1985-1990) and Commissioner
(1979-1990) of the State of New Jersey Commission of Investigation. Former Mayor
(1962-1970) of Princeton Borough, New Jersey. Director of Mount Holly Water
Company, UJBank (since 1967), and UJB Investor Services Co. (since 1983). Member
of the Executive, Compensation, Audit, Capital and Dividend and Acquisition
Committees.
Raymond Silverstein, 68, Director since 1991. Consultant (since 1989) and
former Principal (1949-1989) of Alloy, Silverstein, Shapiro, Adams, Mulford &
Co., P.C. (certified public accountants). Director (1970-1975, 1980-present) of
UJBank. Formerly Chairman of the Board (1987-1994) of United Jersey Bank/South
(predecessor bank to UJBank) Former Chairman of the Board of Kennedy Health Care
Foundation. Former Trustee of John F. Kennedy Hospital and William Likoff
Cardiovascular Instituteof Hahneman University. Member of the Capital and
Dividend, Acquisition and Nominating Committees.
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BENEFICIAL OWNERSHIP OF SUMMIT EQUITY SECURITIES
BY DIRECTORS AND EXECUTIVE OFFICERS
COMMON STOCK
Set forth below are the number of shares of Summit Common Stock
beneficially owned by each Director of Summit, by each executive officer listed
in the Summary Compensation Table and by all Directors and executive officers of
Summit as a group as of March 27, 1996. The beneficial owners listed below hold
sole voting and investment power over all shares listed, except as indicated.
Percentage
Shares of Summit
Beneficially Common
Owned Stock
------------ ----------
S. Rodgers Benjamin ..................... 87,463 (1)(2) .094%
Robert L. Boyle ......................... 77,151 (3) .083%
James C. Brady, Jr. ..................... 346,554 (2)(4) .372%
John G. Collins ......................... 279,711 (5) .300%
Robert G. Cox ........................... 276,733 (6) .297%
T.J. Dermot Dunphy ...................... 73,824 .079%
Anne Evans Estabrook .................... 34,245 .037%
Elinor J. Ferdon ........................ 16,786 (7) .018%
John R. Haggerty ........................ 171,541 (5)(8) .184%
Fred G. Harvey .......................... 2,627 (9) .003%
John R. Howell .......................... 283,500 (5)(10) .305%
Francis J. Mertz ........................ 11,704 (11) .013%
George L. Miles, Jr. .................... 1,200 (12) .001%
Stephen H. Paneyko ...................... 232,551 (5)(13) .251%
Henry S. Patterson II ................... 15,728 .017%
Thomas D. Sayles, Jr. ................... 324,018 (6)(14) .377%
T. Joseph Semrod ........................ 701,003 (5)(15) .753%
Raymond Silverstein ..................... 26,668 (16) .029%
Orin R. Smith ........................... 15,962 (2)(17) .017%
Joseph M. Tabak ......................... 53,014 .057%
Douglas G. Watson. ...................... 14,070 (2)(18) .015%
All Directors and executive officers
as a group (35) ....................... 3,957,553 (19) 4.251%
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(1) Includes 75,141 shares held by Flemington Fur Co., Inc. of which Mr.
Benjamin is Chairman, CEO and a significant shareholder. Mr. Benjamin disclaims
voting and investment powers over such shares.
(2) Includes 900 shares which may be acquired within 60 days pursuant to
options granted under The Summit Bancorporation 1995 Director Stock Option Plan
and converted into options to purchase Summit Common Stock.
(3) Includes 20,340 shares held in trusts for which Mr. Boyle serves as
trustee, and 934 shares owned by Mr. Boyle's wife and 9,837 shares held by Mr.
Boyle's wife as custodian over which Mr. Boyle disclaims voting and investment
powers.
(4) Includes 46,022 shares held by Mill House Associates, L.P. of which Mr.
Brady is a significant equity owner. Mr. Brady disclaims voting and investment
control over such shares.
(5) Includes shares which may be acquired immediately or within sixty days
under one or more of Summit's Stock Option Plans as follows: Mr.
Collins--179,545 shares, Mr. Haggerty--97,785 shares, Mr. Howell--186,180
shares, Mr. Paneyko--147,625 shares, and Mr. Semrod--507,989 shares.
(6) Includes shares which may be acquired immediately pursuant to options
granted under The Summit Bancorporation Stock Incentive Plan and converted into
options to purchase Summit Common Stock as follows: Mr. Cox--142,159 shares, Mr.
Sayles--109,741 shares.
(7) Includes 3,000 shares owned by Mrs. Ferdon's husband over which Mrs.
Ferdon disclaims voting and investment powers.
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(8) Includes 19,581 shares owned jointly with Mr. Haggerty's wife over
which Mr. Haggerty shares voting and investment powers.
(9) Mr. Harvey owns all of these shares jointly with his wife and shares
voting and investment powers with respect to these shares.
(10) Includes 7,765 shares held by Mr. Howell's wife over which Mr. Howell
disclaims voting and investment powers, 101 shares held by Mr. Howell as
custodian for minor children.
(11) Includes 831 shares held by Mr. Mertz as custodian for minor children,
3,650 shares owned jointly with Mr. Mertz's wife over which Mr. Mertz shares
voting and investment powers, and 165 shares owned by Mr. Mertz's wife and 952
shares owned by a family member living in the same household over which Mr.
Mertz disclaims voting and investment powers.
(12) Includes 200 shares owned by Mr. Miles' wife over which Mr. Miles
disclaims voting and investment powers.
(13) Includes 1,100 shares owned by Mr. Paneyko's wife, 2,201 shares owned
by a family member living in the same household and 1,380 shares held by Mr.
Paneyko's wife as custodian for minor children over which Mr. Paneyko disclaims
voting and investment powers.
(14) Includes 4,201 shares held by Mr. Sayles' wife over which Mr. Sayles
disclaims voting and investment powers.
(15) Includes 287 shares held by Mr. Semrod's wife as custodian for a minor
child, 479 shares owned by Mr. Semrod's wife and 521 shares owned by a family
member living in the same household over which Mr. Semrod disclaims voting and
investment powers.
(16) Includes 1,275 shares owned by Mr. Silverstein's wife over which Mr.
Silverstein disclaims voting and investment powers and 608 shares owned by a
partnership in which Mr. Silverstein is a general partner.
(17) Includes 496 shares owned by Mr. Smith's wife over which Mr. Smith
disclaims voting and investment powers.
(18) Includes 13,170 shares owned jointly with Mr. Watson's wife over which
Mr. Watson shares voting and investment powers.
(19) Voting and investment powers are shared as to 169,192 and disclaimed
as to 31,469 of these shares. Includes 1,712,197 shares which may be acquired
within 60 days under all Stock Option Plans.
PREFERRED STOCK
Currently issued and outstanding are 600,166 shares of Summit's Adjustable
Rate Cumulative Preferred Stock Series B. Messrs. Boyle and Tabak beneficially
own 300 and 1,000 shares, respectively, of the Series B Preferred Stock.
CORPORATE GOVERNANCE GUIDELINES
(NOTE: Actions to be taken by the Board of Directors may be taken by the
appropriate Committee of the Board.)
DUTIES OF DIRECTORS.
o The business and affairs of the Corporation shall be managed by its
officers under the direction of the Board of Directors.
o Each director owes a fiduciary duty of loyalty to the Corporation.
o Each director owes a fiduciary duty of care and diligence to the
Corporation.
o Each director, in discharging the director's duties to the Corporation and
in determining what the director reasonably believes to be in the best
interest of the Corporation, may, in addition to considering the effects of
any action on shareholders, consider the effects on the Corporation's
employees, suppliers, creditors, customers, the communities it serves, and
the long term as well as the short-term interests of the Corporation and
its shareholders.
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o Each director should represent all shareholder interests.
o It is desirable that each outside director serves on the board of one of
the Corporation's subsidiaries.
DIRECTOR QUALIFICATIONS AND BOARD STRUCTURE.
o Not less than two-thirds of the directors shall be outside directors, i.e.,
persons not (i) currently employees of the Corporation, (ii) former
executive officers of the Corporation, or (iii) professional advisors,
consultants or counsel receiving material compensation for services to the
Corporation.
o Each director must own at least 1,000 shares of common stock of the
Corporation.
o A director may not be elected to a new term after reaching age 73.
o Inside directors must retire from the Board upon retirement from full-time
employment with the Corporation.
o A director whose personal circumstances change significantly (such as
retirement, a change in employment, or circumstances which compromise the
director's ability to serve the Corporation) shall offer to resign from the
Board, subject to the Board's discretion to accept or reject the offer of
resignation in the best interests of the Corporation.
o Depth and breadth of business and civic experience in leadership positions,
ties to the Corporation's markets, and diversity of Board membership are
criteria considered in reviewing nominees for the Board. The Corporation's
By-Laws provide for shareholder nominations in accordance with specified
procedures. Shareholders may also informally submit names to the Nominating
Committee.
o The Board has determined not to establish term limits for directors or
adopt policies on an ideal size for the Board or whether or not the
positions of Chairman and Chief Executive Officer should be separate, in
order to be free to make the choices which seem best for the Corporation at
any particular time.
COMMITTEE STRUCTURE AND RESPONSIBILITIES.
o All Committee appointments shall be made by the Board. Outside directors
normally serve on at least two Committees.
o Committees shall regularly report their activities to the full Board.
o The Chairman of the Executive Committee is an officer of the Corporation
under its By-Laws and shall be an outside director. The Chairman of each
other Committee shall be an outside director.
o The Compensation, Audit and Nominating Committees shall consist solely of
outside directors. A majority of members of all other Committees shall be
outside directors.
o The Executive Committee shall exercise the powers of the Board of Directors
between meetings of the Board to the extent permitted by law. The Executive
Committee shall be responsible for planning management succession.
o The Compensation Committee recommends to the Board employment, promotion
and remuneration arrangements for executive officers and directors. The
Compensation Committee shall approve all executive incentive plans and
grants thereunder. A portion of executive compensation shall be based on
the performance of the Corporation and its business units. The Compensation
Committee shall review the performance and salary of the Chief Executive
Officer and senior executives annually. The Board shall meet annually in
executive session with the Chief Executive Officer to discuss the
recommendations of the Compensation Committee. The Compensation Committee
shall also review the compensation of the outside directors annually.
Inside directors shall not receive additional compensation for service as
directors.
o The Audit Committee shall recommend the engagement and discharge of
independent Certified Public Accountants, review their annual audit plan
and the results of their auditing activities, and consider the range of
audit and non-audit fees. It shall also review the general audit plan,
scope and results of the Corporation's procedures for internal auditing,
the independence of the internal and external auditors, and the adequacy of
the internal control structure. The reports of examination of the
Corporation and its subsidiaries by state and federal bank regulatory
examiners shall be reviewed by the Audit Committee. The Audit Committee
shall meet periodically in executive session with the independent Certified
Public Accountants. It shall have authority to employ independent legal
counsel.
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o The Nominating Committee considers the appropriate size and makeup of the
Board, and will seek nominees to fulfill the Corporation's qualifications
and criteria for directors when it deems additions to the Board to be
desirable. It will consider nominations from shareholders. The Nominating
Committee shall review the performance of incumbent directors whose terms
expire prior to their renomination.
o The Capital and Dividend Committee and the Board shall review the
Corporation's dividend policy and capital program at least annually.
o The Acquisition Committee reviews acquisition strategy and reviews and
recommends to the Board proposals for significant acquisitions.
BOARD FUNCTIONS.
o Financial and investment results of the Corporation generally will be
reported to the Board at each regularly scheduled meeting.
o The Board will annually review and approve the operating and capital plans
(budgets).
o Management shall periodically prepare an updated strategic plan for the
Corporation, which shall be presented to the Board for its consultation,
advice and approval.
o The Annual Report to Shareholders, SEC Form 10-K, and the Proxy Statement
shall be reviewed by the Board.
GENERAL POLICIES.
o The Board encourages active efforts to seek diversity among employees.
o The Board believes that the Corporation and its subsidiaries should be good
corporate citizens and serve the convenience and needs of their
communities.
o The Board has a strong policy against insider trading.
o Board members have complete access to executive officers of the
Corporation. Senior executives regularly attend portions of the Board
Meetings to make presentations and respond to questions. The Board
encourages presentations from officers other than senior executives who
have expertise and future potential.
o The Board believes that individual directors other than the Chairman of the
Executive Committee should not communicate on CORPORATE ISSUES with the
press, investors or employee groups without approval of the Board or
Executive Committee or at the request of management.
o These corporate governance guidelines have been approved by the Board and
may be amended by it as the Board deems appropriate.
NOMINATIONS TO SUMMIT'S BOARD
The Nominating Committee will consider nominees recommended by
shareholders. Nominations, including biographical information and a statement by
the nominee that he or she is willing to serve if nominated, should be submitted
to the Secretary by October 1 for consideration for proposal at the next annual
meeting. Summit By-Laws state that a nominee must own 1,000 shares of Summit
Common Stock and be under the age of 73. Various state and federal laws prohibit
officers and directors of certain financial institutions, public utility holding
companies and competitors of Summit from serving on Summit's Board. A further
standing resolution of the Board states that employees of Summit and its
subsidiaries and affiliates who serve on the Board must retire from the Board
when they reach normal retirement age under the Summit Retirement Plan
(currently 65) or upon any earlier retirement or termination of full-time
employment with Summit and its subsidiaries and affiliates. Details may be
obtained from the Secretary.
The By-Laws of Summit provide that nominations for the election of
directors may be made at an annual meeting by any shareholder entitled to vote
at the annual meeting but only if written notice of such intent, sent either by
personal delivery or by United States mail, is received by the Secretary of
Summit not later than 70 days in advance of the annual meeting. The notice must
be set forth: (a) the name and address of the shareholder who intends to make
the nomination and of the person or persons to be nominated, (b) a
representation that such holder is a holder of record of shares of Summit
entitled to vote at the annual meeting and intends to appear in person or by
proxy at the annual
10
<PAGE>
meeting to nominate the person or persons specified in the notice, (c) a
description of all arrangements or understandings between such holder and each
nominee and any other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by such holder, (d) such
other information regarding each nominee proposed by such holder as would have
been required to be included in a proxy statement filed pursuant to the proxy
rules of the SEC had each nominee been nominated, or intended to be nominated,
by the Board of Directors and (e) the consent of each nominee to serve as a
director of Summit if so elected and a representation by such nominee that such
person, at the time of notification satisfies, and, on the date of the Annual
Meeting and thereafter during the continuation of directorship, will satisfy the
qualifications for service as a director as set forth in Section 13 of Article
III of the By-Laws. The By-Laws also provide that the chairman of the annual
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
REMUNERATION OF OUTSIDE DIRECTORS
Outside Directors, i.e., Directors who are not employees of Summit or one
of its subsidiaries, are paid $750 per Board and $750 per Committee and
Subcommittee meeting attended. In 1995, each outside Director also received a
$15,000 annual retainer. Mr. Dunphy, Chair of the Executive and Compensation
Committees, received an additional $10,000 annual retainer and Mrs. Ferdon,
Chair of the Audit Committee, received an additional $5,000 annual retainer.
Outside Directors who serve as directors of subsidiaries also receive fees from
such subsidiaries, which vary in amount, with annual retainers for board
membership ranging from $5,000 to $10,000, annual retainers for committee chairs
and membership on certain committees where paid by a subsidiary of $1,000, and
fees for meetings attended ranging from $200 to $650. An outside Director may
elect to defer payment of fees from Summit and its bank subsidiaries until
reaching a stated age or until conclusion of service as a Director of Summit,
with interest on deferred sums payable at the rate paid by UJBank for IRA and
Keogh Accounts.
A retirement plan for individuals who are outside Directors of Summit on
the date their service as a Summit Director ends, provides that outside
Directors with five or more years of service as a Summit Director (a "Vested
Director") are entitled to receive annually, for ten years or the number of
years served as a Director, whichever is less, commencing upon the Vested
Director's attainment of age 65 and retirement from the Summit Board or upon the
Vested Director's disability, payments equal to the highest annual retainer rate
in effect at any time for service as a Summit Director during the two-year
period immediately preceding the Vested Director's date of retirement or, if
earlier, date of death or disability. The plan further provides that, in the
event a Vested Director dies before receiving all benefits to which he or she is
entitled, the Vested Director's surviving spouse is entitled to receive all
benefits not received by the deceased Vested Director, commencing upon such
Vested Director's death. Upon a Change in Control of Summit the plan provides
that each Director then sitting on the Summit Board, notwithstanding that length
of time served as a Director, becomes entitled to receive annually, for ten
years or twice the number of years served as a Director, whichever is less,
payments equal to the higher of (i) the Director's annual retainer at the time
of the Director's termination of Board service, or (ii) the highest annual
retainer in effect at any time during the two-year period immediately preceding
the Change in Control, commencing on the latest to occur of (a) the termination
of the Director's Board service, (b) attainment of age 65 or (c) any date
designated by the Director prior to the Change in Control. The definition of
Change in Control for purposes of the Plan parallels the definition of that term
contained in the Termination Agreements discussed on pages XX and XX hereof.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed
exclusively of Directors who are not, and have not been, officers or employees
of Summit or any of its subsidiaries (collectively, the "Company"). It is
presently chaired by Mr. Dunphy, who also serves as Chair of the Executive
Committee, and includes Mrs. Ferdon, Chair of the Audit Committee, Mr. Mertz,
Chair of the Nominating Committee, Mr. Tabak, Chair of the Acquisition
Committee, Mrs. Estabrook and Messrs. Boyle and Patterson.
Summit's executive compensation program is a coordinated and balanced
program consisting of:
o Salary and benefits;
o Incentive cash compensation;
o Stock option program; and
o Long-term performance stock program
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<PAGE>
A number of elements are taken into account in determining an executive
compensation program including company size and performance, management
philosophy, stock market price volatility, industry practices, company culture
and organizational structure. A balance must be achieved among:
o Aligning the executives' goals with the shareholders' goals of
stock appreciation and yield;
o The Company's goals of attracting, retaining and motivating the
best possible executives in a cost-effective way; and
o The executives' goals of maximizing the amount and certainty of
compensation as well as security of position.
The elements of the executive compensation program fulfill different
purposes:
o The incentive cash feature stresses the importance of achieving
specific goals each year.
o The stock option and stock award programs are intended to provide
a long-term incentive to build the Company's profits. They also
serve as a strong motivator, a capital accumulation opportunity
and a retention mechanism. Stock awards are also tax deductible
by the Company in most cases without incurring any cash outlay.
By increasing the shareholdings of executives, the stock programs
align the goals of Summit executives with those of Summit
shareholders. These programs are submitted to the shareholders
for approval prior to their implementation.
The present mix of the Summit executive compensation program is competitive
with peers in cash bonus and above the median in long-term stock-related
compensation. The Compensation Committee believes that this mix provides an
appropriate balance to maximize long-term shareholder interests. A
stock-weighted compensation program represents more risk to the executive
because the compensation decreases if the Company's stock price declines.
However, there is potentially more reward if the stock does appreciate,
reflecting the increasing reward to the shareholders.
The principal components of the compensation program can be seen in the
Summary Compensation Table on page XX under the following column headings: "(c)
Salary", "(d) Bonus", "(f) Restricted Stock Awards", "(g) Securities Underlying
Options/SARs" and "(h) LTIP Payouts". Reporting of awards under the long-term
performance stock program is split among three of the foregoing headings:
one-fifth of each annual incentive stock award (the unrestricted portion)
appears in the column titled "(d) Bonus" where it is aggregated with an
executive's incentive cash bonus award, four-fifths of each annual award (the
restricted portion) appears under the general caption "Long Term Compensation"
in the column titled "(f) Restricted Stock Awards" and payouts of performance
stock appear in the column titled "Payouts--(h) LTIP Payouts", although there
were no LTIP payouts in 1995. The last column of the Cash Compensation Table,
"(h) All Other Compensation", aggregates the remaining miscellaneous forms of
compensation, including the portion of term life insurance premiums taxable to
executives under the Company life insurance program applicable to all employees
and the employer matching contribution paid to the executive's accounts in the
Employee Savings Plan, a profit sharing and retirement plan established under
Section 401(k) of the Internal Revenue Code of 1986 (the "Code"), pursuant to
which the Company matches, subject currently with respect to 1996 to a maximum
employer contribution of $4,500, 100% of voluntary contributions by an employee
up to 3% of the employee base salary. All employees are eligible to participate
in the Employee Savings Plan after one year of service. Approximately XX% of the
Employee Savings Plan's assets are invested in Summit Common Stock, further
aligning the employees' interests with those of the shareholders.
The Compensation Committee periodically utilizes surveys and advice
provided by outside compensation consultants in arriving at and making
adjustments to the total compensation package appropriate for the executive
officers of the Company. The surveys considered by the Compensation Committee
for this purpose are primarily peer industry surveys but cross-industry surveys
are also reviewed. The peer companies included in the peer industry surveys are
selected by the independent firms which conduct the surveys and consist of the
commercial banks and bank holding companies operating primarily in the United
States which are, generally, in the same asset size group as the Company. In
1995 the Compensation Committee concluded a comprehensive review of the
executive compensation program with the assistance of a nationally recognized
outside compensation specialist. While the principal conclusion of the review
was the desirability of broadening middle management participation in the cash
bonus and long-term performance stock programs, the review also demonstrated the
desirability of shifting executive officer awards under the stock award program
from exclusive reliance on incentive stock awards to a blending of incentive
stock and performance stock awards.
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Salary. Base salaries for executive officers, when initially set, are
generally dependent upon peer industry salaries paid for comparable positions
(as reflected in peer industry salary surveys) and correlate generally to the
size of the organization. The responsibilities to be undertaken and the
experience level of the particular executive officer are also taken into
consideration when setting a salary. The Compensation Committee seeks to
maintain average executive officer salaries near peer industry medians. With
respect to increases in base salaries, the overall general performance of the
Company for a given year, as well as trends in the economy and the banking
industry, are taken into account in arriving at a percentage increase which is
applied Company-wide as a guideline to the merit salary increases of all
employees, including executive officers. Deviations from the guideline
percentage are permitted in cases of exceptionally superior or inferior
performance and to correct significant variances from marketplace salaries. A
guideline percentage of 4% was applied to general salary increases during 1995
and will be applied to general salary increases during 1996.
Cash Bonus. Cash bonuses are awarded pursuant to the Incentive Plan, a
short-term plan adopted in 1982. The Incentive Plan provides for awards of cash
bonuses to key officers of the Company at the conclusion of a fiscal year based
on the Company's performance in relation to goals set for the Company at the
beginning of the year, the Company's performance compared to peers, and the
individual contributions of the officers involved and their profit centers. The
aggregate amount of bonuses may not exceed 50% of aggregate participants'
salaries and no bonuses will normally be paid when the after-tax income of the
Company is less than 7% of average capital for the year, subject to the right of
the Compensation Committee to make exceptions when deemed warranted.
The Compensation Committee periodically uses surveys and recommendations
provided by outside compensation consultants to establish percentages of base
salary representing a cash bonus guideline for executive officers and ranges for
permissible deviations above and below that guideline. In determining the amount
of cash bonus to award executive officers for a particular year, the
Compensation Committee evaluates the Company's performance (as a percentage of
the performance deemed desirable by the Compensation Committee) for that year
using five evaluation categories and pays a cash bonus equal to the rating
percentage times the cash bonus guideline (but no higher than the maximum and no
lower than the minimum in the guideline range). The five evaluation categories
are: financial and strategic plans, earnings growth rate, financial performance
compared to industry peers in the Company's geographic region, financial
performance as measured by selected long term financial performance ratios and
restructuring and positioning objectives. The Compensation Committee assigns
relative weights to these categories each year which reflect, in its judgment,
as of that year, the relative importance of each category to the long-term
financial prospects of the Company. In arriving at the bonus paid with respect
to 1995, the Compensation Committee determined that the Company had performed at
a level equal to 132% of the performance deemed desirable for payment of the
cash bonus guideline and paid cash bonus amounts having a median at
approximately 1.13% of the cash bonus guideline. With respect to 1995, the
Compensation Committee placed particular significance on the ability of the
Company to attain, excluding the effects of the Bancorp New Jersey, Inc.
acquisition, a return on assets in excess of its goal of 1.20%, a return on
common equity in excess of its goal of 15.00%, and an efficiency ratio in excess
of its goal of 59%.
Stock Bonus and Long Term Compensation. To encourage growth in shareholder
value, the Compensation Committee believes that senior executives who are in a
position to make a substantial contribution to the long-term success of the
Company should have a significant stake in the Company and its ongoing success.
An equity position in the business focuses attention on managing the Company as
an owner. To encourage growth in shareholder value, the stock component of the
executive compensation program includes a long-term performance stock program
and a stock option program. These stock-based programs are designed to mature
and grow in value over time and for that reason represent compensation which is
attributable to service over a period of time.
The Long-Term Performance Stock Program is designed to reward executives
who meet predetermined performance standards and retain the executives by paying
out stock over a period of time. The program consists of: (i) performance stock
awards, which are awards made contingent upon attainment of objectively
verifiable performance goals in accordance with the performance criteria
specified in the current stock and option plan, are fixed at the time the
performance goals are set with respect to the number of shares underlying the
award, and are intended, upon full vesting, to qualify as exempt compensation
expense under Section 162(m) of the Code (if Proposal 2 is approved by the
shareholders); and (ii) incentive stock awards, which are awards made with
respect to services rendered in a prior fiscal yesr following the attainment of
Company, division and personal performance standards but need not be fixed with
respect to the number of shares underlying the awards until the awards are made
and are not
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intended to qualify as exempt compensation expense under Section 162(m) of the
Code. Performance stock awards, in addition to requiring the satisfaction of
performance goals, may contain restrictions upon transferability which lapse in
annual increments following the attainment of the performance goals. Incentive
stock awards typically consist of a portion (one-fifth of the total award) which
is transferred without restriction to the participant upon grant and a remaining
portion (four-fifths of the total award) which contains restrictions on
transferability which lapse in annual increments over the four years following
the award. Only upon full vesting of the performance stock awards, i.e.,
attainment of performance goals and lapsing of restrictions on transferability,
will the performance stock awards be reported in the Summary Compensation Table.
When reportable, performance stock awards are found under column (h) as LTIP
(long term incentive plan) Payouts. By contrast, incentive stock awards are
immediately reportable in the Summary Compensation Table. Pursuant to
regulations of the SEC, one-fifth of an annual incentive stock award, the
unrestricted portion, is reported as annual compensation in column (d) of the
Summary Compensation Table. The remaining four-fifths of an annual incentive
stock award, the restricted portion which vests in equal annual installments, is
reported as long-term compensation in column (f) of the Summary Compensation
Table.
The Compensation Committee periodically utilizes surveys and
recommendations provided by outside compensation consultants to establish a
long-term performance stock guideline and ranges for permissible deviations
above and below this guideline. Following the end of a fiscal year and based on
the foregoing, the Chief Executive Officer determines an appropriate stock award
recommendation for each executive officer. The Compensation Committee then
weighs as it deems appropriate the performance of each executive officer and the
evaluation and recommendation of the Chief Executive Officer and makes incentive
stock and performance stock awards after taking into account the overall
performance of the Company or one or more elements thereof or such other factors
as the Compensation Committee considers relevant. When determining appropriate
stock awards to make with respect to services rendered in 1995, the Compensation
Committee placed particular significance on the Company's ability to exceed
return-on-asset, return-on-equity and efficiency ratio goals, as it did when
determining appropriate cash bonus amounts. While typically one-fifth of an
incentive stock award constitutes immediate compensation to the executive
officer, the balance of an incentive stock award is received in four annual
installments only if the executive officer remains in the employ of the Company
during that time. Additionally, performance stock, though awarded on the basis
of a performance evaluation that considers prior year performance, is received
by the executive officer only if the performance goals established in
conjunction with the performance stock award are satisfied by future
performance. Ninety-one executive and senior officers participated in the
January 1996 stock awards applicable to services rendered in 1995, receiving an
aggregate of 90,075 shares. Included in this aggregate stock award is 12,000
shares of performance stock, reflecting the Compensation Committee's shift from
exclusive reliance on incentive stock to a blending of incentive stock and
performance stock in the long-term performance stock program, the principal
indication of the comprehensive review of executive compensation conducted in
1995.
Stock options are a performance-motivating incentive because they have no
value unless the Company's stock price increases. Surveys and recommendations
provided by outside compensation consultants are periodically used by the
Compensation Committee to establish stock option guidelines; (determined in
number of options), and ranges of permissible deviations above and below those
guidelines, for each salary level of senior officer at Summit and each of its
subsidiaries. The Compensation Committee, on a subjective basis and entirely
within its discretion, then evaluates the overall financial performance of the
Company, or any element thereof, and determines whether to grant options in
accordance with the stock option program guidelines or amounts greater than or
less than the guidelines. When determining appropriate option grants to make
with respect to services rendered in 1995, the Compensation Committee again
placed particular significance on the Company's ability to exceed
return-on-asset, return-on-equity and efficiency ratio goals, as it did when
determining appropriate cash bonus amounts and stock awards. The Compensation
Committee does not generally consider currently outstanding and previously
granted options when making grants. The Compensation Committee does not consider
the aggregate size of current grants when making individual grants, but the 1993
Incentive Stock and Option Plan contains specific aggregate annual grant
limitations approved by the shareholders. Stock options will continue to qualify
as exempt compensation expense under Section 162(m) of the Code if Proposal 2 is
approved by the shareholders.
The stock option program is designed with a broad scope to align the
interests of a large number of employees with shareholder interests. A total of
[490] current employees hold one or more stock options granted with respect to
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the current year or to prior years. This amounts to [9%] of the full time work
force. With respect to stock options granted in January 1996 for services
rendered in 1995, 343 employees received options on 593,450 shares. Set forth in
the Summary Compensation Table are the stock option grants made in January 1996
to the five named executive officers for services rendered in 1995. The table
titled "Option Grants in Last Fiscal Year" sets forth (pursuant to SEC
requirements) the stock option grants made to the five named executive officers
in 1995 for services rendered in 1994.
To further encourage employee ownership of Summit Common Stock, the Company
offers a payroll deduction plan which facilitates employee purchases of Summit
Common Stock through the Dividend Reinvestment Plan (at a fair market value
determined in accordance with the terms of the Dividend Reinvestment Plan).
Chief Executive Officer. In general, Mr. Semrod's compensation is
determined in the same manner as that of other senior executives, as described
above. In determining Mr. Semrod's cash bonus, stock option grant and incentive
stock and performance stock award for 1995, the Compensation Committee
considered in accordance with the practices and procedures described above the
surveys and recommendations of compensation consultants previously cited, Mr.
Semrod's performance and the overall performance of the Company, placing
particular significance as with other compensation decisions made with respect
to services rendered in 1995 on the Company's ability to exceed return-on-asset,
return-on-equity and efficiency ratio goals.
Compensation Deductibility Limitation. In 1993, the Code was amended to add
Section 162(m), which limits to $1 million the amount that a publicly-held
corporation such as Summit can deduct for compensation paid to certain senior
executive officers (the "deductibility limitation"). Regulations promulgated in
1995 by the Internal Revenue Service (the "Service") interpret Section 162(m) to
exempt certain compensation expenses ("exempt compensation expense") from the
deductibility limitation, principally: compensation attributable to stock
options granted at fair market value pursuant to a plan that has received
shareholder approval and satisfied certain other requirements ("exempt
options"), compensation payable solely on account of the attainment of one or
more objective performance goals established by a compensation committee prior
to the commencement of the service to which the performance goals relate, or
within 90 days of such commencement, and at a time when it is substantially
uncertain whether the performance goals will be met ("performance compensation")
and compensation paid pursuant to written binding contracts in effect on
February 17, 1993 and not materially modified after that date ("grandfathered
contracts").
Option grants reportable in column (g) of the Summary Compensation Table do
not produce taxable income to the executive officer, or a potential deductible
compensation expense to Summit, until the option is exercised by the executive
officer at a time when the market price of the Summit Common Stock underlying
the option exceeds the exercise price of the option. All of Summit's currently
outstanding options are exempt options and therefore will produce exempt
compensation expense for Summit upon their exercise. In addition, if
shareholders approve Proposal 2, options granted under Summit's 1993 Incentive
Stock and Option Plan prior to Summit's 2001 Annual Meeting of Shareholders will
also be exempt options and produce exempt compensation expense for Summit upon
their exercise. Also subject to shareholder approval of Proposal 2, performance
stock awards were made for the first time in January 1996 to certain executive
officers. Performance stock awards do not generate taxable income to the
executive officer, or a potential deductible compensation expense to Summit,
until they are fully vested--i.e., the performance criteria applicable to the
award are met and any restrictions on the awarded shares respecting their
transfer lapse. Performance stock is reportable in the Summary Compensation
Table at column (h) as a "LTIP Payout" in the year full vesting occurs,
regardless of the year of award, and will be exempt compensation expense if
shareholders approve Proposal 2. Restricted incentive stock awards reportable in
column (f) of the Summary Compensation Table also do not generate taxable income
to the executive officer, or a potential deductible compensation expense to
Summit, until restrictions on the awarded shares lapse. Restricted stock awards
made prior to February 17, 1993 qualify as grandfathered contracts and will thus
generate exempt compensation expense for Summit in the year restrictions on such
awarded shares respecting transfer lapse. Restricted incentive stock awards made
after February 17, 1993 do not qualify as exempt compensation expense and thus
are subject to the deductibility limitation, if applicable, as restrictions on
such shares lapse. Compensation reported in columns of the Summary Compensation
Table other than (g) do not currently qualify as exempt compensation expense and
thus are subject to the deductibility limitation to the extent paid in 1995 and
thereafter, to the extent the deductibility limitation is applicable. However,
as discussed, if shareholders approve Proposal 2, future compensation reported
in column (h) will also qualify as exempt compensation expense.
Respectfully submitted,
T.J. Dermot Dunphy, Chairman
Robert L. Boyle, Anne Evans Estabrook, Elinor J. Ferdon, Francis J. Mertz, Henry
S. Patterson II and Joseph M. Tabak
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<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
------------------------------------
Annual Compensation Awards Payouts
------------------------------------- ------------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Annual Restricted Underlying LTIP All Other
Name And Compen- Stock Options/ Payouts Compen-
Principal Positions Year Salary($) Bonus($)(1) sation($)(2) Awards($)(3) SARs(#) ($) sation($)(4)
- ------------------- ---- -------- ----------- ------------ ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
T. Joseph Semrod ............ 1995 $707,500 $559,300 -- $337,200 65,000 -- $16,785
Chairman of the Board 1994 673,750 414,400 -- 237,600 58,000 -- 14,602
and CEO of Summit and 1993 665,000 284,350 -- 225,400 58,000 -- 16,140
Chairman, CEO and
President of UJBank
John G. Collins ............. 1995 $326,500 $195,100 -- $112,400 22,000 -- $12,866
Vice Chairman of the 1994 311,850 154,355 -- 57,420 20,000 -- 10,899
Board of Summit and 1993 297,850 110,720 -- 54,880 20,000 -- 12,195
UJBank
John R. Howell .............. 1995 $318,500 $189,344 -- $ 52,688 21,000 -- $ 8,269
Vice Chairman of the 1994 305,250 150,855 -- 57,420 20,000 -- 10,779
Board of Summit, 1993 292,750 100,720 -- 54,880 20,000 -- 11,632
Chairman of the Board
and CEO of First Valley
and FVBank
Stephen H. Paneyko .......... 1995 $270,500 $144,319 -- $ 77,275 16,000 -- $10,444
Senior Executive Vice 1994 259,150 118,638 -- 44,550 16,000 -- 8,610
President Commercial 1993 248,400 80,280 -- 43,120 16,000 -- 9,978
Banking of Summit
and UJBank
John R. Haggerty ............ 1995 $258,500 $139,319 -- $ 77,275 16,000 -- $ 7,427
Senior Executive Vice 1994 247,400 113,138 -- 44,550 16,000 -- 4,703
President Finance of 1993 237,150 83,780 -- 43,120 16,000 -- 8,327
Summit and UJBank
- -----------
<FN>
(1) Includes value of one-fifth of performance stock award and any cash bonus,
both of which are paid in the fiscal year following the fiscal year for
which they are reported.
(2) Perquisites and other personal benefits, securities or property paid during
the indicated fiscal year did not exceed, with respect to any named
executive officer, the lesser of $50,000 or 10% of the annual salary and
bonus reported in the table for that individual, and are therefore excluded
from "Other Compensation".
(3) The total number of restricted shares held and their aggregate market value
as of December 31, 1995 are as follows: Mr. Semrod: 26,780 shares,
$954,038; Mr. Collins: 6,268 shares, $223,298; Mr. Howell: 6,252 shares,
$222,728; Mr. Paneyko: 5,244 shares, $186,818; Mr. Haggerty: 4,866 shares,
$173,351.
Restricted stock awards (indicated in shares) which provided for vesting in
less than three years were as follows:
1993 1994 1995
--------------- --------------- ----------------
Vesting Period 1 Year 2 Years 1 Year 2 Years 1 Year 2 Years
-------------- ------ ------- ------ ------- ------- -------
T.J. Semrod ........ 2,300 2,300 2,400 2,400 2,400 2,400
J.G. Collins ....... 560 560 580 580 800 800
J.R. Howell ........ 560 560 580 580 750 750
S.H. Paneyko ....... 440 440 450 450 550 550
J.R. Haggerty ...... 440 440 450 450 550 550
Dividends are paid on all restricted shares held by the named executive
officers.
(4) Amounts listed under "All Other Compensation" for 1995 include Company
contributions to the Employee Savings Plan ("SIP") and the dollar value of
insurance premiums paid with respect to term life insurance (INS) for the
named executive officers as follows: Mr. Semrod: SIP-$4,500, INS-$12,285;
Mr. Collins: SIP-$4,500, INS-$8,366; Mr. Howell: SIP-$4,500, INS-$3,769;
Mr. Paneyko: SIP-$4,500, INS-$5,944; Mr. Haggerty: SIP-$4,500, INS-$2,927.
</FN>
</TABLE>
16
<PAGE>
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Alternative to
(f) and (g):
Grant Date Value
--------------------
(a) (b) (c) (d) (e) (f)
Percent of
Number of Total
Securities Options/SARs Exercise
Underlying Granted to or
Options/SARs Employees in Base Price Expiration Grant Date
Name Granted(1) Fiscal Year ($/Sh)(2) Date Present Value ($)(3)
- ---- ---------- ----------- --------- ---------- --------------------
<S> <C> <C> <C> <C> <C>
T. Joseph Semrod (CEO) .............. 58,000 12% $24.75 2/2/2005
John G. Collins ..................... 20,000 4% $24.75 2/2/2005
John R. Howell ...................... 20,000 4% $24.75 2/2/2005
Stephen H. Paneyko .................. 16,000 3% $24.75 2/2/2005
John R. Haggerty. ................... 16,000 3% $24.75 2/2/2005
- -----------------
<FN>
(1) The stock option grants listed in this table are reported as 1994
compensation on the Summary Compensation Table.
(2) Exercise price equals 100% of the fair market value of a share of Summit
Common Stock on the grant date, which was February 2, 1995 for all options
listed above. All listed options are nonqualified options, become
exercisable one year from the date of grant and terminate upon a
termination of employment, except termination of employment occurring due
to death, disability, retirement or dismissal without cause.
(3) Black-Scholes Option Pricing Model used. The Black-Scholes value based on
three years of monthly stock prices and dividends was .307. The assumptions
used to arrive at that value were: 3-year stock price volatility of .294;
3-year dividend yield of 3.5%; 10-year option term; 5.9% risk-free rate of
return.
</FN>
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e) (f) (g)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End(#)(1) at FY-End($)(1)
Shares Acquired -------------------------- -------------------------
Name on Exercise(#) Value Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
T. Joseph Semrod (CEO) ..... 31,807 $213,610 434,989 78,981 $7,851,228 $978,415
John G. Collins ............ 10,000 85,625 159,545 24,135 2,819,831 280,559
John R. Howell ............. 17,834 318,643 166,180(2) 20,000 2,979,296(2) 217,500
Stephen H. Paneyko ......... 2,868 28,700 131,625 16,000 2,305,313 174,000
John R. Haggerty ........... 26,244 476,340 78,823 16,000 1,090,114 174,000
- ---------------
<FN>
(1) Year-end 1995 numbers and values exclude options granted in January 1996,
which are reported as 1995 compensation on the Summary Compensation Table.
(2) Includes options granted by the predecessor corporation to First Valley
prior to its acquisition by the Company in 1988, which options were
converted in the acquisition to options to purchase stock of the Company.
</FN>
</TABLE>
17
<PAGE>
STOCK PERFORMANCE GRAPH
Set forth below is the five year Cumulative Total Return stock performance
graph for (i) Summit Common Stock, (ii) the Media General ("MG") Mid-Atlantic
Bank Group Index, an industry index encompassing virtually all publicly traded
banking companies in New York, New Jersey, Pennsylvania, Delaware, Maryland and
the District of Columbia (144 companies) and (iii) the New York Stock Exchange
("NYSE") Market Value Index, a broad market index covering all stocks listed on
the NYSE.
SUMMIT BANCORP., MG MID-ATLANTIC BANK GROUP INDEX &
NYSE MARKET VALUE INDEX
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
GRAPHICAL REPRESENTATION OF DATA TABLE BELOW
1990 1991 1992 1993 1994 1995
---- ------ ------ ------ ------ ------
Summit Bancorp $100 $217.21 $375.59 $381.66 $397.66 $603.92
Industry Index 100 133.08 166.65 207.03 196.56 298.47
Broad Market Index 100 129.41 135.50 153.85 150.86 195.61
Assumes $100 invested on January 1, 1991
* Total Return assumes reinvestment of dividends
18
<PAGE>
ADDITIONAL INFORMATION REGARDING DIRECTORS AND OFFICERS
Some executive officers, Directors and nominees for election as Director of
Summit and their associates have deposit accounts with one or more of Summit's
bank subsidiaries and may also have transactions with one or more subsidiaries,
including loans, in the ordinary course of business. All loans in excess of
$60,000 to executive officers and Directors and their associates were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and did
not involve more than the normal risk of collectibility or present other
unfavorable features.
Section 16(a) of the Exchange Act requires Summit's executive officers and
directors, and any persons owning ten percent or more of a registered class of
Summit's equity securities, to file initial statements of beneficial ownership
(Form 3), statements of changes in beneficial ownership (Form 4) and annual
statements of beneficial ownership (Form 5) with the SEC and the NYSE. Persons
filing such statements are required by SEC regulation to furnish the Company
with copies of all such beneficial ownership statements filed under Section
16(a) of the Exchange Act.
Based solely on its review of the copies of beneficial ownership statements
received by it, or written representations from certain reporting persons that
no beneficial ownership statements were required for those persons, Summit
believes that during 1994 all beneficial ownership statements under Section
16(a) of the Exchange Act which were required to be filed by executive officers
and directors of Summit in their personal capacities were filed in a timely
manner, with the following exceptions: clerical oversights in the Corporate
Secretary Department resulted in a delay in the reporting of employee stock
option exercises for 3,335 shares (and related surrender of 1,442 shares in
payment of the exercise) by John R. Howell and 2,193 shares by Dennis
Porterfield from the "next required Form 4" which was filed on November 10, 1995
and February 10, 1994, respectively, to February 13, 1996; a purchase of 1,400
shares by a pension trust for which Raymond Silverstein acts as a trustee,
reportable by the trust on a Form 3 and by Mr. Silverstein on a Form 4 by
November 10, 1993, was not reported until November 10, 1995.
CERTAIN INFORMATION AS TO EXECUTIVE OFFICERS
EMPLOYMENT AGREEMENTS
Summit entered into an employment contract with Mr. Semrod when he joined
Summit in 1981. This contract renews annually for a one-year term, unless the
contract is terminated for cause or due to disability or death, or notice of
nonrenewal is given 120 days prior to its April 2d anniversary date. No notice
of nonrenewal has been given. The contract provided for a minimum base salary of
$200,000 per annum, subject to periodic review to reflect the impact of
inflation, performance, and competitive compensation levels. Mr. Semrod's
contract also provides for a cash bonus formula; however, since the
establishment in 1982 of the Incentive Plan which provides for bonuses to key
employees of Summit and its subsidiaries, Mr. Semrod's bonus has been calculated
and paid under that Plan rather than under the contractual formula.
Summit entered into an employment agreement with Robert G. Cox, providing
for Mr. Cox to serve, commencing at the effective time of the Summit/UJB Merger
(the "Effective Time"), as the President of Summit and UJBank (after UJBank's
anticipated merger with SumBank under the name Summit Bank), for an initial term
of three years; provided, however, on the first and second anniversary dates of
the employment agreement, the term of the employment agreement shall be extended
automatically for one additional year unless not later than 180 days prior to
such anniversary date, either party shall have given written notice to the other
of its or his election not to extend the term of the employment agreement. The
employment agreement additionally provides for Mr. Cox to receive (i) base
salary of not less than $500,000, (ii) an annual bonus at least equal to the
highest annual bonus received by him during any of three calendar years
preceding the Effective Time, (iii) incentive, savings and retirement plan
benefits which in the aggregate are equal to those received by peer executives
of Summit, or, if more favorable, the most favorable incentive, savings and
retirement plan benefits received by him in the 180 days preceding the Effective
Time,(iv) health and welfare plan benefits which in the aggregate are equal to
those received by peer executives of Summit, or, if more favorable, the most
favorable health and welfare plan benefits received by him in the 180 days
preceding the Effective Time, and (v) other customary fringe benefits received
by peer executives of Summit, or, if more favorable, the most favorable of the
fringe benefits received by him in the 180 days preceding the Effective Time. In
the employment agreement Mr. Cox agreed that for a period of one year following
any termination of the employment agreement he will not accept employment with
any national or state bank or thrift institution or affiliate thereof at a
19
<PAGE>
place of employment within 25 miles of any branch location of Summit or any of
its subsidiaries. The employment agreement also provides for Summit to assume
the obligations of the former Summit Bancorporation under the change of control
agreement between the former Summit Bancorporation and Mr. Cox. The change of
control agreement provides for Mr. Cox to receive certain benefits and a
severance payment in the event his employment is terminated following a change
of control or a potential change of control as those terms are defined in the
agreements (the "Change of Control Events") equal to three times the highest
salary and bonus received by him in the 36 months preceding the change of
control. The agreement also provides for reimbursement of a portion of the
excise taxes payable (if any) as a result of receipt by Mr. Cox of payments and
benefits as a result of a termination after a Change of Control Event. The term
of the change of control agreement extends through December 31, 1998 but is
automatically extended each January 1, commencing January 1, 1998, for an
additional one year unless either party gives the other party six months advance
written notice of termination. In the event of a change of control the agreement
remains in effect for not less than 36 months following the change of control.
In no event does the agreement extend beyond Mr. Cox's 65th birthday.
EXECUTIVE SEVERANCE PLAN
In 1986 the Summit Board adopted the Summit Executive Severance Plan for
the purposes of enhancing the ability of Summit to retain existing management
and attract new executives and rewarding key executives for their service to the
Company with reasonable compensation in the event of a termination of their
employment under any of the circumstances set forth in the Plan. Key executives
of the Company are eligible to be selected as Plan participants. The Summit
Board has selected the following executive officers to be Plan participants: T.
Joseph Semrod, John G. Collins, John R. Howell, Stephen H. Paneyko, John R.
Haggerty, Larry L. Betsinger, Alfred M. D'Augusta, William J. Healy, Sabry J.
Mackoul, John J. O'Gorman, Richard F. Ober, Jr., Dennis Porterfield, Alan N.
Posencheg, Gary F. Simmerman and Edmund C. Weiss, Jr. Their period of
participation will expire as of December 15,1999.
The Plan provides that, in the event a participant's employment is
terminated by the Company, other than for Cause (as defined below), death,
disability or retirement, or by the participant for Good Reason (as defined
below), the participant is entitled, for a period of not less than 18 months and
not more than 24 months, or, if earlier, until the participant's death,
disability or retirement, to receive payments based upon the highest rate of
base salary in effect for the participant during the 12-month period preceding
the notice of termination and to remain an active participant in all employee
benefit plans available to employees generally. The participant is also entitled
to receive a pro rated annual bonus for the year in which terminated, and to
continue receiving perquisites for 12 months. The salary and employee benefit
plans continuation period would be 24 months for Mr. Semrod and 18 months for
all other current participants.
For purposes of the Plan, "Cause" is defined to mean any of the following:
(i) the willful commission of an act that causes or that probably will cause
substantial economic damage to the Company or substantial injury to its business
reputation; (ii) the commission of an act of fraud in the performance of the
participant's duties; (iii) a continuing willful failure to perform the duties
of the participants position with the Company or (iv) the order of a bank
regulatory agency or court requiring the termination of the participant's
employment. Willfulness is defined to be an act or failure to act done not in
good faith and without reasonable belief that the action or omission was in the
best interests of the Company.
"Good Reason" for purposes of the Plan is defined to mean any of the
following: (i) the assignment of duties which are inconsistent with, or the
failure to assign duties which are consistent with, the participant's then
current title and salary grade; (ii) removal of the participant from, or any
failure to reappoint or reelect the participant to the highest title held by him
or her during the previous six-month period; (iii) a reduction in the
participant's salary or the failure to grant increases in the participant's
salary comparable to those granted executives of the Company of comparable
title, salary grade and performance ratings; (iv) locating the participant's
office anywhere other than at Summit's (or a subsidiary's) principal executive
offices and (v) the failure by the Company to provide welfare benefits and
perquisites substantially the same as or comparable to those presently provided
to the participant.
In the event a participant becomes entitled to the benefits described above
and the participant subsequently obtains other employment, the participant's
entitlement to the above described benefits ceases and the participant
20
<PAGE>
becomes entitled to receive instead a lump sum payment equal to 50%, of
remaining base salary that would otherwise have been payable to the participant.
TERMINATION AGREEMENTS
The Board of Directors has approved Termination Agreements with certain
executive officers of Summit for the purposes of enhancing the ability of Summit
to retain existing management and attract new executives and of rewarding key
executives for their service to the Company with reasonable compensation in the
event their employment is terminated as provided in the Termination Agreements.
In the Termination Agreements, each officer has agreed that in the event any
person or entity takes certain steps designed to effect a Change in Control (as
defined below) of Summit, he will continue to perform his regular duties and
services for the Company until such person or entity has abandoned or terminated
efforts to effect a Change in Control or until a Change in Control has occurred.
The following executive officers are currently parties to Termination Agreements
with Summit: Messrs. Semrod, Collins, Howell, Paneyko, Haggerty, Betsinger,
D'Augusta, Healy, Mackoul, O'Gorman, Ober, Porterfield, Posencheg, Simmerman and
Weiss. The Termination Agreements provide that if, within three years after a
Change in Control of Summit, the officer's employment with the Company is
terminated by the Company, other than for Cause (as defined below), death,
disability or retirement, or by the officer for Good Reason (as defined below),
the officer is entitled to receive (i) a lump sum cash payment equal to one
year's base salary at his highest rate in effect during the 12 month period
preceding the notice of termination (not to exceed 2.99 times the average of the
officer's annual compensation payable for the five years immediately preceding
the Change in Control), and (ii) upon retirement an amount of total retirement
benefits equal to that which the officer would have received from retirement
plans of, or employment contracts with, the Company if his employment had
continued for three years beyond his termination date or until his retirement,
if earlier, and his rights were fully vested. The amount by which retirement
benefits payable under the Termination Agreements exceeds the amount of
retirement benefits otherwise payable to the officers represents an unfunded
obligation of the Company for which no amounts have been set aside or accrued. A
Termination Agreement terminates if the officer voluntarily ends his employment
during any period when no effort to effect a Change in Control of Summit is then
in progress.
To come within the terms of the Termination Agreements the Change in
Control of Summit must occur, or efforts designed to lead to a Change in Control
of Summit must commence, before December 29, 1996. A "Change in Control" of
Summit is defined to mean: (i) the acquisition by any person of beneficial
ownership of 33-1/3% or more of the combined voting power of Summit's
outstanding securities; (ii) a change in the composition of majority membership
of the Board of Directors over any two-year period; (iii) a change in ownership
of Summit such that Summit becomes subject to the delisting of its Common Stock
from the NYSE; (iv) the approval by the Board of the sale of all or
substantially all of the assets of UJBank; (v) the approval by the Board of any
merger, consolidation, issuance of securities or purchase of assets, the result
of which would be the occurrence of any event described in clause (i), (ii) or
(iii) above.
The definition of "Cause" for purposes of the Termination Agreements
parallels the definition of that term in the Executive Severance Plan described
above. "Good Reason", for purposes of the Termination Agreements, is defined to
mean: (i) the assignment of duties which are materially different or require
substantially more business travel than duties prior to the Change in Control or
which represent a significant reduction in authority and responsibility; (ii)
removal from, or failure to reappoint or reelect the officer to the highest
office held in the six months prior to the Change in Control; (iii) a reduction
in the officer's salary or the failure to grant increases in salary comparable
to those granted officers of comparable title, salary grade and performance
ratings; (iv) the relocation of Summit's principal executive offices outside New
Jersey, a change in the officer's base location to anywhere other than the
Company's principal executive offices or the failure to pay reasonable
relocation expenses where the officer has agreed to a relocation; (v) the
failure to provide the officer with benefits and perquisites the same as or
comparable to those received prior to the Change in Control or (vi) the failure
of Summit to obtain the express written assumption of a Termination Agreement by
any successor to Summit.
PENSION PLANS
Summit maintains a noncontributory pension plan, qualified as a "defined
benefit" pension plan under the Code, which applies to salaried employees,
including executive officers, of Summit and its subsidiaries (the "Basic Plan").
Due to certain benefit restrictions placed on the Basic Plan by the Code, Summit
also maintains a retirement restoration plan and a supplemental retirement plan
applicable to all salaried employee; covered by the Basic Plan (the
21
<PAGE>
"Supplemental Plans"). The following table sets forth the estimated total annual
pension benefits payable under the Basic Plan and the Supplemental Plans at
normal retirement (age 65) at the Years of Credited Service and salary levels
indicated:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Annual Benefit for Years of Credited
Highest Average Yearly Service Indicated (a)(b)
Base Salary of ------------------------------------------------------------------------
Consecutive 60 Months 15 Years 20 Years 25 Years 30 Years 35 Years
--------------------- -------- -------- -------- -------- --------
<C> <C> <C> <C> <C> <C>
$125,000 .................... $ 36,334 $ 48,345 $ 60,432 $ 72,518 $ 75,000
(84,605)
$150,000 .................... 43,759 58,345 73,932 87,518 90,000
(102,105)
$200,000 .................... 58,759 78,345 97,932 117,518 120,000
(137,105)
$250,000 .................... 73,759 98,345 122,932 147,518 150,000
(172,105)
$300,000 .................... 88,759 118,345 147,932 177,518 180,000
(207,105)
$400,000 .................... 118,759 158,345 197,932 237,518 240,000
(277,105)
$450,000 .................... 133,759 178,345 222,932 267,518 270,000
(312,105)
$500,000 .................... 148,759 198,345 247,932 297,518 300,000
(347,105)
$600,000 .................... 178,759 238,345 297,932 357,518 360,000
(417,105)
$700,000 .................... 208,759 278,345 347,932 417,518 420,000
(487,105)
$800,000 .................... 238,759 318,345 397,932 477,518 480,000
(557,105)
- ------------
<FN>
(a) Years of Credited Service are defined by the plan as years of full-time
employment after the employee has attained age 21.
(b) Amounts in parentheses ( ) are amounts payable where the 60% limit of the
Basic Plan does not apply.
</FN>
</TABLE>
Covered compensation, except as described below with respect to Mr. Howell,
includes only base salary and is identical to amounts reported in the Summary
Compensation Table under the column titled "(c) Salary." The benefits listed in
the Pension Plan Table are not subject to offsets for Social Security or other
benefits received by retirees. The listed benefits are those payable if the
straight life annuity method of distribution is chosen. Years of Credited
Service under the Basic Plan for the executive officers listed in the Summary
compensation Table, except as described below for Mr. Howell, are as follows:
Mr. Semrod, 14 years; Mr. Collins, 9 years; Mr. Paneyko, 13 years; Mr.
Haggerty,24 years.
Mr. Semrod's employment contract provides for supplemental retirement
benefits calculated in accordance with the formula of the Basic Plan, but
without regard to the benefit limitations imposed by the Code and the Basic
Plan, and credits Mr. Semrod with years of service commencing February 1, 1963
(an additional 19 years).
Employees and former employees who formerly worked for United Jersey
Bank/Commercial Trust (a predecessor bank to United Jersey Bank), including Mr.
Collins, are covered for service before August 1, 1988 (January 1, 1987 in the
case of Mr. Collins) by a defined benefit, noncontributory pension plan which
provides for benefits lower than those described above for the Basic Plan of
Summit. Mr. Collins has 16 Years of Credited Service under this plan. Such
employees are covered by the Basic Plan and Supplemental Plans for service on
and after August 1, 1988 (January 1, 1987 in the case of Mr. Collins).
Employees and former employees of First Valley and its subsidiaries,
including Mr. Howell, are covered for service before January 1, 1996 by a
formula contained in the Basic Plan which originated with the former pension
plan
22
<PAGE>
of First Valley. The First Valley formula provides for benefits lower than the
standard formula for the Basic Plan when reference is made to specific Years of
Credited Service and Average Compensation on the Pension Plan Table, but
includes in Average Compensation salary as reported in the column titled "(c)
Salary" of the Summary Compensation Table and cash bonus reported, but not
separately listed, in the column titled "(d) Bonus" of the Summary Compensation
Table. Such employees and former employees are covered by the Basic Plan's
standard formula for service on and after January 1, 1996. Mr. Howell's covered
compensation for 1995 under the First Valley formula was $481,000 and under the
standard formula was $318,000. Mr. Howell has 19 Years of Credited Service under
the First Valley formula and just recently became covered by the standard
formula.
Employees of Summit should refer to the more detailed Summary Plan
Descriptions available to them.
2. PROPOSAL TO APPROVE THE AMENDED SUMMIT BANCORP.
1993 INCENTIVE STOCK AND OPTION PLAN
As discussed in the Compensation Committee Report on Executive
Compensation, Section 162(m) of the Code, added in 1993 ("Section 162(m)"),
limits to $1 million the deduction that a publicly-held corporation may take for
federal income tax purposes for compensation paid to the five highest paid
executive officers named in the Annual Compensation Table of the corporation's
proxy statement (the "Proxy Group"). Also, as previously discussed, regulations
of the Service promulgated in 1995 designate certain compensation expenses which
are exempt from this $1 million deductibility limitation, including certain
employee stock options and certain performance-based compensation meeting the
requirements of Section 162(m).
Shareholders previously approved the 1993 Incentive Stock and Option Plan
(the "Original Plan") at the 1993 Annual Meeting of Shareholders. On February
21, 1996 the Directors adopted an amended Original Plan (the Original Plan as so
amended being the "Plan") in response both to the Compensation Committee's
compensation survey which indicated the desirability of blending performance-
based stock awards into the executive compensation program and the definitive
regulations adopted by the Service in 1995 with respect to Section 162(m).
Shareholder approval of the Plan will preserve the tax deductibility under
Section 162(m) of compensation paid upon the exercise of options granted under
the Plan, authorize performance-based stock awards which will be deductible as
compensation expense under Section 162(m) and establish an annual award limit
for the Plan which will satisfy the requirements under Section 422 of the Code
pertaining to the grant of options under the Plan intended to qualify as
incentive stock options ("Incentive Options").
The deductibility of stock awards under Section 162(m) requires the
Compensation Committee to condition the stock awards upon attainment of
specific, objective performance goals. The Plan sets forth general performance
criteria from which the Compensation Committee must select when fixing the
specific performance goals but not the formula which constitute the specific
performance goals. The Board has chosen by this approach to preserve for the
Compensation Committee the flexibility of resetting the formula each performance
period as appropriate. Notwithstanding that the Plan will not expire under its
terms until February 17, 2003, Plan structure as just described requires,
pursuant to Section 162(m), that shareholders approve the Plan again no later
than the 2001 Annual Meeting of Shareholders for continued deductibility under
Section 162(m) of options and performance-based stock awards.
Shareholder approval of the Plan is needed solely to secure tax
deductibility for compensation paid to Summit's Proxy Group pursuant to stock
options and performance-based stock awards under the Plan when total
compensation for a named individual exceeds $1 million. All compensation paid to
all other employees is deductible compensation expense under the Code and
shareholder approval is not necessary to continue the deductibility of this
expense. Should shareholders fail to approve the Plan, the Original Plan would
remain in full force and effect and all options and stock awards (including
stock awards made in January 1996 intended to qualify as performance-based
exempt compensation expense under Section 162(m) of the Code) under the Original
Plan would be subject to the deductibility limitation of Section 162(m) of the
Code.
AMENDMENTS
The Board adopted a revised Article 6 of the Plan which authorizes Summit
to grant stock awards which qualify as exempt compensation expense under Section
162(m) of the Code. For an award of stock under Article 7 to qualify as exempt
compensation expense under Section 162(m), the Compensation Committee must (i)
at the time of the
23
<PAGE>
award, fix (A) the number of shares subject to the award, (B) the specific,
objective performance goals which must be attained, (C) the period or periods
over which the performance goals must be attained and (D) any other conditions
upon which the award is made contingent, and (ii) certify in writing that the
performance goals applicable to a particular stock award have been satisfied.
The Board adopted related provisions, also required for deductibility under
Section 162(m), which limits to 50,000 the number of shares which may be made
subject during a fiscal year to a stock award intended to qualify as exempt
compensation expense and which limits to 175,000 the number of shares which may
be made subject during a fiscal year to options granted to any one individual
during a fiscal year, for compensation paid upon the exercise of options to
qualify as exempt compensation expense.
The Plan was further amended to limit to 1,800,000 the maximum number of
shares which may be made subject to options and awards under the Plan during a
fiscal year in order to satisfy requirements at Section 422 of the Code
applicable to incentive stock options. This amendment will permit Summit to
grant options qualifying as incentive stock options.
GENERAL TERMS
Under the Plan, options ("Options") qualifying as Incentive Options and
those not qualifying as Incentive Options ("Non-Qualified Options") may be
granted. Only salaried full-time key employees of Summit and its subsidiaries
(the "Company") are eligible to receive Option grants. It is anticipated that
approximately 350 employees of the Company participate in the stock option
feature of the Plan each year.
The Plan also provides for the award of shares of Summit Common Stock
("Program Stock"). Only salaried full-time key employees of the Company who
perform policymaking functions are eligible to be selected for participation in
the Program Stock feature of the Plan (individually, a "Participant";
collectively, "Participants"). Out of the approximately 350 key employees
selected to participate in the stock option portion of the Plan, approximately
60 are currently selected to be Participants in the Program Stock feature of the
Plan. Program Stock for a particular Participant may consist of a stock award
intended to qualify as exempt compensation expense under Section 162(m)
("Performance Stock") or a stock award not intended to qualify as exempt
compensation expense under Section 162(m) ("Incentive Stock").
Individual and corporate performance standards will be set for those key
employees selected to be Participants and a stock award consisting of Incentive
Stock or Performance Stock, or both, will be made to a Participant to the extent
the Participant achieves the predetermined performance standards.
The Plan is intended to be part of a competitive compensation program
enabling the Company to attract and retain the services of persons holding key
positions in the Company. Also, by increasing the number of shares of Summit
Common Stock owned by its key employees the Plan better aligns the interest of
the Company's key employees with the interests of the Company's shareholders and
promotes the long-term welfare of the Company. By providing performance-based
awards, the Plan seeks to motivate key employees to achieve performance goals
which benefit all of the Company's shareholders. During each fiscal year of the
Plan's operation, the maximum number of Shares granted as Program Stock under
the Plan or made subject to Options granted under the Plan may not exceed in the
aggregate the greater of (i) 1,800,000, or (ii) 1.2% of the shares of Summit
Common Stock outstanding as of the last grant date during the relevant fiscal
year, plus the number of Shares available for grant in the immediately preceding
year but which were not used for grants (based on the number of shares of Summit
Common Stock outstanding on December 31 of such prior fiscal year) and Shares
subject to terminated or expired Options and forfeited Program Stock (as more
fully described herein). The Company believes that this annual limitation
represents a reasonable balancing of the interest of shareholders in attracting
and retaining key employees and motivating their performance and the interest of
shareholders in controlling the potential dilutive effect of Option grants and
Program Stock awards.
The Plan also limits the number of Shares which may be awarded as Program
Stock during any fiscal year to an amount equal to one-seventh (1/7) of the
aggregate amount of Shares available in that fiscal year for the grant of
Options and Program Stock, determined as described above. The Plan will expire
on February 16, 2003, although grants and awards made prior to that date may
extend beyond the expiration of the Plan.
With respect to services rendered in 1995, 593,450 Options were granted to
343 key employees under the Plan. Of these, 213,500 Options or 36% of the total,
were granted to the 15 executive officers of the Company (which number includes
the five executive officers listed in the Summary Compensation Table while
379,950, or 64% of the
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total, were granted to all other key employees of the Company. Individual Option
grants to the five executive officers listed in the Summary Compensation Table
were previously disclosed in the Option Grant Table at page XX above. While
future Option grants will be made in the discretion of the Compensation
Committee, it is anticipated that the percentage distribution of Option grants
will generally follow the distribution made with respect to 1995.
Future awards of Program Stock will be made in the discretion of the
Compensation Committee in accordance with the terms of the Plan and based on
factors relevant at the time discretion is exercised and thus the number of
shares subject to such awards cannot be currently determined. In January 1996,
90,075 shares of Program Stock were awarded under the Plan to 91 key employees
with respect to 1995 service. Of these, 47,845 shares, or 53% of the total, were
awarded to the 15 executive officers of Summit and 42,230 shares, or 47% of the
total, were awarded to the other key employees selected to participate in the
Program Stock feature of the Plan. The five executive officers listed in the
Summary Compensation Table received Program Stock grants as follows: Mr.
Semrod--15,700 shares (17%); Mr. Collins--5,200 shares (6%); Mr. Howell--2,940
shares (3%); Messrs. Paneyko and Haggerty--3,500 each (4%). Of the 90,075 shares
of Program Stock awarded to all key employees, 12,415 were awarded as shares of
Performance Stock to all key employees, with XX,XXX of such shares, or XX%,
awarded to executive officers as a group, X,XXX of such shares, or XX%, awarded
to the balance of the key employees, and shares of Performance Stock awarded to
the five executive officers listed in the Annual Compensation Table as follows:
Mr. Semrod--X,XXX shares (XX%), Mr. Collins--X,XXX shares (XX%), Mr. Howell--XXX
shares (XX%), Messrs. Paneyko and Haggerty--XXX shares (XX%) each. The value of
the Incentive Stock component of these grants are reflected in the Summary
Compensation Table. While the number of shares subject to future awards of
Program Stock will be determined in the discretion of the Compensation Committee
in accordance with the terms of the Plan based on factors relevant at the time
discretion is exercised and thus cannot currently be calculated. However, it is
anticipated that the percentage distribution of Program Stock awarded generally
will follow the distribution of awards made with respect to 1995 services.
The following summary of the Plan is not intended to be complete and is
qualified in its entirety by reference to the Plan, which is attached as
Appendix A.
ADMINISTRATION
The Compensation Committee of the Board of Directors, which must consist of
not fewer than three Directors who are "disinterested persons" within the
meaning of Rule 16b-3 under the Exchange Act, has been delegated authority to
administer the Plan. No grant may be made to members of the Compensation
Committee or to any Director who is not also a full-time salaried key employee
of the Company. The Compensation Committee has the authority and discretion to
determine all terms of Option grants and Incentive Stock and Performance Stock
awards. Summit receives no monetary consideration for granting Options or
Program Stock under the Plan.
The Board of Directors or the Compensation Committee may amend the Plan and
grants made under the Plan (including amendments which accelerate the
exercisability of Options and amendments which accelerate the lapse of
restrictions on Program Stock) and may suspend or terminate the Plan, but may
not increase the maximum number of Shares available for grant under the Plan,
modify provisions relating to eligibility or materially increase benefits
accruing to employees under the Plan without the approval of the shareholders of
Summit or adversely change the terms of any grants or awards without the consent
of the affected employees.
Subject to the express provisions of the Plan, the Compensation Committee
also has authority to construe the Plan and all Options and Program Stock grants
made under the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan and to make all determinations necessary or advisable for
administrating the Plan.
The Compensation Committee may require, as a condition to the granting of
any Option or Program Stock, that the grantee agree not to compete with the
Company in the event of a termination of the grantee's employment for any reason
other than dismissal without cause. The Compensation Committee may also require
that an employee not sell
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or otherwise dispose of Shares acquired pursuant to the exercise of an Option or
the grant of Program Stock for a specified period from the date of acquisition
or vesting.
OPTIONS
Individual Limits
In no fiscal year may any individual be granted Options with respect to
more than 175,000 Shares. In addition, no individual employee may be granted
Incentive Options to purchase Shares if the aggregate fair market value
(determined as of the date of grant) of Shares with respect to which Incentive
Options are exercisable for the first time by such employee during any calendar
year (under all stock options plans of Summit or any subsidiary corporation or
parent corporation or parent corporation of Summit) exceeds $100,000.
Further, an Incentive Option will not be granted to any person who owns
more than ten percent (10%) of the total combined voting power of all classes of
stock of Summit or of any subsidiary corporation or patent corporation of
Summit.
Purchase Price and Exercise of Options
The purchase price of Shares issuable upon exercise of an Option must not
be less than 100% of the fair market value of such Shares on the date the Option
is granted. The purchase price must be paid in full at the time of exercise of
the Option in cash or, if permitted by the instrument evidencing the Option in
shares of Summit Common Stock having a fair market value equal to the exercise
price. Any cash proceeds received by Summit from the exercise of the Options
will be used for general corporate purposes.
In general, any Incentive Option granted under the Plan may be exercised
during a period of not more than ten years from the date of grant, although a
shorter period may be specified by the Compensation Committee and a
Non-Qualified Option may be exercised during the period specified by the
Compensation Committee in the instrument evidencing such Non-Qualified Option.
In the event of a Change of Control of Summit, all then outstanding Options
become immediately exercisable. The definition of Change of Control parallels
the definition of that term in the Termination Agreements, described above under
"Certain Information as to Executive Officer--Termination Agreements". Moreover,
the Compensation Committee may determine, in its discretion, that upon the
occurrence of a Change of Control, Options will terminate within a specified
number of days (not less than five) after notice to the holder thereof, and such
holder shall receive, with respect to each Share subject to such Option, cash in
an amount equal to the excess of (i) the fair market value of such Share on the
date immediately prior to the date of termination over (ii) the exercise price
per share of such Option.
Expiration and Transfer of Options
Options are non-transferable, except by will or the laws of descent and
distribution. Upon an employee's termination of employment, all previously
unexercised Options (or unexercised portions of Options) granted to such
employee and still outstanding on the day immediately preceding the effective
date of the termination of employment ("Exercisable Options"), shall terminate
according to the terms governing termination contained in the instruments
evidencing the Exercisable Options. In the event the instrument evidencing such
employee's Exercisable Options is silent as to the termination provisions which
shall apply in the circumstances of such employee's termination of employment,
such employee's Exercisable Options shall terminate or continue to be
exercisable as follows according to the first of the following provisions which
are applicable: (a) if the employment of any employee is voluntarily terminated
by the employee, other than due to retirement, within a one-year period
following a Change in Control of the Company, the employee may exercise all or
any portion of such employee's Exercisable Options at any time during the
three-month period immediately following the effective date of the termination
of employment; (b) if an employee is discharged for cause (as defined in the
Plan), all of such employee's Exercisable Options will terminate on the
effective date of such discharge; (c) if an employee resigns by mutual agreement
with the Company or is dismissed by the employer other than for cause, the
employee may exercise all or any portion of such employee's Exercisable Options
at any time during the three-month period immediately following the effective
date of the termination of employment; (d) if the termination of employment is
due to an employee's disability (as defined in the
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Plan), the employee may exercise all or any portion of such employee's
Exercisable Options at any time during a period immediately following the
effective date of the termination of employment as follows: (i) Incentive
Options--one year, (ii) Non-Qualified Options--three years; (e) if the
termination of employment is due to an employee's retirement (as defined in the
Plan), the employee may exercise all or any portion of such employee's
Exercisable Options during a period immediately following the effective date of
the termination of employment as follows: (i) Incentive Options--three months,
(ii) Non-Qualified Options--three years; (f) if an employee's employment is
voluntarily terminated, other than in a one-year period following a Change in
Control and other than due to retirement or resignation by mutual agreement with
the Company, all of such employee's Exercisable Options will terminate on the
effective date of the termination of employment; and (g) if the employee dies
while in the employ of the Company or during any of the post-termination
extension periods set forth in clauses (c), (d) or (e) above, such employee's
legal representative, beneficiary, legatee or successor-in-interest may exercise
all or any portion of such employee's Exercisable Options during the one-year
period immediately following the death. The Compensation Committee may, at any
time before or after a termination of employment, extend the period during which
an Exercisable Option may be exercised following a termination of employment
beyond that which may be provided for in the instrument evidencing the
Exercisable Option and beyond that provided for in clauses (a) through (g)
above.
In no event may any Option be exercised during a period following a
termination of employment (whether fixed by the Plan or extended by the
Compensation Committee) if the Option was not exercisable on the day immediately
prior to the date of termination and in no event may an Option be exercised to
the extent it has already been exercised or after its expiration date.
Adjustment of Shares
In the event of any change in the outstanding shares of Summit Common Stock
(through events such as a stock split, stock dividend, recapitalization,
spin-off, split-up, split-off, merger, consolidation or reorganization of Summit
or other like change in its capital structure), appropriate adjustments to the
Options are to be made so that Options become exercisable for such securities,
cash or other property as would have been received in respect of Shares had the
Option been fully exercised prior to such change, and adjustments are to be made
in the number of Shares and exercise price of Options to prevent dilution or
enlargement of rights thereunder, subject to the rules of Section 424(a) of the
Code as to Incentive Options.
PROGRAM STOCK
Individual and corporate performance goals will be set for those key
employees selected to be Participants and Program Stock grants will be made to
Participants to the extent Participants achieve the predetermined performance
goals.
To the extent the Program Stock is Incentive Stock, the Shares of Incentive
Stock so awarded are issued immediately to Participants and become issued and
outstanding Common Stock of Summit. Participants enjoy full ownership rights
with respect to the Incentive Stock, except that for such periods as the
Compensation Committee shall designate the Incentive Stock may not be sold,
transferred, granted, assigned, gifted, placed in trust or otherwise disposed
of, or pledged, made subject to a security interest or lien or otherwise
encumbered. (Incentive Stock subject to this restriction is sometimes referred
to as "Restricted Incentive Stock").
To the extent the Program Stock is intended to be Performance Stock, the
Compensation Committee must select one or more of the general performance
criteria set forth in the Plan and condition issuance of the Performance Stock
upon satisfaction of specific, objectively verifiable performance goals set
within the parameters of the selected general performance criteria for the
fiscal year or other performance period. In no fiscal year may any individual be
awarded more than 50,000 Shares of Performance Stock. Performance goals may not
be changed once set. The Plan permits the Compensation Committee to set
performance goals within the following general performance criteria; earnings,
stock price, return on equity, return on investment, return on assets,
efficiency ratio, total return to shareholders, economic value added, debt
rating or achievement of business or operational goals or any combination of the
foregoing. An award may provide for the Performance Stock subject to the award
to be issued immediately to the Participant and immediately become issued and
outstanding Common Stock of Summit or to be issued only upon attainment of the
performance goals. If Performance Stock is issued immediately to a Participant
the certificate representing the Performance Stock must be held in custody by
Summit or its designee and forfeited if the relevant performance goals are not
attained in the specified performance period. Dividend income earned on
immediately-issued Performance Stock is not exempt compensation expense under
Section 162(m). Attainment of performance goals must be certified in writing by
the Compensation Committee. In addition, the Compensation
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Committee may, at the time an award is made, provide that for such periods as it
shall designate following attainment of applicable performance goals the
Performance Stock may not be sold, transferred, granted, assigned, gifted,
placed in trust or otherwise disposed of, or pledged, made subject to a security
interest or lien or otherwise encumbered. (Performance Stock subject to this
restriction is sometimes referred to as "Restricted Performance Stock", and
Restricted Incentive Stock and Restricted Performance Stock are sometimes
referred to collectively as "Restricted Stock"). If Restricted Performance Stock
is issued at the time of an award, it must remain with the custodian following
attainment of the performance goals during the period of the restriction. If
Restricted Performance Stock is issued at the time performance goals are
attained, the certificate representing the Restricted Performance Stock will be
delivered to Summit or its designee as custodian and held during the period of
the restriction.
If during the restricted period or periods applicable to particular
Restricted Stock or during the performance period preceding attainment of
performance goals applicable to particular Performance Stock, a Participant
leaves the employ of the Company, voluntarily or involuntarily, all of the
Participant's right, title and interest in and to such Restricted Stock or
Performance Stock, as the case may be, is forfeited by the Participant and, if
issued and outstanding, reverts to the Company, except that (i) restrictions on
Restricted Incentive Stock and Restricted Performance Stock will lapse, and
Performance Stock will vest, if (A) the Participant dies, becomes disabled, or
retires from employment with the Company (as disability and retirement are
defined in the Plan) or (B) there occurs a Change in Control of Summit, and (ii)
restrictions on Restricted Incentive Stock will additionally lapse if (A) an
event similar to any described in clause (i) (as determined at the time of the
award by the Compensation Committee) occurs or (B) the Compensation Committee so
determines in a particular case. Upon a lapsing of restrictions or vesting in
accordance with the foregoing, Share certificates held in custody will be
released, or Share certificates will be issued, as appropriate, and delivered to
such Participant or to such Participant's beneficiary, estate or legal
representative.
Even though there occurs no outlay of cash, (i) the value of Incentive
Stock is tax deductible to the Company, subject to the $1 million deductibility
limitation of Section 162(m), (ii) the value of Performance Stock is tax
deductible in all cases if shareholders approve Proposal 2 and vesting of
particular Performance Stock occurs upon the attainment of all applicable
performance goals and the lapse of all applicable restrictions and (iii) the
value of Performance Stock is tax deductible to the Company subject to the $1
million deductibility limitation of Section 162(m) if shareholders do not
approve Proposal 2 or if vesting of particular Performance Stock occurs under
the circumstances described in the immediately preceding paragraph at clause
(i).
FEDERAL INCOME TAX CONSEQUENCES OF THE ISSUANCE AND EXERCISE OF OPTIONS
Incentive Options
Under the Code, an optionee generally is not subject to ordinary income tax
upon the grant or exercise of an Incentive Option. However, an employee who
exercises an Incentive Option by delivering shares of Summit Common Stock
previously acquired pursuant to the exercise of an Incentive Option is treated
as making a "disqualifying disposition" (described below) of such Shares if the
employee delivers such Shares before the expiration of the holding period
applicable to such Shares. The applicable holding period is the longer of two
years from the date of grant or one year from the date of exercise. Upon the
exercise of an Incentive Option with previously acquired Summit Common Stock as
to which no disqualifying disposition occurs, it would appear that the optionee
would not recognize gain or loss with respect to such previously acquired
shares.
For purposes of computing any alternative minimum tax liability, the
optionee who exercises an Incentive Option generally would be required to
increase taxable income, and compute the tax basis in the Shares so acquired,
the same manner as if the optionee had exercised a Non-Qualified Option (as
described below). An individual will be liable for the alternative minimum tax
only to the extent that the amount of such tax exceeds the liability for regular
federal income tax (reduced by certain credits). The amount of any alternative
minimum tax liability incurred as a result of the exercise of an Incentive
Option generally will be allowed as a credit offsetting regular tax liability in
subsequent years.
If, subsequent to the exercise of an Incentive Option (whether paid for in
cash or in Shares), the optionee holds the Shares received upon exercise for a
period that exceeds (a) two years from the date such Incentive Option was
granted or, if later (b) one year from the date of exercise (the "applicable
holding period"), the difference (if any) between the amount realized from the
sale of such Shares and their tax basis to the holder will be taxed as long-term
capital gain or loss (provided that the Shares are held as a capital asset as
such time). If the holder is subject to the alternative minimum tax in the year
of disposition, such holder's tax basis in his or her Shares for such purposes
will be increased as described in the preceding paragraph.
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In general, if, after exercising an Incentive Option, an employee disposes
of the Shares so acquired before the end of the applicable holding period (i.e.,
sales a "disqualifying disposition"), such optionee would be deemed in receipt
of ordinary income in the year of the disqualifying disposition, in an amount
equal to the excess of the fair market value of the Shares at the date the
Incentive Option was exercised over the exercise price. If the disqualifying
disposition is a sale or exchange which would permit a loss to be recognized
under the Code (were a loss in fact to be sustained), and the sales proceeds are
less than the fair market value of the Shares on the date of exercise, the
optionee's ordinary income would be limited to the gain (if any) from the sale.
If the amount realized upon disposition exceeds the fair market value of the
Shares on the date of exercise, the excess would be treated as short-term or
long-term capital gain, depending on whether the holding period for such Shares
exceeded one year and provided that the Shares are held as a capital asset at
such time. Under proposed regulations, special rules may apply in the case of
disqualifying disposition of Shares that were acquired upon the exercise of an
Incentive Option by delivering previously acquired shares of Summit Common
Stock.
A deduction is not allowed to Summit for federal income tax purposes with
respect to the grant or exercise of an Incentive Option or the disposition,
after the applicable holding period, of Shares acquired upon exercise. In the
event of a disqualifying disposition, a federal income tax deduction will be
allowed to Summit in an amount equal to the ordinary income to be recognized by
the optionee, provided that such amount constitutes an ordinary and necessary
business expense to Summit provided it is reasonable and Summit Satisfies its
withholding obligation with respect to such income.
Non-Qualified Options
An employee who receives a Non-Qualified Option will not recognize any
taxable income upon the grant of such Non-Qualified Option. In general, upon
exercise of a Non-Qualified Option an employee will be treated as having receive
ordinary income in an amount equal to the excess of the fair market value of the
Shares at the time of exercise over the exercise price. If the employee is an
executive officer or Director of Summit or the beneficial owner of more than ten
percent of any class of equity securities of Summit, recognition of income (and
the determination of amount thereof) upon the exercise for Shares of a
Non-Qualified Option possibly may be deferred under certain circumstances until
the earliest date on which the employee may sell such Shares at a profit without
being subject to suit under Section 16(b) of the Exchange Act (the "Deferral
Period"), unless the employee files a written election with the Internal Revenue
Service, within 30 days after the date of exercise, to include in income the
excess of the fair market value of the Shares on the date of exercise over the
exercise price. The ordinary income recognized with respect to the transfer of
Shares or exercise of a Non-Qualified Option under the Plan will be subject to
both wage withholding and employment taxes.
In addition to the customary methods of satisfying the withholding tax
liabilities which arise upon the exercise of a Non-Qualified Option, an employee
may satisfy the liability in whole or in part by directing the Company to
withhold Shares from those that would otherwise be issuable to the employee. The
withheld Shares will be valued at their fair market value as of the date that
the tax withholding obligation arises. Employees who by virtue of their
positions with the Company are subject to Section 16(b) of the Exchange Act may
elect this method of satisfying the withholding obligation only during certain
restricted periods.
An employee's tax basis in the Shares received on exercise of such Option
will be equal to the amount of any cash paid on exercise, plus the amount of
ordinary income recognized as a result of the receipt of such Shares. The
holding period for such Shares would begin just after the transfer of such
Shares or, in the case of an executive officer, Director or beneficial owner of
more than 10% of any class of equity securities of Summit, just after the
expiration of the Deferral Period, if any (unless the employee elected to be
taxed as of the date of exercise). A deduction for federal income tax purposes
will be allowed to Summit in an amount equal to the ordinary income to be
recognized by the optionee, provided that such amount constitutes an ordinary
and necessary business expense to Summit provided it is reasonable and Summit
satisfies its withholding obligation with respect to such income.
If an employee exercises a Non-Qualified Option by delivering other Shares,
the employee will not recognize gain or loss with respect to the exchange of
such Shares, even if their then fair market value is different from the
employee's tax basis. The employee, however, will be taxed as described above
with respect to the exercise of the Non-Qualified Option as if the employee had
paid the exercise price in cash, and Summit likewise generally will be entitled
to an equivalent tax deduction. Provided the employee receives a separate
identifiable stock certificate therefor, the employee's tax basis in that number
of Shares received on such exercise which is equal to the number of
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Shares surrendered on such exercise will be equal to the employees' tax basis in
the Shares surrendered and the employee's holding period for such number of
Shares received will include the employee's holding period for the Shares
surrendered. The employee's tax basis and holding period for the additional
Shares received on exercise of a Non-Qualified Option paid for, in whole or in
part, with Shares will be the same as if the employee has exercised the
Non-Qualified Option solely for cash.
The Plan is neither qualified under the provisions of Section 401(a) of the
Code, nor subject to any of the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA").
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL NO. 2.
3. SELECTION OF AUDITORS
The Board of Directors recommends that the shareholders satisfy the
selection of KPMG Peat Marwick LLP, independent certified public accountants, to
audit the accounts of Summit for 1996.
Representatives of KPMG Peat Marwick LLP, who were also Summit's auditors
for the year 1995, are expected to be present at the Annual Meeting. They will
have the opportunity to make a statement if they desire to do so, and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL NO. 3.
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OTHER MATTERS
SOLICITATION OF PROXIES
Proxies may be solicited by mail, telephone, telegram, facsimile
transmission or other electronic methods and personal meetings and interviews.
Certain executive officers and managerial and administrative employees of Summit
and its subsidiaries may solicit proxies on behalf of Summit, for which such
officers and employees will receive no additional compensation other than
reimbursement for actual expense; incurred in connection therewith. Summit has
retained Morrow & Co., Inc. to assist in the solicitation of proxies for a fee
of $10,000, plus reasonable out-of-pocket expenses. Summit will also reimburse
brokers or other persons holding shares in their names or in the names of their
nominees for their reasonable out-of-pocket expenses in forwarding proxies and
proxy material to the beneficial owners of such shares. Summit will bear all of
the expenses incurred in connection with this solicitation.
SHAREHOLDER PROPOSALS
The Board of Directors will consider and include in the Proxy Statement for
the 1997 Annual Meeting proposals which meet the regulations of the SEC and New
Jersey law and which comply with the Company's By-Laws. In order to be
considered for inclusion, proposals must be received on or before December 13,
1996. Proposals should be addressed to the Secretary.
The By-Laws of Summit provide that shareholder proposals which do not
appear in the Proxy Statement may be considered at a meeting of shareholders
only if written notice of the proposal is received by the Secretary of Summit
not less than 70 and not more than 90 days before the date of the meeting
provided, however, that, if less than 80 days' notice or prior public disclosure
of the date of the meeting has been given to shareholders, the notice of a
shareholder proposal, to be timely, must be received by the Secretary not later
than the close of business on the tenth day following the day on which notice of
the meeting or such public disclosure was made, whichever first occurs. Any such
notice of a shareholder proposal by a shareholder to the Secretary of Summit
must be accompanied by (a) the name and address of the shareholder who intends
to present the proposal for a vote, (b) a representation that such shareholder
is a holder of record of shares entitled to vote at the meeting, (c) a
description of all agreements, arrangements or understandings between such
shareholder and any other shareholder relating to the proposal to be voted on
and any financial contractual interest of such shareholder in the outcome of
such vote and (d) such other information regarding the proposal to be voted on
and the shareholder intending to present the proposal for a vote as would be
required to be included in a proxy statement soliciting the vote of shareholders
in respect of such proposal pursuant to the proxy rules of the SEC.
The vote of a plurality of the shares cast at the Annual Meeting is
necessary to elect the ten Directors. The vote of a majority of shares cast at
the Annual Meeting is necessary to approve the amended Summit Bancorp. 1993
Incentive Stock and Option Plan and to ratify the selection of independent
certified public accountants. For purposes of determining the number of votes
cast with respect to a matter, only those cast "for" or "against" are included.
Abstentions on the proxy card will not be counted "for" or "against" for
purposes of determining the number of votes cast with respect to a matter but
will be counted as present for quorum purposes. "Broker non-votes" specified on
proxies returned by brokers holding shares for beneficial owners will be treated
as present for quorum purposes but also will not be counted as votes "for" or
"against" for purposes of determining the number of votes cast.
We urge you to sign, date and mail the white proxy enclosed with this
mailing, in the postage-paid envelope provided, as promptly as possible.
We sincerely hope that you will attend the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
T. JOSEPH SEMROD
-----------------------
Chairman, President and
Chief Executive Officer
Dated: April 12, 1996
IT IS IMPORTANT THAT YOUR SHARES ARE VOTED AT THE ANNUAL MEETING.
SHAREHOLDERS ARE URGED TO PROMPTLY SIGN, DATE AND MAIL THE WHITE PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. PLEASE ACT TODAY.
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ATTACHMENT A
SUMMIT BANCORP.
1993 INCENTIVE STOCK AND OPTION PLAN
1. PURPOSES
(a) Summit Bancorp. (the "Company") desires to afford certain of its key
employees and the key employees of any subsidiary corporation or parent
corporation (as such terms are herein defined) of the Company now existing or
hereafter formed or acquired who are responsible for the continued growth of the
Company an opportunity to acquire a proprietary interest in the Company, and
thus to create in such key employees an increased interest in and a greater
concern for the welfare of the Company and its shareholders. The Company also
seeks to retain the services of persons holding key positions with the Company
and enhance its ability to attract qualified persons to fill these positions in
the future, while motivating those persons, as key employees and shareholders,
to achieve individual and corporate performance standards.
(b) The common stock, par value $1.20 per share, of the Company ("Summit
Common Stock") offered pursuant to this 1993 Incentive Stock and Option Plan
(the "Plan"), either by means of an award or through the exercise of stock
options granted under the Plan ("Options"), and such Options, are offered as a
matter of separate inducement and are not in lieu of any salary or other
compensation for the services of any key employee. The Plan is intended to be
part of the Company's long-term performance stock program.
(c) Options granted under the Plan will be those intended to qualify as
incentive stock options ("Incentive Options") within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or those not
intended to qualify as Incentive Options ("Non-Qualified Options"), but the
Company makes no warranty as to the qualification of any Option as an Incentive
Option.
(d) Awards of stock made under the Plan ("Program Stock") will be those
intended to qualify as exempt compensation expense under Section 162(m) of the
Code ("Performance Stock") and those not intended to qualify as exempt
compensation expense under Section 162(m) of the Code ("Incentive Stock").
2. AMOUNT OF STOCK SUBJECT TO THE PLAN; TERM
(a) During any fiscal year of the Company the number of shares of Program
Stock awarded pursuant to the Plan, together with the number of shares made
subject to Options granted pursuant to the Plan, may not exceed, in the
aggregate, the lesser of (i) 1,800,000, or (ii) one and one-fifth percent (1.2%)
of the shares of Summit Common Stock issued and outstanding immediately prior to
the particular grant or award date, plus (A) such number of shares which could
have been awarded as Program Stock or made subject to Options under the Plan in
each previous fiscal year of the Company pursuant to the foregoing percentage
authorization, calculated on the basis of the number of shares of Summit Common
Stock outstanding on December 31 of each such previous fiscal year, less the
number of shares actually awarded as Program Stock or made subject to Options in
each such previous fiscal year, and (B) shares of Summit Common Stock subject to
Options which expire or terminate for any reason during the Plan Period without
having been fully exercised and shares of Program Stock forfeited for any reason
during the Plan Period as provided for herein, less the number of such shares
used in a prior fiscal year for the grant of Options or award of Program Stock
pursuant to the authorization in this clause (B). (Shares of Summit Common Stock
issuable in connection with the Plan are sometimes referred to herein as the
"Shares"). In addition, during no fiscal year shall any individual be (i)
granted Options with respect to more than 175,000 Shares, or (ii) awarded more
than 50,000 Shares of Performance Stock (in each case, subject to adjustment
pursuant to Section 11 below).
(b) In any one fiscal year of the Company the number of Shares of Program
Stock awarded during such fiscal year shall not exceed an amount equal to
one-seventh (1/7) of the aggregate amount of Shares available for the grant of
Options and award of Program Stock determined in accordance with Subsection 2(a)
above.
(c) Shares which may be acquired under the Plan, either through the award
of Program Stock or through the exercise of Options, may be either authorized
but unissued Shares, Shares of issued stock held in the Company's treasury, or
both, at the discretion of the Company. All Shares issued as provided herein
shall be fully paid and non-assessable to the extent permitted by law. In no
event may any Option be granted or any Program Stock be awarded, nor may any
Option granted hereunder be exercised, for a fraction of a Share.
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(d) Except as provided in Section 20, the Company may, from time to time
during the period (the "Plan Period") from February 17, 1993 (the "Effective
Date") through February 16, 2003 (the "Termination Date"), grant Options, award
Incentive Stock and award Performance Stock to certain key employees of the
Company, or of any subsidiary corporation or parent corporation of the Company
now existing or hereafter formed or acquired, under the terms herein set forth.
(e) As used in the Plan, the terms "subsidiary corporation" and "parent
corporation" shall mean a corporation coming within the definition of such terms
contained in, respectively, Section 424(f) and Section 424(e) of the Code.
3. ADMINISTRATION
(a) The board of directors of the Company (the "Board of Directors") shall
designate from among its members a compensation committee (the "Committee") to
administer the Plan, which shall consist of no fewer than three members of the
Board of Directors, each of whom shall be (i) a "disinterested person" within
the meaning of Rule 16b-3 (or any successor rule or regulation) promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
(ii) unless otherwise determined by the Board of Directors, an "outside
director" within the meaning of Section 162(m) of the Code. A majority of the
members of the Committee shall constitute a quorum, and the act of a majority of
the members of the Committee shall be the act of the Committee. Any member of
the Committee may be removed at any time either with or without cause by
resolution adopted by the Board of Directors, and any vacancy on the Committee
may at any time be filled by resolution adopted by the Board of Directors.
(b) Subject to the express provisions of the Plan, the Committee shall have
authority, in its discretion, to determine (i) the employees to whom Options
shall be granted, the time such Options shall be granted, the number of Shares
which shall be subject to each Option, the purchase price of each Share which
shall be subject to an Option, the period(s) during which such Options shall be
exercisable (whether in whole or in part), and any and all other terms and
provisions of the Options, which need not be the same for all Options, and (ii)
which employees shall participate in the Program Stock feature of the Plan
(individually, a "Participant"; collectively, "Participants"), which
Participants shall be awarded Program Stock, if any, the dates Program Stock
awards shall be made, the number of Shares of Program Stock to be awarded, if
any, the restrictions and vesting periods to be applicable to such awards of
Program Stock, if any, the various performance standards to be applied in
determining the foregoing, the Performance Goals (as defined in Section 6)
applicable to awards of Performance Stock and all other terms of Program Stock
awards, which need not be the same for all Program Stock awards.
(c) In determining the employees to whom Options shall be granted and the
number of Shares with respect to which each such Option shall be granted, the
Committee shall consider the length of service, the amount of earnings, and the
responsibilities and duties of such employee.
(d) Subject to the express provisions of the Plan, the Committee also shall
have authority to construe the Plan and all Options granted and all Program
Stock awarded under the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan and to make all other determinations necessary
or advisable for administering the Plan (including determinations during any
suspension or after any termination effected in accordance with Section 17). The
Committee also shall have the authority to require, in its discretion, as a
condition to the granting of any Option or award of Program Stock that the
employee agree (i) not to sell or otherwise dispose of Shares acquired pursuant
to the Option or Program Stock award for a specified period following the date
of acquisition or vesting of such Shares and (ii) that in the event the
employment of such employee is terminated, other than a result of dismissal
without cause, such employee will not, for a period to be fixed at the time of
the grant of the Option or the award of Program Stock, enter into any other
employment or participate directly or indirectly in any other business or
enterprise which is competitive with the business of the Company or any
subsidiary corporation or parent corporation of the Company, or enter into any
employment in which such employee will be called upon to utilize special
knowledge obtained through employment with the Company or any subsidiary
corporation or parent corporation thereof.
(e) Any determination by the Committee on matters subject to its authority
and discretion under the Plan shall be conclusive.
(f) The Committee may employ such legal counsel (which may include counsel
employed by the Company), consultants and agents as it may deem desirable for
the administration of the Plan and may rely upon any opinion received from any
such counsel or consultant and any computation received from any such consultant
or agent. Expenses incurred by the Committee in the engagement of such counsel,
consultant or agent shall be paid by the
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Company. No member or former member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan, any Option
grant or any Program Stock award.
4. ELIGIBILITY
(a) Only full-time salaried key employees of the Company or of any
subsidiary corporation or parent corporation of the Company are eligible to
receive the grant of an Option. Only full-time salaried key employees of the
Company or any subsidiary corporation or parent corporation of the Company who
perform policymaking functions are eligible to be selected as a Participant in
the Program Stock feature of the Plan or to receive the award of Program Stock
(if previously selected as a Participant). No grant or award shall be made to
members of the Committee and no grant or award shall be made to any director who
is not also a full-time salaried key employee. Any person who shall have retired
from the active employment by the Company, even if such person shall have
entered into a consulting contract with the Company, shall not be eligible to
receive an Option or award of Program Stock.
(b) The Plan does not create a right in any employee to participate in the
Plan or any part of the Plan.
(c) An Incentive Option shall not be granted to any person who, at the time
such Option would be granted, owns stock of the Company or any subsidiary
corporation or parent corporation of the Company possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any subsidiary corporation or parent corporation of the Company.
In determining stock ownership of an employee, the rules of Section 424(d) of
the Code shall be applied, and the Committee may rely on representations of fact
made to it by the employee and believed by it to be true.
5. OPTIONS
(a) Option Price and Payment
The price for each Share purchasable under any Option granted hereunder
shall be such amount as the Committee shall, in its best judgment, determine on
the basis of facts and circumstances to be not less than one hundred percent
(100%) of the fair market value per Share at the date the Option is granted.
(b) Term of Options.
(1) Subject to the limitation on exercise of Incentive Options contained in
this Section 5, any Incentive Option granted hereunder shall be exercisable
during a period of not more than ten (10) years from the date of grant of such
Option at such times and in such amounts as the Committee shall determine at
such date of grant.
(2) Any Non-Qualified Option granted hereunder shall be exercisable at such
times, in such amounts and during such period or periods as the Committee shall
determine at the date of the grant of such Option.
(3) The Committee shall have the right to accelerate, in whole or in part,
from time to time, conditionally or unconditionally, rights to exercise any
Option granted hereunder and all outstanding Options shall automatically become
exercisable immediately upon the occurrence of a "change in control", as defined
in Section 7.
(4) To the extent that an Option is not exercised within the period of
exercisability specified therein, it shall expire as to the then unexercised
part.
(c) Exercise of Options
(1) Options granted under the Plan shall be exercised by the optionee as to
all or part of the Shares covered thereby by the giving of written notice of the
exercise thereto to the Corporate Secretary of the Company at the principal
business office of the Company, specifying the number of Shares to be purchased
and specifying a business day, not more than fifteen (15) days from the date
such notice is given, for the payment of the purchase price of the Shares being
purchased. Provided all other requirements and conditions imposed by this Plan
and the Committee with respect to such exercise are satisfied, an exercise shall
be effective (and an Option shall be deemed "exercised") as of the date by which
both notice and payment have been received by the Company.
(2) In connection with the exercise of any Option, the holder must, in the
case of an Incentive Option, if so required by the Committee, agree to notify
the Company of any disqualifying disposition (as defined in Section 421 of
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the Code) of the Shares acquired upon the exercise and agree to pay to the
Company any amount required to be withheld under any tax law on account of the
disposition.
(3) In the event a holder of an Option shall fail to satisfy all conditions
and requirements imposed by the Plan or the Committee with respect to the
exercise of a particular Option the Committee may, until all such conditions and
requirements have been satisfied, refuse to permit the holder to exercise such
Option or may permit the Option to be exercised but withhold delivery of
certificates evidencing the Shares purchased. Subject to the foregoing,
following the exercise of an Option and the satisfaction of all requirements and
conditions imposed by this Plan and the Committee with respect to such exercise,
and subject to the Committee's right to withhold certificates pursuant to
Section 12, a certificate for the Shares as to which the Option has been
exercised shall be delivered to or upon the order of such person or persons.
(d) Manner of Payment
Payment of the purchase price for the Shares may be made in cash. In lieu
of cash, the holder of an Option may, if and to the extent the terms of such
Option so provide and to the extent permitted by applicable law, exercise an
Option in whole or in part, by delivering to the Company shares of common stock
of the Company (in proper form for transfer and accompanied by all requisite
stock transfer tax stamps or cash in lieu thereof) owned by such holder having a
fair market value equal to the cash exercise price applicable to that portion of
the Option being exercised by the delivery of such Shares; provided, however,
the Company may, as condition to accepting stock in whole or in partial payment
of an Option exercise, require that such holder have owned the shares for a
period of time that would not cause the disposition thereof to create a charge
to the Company's earnings. The fair market value of the stock so delivered shall
be determined as of the date immediately preceding the date on which the Option
is exercised, or as may be required in order to comply with or to conform to the
requirements of any applicable laws or regulations.
(e) Termination of Employment
(1) Any exercise of an Option subsequent to termination of employment of
any employee with the Company and all subsidiary corporations and parent
corporations of the Company shall be subject to each of the conditions in
clauses (A), (B) and (C) below:
(A) an Option may be exercised only if, and to the extent that, the
employee was entitled to exercise the Option on the day prior to the date
of termination of employment;
(B) all or any part of an Option otherwise exercisable and not
theretofore exercised may be exercised; and
(C) no Option may be exercised after the expiration of the original
term of exercisability provided for in such Option.
(2) Upon the termination of employment of any employee with the Company and
with all subsidiary corporations and parent corporations of the Company, and
subject to the preceding paragraph, any Option previously granted to the
employees shall terminate and become null and void at the time, or upon the
expiration of the period, specified by the first of the following provisions
which is applicable to the particular termination of employment, considered in
order of priority from clause (A) through clause (I):
(A) if the employment of any employee with such corporations is
voluntarily terminated by the employee other than due to retirement within
a one-year period following a change in control of the Company (as defined
in Section 7), such employee shall have the right to exercise Options held
by the employee at any time up to and including three (3) months after the
date of termination of employment;
(B) whether or not specified in such Option, before or after a
termination, the Committee may determine to extend the period after a
termination of employment during which Options held by terminated employee
may be exercised, but not beyond the expiration of the original term of
exercisability;
(C) as specified by the Committee in such Option;
(D) if an employee is discharged for cause (as defined below), any
Options held by such employee shall forthwith terminate;
(E) if an employee voluntarily terminates his or her employment (other
than due to retirement or resignation by mutual agreement), any Options
held by such employee shall forthwith terminate;
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(F) if an employee (1) resigns by mutual agreement with such
corporation, or (2) is dismissed by the employer other than for cause, any
Options held by such employee shall be exercisable at any time up to and
including three (3) months after the date of termination of employment;
(G) if the employment of any employee shall terminate by reason of the
employee's disability (as defined in Section 22(e)(3) of the Code), any
Options held by such employee shall be exercisable at any time up to and
including: (1) one (1) year after the date of termination of employment, in
the case of an Incentive Option, and (2) three (3) years after the date of
termination of employment, in the case of a Non-Qualified Option;
(H) if the employment of any employee shall terminate by reason of the
employee's retirement (at such age or upon such conditions as shall be
specified by the Committee or, if not so specified, at any normal or early
retirement date under such corporation's defined benefit pension plan), any
Options held by such employee shall be exercisable at any time up to and
including (1) three (3) months after the date of such retirement, in the
case of an Incentive Option, and (2) three (3) years after the date of such
retirement, in the case of a Non-Qualified Option; and
(I) if an employee shall die (1) while in the employ of such
corporation or (2) during the period specified in clause (F), (G) or (H) of
this Section (e)(2) of this Section 5, any Options held by such employee
shall be exercisable at any time up to and including one (1) year from the
date of death of such employee by the legal representative of such employee
or by such person who acquires such employee Options by bequest or
inheritance or by any other means by reason of the death of the employee.
(3) The Committee, in its discretion, may provide in an Option at the time
it is granted or may at any time thereafter determine that, upon the occurrence
of a "change in control" (as defined in Section 7), an outstanding Option shall
terminate, notwithstanding the date upon which it otherwise would terminate,
within a specified number of days (but not less than five (5) days) after notice
of such termination is given to the holder and that such holder shall receive in
respect of such termination, with respect to each Share subject to such Option,
cash in an amount equal to the excess of (i) the fair market value of such Share
immediately prior to the date of termination over (ii) the exercise price per
share of such Option: provided, however, that the date of termination of the
Option shall not be earlier than five (5) days after the public announcement of
the material terms of the change of control transaction, as determined in good
faith by the Committee. The provisions contained in the preceding sentence shall
be inapplicable to an Option granted within six (6) months before the occurrence
of a change in control if the holder of such Option is a director or executive
officer of the Company or a beneficial owner of Common Stock of the Company who
is described in Section 16(a) of the Exchange Act; it being understood, however,
that such provisions shall be applicable to the legal representative or
permitted successor of a director or executive officer who has died or become
disabled (as defined in Section 22(e)(3) of the Code) during such six-month
period.
(4) For all purposes under the Plan, the term "for cause", shall mean (A)
with respect to an employee who is a party to a written agreement with, or,
alternatively, participates in a compensation or benefit plan of the Company or
a subsidiary corporation or parent corporation of the Company, which agreement
or plan contains a definition of "for cause" or "cause" (or words of like
import) for purposes of termination of employment thereunder by the Company or
such subsidiary corporation or parent corporation of the Company, "for cause" or
"cause" as defined in the most recent of such agreements or plan, or (B) in all
other cases, as determined by the Committee, in its sole discretion, that one or
more of the following has occurred: (1) the willful commission by an employee of
a criminal or other act that causes or will probably cause substantial economic
damages to the Company or a subsidiary corporation or parent corporation of the
Company or substantial injury to the business reputation of the Company or a
subsidiary corporation or parent corporation of the Company; (2) the commission
by an employee of an act of fraud in the performance of such employee's duties
on behalf of the Company or a subsidiary corporation or parent corporation of
the Company; (3) the continuing willful failure of an employee to perform the
duties of such employee to the Company or a subsidiary corporation or parent
corporation of the Company (other than such failure resulting from the
employee's incapacity due to physical or mental illness) after (A) written
notice thereof (specifying the particulars thereof in reasonable detail) is
given to the employee by the employee's supervisor and (B) a reasonable
opportunity to be heard and cure such failure is given to the employee by the
Committee or a committee of nonemployee directors of the subsidiary corporation
or parent corporation employing such employee; or (4) the order of a federal or
state bank regulatory agency or a court of competent jurisdiction requiring the
termination or the employee's employment. For purposes of the Plan, no act, or
failure to act, on the employee's part shall be considered "willful" if such
act, or failure to act, was done or omitted to be done by the employee in good
faith and in a manner that the employee
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reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to criminal acts or failures to act, such employee
had no reasonable cause to believe his or her conduct was unlawful.
(f) Nontransferability of Options
Options granted hereunder shall not be transferable, whether by operation
of law or otherwise, other than by will or the laws of descent and distribution,
and any Option granted hereunder shall be exercisable, during the lifetime of
the holder, only by such holder.
(g) Limitation on Exercise of Incentive Options
Except as otherwise provided under the Code, to the extent that the
aggregate fair market value of stock with respect to which Incentive Options are
exercisable for the first time by an employee during any calendar year (under
all stock options plans of the Company and any parent corporation or subsidiary
corporation of the Company) exceeds $100,000, such Options shall be treated as
Non-Qualified Options. For purposes of this limitation, (1) the fair market
value of stock is determined as of the time the Option is granted, (2) the
limitation will be applied by taking into account Options in the order in which
they were granted, and (3) Incentive Options granted before 1987 shall not be
taken into account.
6. PROGRAM STOCK
(a) Performance Standards
(1) The Committee may establish performance standards applicable to a
Participant for a fiscal year or other performance period. These performance
standards may be stated in terms of corporate-wide goals, subsidiary goals,
division goals, individual goals, or any combination of the foregoing and may be
set by the Committee in its discretion.
(2) If at any time there occurs a significant event which is beyond the
control of the Participants, which is unforeseen at the time performance
standards are set in accordance with Section 6(a) above and which affects the
performance of the Company or subsidiary corporation or parent corporation, the
Committee may, in its discretion, revise any previously established performance
standards to account for the impact of such event.
(b) Awards
(1) Upon the conclusion of a particular fiscal year or other relevant
performance period or at such other time determined by the Committee in its
discretion, the Committee may make such awards of stock as it shall determine to
be appropriate based on the extent to which performance standards established
pursuant to Subsection 6(a) above were met and any other factors the Committee
deems relevant. Stock subject to the awards made pursuant to this Subsection
6(b)(1) shall be "Incentive Stock", as previously defined.
(2) Upon the conclusion of a particular fiscal year or other relevant
performance period, or at such other time determined by the Committee in its
discretion, the Committee may make such awards of stock as it shall determine to
be appropriate, based on factors it deems relevant, including if deemed relevant
the extent to which performance standards established pursuant to Subsection
6(a) above were met, which are contingent upon the attainment of one or more
Performance Goals (as defined in this Section 6) and Written Certification (as
defined in this Section 6) thereof. Stock subject to the awards made pursuant to
the Section 6(b)(2) shall be "Performance Stock", as previously defined. The
Committee may reduce or eliminate the number of Shares of Performance Stock
subject to an award prior to an Attainment Event.
(c) Restrictions and Conditions
(1) The Committee may, pursuant to Section 3: (i) establish with respect to
an Incentive Stock award, at the time the award is made, such periods or periods
during which the Incentive Stock, or any portion thereof, may not be sold,
transferred, granted, assigned, gifted, donated, placed in trust, placed in
custody under a uniform gift or transfer to minor's act or otherwise disposed
of, and may not be pledged, made subject to a security interest or lien or
otherwise encumbered, and (ii) establish with respect to a Performance Stock
award, at the time the award is made, such period or periods, following
attainment of applicable Performance Goals and Written Certification thereof (an
"Attainment
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Event"), during which the Performance Stock, or any portion thereof, may not be
sold, transferred, granted, assigned, gifted, donated, placed in trust, placed
in custody under a uniform gift or transfer to minors act or otherwise disposed
of, and may not be pledged, made subject to a security interest or lien or
otherwise encumbered. Any attempted disposition or encumbrance during such a
period shall be null and void and unenforceable against the Company. (Incentive
Stock and Performance Stock subject to this restriction are each sometimes
referred to herein as "Restricted Stock").
(2) If during the restricted period or periods applicable to particular
Restricted Stock, or if prior to attainment of Performance Goals applicable to
particular Performance Stock (such stock during the relevant periods being
sometimes referred to herein as "Forfeitable Stock"), a Participant leaves the
employ of the Company or a subsidiary corporation or parent corporation,
voluntarily or involuntarily, excepting those terminations described in and
governed by Subsection 6(c)(4) below, all of the Participant's rights, title and
interest in and to such Restricted Stock or Performance Stock, as the case may
be, shall be forfeited by the Participant and shall revert to the Company
without further action on anyone's part, unless with respect to particular
Incentive Stock the Committee determines that such Restricted Stock should not
be forfeited at the time the Participant so leaves the employ of the Company or
a subsidiary corporation or parent corporation.
(3) Upon an award of Incentive Stock or upon the occurrence of the
Attainment Event applicable to particular Performance Stock the Committee shall,
and upon the award of Performance Stock the Committee may, issue one or more
certificates for the Shares covered by the award ("Certificated Shares"),
bearing such legend as may be required under Section 14, in the name of the
Participant. Subject to the restrictions and risk of forfeiture applicable to
Certificated Shares which are Forfeitable Stock as provided in Sections 6(c)(1)
and 6(c)(2) above, a Participant shall otherwise be entitled to exercise and
enjoy all rights and entitlements of a shareholder with respect to the
Certificated Shares, including by way of illustration and not limitation, the
right to vote on matters which come before shareholders of the Company and the
right to receive dividends, whether or not such Forfeitable Stock is held in
custody. Upon an award of Incentive Stock which is not Restricted Stock, upon
the occurrence of the Attainment Event applicable to Performance Stock which is
not Restricted Stock and upon the lapse of all restrictions applicable to
particular Restricted Stock, the Committee shall cause to be delivered to the
Participant to whom the particular Incentive Stock or Performance Stock was
awarded certificates representing such Incentive Stock or Performance Stock,
subject in all cases to the Committee's right to withhold certificates pursuant
to Section 12. Unless otherwise determined by the Committee, during the period
that Certificated Shares are Forfeitable Stock the certificates representing
such Certificated Shares shall be held in the custody of the Secretary of the
Company or in the custody of another custodian satisfactory to the Committee.
The Committee may require a Participant, as a condition to receipt of particular
Program Stock award, to execute and deliver to the Company stock powers with
respect to the Shares of Program Stock required to be held by a custodian.
(4) With respect to awarded Program Stock which is as of a relevant moment
in time Forfeitable Stock, the restrictions and forfeiture requirement imposed
by the Committee pursuant to Sections 6(c)(1) and 6(c)(2) hereunder shall become
null and void and cease to exist, and all such Forfeitable Stock shall be
released to the appropriate Participant (or personal representative,
beneficiary, estate or other legally entitled person) upon the happening of any
of the following:
(A) The death of the Participant;
(B) The disability of the Participant (as defined in Section 22(e)3 of
the Code);
(C) The retirement of the Participant (at such age or upon such
conditions as shall be specified by the Committee or, if not so specified,
at any normal or early retirement date under the Company's defined benefit
pension plan); or
(D) A "change in control", as defined in Section 7; and
(E) With respect solely to Restricted Stock which is Incentive Stock,
any similar event determined by the Committee at the time of the award to
merit similar treatment.
(5) After establishment of a Performance Goal, the Committee shall not
revise such Performance Goal or increase the amount of compensation payable
thereunder (as determined in accordance with Section 162(m) of the Code) upon
the attainment of such Performance Goal.
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(d) Definitions
(1) The term "Performance Goals" for purpose of the Plan is hereby defined
to be the performance goals applicable to each fiscal year or other performance
period established by the Committee with respect to a designated award of
Program Stock or portion of an award of Program Stock within the time period and
in the manner prescribed by regulations under Section 162(m) of the Code based
on one or more of the following criteria: earnings, stock price, return on
equity, return on investment, return on assets, efficiency ratio, total return
to shareholders, economic value added, debt rating or achievement of business or
operations goals, or any combination of the foregoing.
(2) The term "Written Certification" for purposes of the Plan is hereby
defined to be the prior written certification by the Committee, in accordance
with Section 162(m) of the Code and the regulations thereunder, that Performance
Goals and other material terms previously established by the Committee in
accordance with Section 162(m) of the Code with respect to an award of Program
Stock have been attained.
7. CHANGE IN CONTROL
For all purposes under the Plan, a "change in control" of the Company shall
mean a change in control required to be reported in response to Item 5(f) of
Schedule 14A of Regulation 14A (or any successor provision) promulgated under
the Exchange Act; provided that, without limitation, such a change in control
shall be deemed to have occurred if (a) any "person" (including as such term is
used in Section 13(d) and 14(d)(2) (or any successor provision) of the Exchange
Act) is or becomes the beneficial owner, directly or indirectly of securities of
the Company representing thirty-three percent or more of the combined voting
power of the Company's outstanding securities then entitled to vote for the
election of directors; or (b) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board cease for
any reason to constitute at least a majority thereof (excluding for purposes of
this calculation any director who dies during such period); or (c) the Company
shall meet the delisting criteria of the New York Stock Exchange, Inc. or any
successor exchange in respect of the number of publicly-held shares or the
number of shareholders holding one hundred shares or more; or (d) the Board
shall approve the sale of all or substantially all of the assets of the Company;
or (e) the Board shall approve any merger, consolidation, issuance of securities
or purchase of assets, the result of which would be the occurrence of any event
described in clause (a), (b) or (c) above.
8. FAIR MARKET VALUE
For all purposes under the Plan, "fair market value" shall be determined as
follows: If Summit Common Stock is listed on one or more national securities
exchanges in the United States or admitted to trading on one or more national
securities exchanges in the United States pursuant to unlisted trading
privileges granted by such exchanges (and approved by the U.S. Securities and
Exchange Commission) on the date as of which fair market value must be or is to
be determined (a "determination date"), fair market value shall be deemed to be
the average of the high and low quotations at which Summit Common Stock is sold
on such national securities exchanges, considered on a composite basis, on the
determination date. If Summit Common Stock is listed on one or more national
securities exchanges in the United States or admitted to trading on one or more
national securities exchanges in the United States pursuant to unlisted trading
privileges granted by such exchanges (and approved by U.S. Securities and
Exchange Commission) on such determination date, but Summit Common Stock is not
traded on any of such exchanges on such date, or none of such national
securities exchanges are open for business on such date, fair market value shall
be determined as of the closest preceding date on which any of such exchanges
shall have been open for business and Summit Common Stock shall have been
traded. Notwithstanding any of the foregoing, the Committee shall at all times
retain the power to establish fair market value in the event that, in its
discretion, it determines that extraordinary circumstances or conditions have
affected trading in Summit Common Stock on one or more such exchanges such that,
in its judgement, the fair market value determined in accordance with the
foregoing does not reflect the true fair market value of Summit Common Stock on
such determination date. For all purposes under this Plan, the determination by
the Committee of the fair market value shall be conclusive.
9. THE EMPLOYMENT RELATIONSHIP
(a) The Plan shall not impose any obligation on the Company or a subsidiary
corporation or parent corporation to continue the employment of any key employee
selected to receive the grant of an Option, any key employee selected to
participate in the Program Stock feature of the Plan or any Participant selected
to receive a Program Stock award.
A-8
<PAGE>
The Plan does not impose any obligation on any key employee selected to
receive an Option grant or Program Stock award to remain in the employ of the
Company or a subsidiary corporation or parent corporation.
(b) For all purposes under the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of the
determination, the individual was an "employee" of such corporation for purposes
of Section 422(a) of the Code. If an individual is on military leave, sick leave
or other bona fide leave of absence such individual shall be considered an
"employee" for purposes of the exercise of an Option and shall be entitled to
exercise such Option during such leave if the period of such leave does not
exceed, (i) in the case of Non-Qualified Options, one (1) year, or (ii) in the
case of Incentive Options, the longer of (A) 90 days, or (B) the period during
which the individual's right to reemployment with the Company or a subsidiary
corporation or parent corporation of the Company is guaranteed either by statute
or by contract. If the period of leave exceeds the applicable periods of time
set forth in clauses (i) and (ii) of the immediately preceding sentence, the
employment relationship shall be deemed to have terminated by reason of
dismissal by the employer without cause on the day following the final day of
such applicable period of time.
(c) A termination of employment shall not be deemed to occur by reason of
(i) the transfer of an employee from employment by the Company to employment by
a subsidiary corporation or parent corporation of the Company or (ii) the
transfer of an employee from employment by a subsidiary corporation or parent
corporation of the Company to employment by the Company or by another subsidiary
corporation or parent corporation of the Company.
10. USE OF PROCEEDS
The cash proceeds of the sale of Shares subject to the Options granted
hereunder are to be added to the general funds of the Company and used for its
general corporate purposes as the Board of Directors shall determine.
11. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTIONS
(a) In the event of any change in the outstanding Shares through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
split-off, spin-off, combination of shares, exchange of shares, or other like
change in capital structure of the Company, and adjustment shall be made to each
outstanding Option such that each such Option shall thereafter be exercisable
for such securities or other property as would have been received in respect of
the Shares subject to such Option had such Option been exercised in full
immediately prior to such change, and such an adjustment shall be made
successively each time any such change shall occur. The term "Shares" shall
after any such change refer to the securities or other property then receivable
upon exercise of an Option. In addition, in the event of any such change, the
Committee shall make any further adjustment as may be appropriate to the maximum
number of Shares for which Options may be granted to any one employee and the
number of Shares and price per Share subject to outstanding Options as shall be
equitable to prevent dilution or enlargement of rights under such Options and
the determination of the Committee as to these matters shall be conclusive. All
adjustments shall be rounded down to the next lower full share. Notwithstanding
the foregoing, (i) each such adjustment with respect to an Incentive Option
shall comply with the rules of Section 424(a) of the Code, and (ii) in no event
shall any adjustment to be made which would render any Incentive Option granted
hereunder other than an incentive stock option for purposes of Section 422 of
the Code.
(b) In the event any of the events referred to in Section 11(a) shall
occur, the Committee shall make such adjustments to the Plan, to Program Stock
awards and to Shares of Program Stock awarded as may be needed to prevent
enlargement or dilution of the benefits intended to be conferred by the Plan
through its Program Stock feature.
12. WITHHOLDING TAXES
(a) The Committee may require a Participant receiving Program Stock upon
the satisfaction of all requirements, restrictions and conditions, if any,
applicable to the Program Stock, or an employee exercising a Non-Qualified
Option granted hereunder or disposing of Shares acquired pursuant to the
exercise of an Incentive Option hereunder in a disqualifying disposition (within
the meaning of Section 421(b) of the Code) or otherwise engaging in any action
or transaction with respect to the Plan which results in the imposition of a tax
withholding obligation on the corporation that employs the employee (such events
are sometimes referred to herein as "taxable events"), to reimburse the
corporation that employs such employee for any taxes required by any government
to be withheld or otherwise deducted and paid by such corporation on account of
the taxable event. Any payment on account of a tax
A-9
<PAGE>
obligation shall be in a form acceptable to the Committee. If upon the
occurrence of a taxable event the affected employee does not, in the time
required by law or designated by the Committee, reimburse the corporation
employing such employee for taxes as provided for above: (i) the corporation
that employs such employee shall have the right to withhold some or all of the
amount of such taxes from any other sums due or to become due from such
corporation to the employee upon such terms and conditions as the Committee
shall prescribe, and (ii) the Company may satisfy some or all of the tax
obligation of such employee by withholding Shares acquired by the employee in
the exercise of any Option and may in the same manner satisfy some or all of any
additional tax obligation resulting from such withholding of Shares.
(b) Upon the occurrence of a taxable event, except as set forth below with
respect to persons subject to Sections 16(a) and (b) of the Exchange Act, an
employee, if so permitted by the Committee, may elect to satisfy, in whole or in
part, the employee's related estimated personal tax liabilities (an "Election")
by (i) directing the Company or the subsidiary corporation or parent corporation
employing the employee to withhold from the Shares issuable in the related
exercise or distributable in connection with the award of unrestricted Incentive
Stock or the satisfaction of all requirements, restrictions and conditions
applicable to particular Program Stock either (A) a specified percentage of
Shares, (B) a specified number of Shares or (C) shares having a specified value,
in each case with a value not in excess of such estimated tax liabilities, (ii)
tendering Shares previously issued pursuant to an exercise or other shares of
the Company's Common Stock owned by the employee or (iii) combining any or all
of the foregoing options in any fashion. An Election shall be irrevocable. The
withheld Shares and any other shares tendered in payment shall be valued at
their fair market as of on the date that the withholding obligation arises (the
"Tax Date"). The Committee may disapprove of any Election, suspend or terminate
the right to make Elections or provide that the right to make Elections shall
not apply to particular grants, awards, Shares or exercises. If an employee is
subject to Sections 16(a) and 16(b) of the Exchange Act then any Election by
such employee must be made at a time or during a period and under such
conditions, restrictions, limitations, requirements and circumstances which
cause the Election and the related withholding to be exempt from Section 16(b)
of the Exchange Act under applicable regulations of the U.S. Securities and
Exchange Commission or otherwise. The Committee may impose any other conditions
or restrictions on the right to make an Election as it shall deem appropriate.
13. PURCHASE FOR INVESTMENT
Except as hereinafter provided and if so required by the Committee, the
holder of an Option granted hereunder shall upon any exercise thereof, and the
recipient of any Program Stock award shall upon receipt of the award and any
Shares represented by the award, execute and deliver to the Company a written
statement, in form satisfactory to the Company, in which such holder or
recipient represents and warrants that such holder or recipient is purchasing or
acquiring the Shares acquired thereunder for such holder's or recipient's own
account, for investment only and not with a view to the resale or distribution
thereof, and agrees that any subsequent offer for a sale or sale or distribution
of any such Shares shall be made only pursuant to either (a) a Registration
Statement on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act"), which Registration Statement has become effective and is
current with regard to the Shares being offered or sold, or (b) a specific
exemption from the registration requirements of the Securities Act, but in
claiming such exemption the holder or recipient shall, if required by the
Company, prior to any offer for sale or sale of such Shares, obtain a favorable
written opinion, in form and substance satisfactory to the Company, from
counsel, for or approved by the Company, as to the applicability of such
exemption thereto. The foregoing restriction shall not apply to (x) issuances by
the Company so long as the Shares being issued are registered under the
Securities Act and a prospectus in respect thereof is current or (y) reofferings
of Shares by affiliates of the Company (as defined in Rule 405 or any successor
rule or regulation promulgated under the Securities Act) if the Shares being
reoffered are registered under the Securities Act and a prospectus in respect
thereof is current.
14. LEGENDS; PAYMENTS OF EXPENSES
(a) The Company may endorse such legend or legends upon the certificates
for Shares issued upon exercise of an Option granted hereunder or in connection
with Program Stock awarded hereunder and may issue such "stop transfer"
instructions to its transfer agent in respect of such Shares as, in its
discretion, it determines to be necessary or appropriate to (i) prevent a
violation of, or to perfect an exemption from, the registration requirements of
the Securities Act, (ii) implement the provisions of the Plan and any agreement
between the Company and the optionee or award recipient with respect such
Shares, or (iii) permit the Company to determine the occurrence of a
disqualifying disposition, as described in Section 421(b) of the Code, of Shares
transferred upon exercise of an Incentive Option granted under the Plan.
A-10
<PAGE>
(b) The Company shall pay all issue taxes with respect to the issuance of
Shares, as well as all fees and expenses necessarily incurred by the Company in
connection with such issuance.
15. LISTING OF SHARES AND RELATED MATTERS
If at any time the Board of Directors shall determine in its discretion
that the listing, registration or qualification of the Shares covered by the
Plan upon any national securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the sale, purchase, grant,
award, issuance or delivery of Shares under the Plan, no Shares shall be sold,
purchased, granted, issued or delivered, as the case may be, unless and until
such listing, registration, qualification, consent or approval shall have been
effected or obtained, or otherwise provided for, free of any conditions not
acceptable to the Board of Directors.
16. AMENDMENT TO THE PLAN
The Board of Directors may, from time to time, subject to Section 6(c)(5)
of the Plan, amend the Plan and any Options granted and any award of Program
Stock made under the Plan (including amendments which accelerate the
exercisability of Options and the lapse of any restrictions on Incentive Stock)
provided that no amendment shall be made, without the approval of the
shareholders of the Company, that will (a) increase the number of Shares
provided for herein available for grants and awards to all employees
collectively or available for grant or award to individuals, other than an
increase resulting from an adjustment provided for in Section 11, (b) reduce the
exercise price of any Incentive Option granted hereunder below the price
required by Section 5, (c) modify the provisions of the Plan relating to
eligibility, or (iv) materially increase the benefits accruing to employees
chosen for grants or awards under the Plan. The Committee shall be authorized to
amend the Plan and the Options granted hereunder to permit the Incentive Options
granted thereunder to qualify as incentive stock options within the meaning of
Section 422 of the Code. The rights and obligations under any Options granted or
any award of Program Stock made before amendment of the Plan shall not be
adversely affected by amendment of the Plan, the Option or the Program Stock
award, as the case may be, without the consent of the holder of the Option or
Program Stock award.
17. TERMINATION OR SUSPENSION OF THE PLAN
The Board of Directors may at any time suspend or terminate the Plan. The
Plan, unless sooner terminated under Section 20 or by action of the Board of
Directors, shall terminate at the close of business on the Termination Date. No
Options may be granted or Program Stock awarded while the Plan is suspended or
after it is terminated. Rights and obligations under any Option granted or any
award of Program Stock made while the Plan is in effect shall not be altered or
impaired by suspension or termination of the Plan, except upon the consent of
the person to whom the Option was granted or the Program Stock awarded. The
power of the Committee under Section 3 to construe and administer any Option
granted or Program Stock awarded prior to the termination or suspension of the
Plan nevertheless shall continue after such termination or during such
suspension.
18. GOVERNING LAW
The Plan, such Options as may be granted and such Program Stock awards as
may be made thereunder, and all related matters shall be governed by, and
construed and enforced in accordance with, the laws of the State of New Jersey.
19. PARTIAL INVALIDITY
The invalidity or illegality of any provision herein shall not be deemed to
affect the validity of any other provision.
20. EFFECTIVE DATE
The Plan shall become effective at 3:00 P.M., New York City time, on the
Effective Date; provided, however, that if the Plan is not approved by a vote of
the shareholders of the Company at an annual meeting or any special meeting on
or prior to February 16, 1994, the Plan, any Options granted and any awards of
Program Stock made thereunder shall terminate.
A-11
<PAGE>
[MAP]
NOTICE
ADMITTANCE TO THE ANNUAL MEETING
In order to accommodate our shareholders, admission to the Annual Meeting
must be limited to shareholders, proxies, press and meeting staff. Two Welcome
Desks will be set up to greet meeting attendees. If you hold stock in your own
name, please proceed to the RECORD HOLDER Welcome Desk when you arrive. If you
hold stock through a bank, broker or otherwise, please proceed to the STREET
NAME Welcome Desk and please be prepared to furnish an account statement from
your bank or broker, a copy of a proxy card mailed to you, or other proof of
ownership of Summit Common Stock. PERSONS WITHOUT SUCH PROOF WILL NOT BE SEATED
UNTIL THE MEETING STAFF DETERMINES THERE IS ADEQUATE SEATING FOR ALL ATTENDEES
AND MAY BE DENIED ADMITTANCE ALTOGETHER.
Attendees should at all times wear the official name tag provided by the
Welcome Desks in order that the meeting staff may readily identify attendees
admitted to the meeting in accordance with the procedures administered by the
Welcome Desks. If you own stock in your own name and plan to attend the Annual
Meeting, please mark the appropriate box on the proxy card. If you wish to
attend the Annual Meeting but will not be submitting a proxy card with the
appropriate box marked, please notify Summit at the following address as soon as
possible: Corporate Secretary, ATTN: Annual Meeting Admissions, Summit Bancorp.,
301 Carnegie Center, PO. Box 2066, Princeton, NJ 08543-2066. Doing this will
allow us to prepare your official name tag in advance and eliminate unnecessary
delays upon your arrival at the Annual Meeting.
<PAGE>
APPENDIX
(Pursuant to Rule 304 of Regulation S-T)
1. Page 18 contains a description in tabular form of a graph entitled
"Stock Performance Graph" which represents the comparison of the cumulative
total return on the Company's Common Stock against the cumulative total return
of the Media General ("MG") Mid-Atlantic Bank Group Index, an industry index and
the New York Stock Exchange ("NYSE") Market Value Index, a broad market index
for the period of five years commencing January 1, 1991 and ending December 31,
1995, which graph is contained in the paper format of this Proxy Statement being
sent to Stockholders.
<PAGE>
- --------------------------------------------------------------------------------
P SUMMIT BANCORP.
Proxy Solicited on Behalf of the Board of Directors
R of UJB for the Annual Meeting on May 20, 1996
O The undersigned hereby constitutes and appoints T.J. Dermot Dunphy, Elinor
J. Ferdon and Henry S. Patterson II, and each of them, the undersigned's
X true and lawful agents and proxies with full power of substitution in each,
to represent the undersigned at the Annual Meeting of Shareholders of
Y SUMMIT BANCORP. to be held at The Hyatt Regency Princeton, 102 Carnegie
Center, Route 1 at Alexander Road, Princeton, New Jersey on Monday, May 20,
1996, and at any adjournments thereof, on all matters coming before
said meeting.
Election of Directors, Nominees:
S. Rodgers Benjamin, Robert L. Boyle, James C. Brady, Jr.,
Robert G. Cox, Elinor J. Ferdon, John R. Howell,
Thomas D. Sayles, Jr., Orin R. Smith, Joseph M. Tabak,
Douglas G. Watson
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. However, the Proxies cannot vote
your shares unless you sign and return this card.
[SEE REVERSE SIDE]
[X] Please mark your votes as in this example. 1724
This proxy, when properly signed and timely returned, will be voted in the
manner you direct. If no direction is made, this proxy will be voted FOR the
election of the listed Director nominees and FOR proposals 2 and 3.
The Board of Directors recommends a vote FOR 1 and 2 and AGAINST 3 and 4.
FOR WITHHELD
1. Election of Directors (See Reverse) [ ] [ ]
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
2. Approval of amended 1993 Incentive Stock and Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- --------------------------------------------------------
FOR AGAINST ABSTAIN
3. Approval of Independent Accountants [ ] [ ] [ ]
- --------------------------------------------------------
[ ] Please mark this box if you plan to attend the Annual Meeting.
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments thereof.
Please date and sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
- --------------------------------------------------------
- --------------------------------------------------------
SIGNATURE(S) DATE
<PAGE>
- --------------------------------------------------------------------------------
SUMMIT BANCORP.
O SAVINGS INCENTIVE PLAN
T Solicited on Behalf of the Board of Directors
I of UJB FINANCIAL CORP.
N for the Annual Meeting on May 20, 1996
G
The undersigned hereby directs United Jersey Bank, Trustee of the SUMMIT
I BANCORP. Savings Incentive Plan, to vote all of the shares which are
N held in the undersigned's Plan accounts at the Annual Meeting of
S Shareholders of SUMMIT BANCORP., to be held on Monday, May 20, 1996
T at The Hyatt Regency Princeton, 102 Carnegie Center, Route 1 at Alexander
R Road, Princeton, New Jersey, and at any adjournments thereof, as designated
U on the reverse, and in its discretion on such other matters as may properly
C come before the meeting.
T
I
O Election of Directors, Nominees:
N
S. Rodgers Benjamin, Robert L. Boyle, James C. Brady, Jr.,
Robert G. Cox, Elinor J. Ferdon, John R. Howell,
Thomas D. Sayles, Jr., Orin R. Smith, Joseph M. Tabak,
Douglas G. Watson
C
A
R
D
You are encouraged to specify your choices by marking the appropriate boxes on
the reverse side.
[X] Please mark your votes as in this example. 4036
This card, when properly executed, will be voted in the manner you direct.
If this card is not timely returned or properly executed, or if no direction is
made, the Trustee will vote shares held in your account in the manner deemed by
the Trustee to be in Plan participants' best interests.
The Board of Directors recommends a vote FOR 1, 2 and 3.
FOR WITHHELD
1. Election of Directors (See Reverse) [ ] [ ]
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
2. Approval of amended 1993 Incentive Stock and Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- --------------------------------------------------------
FOR AGAINST ABSTAIN
3. Approval of Independent Accountants [ ] [ ] [ ]
- --------------------------------------------------------
This Card Must Be Signed Exactly As
Your Name Appears Hereon
-----------------------------------
SIGNATURE DATE
