As filed with the Securities and Exchange Commission on August 21, 1998
Registration No. 333-_____
================================================================================
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SUMMIT BANCORP.
(Exact name of registrant as specified in its charter)
---------------
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NEW JERSEY 6711 22-1903313
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
301 CARNEGIE CENTER, P.O. BOX 2066
PRINCETON, NEW JERSEY 08543-2066
(609) 987-3200
(Address, including zip code, and telephone number, including area code of
registrant's principal executive offices)
---------------
RICHARD F. OBER, JR., ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
301 CARNEGIE CENTER, P.O. BOX 2066
PRINCETON, NEW JERSEY 08543-2066
(609) 987-3200
(Name, address, including ZIP code, and telephone number,
including area code, of agent for service)
---------------
COPY TO:
WILLIAM W. BOUTON III, ESQ.
TYLER COOPER & ALCORN, LLP
CITY PLACE - 35TH FLOOR
HARTFORD, CT 06103-3488
(860) 725-6200
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement and upon
consummation of the merger of NSS Bancorp, Inc. into Registrant as described
herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box -.
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES BEING AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED UNIT PRICE REGISTRATION FEE
- ---------------------------- -------------- -------------------- -------------------- -----------------
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Common Stock, par value 3,278,272(2) $50.13(3) $133,392,672(4) $39,351
$.80 (and associated stock
purchase rights) (1)
</TABLE>
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(1) Prior to the occurrence of certain events, the stock purchase rights will
not be evidenced separately from the common stock.
(2) Based upon the number of shares of NSS Bancorp, Inc. common stock
outstanding on June 17, 1998, plus the number of shares which will be
subject to outstanding stock options prior to consummation of the merger,
for an aggregate of 2,660,935 shares, multiplied by 1.232, the exchange
ratio provided for in the Reorganization Agreement
(3) Based upon the average of the high and low sale prices of NSS Bancorp, Inc.
common stock on August 17, 1998 as reported on the Nasdaq Stock
Market-National Market System, pursuant to Rule 457.
(4) Based upon the price of NSS Bancorp, Inc. common stock referred to in
footnote (3) hereof multiplied by the number of shares of NSS Bancorp, Inc.
common stock referred to in footnote (2) hereof.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
September , 1998
Dear Fellow Shareholder:
We are pleased to enclose information relating to a Special Meeting of
Shareholders of NSS Bancorp, Inc. to be held at Norwalk Inn and Conference
Center, Norwalk, Connecticut, at 10:00 a.m. local time on 1998.
At the Special Meeting, you will be asked to approve a Reorganization
Agreement dated June 17, 1998 by and between NSS and Summit Bancorp., a New
Jersey-based bank holding company. Under the terms of the Reorganization
Agreement, Summit will acquire all of the issued and outstanding shares of NSS
common stock in exchange for the right to receive 1.232 shares of Summit common
stock for each exchanged share of NSS common stock (and cash, without interest,
in lieu of fractional shares) (the "Reorganization"). You are also being asked
to vote on a proposal to adjourn the Special Meeting if required to solicit
additional votes.
You will have the opportunity to participate as a shareholder in Summit if
NSS shareholders approve the Reorganization. We believe that NSS, upon
completion of the strategic alliance with Summit, will be able to offer a
broader variety of products and services . We likewise believe that, after the
Reorganization, Summit will be well positioned to achieve NSS's goals for
community service, continued revenue growth and improved profitability, customer
service, and shareholder returns.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE REORGANIZATION
AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY. The
enclosed Proxy Statement-Prospectus explains in detail the terms of the proposed
Reorganization and related matters. Please carefully review and consider all of
this information.
Consummation of the Reorganization is subject to certain conditions,
including the approval of the Reorganization by the requisite vote of NSS
Shareholders and approval of the Reorganization by various bank regulatory
authorities.
It is very important that your shares are represented at the Special
Meeting, whether or not you plan to attend in person. The affirmative vote of a
majority of the holders of the outstanding shares of NSS common stock entitled
to vote is required for approval of the Reorganization. Your failure to vote for
approval of the Reorganization will have the same effect as a vote against the
Reorganization. The approval of any proposed adjournment requires the
affirmative vote of a majority of the votes cast by holders of NSS common stock,
provided that at least 50% of the outstanding shares are represented in person
or by proxy. IN ORDER TO ENSURE THAT YOUR VOTE IS REPRESENTED AT THE SPECIAL
MEETING, PLEASE SIGN, DATE AND MAIL THE PROXY CARD IN THE ENCLOSED ENVELOPE. You
are, of course, welcome to attend the meeting and to vote your shares in person.
----------------------------------
Donald St. John
Chairman
NSS Bancorp, Inc.
----------------------------------
Robert T. Judson
President & Chief Executive
Officer
NSS Bancorp, Inc.
<PAGE>
NSS BANCORP, INC.
NOTICE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD
_______________, 1998
TO OUR SHAREHOLDERS:
A Special Meeting of Shareholders (the "Special Meeting") of NSS Bancorp,
Inc. ("NSS") will be held at ___________ on _________________ at
___________________, Norwalk, Connecticut, for the following purposes:
1.To consider and vote upon a proposal to approve and adopt the
Reorganization Agreement dated June 17, 1998 (the "Reorganization
Agreement") between NSS and Summit Bancorp. ("Summit") and the
transactions contemplated thereby including (1) the acquisition of NSS
by Summit through one of the following alternative structures (the
"Reorganization"): (i) the merger of NSS into Summit; (ii) the merger
of NSS into a wholly owned subsidiary of Summit; (iii) the merger of a
wholly owned subsidiary of Summit into NSS; or (iv) the exchange of
shares of Summit for shares of NSS in accordance with to the share
exchange provisions of the Connecticut Business Corporation Act;
pursuant to which shares of NSS Common Stock will be converted into
the right to receive whole shares of Summit Common Stock and cash in
lieu of fractional shares based upon an exchange ratio of Summit
Common Stock to NSS Common Stock of 1.232 and (2) the NSS Bancorp Inc.
Stock Option Agreement.
2.A proposal to approve in advance an adjournment of the Special
Meeting in the event there are not sufficient votes to constitute a
quorum or approve the Reorganization Agreement at the scheduled time
of the Special Meeting, in order to permit further solicitation of
proxies.
3.To transact such other business as may properly come before the
Special Meeting.
Shareholders of record as of the close of business on __________________,
1998 are entitled to notice of and to vote at the Special Meeting. NSS cordially
invites all shareholders to attend the meeting in person. Whether or not you
expect to attend the meeting, please complete, sign and date the enclosed proxy
and return it in the envelope provided.
By order of the Board of Directors
Jeremiah T. Dorney,
Secretary
Norwalk, Connecticut
______________, 1998
<PAGE>
Subject to Completion
[GRAPHIC OMITTED]
PROXY STATEMENT PROSPECTUS
NSS BANCORP, INC. SUMMIT BANCORP.
48 WALL STREET 301 CARNEGIE CENTER
NORWALK, CONNECTICUT 06852 PRINCETON, NEW JERSEY 08543-2066
(203) 838-4545 (609) 987-3200
3,278,272 SHARES OF COMMON STOCK (PAR VALUE $ .80 PER SHARE)
This Proxy Statement-Prospectus is being furnished to the holders of common
stock, $.01 par value (including associated preferred stock purchase rights,
"NSS Common"), of NSS Bancorp, Inc., a Connecticut corporation and registered
bank holding company ("NSS"), in connection with the solicitation of proxies by
the Board of Directors of NSS ("NSS Board") for use at the Special Meeting of
Shareholders of NSS to be held in the__________________________________,
Norwalk, Connecticut at 10:00 a.m., Eastern Time, on _________________, 1998 and
at any adjournments thereof ("Special Meeting").
This Proxy Statement-Prospectus relates to up to 3,278,272 shares of
common stock, par value $.80 per share, (including associated preferred stock
purchase rights attached thereto, "Summit Common"), of Summit Bancorp., a New
Jersey corporation and registered bank holding company ("Summit"), to be issued
upon the reorganization ("Reorganization") of NSS with and into Summit pursuant
to a Reorganization Agreement, dated June 17, 1998 ("Reorganization Agreement").
In the Reorganization, shares of NSS Common outstanding at the Effective Time
(as defined herein) will be converted into the right to receive whole shares of
Summit Common and cash in lieu of any fractional shares of Summit Common
resulting from the conversion ("Cash In Lieu Amount"), based on an exchange
ratio of Summit Common to NSS Common of 1.232 (the "Exchange Ratio"), adjusted,
if necessary, in accordance with certain anti-dilution provisions (whole shares
of Summit Common and any Cash In Lieu Amount determined in accordance with the
Exchange Ratio, as adjusted, if necessary, in accordance with the anti-dilution
provisions, are referred to collectively herein as the "Reorganization
Consideration").
This Proxy Statement-Prospectus constitutes (1) the Proxy Statement of NSS
relating to the solicitation of proxies by the NSS Board for use at the Special
Meeting to be held for the purpose of considering and voting upon (a) a proposal
to approve the Reorganization Agreement and the transactions contemplated
thereby, including the NSS Bancorp, Inc. Stock Option Agreement dated as of June
18, 1998 (the "Reorganization Option Agreement"), and (b) a proposal to approve
in advance an adjournment of the Special Meeting in order to permit further
solicitation of proxies by NSS if insufficient shares are present at the Special
Meeting to constitute a quorum or to approve the Reorganization Agreement (the
"Adjournment Proposal"), and (2) the Prospectus of Summit with respect to the
Summit Common to be issued in the Reorganization. Consummation of the
Reorganization is subject to various conditions, including the approvals
(collectively, the "Required Approvals") of the shareholders of NSS, the Board
of Governors of the Federal Reserve System ("Federal Reserve Board") and the
Commissioner of Banking of the State of Connecticut ("Connecticut Commissioner
of Banking").
Summit Common is traded on the New York Stock Exchange ("NYSE") and NSS
Common is traded on the Nasdaq Stock Market ("Nasdaq"). The closing sale prices
of Summit Common and NSS Common were $47.75 and $45.88, respectively, on June
17, 1998 (the last trading day prior to the public announcement of the
Reorganization), and were $_____ and $_____, respectively, on _____, 1998.
All information contained in this Proxy Statement-Prospectus with respect
to Summit has been supplied by Summit and all information with respect to NSS
has been supplied by NSS.
The Proxy Statement-Prospectus is first being mailed to NSS shareholders on
or about September __, 1998.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THE DATE OF THIS PROXY STATEMENT-PROSPECTUS IS SEPTEMBER __, 1998.
<PAGE>
TABLE OF CONTENTS
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PAGE
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INDEX OF DEFINED TERMS ......................................................... (iii)
AVAILABLE INFORMATION ......................................................... (iv)
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE .............................. (v)
SUMMARY ........................................................................ 1
The Companies ............................................................... 1
NSS Special Meeting ......................................................... 1
Stock Held by NSS Affiliates ................................................ 2
The Reorganization ......................................................... 2
Market Prices and Dividends ................................................ 6
Summary of Comparative and Pro Forma Per Share Financial Information ...... 7
INTRODUCTION .................................................................. 8
SPECIAL MEETING ............................................................... 8
Record Date; Vote Required; Revocability of Proxies ........................ 8
SELECTED FINANCIAL DATA ...................................................... 10
MARKET PRICE AND DIVIDEND MATTERS ............................................. 12
Market Price and Dividend History .......................................... 12
Coordination and Determination of Dividends Under Reorganization Agreement 13
Dividend Limitations ...................................................... 13
PROPOSAL I - APPROVAL OF THE REORGANIZATION AGREEMENT ........................ 13
THE REORGANIZATION ......................................................... 13
General ..................................................................... 13
Closing and Effective Time ................................................ 13
Conversion of NSS Common ................................................... 14
Exchange of NSS Certificates ................................................ 14
Conversion of NSS Stock Options ............................................. 15
Recommendation of NSS Board ................................................ 15
Background .................................................................. 16
Reasons for the Reorganization ............................................. 17
Opinion of NSS's Financial Advisor .......................................... 18
Reorganization Option Agreement ............................................. 22
Regulatory Approvals ...................................................... 24
Interests of Certain Persons in the Reorganization ........................ 25
The Reorganization Agreement ................................................ 28
Charter and By-Laws of Surviving Corporation .............................. 30
Board of Directors and Officers of Surviving Corporation .................. 30
Dissenters Rights ......................................................... 30
New York Stock Exchange Listing ............................................. 32
Accounting Treatment ...................................................... 32
Certain Federal Income Tax Consequences of the Reorganization ............... 32
Resale of Summit Common ................................................... 33
Differences in Shareholder Rights .......................................... 34
SUMMIT BANCORP. ............................................................... 45
Description of Business ................................................... 45
</TABLE>
(i)
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PAGE
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DESCRIPTION OF SUMMIT CAPITAL STOCK ............... 46
Common Stock .................................... 46
Trust Preferred Securities ..................... 46
Shareholder Rights Plan ........................ 47
NSS BANCORP, INC. ................................. 47
Description of Business ........................ 47
DESCRIPTION OF NSS CAPITAL STOCK .................. 48
PROPOSAL II - ADJOURNMENT OF SPECIAL MEETING ...... 49
SHAREHOLDER PROPOSALS .............................. 49
LEGAL MATTERS .................................... 50
EXPERTS .......................................... 50
</TABLE>
REORGANIZATION AGREEMENT (w/o exhibits)........................... Appendix A
OPINION OF SANDLER O'NEILL & PARTNERS, L.P........................ Appendix B
NSS BANCORP, INC. STOCK OPTION AGREEMENT.......................... Appendix C
SECTIONS 33-555 TO 33-872, INCLUSIVE, OF THE CONNECTICUT GENERAL
STATUTES......................................................... Appendix D
(ii)
<PAGE>
INDEX OF DEFINED TERMS
(INDEX OF CAPITALIZED TERMS DEFINED IN THIS PROXY STATEMENT-PROSPECTUS)
PAGE IN
DEFINED TERM PROSPECTUS
- ------------ ----------
Acquiring Person ................................
Acquisition Proposal ............................
Acquisition Transaction .........................
Adjournment Proposal ............................
Special Meeting .................................
BHC Act .........................................
CBCA ............................................
Cash in Lieu Amount .............................
Certificate of Merger ..........................
Closing .........................................
Closing Date ....................................
Closing Notice ..................................
Code ............................................
Commission ......................................
Counsel .........................................
Distribution Date ...............................
Effective Time ..................................
Exchange Act ....................................
Exchange Agent ..................................
Exchange Ratio ..................................
Extension Event .................................
Federal Reserve Board ...........................
NSS .............................................
NSS Board .......................................
NSS Common Certificates .........................
NSS Option ......................................
NSS Savings Plan ................................
NSS Stock Award Plans ...........................
Nasdaq ..........................................
New Option ......................................
New Jersey Commissioner of Banking ..............
NJBA ............................................
NYSE ............................................
Original Option .................................
Per Share Calculation ...........................
Purchase Event ..................................
Record Date .....................................
Registration Rights .............................
Registration Statement ..........................
Reorganization ..................................
Reorganization Agreement ........................
Reorganization Consideration ....................
Reorganization Option Agreement .................
Required Approvals ..............................
Rights ..........................................
Rights Plan .....................................
Securities Act ..................................
Service .........................................
Substitute Option ...............................
Summit ..........................................
Summit Common ...................................
Summit Common Certificate .......................
Summit Preferred ................................
Summit Series R Preferred .......................
Surviving Corporation ...........................
(iii)
<PAGE>
AVAILABLE INFORMATION
Summit and NSS are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and, in accordance
therewith, file reports, proxy statements and other information with the
Securities and Exchange Commission ("Commission") relating to their businesses,
financial statements and other matters. The Registration Statement discussed
below and the exhibits thereto as well as such reports, proxy statements and
other information filed by Summit and NSS may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the following regional offices
of the Commission: Chicago Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and New York Regional Office, 7 World Trade Center,
Suite 1300, New York, New York, 10048. Copies of such materials may be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains an
Internet site on the World Wide Web containing reports, proxy and information
statements and other information filed electronically by Summit and NSS with the
Commission. The address of the World Wide Web site maintained by the Commission
is: http://www.sec.gov. In addition, Summit Common is listed on the NYSE and
reports, proxy statements and other information concerning Summit are available
for inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005. NSS Common is listed on Nasdaq and reports, proxy statements and other
information concerning NSS are available for inspection at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.
Washington, D.C. 20006.
Summit has filed with the Commission a registration statement on Form S-4
under the Securities Act of 1933, as amended ("Securities Act"), in respect of
the Summit Common to be issued in the Reorganization ("Registration Statement").
As permitted by the rules and regulations of the Commission, this Proxy
Statement-Prospectus omits certain information, exhibits and undertakings
contained in the Registration Statement. For such information, reference is made
to the Registration Statement and the exhibits filed as a part thereof or
incorporated by reference therein.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement-Prospectus and, if given or
made, such information or representation should not be relied upon as having
been authorized. This Proxy Statement-Prospectus does not constitute an offer to
sell, or solicitation of an offer to purchase, the securities offered by this
Proxy Statement-Prospectus or the solicitation of a proxy in any jurisdiction in
which, or to any person to whom, it would be unlawful to make such offer or
solicitation. Neither the delivery of this Proxy Statement-Prospectus nor any
distribution of the securities to which this Proxy Statement-Prospectus relates
shall, under any circumstances, create an implication that there has been no
change in the affairs of Summit or NSS or in the information set forth herein
since the date of this Proxy Statement- Prospectus.
(iv)
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference into and made a part of this
Proxy Statement-Prospectus the following documents filed by Summit (File No.
1-6451) with the Commission: (1) the Annual Report on Form 10-K for the fiscal
year ended December 31, 1997; (2) the Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1998, and June 30, 1998 and (3) the description
of Summit Common contained in Summit's Registration Statement on Form 10 filed
pursuant to Section 12(b) of the Exchange Act, dated August 31, 1970, and the
description of the preferred stock purchase rights appurtenant to the Summit
Common contained in Summit's Registration Statement on Form 8-A filed pursuant
to Section 12(b) of the Exchange Act, dated August 28, 1989, including all
amendments thereto and reports filed under the Exchange Act for the purpose of
updating such description. Such incorporation by reference will not be deemed to
specifically incorporate by reference the information referred to in Item
402(a)(8) of Regulation S-K. There are hereby incorporated by reference into and
made a part of this Proxy Statement-Prospectus the following documents filed by
NSS (File No. 000-22937) with the Commission: (1) the Annual Report on Form 10-K
for the fiscal year ended December 31, 1997; (2) Amendment No. 1 to the Annual
Report on Form 10-K for the fiscal year ended December 31, 1997, filed April 30,
1998; (3) the Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, 1998 and June 30, 1998; (4) the Current Report on Form 8-K dated July 2,
1998; (5) the description of NSS Common contained in NSS's Registration
Statement on Form 8-A filed pursuant to Section 12(g) of the Exchange Act, dated
August 4, 1997 and the description of the preferred stock purchase rights
appurtenant to the NSS Common contained in NSS's Registration Statement on Form
8-A dated August 4, 1997, including all amendments thereto and all reports filed
under the Exchange Act for the purpose of updating such description. Such
incorporation by reference will not be deemed to specifically incorporate by
reference the information referred to in Item 402(a)(8) of Regulation S-K.
All documents filed by Summit and NSS pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Proxy Statement-Prospectus
and prior to the date of the Special Meeting shall be deemed to be incorporated
by reference into this Proxy Statement-Prospectus and to be a part hereof from
the respective dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Proxy
Statement-Prospectus to the extent that a statement contained herein, or in any
other subsequently filed document that is also incorporated or deemed
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement-Prospectus.
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREIN. SUMMIT AND NSS EACH HEREBY
UNDERTAKES, WITH RESPECT TO THE DOCUMENTS LISTED ABOVE FILED BY IT WITH THE
COMMISSION, TO PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL
OWNER, TO WHOM THIS PROXY STATEMENT-PROSPECTUS HAS BEEN DELIVERED, UPON THE
WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS
REFERRED TO ABOVE THAT HAVE BEEN OR MAY BE INCORPORATED INTO THIS PROXY
STATEMENT-PROSPECTUS AND DEEMED TO BE PART HEREOF, OTHER THAN EXHIBITS TO SUCH
DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN
SUCH DOCUMENTS. REQUESTS FOR DOCUMENTS FILED BY SUMMIT SHOULD BE DIRECTED TO
RICHARD F. OBER, JR., SECRETARY, SUMMIT BANCORP., 301 CARNEGIE CENTER, P.O. BOX
2066, PRINCETON, NEW JERSEY 08543-2066, (TELEPHONE (609) 987-3442). REQUESTS FOR
DOCUMENTS FILED BY NSS SHOULD BE DIRECTED TO JEREMIAH T. DORNEY, SECRETARY, NSS
BANCORP, INC., 48 WALL STREET, NORWALK, CONNECTICUT 06852, (TELEPHONE (203)
838-4545). IN ORDER TO ENSURE TIMELY DELIVERY OF DOCUMENTS PRIOR TO THE SPECIAL
MEETING, ANY REQUEST SHOULD BE MADE BY SEPTEMBER __, 1998.
(v)
<PAGE>
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SUMMARY
THE FOLLOWING CONSTITUTES A BRIEF SUMMARY FOR THE CONVENIENCE OF THE
SHAREHOLDERS OF NSS OF THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT-PROSPECTUS, INCLUDING THE APPENDICES HERETO, RELATING TO THE PROPOSAL
TO APPROVE THE REORGANIZATION AGREEMENT. THE SUMMARY IS NECESSARILY SELECTIVE
AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE EXTENSIVE DISCUSSION CONTAINED
ELSEWHERE IN THIS PROXY STATEMENT-PROSPECTUS, THE APPENDICES HERETO AND IN THE
DOCUMENTS INCORPORATED BY REFERENCE HEREIN RELATING TO THE PROPOSAL TO APPROVE
THE REORGANIZATION AGREEMENT. NSS SHAREHOLDERS ARE ENCOURAGED TO READ CAREFULLY
THIS PROXY STATEMENT-PROSPECTUS, INCLUDING THE APPENDICES.
THE COMPANIES
SUMMIT BANCORP.
Summit Bancorp., a New Jersey corporation and registered bank holding
company with its principal executive offices at 301 Carnegie Center, Princeton,
New Jersey, through its wholly-owned subsidiary banks, Summit Bank (Hackensack,
NJ) and Summit Bank (Bethlehem, PA), operated 450 banking offices (including 53
supermarket branches) located in New Jersey and eastern Pennsylvania as of June
30, 1998. Its telephone number is (609) 987-3200. The subsidiary banks of Summit
are engaged in a general banking business. They offer demand and interest
bearing deposit accounts, make business, real estate, personal and installment
loans, and provide lease financing, fiduciary, investment management, investment
advisory, custodial, correspondent and treasury services and insurance and
nondeposit investment products and services. In addition, Summit owns
subsidiaries that are engaged in securities brokerage, insurance brokerage,
venture capital investment, commercial finance lending, lease financing, asset
based lending production, letter of credit issuance, data processing and
reinsuring credit life and disability insurance policies related to consumer
loans made by the bank subsidiaries.
NSS BANCORP, INC.
NSS Bancorp, Inc., a Connecticut corporation and registered bank holding
company with its principal executive offices at 48 Wall Street, Norwalk,
Connecticut, through its wholly-owned subsidiary bank, NSS Bank, operated eight
banking offices in Fairfield County, Connecticut as of June 30, 1998. Its
telephone number is (203) 838-4545. NSS Bank is principally engaged in the
business of attracting deposits from the general public and using these deposits
to extend loans for the purchase or construction of residential or commercial
properties, as well as consumer and commercial loans.
NSS SPECIAL MEETING
TIME, DATE, PLACE AND PURPOSE
The Special Meeting will be held on __________, 1998 at _____ a.m. (local
time), in the _______________________________________Norwalk, Connecticut, to
consider and vote upon (1) a proposal to approve the Reorganization Agreement
and the transactions contemplated thereby, including the Reorganization Option
Agreement and (2) a proposal to approve the Adjournment Proposal. A copy of the
Reorganization Agreement is attached hereto as Appendix A.
RECORD DATE, VOTE REQUIRED
The record date ("Record Date") for determining NSS shareholders entitled
to notice of and to vote at the Special Meeting is September __, 1998. The
presence, in person or by proxy, of at least a majority of the __________ shares
of NSS Common outstanding on the Record Date is necessary to constitute a quorum
at the Special Meeting. Assuming a quorum is present, an affirmative vote of a
majority of the votes entitled to be cast by the holders of shares entitled to
vote at the Special Meeting is necessary to approve the Reorganization
Agreement, and approval of the Adjournment Proposal requires that more votes
must be cast in favor of such
- --------------------------------------------------------------------------------
1
<PAGE>
proposal than against. In the event a quorum is not present or there are
insufficient votes to approve any proposal, the Special Meeting may be adjourned
from time to time by a majority of those present in person or by proxy in order
to permit, as appropriate, further solicitation of proxies by the NSS Board.
STOCK HELD BY NSS AFFILIATES
The directors and executive officers of NSS and their affiliates
beneficially owned, as of the Record Date, ________ shares of NSS Common
(assuming the exercise of all options to purchase NSS Common held by such
persons and outstanding on such date), representing ____% of the outstanding
shares of NSS Common. The directors and executive officers of NSS have entered
into agreements with Summit to vote their shares of NSS Common in favor of the
proposal to approve the Reorganization Agreement.
Summit beneficially owns 105,500 shares of NSS Common, which represents %
of the outstanding shares of NSS Common, and intends to vote these shares in
favor of the proposal to approve the Reorganization Agreement.
Also, by virtue of holding the NSS Option (as defined herein), Summit could
be deemed to be the beneficial owner of an additional 494,629 shares of NSS
Common. Combined, the 105,500 shares beneficially owned and the 494,629 shares
deemed beneficially owned by Summit represent % of NSS Common outstanding on the
Record Date (assuming, for purposes of calculating this percentage, that the
shares represented by the NSS Option were issued and outstanding on such date).
However, the NSS Option is not presently exercisable and the NSS Common
represented thereby has not been issued, is not outstanding and cannot be voted.
THE REORGANIZATION
EFFECTIVE TIME
The Reorganization will become effective at the hour and on the date
("Effective Time") specified in the certificate or certificates of merger
required to be filed with the jurisdictions or jurisdiction of incorporation of
each of the constituent corporations to the Reorganization, or if the
Reorganization is effected as a share exchange pursuant to the Connecticut
Business Corporation Act ("CBCA"), the time and date specified in the
certificate of exchange filed with the Secretary of State of Connecticut. If the
Reorganization is approved by NSS shareholders, subject to the satisfaction or
waiver of certain other conditions set forth in the Reorganization Agreement, it
is currently contemplated that the Effective Time will occur during the fourth
calendar quarter of 1998. See "THE REORGANIZATION-Closing and Effective Time."
CONVERSION OF NSS COMMON
At the Effective Time, outstanding shares of NSS Common, other than shares
of NSS Common beneficially owned by Summit or a subsidiary of Summit (other than
shares of NSS Common held as a result of foreclosures or debts previously
contracted), if any, shares of NSS Common beneficially owned by NSS or a
subsidiary of NSS (other than shares of NSS Common held as a result of
foreclosures or debts previously contracted), if any, and shares held in the
treasury of NSS, if any, will be converted into and represent the right to
receive the Reorganization Consideration. Within 10 days of the receipt of an
accurate and complete list of all holders of record of NSS Common as of the
Effective Time by First Chicago Trust Company of New York, or another entity
reasonably satisfactory to NSS, acting as the exchange agent for the
Reorganization ("Exchange Agent"), from NSS, each holder of record of NSS Common
will be sent by the Exchange Agent information regarding, and materials to be
used in, the exchange of NSS Common for Summit Common. Within 10 days of the
later to occur of the receipt of a final shareholder list from NSS by the
Exchange Agent or the receipt by the Exchange Agent of complete exchange
materials from a NSS shareholder, the NSS shareholder will be sent, in exchange
for all certificates representing their NSS Common ("NSS Common Certificates"),
one certificate representing the whole shares of Summit Common into which their
NSS Common has been converted ("Summit Common Certificate") and, to the extent
entitled thereto, a check representing the Cash In Lieu Amount. Such exchange
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2
<PAGE>
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period may be extended 5 business days by the Exchange Agent to permit it to
satisfy its obligations under the Internal Revenue Code of 1986, as amended (the
"Code"), with respect to reporting the dividend income.
CONVERSION OF NSS STOCK OPTIONS
Each stock option relating to NSS Common ("Original Option") outstanding at
the Effective Time and granted to a director or employee pursuant to the NSS
1994 Director Stock Option Plan (the "Director Plan") or the NSS 1994 Employee
Stock Option Plan (the "Employee Plan") (collectively, the "NSS Option Plans")
will be converted automatically at the Effective Time into an option to purchase
Summit Common ("New Option"). All Original Options granted under the Employee
Plan, whether or not exercisable immediately prior to the Effective Time, will
be converted pursuant to the terms of the Employee Plan into a New Option that
is immediately exercisable after the Effective Time and for a thirty day period
holders of such options may elect to receive a cash payment equal to the
difference between the adjusted exercise price and the value of the Summit
Common that could be obtained upon the exercise of the option. Subject to the
adjustment in exercise price and the number of shares described below, the New
Options will continue to be governed by the terms of the NSS Option Plan and the
stock option agreement pursuant to which the corresponding Original Option was
granted, including terms and provisions governing exercises. The number of
shares of Summit Common subject to the New Options and the exercise price of the
New Options will be adjusted as provided in the Reorganization Agreement based
on the Exchange Ratio. See "THE REORGANIZATION-Conversion of Stock Options."
RECOMMENDATION OF NSS BOARD
The NSS Board unanimously recommends that NSS shareholders vote to approve
the Reorganization Agreement and the Adjournment Proposal. See "THE
REORGANIZATION-Recommendation of NSS Board."
OPINION OF NSS'S FINANCIAL ADVISOR
NSS engaged Sandler O'Neill & Partners, L.P. ("Sandler O'Neill") to act as
financial advisor in connection with any acquisition of or by NSS and to render
its opinion to the NSS Board as to whether the Exchange Ratio is fair, from a
financial point of view, to the shareholders of NSS. Sandler O'Neill has
delivered to NSS an opinion dated as of the date of this Proxy
Statement-Prospectus stating that, as of such date, based on the review and
assumptions and subject to the limitations described therein, the Exchange Ratio
is fair, from a financial point of view, to NSS's shareholders. A copy of
Sandler O'Neill's opinion is attached as Appendix B to this Proxy
Statement-Prospectus and should be read in its entirety. See "THE
REORGANIZATION-Opinion of NSS's Financial Advisor."
DISSENTERS' RIGHTS
By complying with the specific procedures required by the CBCA described
herein and attached hereto as Appendix D, holders of NSS Common will have the
right to dissent from the Reorganization, in which event they may be entitled to
receive the "fair value" of their shares of NSS Common. See "THE REORGANIZATION
- - Dissenters' Rights."
ACCOUNTING TREATMENT
It is anticipated that the Reorganization, when consummated, will be
accounted for as a purchase. See "THE REORGANIZATION-Accounting Treatment."
FEDERAL INCOME TAX CONSEQUENCES
Thompson Coburn, Summit's special counsel, has delivered its opinion to the
effect that, assuming the Reorganization occurs in accordance with the
Reorganization Agreement and conditioned on the accuracy of certain
representations made by Summit and NSS, the Reorganization will constitute a
"reorganization" within
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3
<PAGE>
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the meaning of Section 368 of the Internal Revenue Code of 1986, as amended
("Code"), for federal income tax purposes and that, accordingly, no gain or loss
will be recognized by NSS shareholders who exchange their shares of NSS Common
solely for shares of Summit Common in the Reorganization, except with respect to
any Cash In Lieu Amount received, if any. Each NSS shareholder is urged to
consult his or her tax advisor to determine the specific tax consequences of the
Reorganization to such shareholder, including the applicability of various
state, local, and foreign tax laws. See "THE REORGANIZATION- Certain Federal
Income Tax Consequences of the Reorganization."
REGULATORY APPROVALS
Consummation of the Reorganization requires, and is conditioned upon
receipt of, approvals by the Federal Reserve Board and the Connecticut
Commissioner of Banking. See "THE REORGANIZATION-Regulatory Approvals."
CONDITIONS OF THE REORGANIZATION
Consummation of the Reorganization is additionally subject, among other
things, to (i) the approval of the Reorganization Agreement by a majority of
NSS's shareholders entitled to vote on the matter; (ii) the expiration of any
waiting period required in connection with a regulatory approval; (iii)
continued effectiveness of the registration statement; (iv) receipt by Summit
and NSS of the opinion of Thompson Coburn as to certain federal income tax
consequences of the Reorganization; (v) the NYSE having indicated that the
shares of Summit Common to be issued in the Reorganization are to be listed on
the NYSE subject to official notice of issuance; (vi) the absence of any
material litigation; (vii) the absence of regulatory agreements relating to the
respective parties; and (viii) the delivery of officers' certificates by NSS and
Summit. Certain of the foregoing conditions may be waived by the party for whose
benefit the condition was included. However, the Reorganization will not be
consummated without the receipt of all Required Approvals. See "THE
REORGANIZATION-The Reorganization Agreement-Conditions to the Reorganization,
Termination."
TERMINATION
The Reorganization Agreement may be terminated by mutual consent of the
Summit Board and the NSS Board. The Reorganization Agreement may also be
terminated by either the Summit Board or the NSS Board if the conditions
precedent to, respectively, Summit's or NSS's obligations to close under the
Reorganization Agreement have not been met. Further, the Reorganization
Agreement may be terminated by either the Summit Board or the NSS Board if (i)
the shareholders of NSS have failed to approve the Reorganization; (ii) a
material breach by the other party of a warranty or representation or covenant
has occurred and has not been cured or is not capable of being cured (after 30
days notice thereof has been given and provided that the terminating party is
not in material breach of any representation, warranty, covenant or other
agreement); or (iii) the Closing is not consummated on or before March 1, 1999.
In addition, the NSS Board may terminate the Reorganization Agreement if the
average closing price of a share of Summit Common on the NYSE Composite
Transactions List for the 10 consecutive full trading days ending on the date
(the "FRB Approval Date") of the Required Approval given by the FRB (the "Summit
Price") is less than $39.11 and the number obtained by dividing the Summit Price
by $47.125 is more than .17 less than the number obtained by dividing the
average closing price per share of the common stocks of 18 bank holding
companies (the "Index Group") for the 10 consecutive full trading days ending on
the FRB Approval Date by the average closing price per share of the common
stocks of the Index Group on June 16, 1998. The Summit Board may terminate the
Reorganization Agreement if the NSS Board fails to recommend approval of the
Reorganization Agreement or withdraws such approval or if the cost of certain
environmental matters exceeds thresholds set forth in the Reorganization
Agreement. See "THE REORGANIZATION-The Reorganization Agreement-Termination."
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4
<PAGE>
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INTERESTS OF CERTAIN PERSONS IN THE REORGANIZATION
Directors and executive officers of NSS have interests in the
Reorganization that are in addition to their interests as shareholders of NSS.
These interests include: (1) the indemnification of directors and executive
officers of NSS against certain claims that may arise after the Effective Time
based on services provided to NSS or any subsidiary of NSS prior to the
Effective Time; (2) Summit's covenant to use its best efforts to purchase
insurance for six years after the Effective Time, subject to a maximum premium
limitation, protecting NSS directors and executive officers against such claims;
(3) the conversion of all Original Options held by directors and executive
officers of NSS into New Options, with adjustments to the exercise price and
number of shares subject thereto based on the Exchange Ratio, and the immediate
exercisability, pursuant to the terms of the Employee Plan and stock option
agreements, of all New Options granted under the Employee Plan, whether or not
the related Original Option is exercisable immediately prior to the Effective
Time; (4) for Robert T. Judson, Charles F. Howell, Jeremiah T. Dorney and Marcus
I. Braverman, payments of $ 1,140,383, $779,348, $609,509, and $609,117,
respectively, pursuant to their change of control agreements with NSS; (5) for
Messrs. Judson, Howell, Dorney and Braverman, payments of $135,041, $92,001,
$72,000 and $72,000, respectively, as pro-rated awards under the NSS 1995
Executive Incentive Plan (the "Executive Incentive Plan") and payments of
$92,840, $63,250, $49,500 and $49,500, respectively, under the NSS Annual
Incentive Plan (the "Employee Annual Incentive Plan") and (6) for Donald St.
John, Brian Fitzgerald, Herbert Jay, Edward Kelley, John Segall and Alan Stack,
the non-employee directors of NSS, payments of $25,300 to Mr. St. John and
$16,400 to each other non-employee director as pro-rated awards under the NSS
Directors Annual Incentive Plan (the "Director Annual Incentive Plan", and
together with the Employee Annual Incentive Plan the "Annual Incentive Plans").
These interests and the underlying assumptions are described in more detail
below under "THE REORGANIZATION-Interests of Certain Persons in the
Reorganization."
DIFFERENCE IN SHAREHOLDERS' RIGHTS
The rights of NSS shareholders, which are determined by Connecticut
corporation law and the Certificate of Incorporation and By-Laws of NSS, differ
from the rights accorded Summit shareholders, which are determined by New Jersey
corporation law and the Restated Certificate of Incorporation and By-Laws of
Summit. Some of the differences in shareholders' rights are attributable to
differences between the corporation law of Connecticut, the state of NSS's
incorporation, and the corporation law of New Jersey, the state of Summit's
incorporation. The remaining differences in shareholders rights are attributable
to differences between the Certificate of Incorporation and By-Laws of NSS and
the Restated Certificate of Incorporation and By-Laws of Summit. Certain of the
rights of NSS shareholders which are provided by Connecticut corporation law or
contained in the Certificate of Incorporation or By-Laws of NSS and which are
not provided by New Jersey corporation law or contained in the Restated
Certificate of Incorporation or By-Laws of Summit are deemed to have an
anti-takeover effect and will not be available to NSS shareholders as Summit
shareholders; however, certain rights provided for by New Jersey corporation law
or the Restated Certificate of Incorporation or By-laws of Summit are also
deemed to have an anti-takeover effect and will be available to NSS stockholders
only after becoming Summit shareholders. See "THE REORGANIZATION - Differences
in Shareholders' Rights."
REORGANIZATION OPTION AGREEMENT
As an inducement and condition to Summit's willingness to enter into the
Reorganization Agreement, NSS (as issuer) entered into the Reorganization Option
Agreement with Summit (as grantee), dated as of June 18, 1998. The
Reorganization Option Agreement is set forth in Appendix C to this Proxy
Statement-Prospectus.
Pursuant to the Reorganization Option Agreement, NSS granted to Summit an
irrevocable option (the "NSS Option"), exercisable under certain limited and
specifically defined circumstances, none of which, to the best of Summit's and
NSS's knowledge, has occurred as of the date hereof to purchase, (a) prior to
the date the NSS shareholders have approved the Reorganization Option Agreement,
up to 248,308 shares of NSS Common, at a price of $45.00 per share or (b) after
the date the NSS shareholders have approved the Reorganization Option
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5
<PAGE>
Agreement, up to 494,629 shares of NSS Common also at a price of $45.00 per
share. In addition, NSS agreed to pay Summit a "breakup fee" of $3.5 million in
the event the NSS Option becomes exercisable pursuant to the conditions set
forth in (a) above.
The Reorganization Option Agreement is intended to increase the likelihood
that the Reorganization will be consummated according to the terms set forth in
the Reorganization Agreement, and may be expected to discourage offers by third
parties to acquire NSS prior to the Reorganization. See "THE REORGANIZATION
Reorganization Option Agreement."
MARKET PRICES AND DIVIDENDS
Summit Common is listed and traded on the NYSE under the symbol "SUB". NSS
Common is listed and traded on Nasdaq under the symbol "NSSY" (prior to the
October 1, 1997 formation of NSS, the common stock of NSS Bank traded on Nasdaq
under the same symbol). The following table presents for the periods indicated
(rounded to the nearest cent and adjusted for all stock splits and stock
dividends) the high and low sale prices of a share of Summit Common and of a
share of NSS Common and dividends declared per share on Summit Common and NSS
Common.
<TABLE>
<CAPTION>
SUMMIT COMMON NSS COMMON
----------------------------------- ----------------------------------
SALE PRICE SALE PRICE
--------------------- ---------------------
DIVIDENDS DIVIDENDS
CALENDAR YEAR HIGH LOW PER SHARE HIGH LOW PER SHARE
- ----------------------------------------- --------- --------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996 .................................... $30.08 $21.75 $0.90 $24.88 $17.94 $.15
1997 .................................... 53.38 28.50 1.02 40.25 22.94 .35
1998 (through September __, 1998) ......
</TABLE>
The following table presents (rounded to the nearest cent) for June 17,
1998, (the last full trading day prior to the public announcement of the
execution of the Reorganization Agreement), and as of September __, 1998 the
last sale price of a share of Summit Common, the last sale price of a share of
NSS Common and the pro forma equivalent in Summit Common of a share of NSS
Common computed by multiplying the last sale price of Summit Common on each of
the dates specified in the table by the Exchange Ratio of 1.232.
PRO FORMA NSS
SUMMIT NSS EQUIVALENT
--------- --------- --------------
June 17, 1998 ............ $47.75 $45.88 $58.83
September __, 1998 ...... __.__ __.__ __.__
NO ASSURANCE CAN BE GIVEN AS TO WHAT THE MARKET PRICE OF SUMMIT COMMON WILL
BE IF AND WHEN THE REORGANIZATION IS CONSUMMATED. BECAUSE THE EXCHANGE RATIO IS
FIXED AND BECAUSE THE MARKET PRICE OF SUMMIT COMMON IS SUBJECT TO FLUCTUATION,
THE VALUE OF THE SHARES OF SUMMIT COMMON THAT HOLDERS OF NSS COMMON WILL RECEIVE
IN THE REORGANIZATION MAY INCREASE OR DECREASE PRIOR TO AND FOLLOWING THE
REORGANIZATION. NSS SHAREHOLDERS ARE ADVISED TO OBTAIN CURRENT MARKET QUOTATIONS
FOR SUMMIT COMMON AND NSS COMMON. IN ADDITION, PAST DIVIDENDS PAID IN RESPECT OF
SUMMIT COMMON AND NSS COMMON ARE NOT NECESSARILY INDICATIVE OF FUTURE DIVIDENDS
THAT MAY BE DECLARED AND PAID. NO ASSURANCE CAN BE GIVEN CONCERNING DIVIDENDS TO
BE DECLARED AND PAID IN RESPECT OF SUMMIT COMMON AND NSS COMMON BEFORE OR AFTER
THE EFFECTIVE TIME. SEE "MARKET PRICE AND DIVIDEND MATTERS."
The following table presents, as of September __, 1998, the current
annualized dividend rate for a share of Summit Common, for a share of NSS
Common, and (rounded to the nearest cent) for the pro forma equivalent in Summit
Common of a share of NSS Common computed by multiplying the annualized dividend
rate of a share of Summit Common by the Exchange Ratio of 1.232.
PRO FORMA NSS
SUMMIT NSS EQUIVALENT
-------- ------- --------------
September __, 1998 ...... $__.__ $.___ $___
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SUMMARY OF COMPARATIVE AND PRO FORMA PER SHARE FINANCIAL INFORMATION
The following summary presents, for the periods indicated, selected
comparative and pro forma per share financial information: (i) on a historical
basis for both Summit and NSS; (ii) on a pro forma combined basis for Summit,
giving effect to the Reorganization; and (iii) on a pro forma equivalent basis
per common share for NSS. Such financial information is computed on a pro forma
equivalent basis with respect to a share of NSS Common by multiplying the pro
forma combined amount (giving effect to the Reorganization) by the Exchange
Ratio of 1.232. The pro forma information does not reflect anticipated cost
savings expected to be realized from the Reorganization. The purchase accounting
adjustments used for the purpose of calculating the pro forma combined results
are subject to final determination, based upon estimates and other evaluation of
fair value, as of the close of the transaction. Therefore, the pro forma amounts
reflected in the pro forma per share financial information may differ from the
amounts ultimately determined. The unaudited pro forma information does not
purport to be indicative of the combined financial position or results of
operations of future periods.
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------ -------------------
NET INCOME PER DILUTED SHARE
Historical:
Summit ........................ $ 1.29 $ 2.09
NSS ........................... 1.02 2.20
Pro Forma:
Summit and NSS combined ...... 1.28 2.06
NSS Equivalent ............... 1.57 2.54
DIVIDENDS PER SHARE
Historical:
Summit ........................ $ 0.57 $ 1.02
NSS ........................... 0.23 0.35
Pro Forma:
Summit and NSS combined ...... 0.57 1.02
NSS Equivalent ............... 0.70 1.26
JUNE 30, 1998 DECEMBER 31, 1997
----------------- ------------------
BOOK VALUE PER SHARE
Historical:
Summit ........................ $14.85 $14.79
NSS ........................... 23.19 23.06
Pro Forma:
Summit and NSS combined ...... 15.38 14.79
NSS Equivalent ............... 18.95 18.22
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INTRODUCTION
This Proxy Statement-Prospectus is being furnished to NSS shareholders as
of the Record Date in connection with the solicitation of proxies by the NSS
Board for use at the Special Meeting to be held on October__, 1998 or any
adjournments thereof, in
________________________________________________________, Norwalk, Connecticut,
at _____a.m., Eastern Time. The purpose of the Special Meeting is to consider
and vote upon (i) a proposal to approve the Reorganization Agreement and the
transactions contemplated thereby, and (ii) a proposal to approve the
Adjournment Proposal.
THE NSS BOARD HAS APPROVED THE REORGANIZATION AGREEMENT AND UNANIMOUSLY
RECOMMENDS THAT NSS SHAREHOLDERS VOTE FOR ITS APPROVAL. THE NSS BOARD ALSO
RECOMMENDS THAT NSS SHAREHOLDERS VOTE FOR APPROVAL OF THE ADJOURNMENT PROPOSAL.
SPECIAL MEETING
RECORD DATE; VOTE REQUIRED; REVOCABILITY OF PROXIES
The securities to be voted at the Special Meeting consist of shares of NSS
Common, with each share entitling its owner to one vote on each proposal and on
all other matters properly brought before the Special Meeting. NSS had no other
class of outstanding voting securities entitled to vote on the Reorganization
Agreement or the Adjournment Proposal at the close of business on the Record
Date. There were _____ holders of record of NSS Common and __________ shares of
NSS Common outstanding and eligible to be voted at the Special Meeting as of the
Record Date. It is anticipated that this Proxy Statement-Prospectus, together
with the enclosed proxy card, will be mailed to shareholders on or about
September __, 1998.
The presence at the Special Meeting, in person or by proxy, of the holders
of at least a majority of the shares of NSS Common outstanding on the Record
Date will constitute a quorum for the transaction of business. By checking the
appropriate box on the proxy card provided by the NSS Board, a shareholder may
vote "FOR" approval of the Reorganization Agreement, vote "AGAINST" approval of
the Reorganization Agreement or "ABSTAIN". Under the CBCA and NSS's Certificate
of Incorporation and By-Laws, the approval of the proposal to approve the
Reorganization Agreement requires the affirmative vote of a majority of the
votes entitled to be cast by the holders of shares entitled to vote thereon at
the Special Meeting, and the approval of the Adjournment Proposal requires that
more votes be cast in favor of the proposal than against the proposal.
Accordingly, "broker non-votes" (i.e., shares held by brokers or nominees as to
which instructions have not been received from the beneficial owners or the
persons entitled to vote such shares and with respect to which the broker or
nominee does not have discretionary voting power under the applicable NYSE rule)
will have the effect of a vote against the Reorganization Agreement but have no
effect on whether the Adjournment Proposal is adopted. Abstentions will be
treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum and the number of votes necessary to adopt
any proposal and therefore will also have the effect of a vote against the
Reorganization Agreement. Under NSS's Certificate of Incorporation the approval
of the Reorganization Agreement requires only the vote of the majority of votes
entitled to be cast because the Reorganization Agreement meets certain
conditions set forth in NSS's Certificate of Incorporation which render
inapplicable the super majority voting requirements for certain business
combinations set forth therein. See "THE REORGANIZATION -Differences in
Shareholders Rights". Proxies voting against the Reorganization Agreement will
not be used by the proxy holders to vote in favor of the Adjournment Proposal
unless the shareholder has voted FOR approval of the Adjournment Proposal on the
proxy card. The Special Meeting may be adjourned from time to time if necessary
to obtain a quorum or to obtain the votes necessary to approve the
Reorganization Agreement. The approval of the Reorganization Agreement by NSS
shareholders is a condition to the consummation of the Reorganization. See "THE
REORGANIZATION-The Reorganization Agreement-Conditions to the Reorganization;
Termination".
If a quorum is not obtained, or if fewer shares of NSS Common are voted in
favor of approval of the Reorganization Agreement than the number required for
approval, it is expected that, if a majority of the proxies voted with respect
to the Adjournment Proposal have been voted in favor of the Adjournment
Proposal, the Special Meeting will be postponed or adjourned for the purpose of
allowing additional time for obtaining additional proxies or votes, and, at any
subsequent reconvening of the Special Meeting, all proxies will be voted in
8
<PAGE>
the same manner as such proxies would have been voted at the original convening
of the Special Meeting (except for any proxies which have theretofore
effectively been revoked or withdrawn). As to other matters that may properly
come before the Special Meeting, unless otherwise provided in the Certificate of
Incorporation or By-laws of NSS or by statute, the matter will be approved if
more votes are cast in favor of the matter than are cast against.
If the enclosed form of proxy is properly executed and returned to NSS in
time to be voted at the Special Meeting, the shares represented thereby will be
voted in accordance with the instructions marked thereon. Proxies that are
executed, but as to which no instructions have been marked, will be voted FOR
the approval of the Reorganization Agreement and FOR the approval of the
Adjournment Proposal, except that if a proxy is voted against the Reorganization
Agreement and no instruction is given in connection with the Adjournment
Proposal, the proxy will not be voted in favor of the Adjournment Proposal.
Should any other matter properly come before the Special Meeting, the persons
named as proxies in the accompanying proxy, acting by a plurality of those
proxies present, will have discretionary authority to vote on such matters in
accordance with their judgment. As of the time of the preparation of this Proxy
Statement-Prospectus, the NSS Board does not know of any matters other than
those referred to in the Notice of Special Meeting of Shareholders to be
presented for action at the Special Meeting.
Shareholders who execute a proxy retain the right to revoke it at any time
prior to its use. Unless so revoked, the shares represented by such proxies will
be voted at the Special Meeting and all adjournments thereof. Prior to the
Special Meeting a proxy may be revoked by filing a written revocation or a duly
executed proxy bearing a later date with the Secretary of NSS, Jeremiah T.
Dorney. During the Special 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 Special Meeting prior to the close of voting. A proxy will not be voted if a
shareholder attends the Special Meeting and votes in person.
If a shareholder holds NSS Common through participation in NSS's Employee
Stock Ownership Plan (the "NSS ESOP"), the shareholder will receive a separate
card for use in providing voting instructions to the ESOP Trustee. The ESOP
Trustee will vote all allocated shares held by the ESOP in accordance with the
instructions received from participants and will vote all unallocated shares and
allocated shares with respect to which voting instructions have not been
received in its fiduciary discretion.
Employees who hold NSS Common through participation in NSS's Thrift
Incentive Savings Plan ("NSS Thrift Incentive Plan") will receive a separate
card for use in providing voting instructions to the Trustee of the NSS Thrift
Incentive Plan. Full shares held by the NSS Thrift Incentive Plan will be voted
by the Trustee in accordance with the instructions received from participants.
The Trustee will vote any participants' shares with respect to which
instructions have not been received in its fiduciary discretion.
If a person holding NSS Common in street name wishes to vote such NSS
Common at the Special Meeting, the person must obtain from the nominee holding
the NSS Common in street name a properly executed "legal proxy" identifying the
individual as a NSS shareholder, authorizing the NSS shareholder to act on
behalf of the nominee at the Special Meeting and identifying the number of
shares with respect to which the authorization is granted.
The cost of soliciting proxies will be borne by NSS. In addition to use of
the mails, proxies may be solicited personally or by telephone, telecopier or
telegraph by officers, directors or employees of NSS, who will not be specially
compensated for such solicitation activities. Arrangements will also be made by
NSS to reimburse brokerage houses and other custodians, nominees and fiduciaries
for their reasonable expense incurred in forwarding solicitation materials to
the beneficial owners of shares held of record by such persons. NSS has retained
Morrow & Co., a proxy soliciting firm, to assist in the solicitation of proxies,
at a fee of $6,000 plus fees for direct telephone solicitations, if authorized,
and reimbursement of certain out-of-pocket costs.
9
<PAGE>
SELECTED FINANCIAL DATA
The tables below set forth selected historical financial information for
Summit and NSS for each of the five years in the period ended December 31, 1997
and the six month periods ended June 30, 1998 and June 30, 1997. Such
information has been derived from and should be read in conjunction with the
consolidated financial statements of Summit and NSS, including the respective
notes thereto, and management's discussions and analysis of financial condition
and results of operations contained in the respective Form 10-K's and Form
10-Q's of Summit and NSS, which are incorporated by reference in this Proxy
Statement-Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE". The
selected historical financial information for Summit and NSS for the six month
periods ended June 30, 1998 and June 30, 1997 reflect, in the opinion of the
managements of Summit and NSS, respectively, all adjustments (comprising only
normal recurring accruals) necessary for a fair presentation of the consolidated
operating results and financial position of Summit and NSS for such interim
periods. Results for the interim periods are not necessarily indicative of
results for the full year or any other period.
SUMMIT BANCORP.
SUMMARY OF SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------
1998 1997
------------- -------------
<S> <C> <C>
SUMMARY OF OPERATIONS:
Interest income ........................ $ 1,067,717 $ 1,018,145
Interest expense ........................ 483,666 451,315
Net interest income ..................... 584,051 566,830
Provision for loan losses ............... 33,000 30,600
Securities gains ........................ 4,498 2,206
Net income .............................. 230,894 187,540
Net income per share:
Basic ................................ 1.31 1.07
Diluted ................................ 1.29 1.06
Cash dividends declared per share ...... 0.57 0.48
Average common shares outstanding:
Basic ................................. 176,528 174,642
Diluted ................................ 178,739 176,916
BALANCE SHEET DATA (AT PERIOD END):
Total assets ........................... $31,142,043 $29,224,687
Securities .............................. 9,390,357 8,695,024
Loans ................................. 19,704,103 18,597,663
Total deposits ........................ 22,106,450 22,167,140
Borrowed funds, including long-term
debt ................................. 6,034,250 4,243,000
Shareholders' equity .................. 2,582,582 2,484,062
Book value per common share ............ 14.85 14.17
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Interest income ........................ $ 2,064,706 $ 1,906,996 $ 1,831,934 $ 1,572,370 $ 1,452,643
Interest expense ........................ 919,617 853,707 822,232 599,732 558,889
Net interest income ..................... 1,145,089 1,053,289 1,009,702 972,638 893,754
Provision for loan losses ............... 59,100 64,034 72,090 94,347 115,902
Securities gains ........................ 5,637 3,862 8,595 4,954 12,681
Net income .............................. 370,965 283,675 300,412 213,917 182,683
Net income per share:
Basic ................................ 2.12 1.69 1.89 1.37 1.19
Diluted ................................ 2.09 1.67 1.87 1.36 1.17
Cash dividends declared per share ...... 1.02 0.90 0.79 0.63 0.46
Average common shares outstanding:
Basic .................................. 175,128 166,673 157,244 153,698 151,080
Diluted ................................ 177,459 168,788 159,249 155,520 153,323
BALANCE SHEET DATA (AT PERIOD END):
Total assets ........................... $29,964,172 $27,767,271 $26,647,452 $25,484,073 $22,605,545
Securities .............................. 9,267,655 8,320,520 8,026,968 8,445,936 7,035,110
Loans ................................. 18,888,366 17,386,059 16,413,222 15,048,579 13,552,381
Total deposits ........................ 22,329,436 21,629,531 21,232,926 19,981,071 18,956,204
Borrowed funds, including long-term
debt ................................. 4,644,703 3,502,160 2,483,584 2,816,154 1,087,698
Shareholders' equity .................. 2,612,420 2,290,838 2,130,108 1,813,445 1,691,108
Book value per common share ............ 14.79 13.61 13.04 11.40 10.80
</TABLE>
10
<PAGE>
NSS BANCORP, INC.
SUMMARY OF SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994 (1) 1993 (1)
---------- ---------- ---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Interest income ........................ $ 23,323 $ 22,024 $ 45,869 $ 41,255 $ 33,015 $ 25,045 $ 24,520
Interest expense ........................ 13,261 12,786 26,496 23,640 18,398 13,112 13,719
Net interest income ..................... 10,062 9,238 19,373 17,615 14,617 11,933 10,801
Provision for loan losses ............... 150 - - 4,415 1,005 3,790 1,000
Securities gains (losses) ............... 360 363 1,115 661 798 (64) 1,939
Net income (loss) ..................... 2,596 2,194 5,565 5,702 4,778 (3,487) 781
Net income (loss) per share:
Basic ................................ 1.08 .91 2.31 2.39 2.04 (1.51) N/A
Diluted ................................ 1.02 .88 2.20 2.34 2.03 (1.51) N/A
Cash dividends declared per share ...... .23 .15 0.35 0.15 - - -
Average common shares outstanding:
Basic .................................. 2,398 2,404 2,414 2,381 2,346 2,306 N/A
Diluted ................................ 2,553 2,499 2,533 2,440 2,351 2,306 N/A
BALANCE SHEET DATA (AT PERIOD END):
Total assets ........................... $651,825 $663,668 $654,222 $589,589 $515,267 $464,901 $427,950
Securities .............................. 189,822 184,965 180,497 140,101 123,865 148,431 116,357
Loans ................................. 418,885 450,041 432,269 418,818 360,475 290,416 269,300
Total deposits ........................ 458,450 435,031 444,211 423,290 402,797 363,071 359,063
Borrowed funds, including long-term
debt ................................. 136,260 174,986 151,671 114,043 67,123 63,510 48,765
Shareholders' equity .................. 55,141 51,910 56,138 49,353 43,595 37,513 19,712
Book value per common share ............ 23.19 21.54 23.06 20.59 18.44 16.10 N/A
</TABLE>
- --------
(1) NSS Bank's initial public offering of common stock was completed June 15,
1994 upon the conversion of NSS Bank from a mutual savings bank into a stock
savings bank.
11
<PAGE>
MARKET PRICE AND DIVIDEND MATTERS
MARKET PRICE AND DIVIDEND HISTORY
Summit Common is listed and traded on the NYSE and is quoted under the
symbol "SUB" and NSS Common is listed and traded on the Nasdaq under the symbol
"NSSY" (NSS became a bank holding company on October 1, 1997; prior to that date
NSS Common consisted of common stock of NSS Bank (formerly known as Norwalk
Savings Society, which also traded on Nasdaq under the symbol "NSSY"). The
following table sets forth, for the periods indicated, the high and low sale
prices of a share of Summit Common and NSS Common, as reported in published
financial sources, and quarterly dividends declared per share of Summit Common
and NSS Common.
Where necessary, sale prices shown in the table below have been rounded to
the nearest cent. All sale prices and dividends shown below with respect to
Summit Common have been adjusted for stock splits.
<TABLE>
<CAPTION>
SUMMIT COMMON NSS COMMON
--------------------------------- --------------------------------
SALES PRICES SALES PRICES
------------------- -------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
-------- -------- ----------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996
First Quarter ............ $26.75 $22.92 $.21 $22.00 $18.75 $ -
Second Quarter ............ $26.33 $22.67 $.21 $22.25 $17.94 $.05
Third Quarter ............ $27.42 $21.75 $.24 $23.13 $20.88 $.05
Fourth Quarter ............ $30.08 $26.33 $.24 $24.88 $22.75 $.05
1997
First Quarter ............ $33.33 $28.50 $.24 $26.25 $22.94 $.05
Second Quarter ............ $35.08 $28.58 $.24 $31.00 $23.00 $.10
Third Quarter ............ $45.31 $33.58 $.27 $37.50 $28.25 $.10
Fourth Quarter ............ $53.38 $38.38 $.27 $40.25 $31.75 $.10
1998
First Quarter ............ $53.88 $45.88 $.27 $48.50 $36.63 $.10
Second Quarter ............ $53.50 $44.75 $.30 $57.13 $42.00 $.13
Third Quarter (through
September __, 1998) ......
</TABLE>
On June 17, 1998, the last full trading day prior to the public
announcement of the execution of the Reorganization Agreement, the last sale
price of a share of Summit Common was $47.75 and the last sale price of a share
of NSS Common was $45.88. On September ___, 1998, the last sale price of Summit
Common was $____ and the last sale price of NSS Common was $______. NSS
shareholders are urged to obtain current market quotations.
NO ASSURANCE CAN BE GIVEN AS TO WHAT THE MARKET PRICE OF SUMMIT COMMON WILL
BE IF AND WHEN THE REORGANIZATION IS CONSUMMATED. BECAUSE THE EXCHANGE RATIO IS
FIXED AND BECAUSE THE MARKET PRICE OF SUMMIT COMMON IS SUBJECT TO FLUCTUATION,
THE VALUE OF THE SHARES OF SUMMIT COMMON THAT HOLDERS OF NSS COMMON WILL RECEIVE
IN THE REORGANIZATION MAY INCREASE OR DECREASE PRIOR TO AND FOLLOWING THE
REORGANIZATION. NSS SHARE HOLDERS ARE ADVISED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR SUMMIT COMMON AND NSS COMMON. IN ADDITION, PAST DIVIDENDS PAID IN
RESPECT OF SUMMIT COMMON AND NSS COMMON ARE NOT NECESSARILY INDICATIVE OF FUTURE
DIVIDENDS WHICH MAY BE DECLARED AND PAID. NO ASSURANCE CAN BE GIVEN CONCERNING
DIVIDENDS TO BE DECLARED AND PAID IN RESPECT OF SUMMIT COMMON AND NSS COMMON
BEFORE OR AFTER THE EFFECTIVE TIME.
12
<PAGE>
COORDINATION AND DETERMINATION OF DIVIDENDS UNDER REORGANIZATION AGREEMENT
In order to ensure that NSS shareholders would be paid at least one, but no
more than one, regular dividend in the calendar quarter in which the
Reorganization is consummated, NSS agreed to coordinate with Summit the
declaration of any dividends and the setting of any dividend record or payment
dates. Under the Reorganization Agreement, NSS may declare a quarterly dividend
up to $.13 per share; provided, however, that if Summit declares a dividend
between the date of the Reorganization Agreement and the Effective Time which
represents an increase over the most recent dividend declared by Summit prior to
the date of the Reorganization Agreement, NSS may pay a dividend per quarter
equal to $.13 plus the percentage increase in the Summit dividend.
DIVIDEND LIMITATIONS
Summit's primary source of funds to pay dividends to its shareholders is
provided by dividends from its subsidiary banks. The bank subsidiaries of Summit
are restricted by law in the amount of dividends they may pay to Summit. In
addition, Summit is restricted by certain debt agreements in the amount of
dividends it may pay to its shareholders. At June 30, 1998, the amount that
would have been available on that date for dividend payments to holders of
Summit Common was approximately $106.7 million.
PROPOSAL I-APPROVAL OF THE REORGANIZATION AGREEMENT
THE REORGANIZATION
The following information concerning the Reorganization, insofar as it
relates to matters contained in the Reorganization Agreement, is qualified in
its entirety by reference to the Reorganization Agreement, a copy of which is
attached hereto as Appendix A and incorporated herein by reference.
GENERAL
The Reorganization Agreement provides for the reorganization of NSS with
and into Summit, pursuant to one of the following methods, as determined by
Summit: (1) The merger of NSS into Summit; (2) the merger of NSS into a newly
formed, wholly-owned subsidiary of Summit; (3) the merger of a newly formed,
wholly-owned subsidiary of Summit into NSS or (4) the exchange of shares of
Summit Common for shares of NSS Common pursuant to the share exchange provisions
of the CBCA. Summit currently intends to effectuate the Reorganization through
the merger of NSS into Summit. However, until the closing of the Reorganization
("Closing"), Summit has the ability to select any one of the four methods
described above to effectuate the Reorganization and may select from any of the
four methods without further notice to NSS shareholders. Accordingly, a vote in
favor of the Reorganization Agreement constitutes approval to effectuate the
Reorganization pursuant to any one of the four methods described. In addition, a
vote in favor of the proposal to approve the Reorganization Agreement
constitutes approval of the Reorganization Option Agreement which is a part of
the Reorganization Agreement. Upon consummation of the Reorganization, and
irrespective of the method chosen by Summit to effectuate the Reorganization,
each outstanding share of NSS Common other than (i) shares of NSS Common
beneficially owned by Summit or a subsidiary of Summit (other than shares held
as a result of foreclosures or debts previously contracted), if any, (ii) shares
of NSS Common beneficially owned by NSS or a subsidiary of NSS (other than
shares of NSS Common held as a result of forfeitures or debts previously
contracted), if any, and (iii) shares of NSS Common held in the treasury of NSS,
if any, will be converted into and represent the right to receive the
Reorganization Consideration.
CLOSING AND EFFECTIVE TIME
The Reorganization Agreement provides that, unless otherwise agreed and
assuming all conditions to closing have been satisfied or waived, the Closing
will be held on the date designated by Summit on at least five business days
notice ("Closing Notice") given to NSS. The date for the Closing designated by
Summit may not be later than 32 days after the last to occur of the following:
(1) if the transactions contemplated by the Reorganization Agreement are being
contested in any legal proceedings, the date that all such proceedings have been
13
<PAGE>
brought to a conclusion favorable, in the judgment of Summit and NSS, to the
consummation of the transactions contemplated by the Reorganization Agreement or
such prior date as Summit and NSS shall elect, whether or not such proceedings
have been brought to a conclusion; or (2) the date on which all Required
Approvals are received and any required waiting periods have expired.
If the Reorganization Agreement is approved by the requisite vote of NSS
shareholders, all other conditions of the Reorganization are satisfied or waived
and the Closing is held, the Reorganization will become effective at the date
and time specified in the certificate or certificates of merger required to be
filed with the jurisdiction or jurisdictions of incorporation of each of the
constituent corporations to the Reorganization or if the Reorganization is a
share exchange the date and time specified in the certificate of exchange
required to be filed with the Secretary of the State of the State of Connecticut
following the date on which the closing of the Reorganization occurs ("Closing
Date"). If the Reorganization Agreement is approved by NSS shareholders on the
scheduled date of the Special Meeting, subject to the satisfaction or waiver of
certain other conditions described herein, it is presently contemplated that the
Effective Time will occur during the fourth calendar quarter of 1998. The
Reorganization Agreement may be terminated by either party if, among other
things, the Closing fails to occur on or before March 1, 1999, but a party may
not exercise this right if the failure to close is due solely to that party's
failure to perform or observe agreements required by the Reorganization
Agreement to be performed or observed by it on or before the Closing Date. See
"THE REORGANIZATION -- The Reorganization Agreement -- Conditions to the
Reorganization; Termination".
CONVERSION OF NSS COMMON
Upon consummation of the Reorganization, the outstanding shares of NSS
Common held at the Effective Time by each shareholder of NSS at the Effective
Time, other than (i) shares of NSS Common beneficially owned by Summit or a
subsidiary of Summit (other than shares held as a result of foreclosures or
debts previously contracted), if any, (ii) shares of NSS Common beneficially
owned by NSS or a subsidiary of NSS (other than shares of NSS Common held as a
result of forfeitures or debts previously contracted), if any, and (iii) shares
of NSS Common held in the treasury of NSS, if any, will be converted into Summit
Common at Exchange Ratio of 1.232 and represent the right of the particular
shareholder to receive the whole shares of Summit Common resulting from the
conversion and, in lieu of any fractional share of Summit Common resulting from
the conversion, a Cash in Lieu Amount equal to the fraction of a whole share
represented by the fractional share multiplied by the closing price of a share
of Summit Common on the NYSE-Composite Transactions List on the last trading day
prior to the Effective Time. The Exchange Ratio is subject to appropriate
adjustments in the event that, from the date of the Reorganization Agreement to
the Effective Time, the outstanding shares of Summit Common are increased or
decreased, changed into or exchanged for a different number or kind of shares or
securities through reorganization, recapitalization, reclassification, stock
dividend, stock split or reverse stock split or other similar changes.
EXCHANGE OF NSS CERTIFICATES
Prior to the Effective Time, Summit will appoint First Chicago Trust
Company of New York or another entity reasonably satisfactory to NSS as the
Exchange Agent. As promptly as practicable after the Effective Time, but in no
event more than 10 days after the Exchange Agent receives an accurate and
complete list of all holders of record of outstanding NSS Common as of the
Effective Time, Summit will cause the Exchange Agent to send to each NSS
shareholder a letter of transmittal and instructions for exchanging their NSS
Certificates for a Summit Certificate and, if entitled thereto, a check
representing a Cash In Lieu Amount.
To effect a proper surrender and exchange of NSS Certificates, all NSS
Certificates held by a particular NSS shareholder must be surrendered to the
Exchange Agent by such shareholder with properly executed and completed letters
of transmittal. Until a NSS shareholder has properly surrendered NSS
Certificates, Summit may, at its option, refuse to pay to such holder dividends
or other distributions, if any, payable to holders of Summit Common; provided,
however, that, upon proper surrender and exchange of NSS Certificates, there
will be paid to such holders the amount, without interest, of dividends and
other distributions, if any, which became payable prior thereto but which were
not paid. No transfer of NSS Common will be effected on the stock transfer books
of NSS at and after the Effective Time.
14
<PAGE>
The Exchange Agent shall have reasonable discretion to determine whether
letters of transmittal have been properly completed and executed and to
disregard immaterial defects, and any good faith decisions of Summit regarding
such matters as may be referred to it by the Exchange Agent shall be binding and
conclusive.
Neither certificates for fractions of shares of Summit Common nor scrip
certificates for such fractions will be issued, and holders of NSS Certificates
who would otherwise be entitled to receive fractions of shares of Summit Common
will have none of the rights with respect to such fractions of shares
(including, without limitation, the right to receive dividends) that a holder of
a full share of Summit Common would possess in respect of such full share, and
will receive, in lieu thereof, the Cash In Lieu Amount.
If more than one NSS Certificate is surrendered for the same NSS
shareholder account, the number of whole shares of Summit Common for which a
Summit Certificate will be issued to the owner of such account pursuant to the
Reorganization Agreement will be computed on the basis of the aggregate number
of shares of NSS Common represented by the NSS Certificates so surrendered.
NSS SHAREHOLDERS SHOULD NOT SURRENDER THEIR NSS CERTIFICATES FOR EXCHANGE
UNTIL A LETTER OF TRANSMITTAL, INSTRUCTIONS AND OTHER EXCHANGE MATERIALS ARE
RECEIVED FROM THE EXCHANGE AGENT. HOWEVER, NSS SHAREHOLDERS ARE URGED TO NOTIFY
CHASEMELLON SHAREHOLDER SERVICES, L.L.C. NOW, AT (800) 851-9677 IF THEIR NSS
CERTIFICATES ARE LOST, STOLEN, DESTROYED OR NOT PROPERLY REGISTERED, IN ORDER TO
BEGIN THE PROCESS OF ISSUING REPLACEMENT NSS CERTIFICATES.
CONVERSION OF NSS STOCK OPTIONS
Each Original Option granted pursuant to the NSS Option Plans which is
outstanding and unexercised at the Effective Time, will be converted
automatically at the Effective Time into a New Option. All Original Options
granted under the Employee Plan, whether or not exercisable immediately prior to
the Effective Time, will be converted pursuant to the terms of the Employee Plan
into a New Option that is immediately exercisable after the Effective Time. In
addition, for a thirty day period holders of New Options which were originally
granted under the Employee Plan have the right to elect to receive, in lieu of
Summit Common, a cash payment equal to the difference between the adjusted
exercise price of the New Option and the value of the Summit Common which could
be acquired pursuant to the exercise of the New Option. Subject to the
adjustment in exercise price and number of shares, described below, each New
Option will continue to be governed by the terms of the NSS Option Plan under
which the corresponding Original Option was granted and the stock option
agreement by which it was evidenced, including terms and provisions governing
exercises. In each case, (i) the number of shares of Summit Common subject to
the New Option will be equal to the number of shares of Summit Common which
would have been issued in the Reorganization if the shares of NSS Common subject
to that option were issued and outstanding immediately prior to the Effective
Time, rounded down to the next lower full share, and (ii) the exercise price per
share of Summit Common subject to the New Option will be equal to the exercise
price per share of NSS Common subject to the Original Option so converted
divided by the Exchange Ratio.
Within 45 days after the receipt by Summit of an accurate and complete list
of all holders of NSS options, Summit will issue to each holder of New Options,
upon receipt and cancellation of all agreements under which Original Options
were issued to such holder, appropriate instruments confirming the conversion
described above; provided, however, that Summit will not be obligated to issue
such confirming instruments or any shares of Summit Common issuable upon
exercise of a New Option until the shares of Summit Common issuable upon
exercise of the New Options have been registered with the Commission and
authorized for listing on the NYSE and for sale by any appropriate state
securities regulators, which Summit will use its best efforts to effect within
30 days after NSS shall have delivered to Summit the above mentioned
option-holder list.
RECOMMENDATION OF NSS BOARD
THE REORGANIZATION AGREEMENT HAS BEEN APPROVED BY THE NSS BOARD. THE NSS
BOARD BELIEVES THAT THE REORGANIZATION IS IN THE BEST INTERESTS OF NSS
SHAREHOLDERS. THE NSS BOARD UNANIMOUSLY RECOMMENDS THAT NSS SHAREHOLDERS VOTE
FOR THE PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT.
15
<PAGE>
BACKGROUND
NSS Bank completed its conversion from a mutual savings bank to a capital
stock savings bank in June, 1994. The Certificate of Incorporation of NSS Bank
and Connecticut Banking Department regulations placed certain restrictions on
the ability of a person to offer to acquire, or acquire, NSS Bank for a period
of three years following the conversion (until June, 1997). Shortly after the
expiration of the three year period, NSS Bank and its management began to
receive, on occasion, informal acquisition proposals and other inquiries as to
NSS Bank's interest in forming a strategic alliance with another entity. The NSS
Bank Board determined that none of these informal proposals and inquiries
warranted entering into formal negotiations with the party making them.
Accordingly, NSS Bank concentrated most of its efforts in 1997 on improving
shareholder value as an independent institution. NSS Bank formed NSS in 1997 to
provide the organization with a greater corporate flexibility to effect
acquisitions, stock repurchases and business and product expansion. However, in
considering both the short-term and long-term objectives of NSS, the NSS Board
recognized that changes in government regulation of interstate banking and
industry consolidation had significantly increased competition in NSS's market
area. The NSS Board determined that, in order to compete in this changed
environment, NSS would have to expand the products and services offered to
customers.
During late 1997, the NSS Board interviewed several investment banking
firms specifically to assist NSS with its evaluation of various strategic
options to maximize shareholder value. Upon completion of the interview process,
NSS engaged Sandler O'Neill as its financial advisor. Sandler O'Neill reviewed
with NSS a variety of strategic options, including a possible sale of NSS. At
that time, the NSS Board determined that it could enhance shareholder value by
remaining independent, improving operational performance and repurchasing its
stock.
Several events beginning in late 1997 and carrying over into 1998
subsequently caused NSS to review its remaining independent strategy. First, a
significant shareholder of NSS publicly took the position that NSS should be
sold. Second, the stock price of NSS appreciated significantly due in part,
presumably, to the increased possibility that NSS might be sold in the short
term. Third, a number of banking institutions announced acquisitions at
historically high sales prices. Finally, it became apparent through acquisition
announcements such as that between Citicorp and Travelers Insurance that
cross-industry barriers were rapidly coming down, thereby creating the promise
of a new and powerful competitive force for community banks such as NSS to
contend with. After deliberate consideration of these developments and NSS's
options, the NSS Board decided to further explore the possibility of a strategic
alliance with another financial institution.
At the instruction of NSS, Sandler O'Neill identified and contacted
numerous financial institutions to determine their initial interest in acquiring
NSS. In May 1998, Sandler O'Neill prepared a confidential offering memorandum
containing financial data and other information relating to NSS and sent it to
seven companies that had executed confidentiality agreements. The seven
companies were initially instructed to provide their preliminary indications of
interest to Sandler O'Neill by May 28, 1998. Three of the seven companies that
received the offering memorandum provided preliminary indications of interest,
which were presented to the NSS Board on June 3, 1998. All three proposals
contemplated a stock- for- stock exchange. The NSS Board questioned Sandler
O'Neill about the financial aspects of each of the proposals, specifically
inquiring into the key financial components of comparable transactions. The NSS
Board dismissed one of the indications of interest because the Board believed
that the price submitted by that bidder was not competitive. The NSS Board
extensively discussed the remaining two proposals, and based upon the strength
of Summit's historic and expected results of operations, financial condition and
common stock value and the other factors described below under "Reasons for the
Reorganzation", NSS's Board determined Summit to have the preferred proposal.
The NSS Board then authorized Summit to perform additional due diligence on NSS,
asked Summit to prepare a definitive agreement for review, and authorized its
representatives to perform certain due diligence activities relative to Summit.
The NSS Board further instructed Sandler O'Neill to advise the other interested
party that based upon the NSS Board's review of the other proposals submitted,
NSS had determined to pursue discussions with another party.
In response to Sandler O'Neill's notification the other interested party
submitted a revised proposal, increasing its price. Sandler O'Neill then advised
Summit that NSS had received a revised proposal from the other finalist that
would be considered by the NSS Board and suggested to Summit that it should
16
<PAGE>
consider revising its proposal if it intended to continue to pursue the
transaction. In response, Summit submitted to NSS a revised proposal that
included an increase in the Exchange Ratio to 1.232 and reflected the completion
of Summit's due diligence process. NSS management, its financial advisor and
legal counsel proceeded to review and revise several drafts of the proposed
agreement with Summit, arriving at a draft that was presentable to the NSS
Board for its consideration. The proposed definitive agreement, together with a
memorandum from NSS's legal counsel summarizing the material terms of the
definitive agreement, were then delivered to each of NSS's directors for their
review and consideration at the June 17, 1998 NSS Board meeting.
At the June 17, 1998 NSS Board meeting, Sandler O'Neill reviewed the
financial terms of the two revised proposals. Management of NSS and Sandler
O'Neill also reviewed with the NSS Board the results of their due diligence
review of Summit. Legal counsel for NSS reviewed at length with NSS's Board the
proposed definitive agreement and the stock option agreement. Based on
substantially the same factors that led to its prior decision, plus the fact
that Summit's proposal was not conditional on due diligence review and was
embodied in a definitive agreement, NSS's Board again determined that Summit's
proposal, with its increased price, continued to be the preferred proposal. In
reaching its determination the NSS Board considered the strengths of Summit
referenced above, as well as other relevant interests, including those of the
shareholders, employees, customers, suppliers and community as required pursuant
to Connecticut corporation law, and Sandler O'Neill's opinion that the Exchange
Ratio is fair to NSS's shareholders from a financial point of view. The NSS
Board determined that the Reorganization is in the best interests of NSS, its
shareholders and other constituents, and for the reasons set forth below, the
NSS Board unanimously approved the Reorganization. The NSS Board authorized
management and NSS's representatives to finalize the definitive agreement. Once
final revisions were made to the definitive agreement, it was executed by NSS
and Summit on the evening of June 17, 1998. Summit and NSS publicly announced
the Reorganization prior to the beginning of business on June 18, 1998.
REASONS FOR THE REORGANIZATION
NSS
The NSS Board unanimously recommends the approval of the Reorganization to
shareholders. The terms of the transaction, including the Exchange Ratio, were
the result of arm's-length negotiations between NSS and Summit. The NSS Board
believes that the Reorganization will enable holders of NSS Common to
immediately realize increased value on their investment in NSS and to
participate in opportunities for appreciation of Summit Common. In reaching its
determination that the Reorganization is in the best interests of the NSS
shareholders, and recommending that the NSS shareholders approve the
Reorganization, the NSS Board consulted with NSS management, as well as Sandler
O'Neill and its legal advisors, and considered a number of factors. Without
assigning any relative or specific weights thereto, the following material
factors were considered by the NSS Board in reaching its determination:
(a) the amount and form of the consideration offered by Summit in relation to
the market value, book value, earnings per share, and dividend rates of
NSS Common and the NSS Board's belief that of the alternatives available,
the Reorganization offered the greatest opportunity for long-term value
to the NSS shareholders;
(b) the expectation that the Reorganization will be a tax-free transaction to
NSS and its shareholders to the extent that they receive Summit Common in
exchange for their shares;
(c) Summit's business, results of operations, prospects and financial
condition and the historical and potential future value of the Summit
Common and dividends paid thereon;
(d) the potential operating efficiencies and financial strength that the
Reorganization would provide to the combined NSS-Summit organization, its
customers, depositors, employees and the communities it serves, and the
immediate and long-term effect that it would have on such organization's
ability to compete for new business;
(e) that the combined organization would be well situated to offer an
expanded range of financial services and the benefits to customers as a
result thereof;
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(f) the favorable conditions to the Reorganization, including the absence of
a condition requiring pooling-of-interests accounting treatment;
(g) the fact that the Reorganization Agreement is structured in such a manner
to empower the shareholders as a group to decide whether or not to accept
Summit's proposal to acquire NSS;
(h) Sandler O'Neill's opinion that the Exchange Ratio is fair, from a
financial point of view, to NSS shareholders, and the fact that Sandler
O'Neill has confirmed in writing its opinion, as of the date of this
Proxy Statement Prospectus;
(i) the NSS Board's familiarity with, and review of, the business, financial
condition, results of operations and prospects of NSS, including, but not
limited to, its potential growth, development, productivity and
profitability and the business risks associated therewith;
(j) the current and prospective environment in which NSS operates, including
national and local economic conditions, the highly competitive
environment for financial institutions generally, the increased
regulatory burden on financial institutions, and the trend toward
consolidation in the financial services industry;
(k) the advantages and disadvantages of NSS remaining as an independent
institution or affiliating with a larger institution; and
(l) the general structure of the Reorganization and the compatibility of
management and business philosophy of Summit and NSS.
THE NSS BOARD UNANIMOUSLY RECOMMENDS THAT NSS SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE REORGANIZATION AGREEMENT.
SUMMIT. The Summit Board believes the Reorganization will enhance Summit's
retail franchise and competitive position in key market areas.
OPINION OF NSS'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated as of April 20, 1998 (the "Sandler
O'Neill Agreement"), NSS retained Sandler O'Neill as an independent financial
advisor in connection with NSS's consideration of a possible business
combination with a second party. Sandler O'Neill is a nationally recognized
investment banking firm whose principal business specialty is banks and savings
institutions. In the ordinary course of its investment banking business, Sandler
O'Neill is regularly engaged in the valuation of such businesses and their
securities in connection with mergers and acquisitions and other corporate
transactions.
Pursuant to the terms of the Sandler O'Neill Agreement, Sandler O'Neill
acted as financial advisor to NSS in connection with the Reorganization. In
connection therewith, the NSS Board requested Sandler O'Neill to render its
opinion as to the fairness of the Exchange Ratio to the shareholders of NSS from
a financial point of view. On June 17, 1998, Sandler O'Neill delivered to the
NSS Board its oral opinion, subsequently confirmed in writing, that, as of such
date, the Exchange Ratio was fair to the holders of shares of NSS Common from a
financial point of view. Sandler O'Neill has also delivered to the NSS Board a
written opinion dated the date of this Proxy Statement-Prospectus (the "Sandler
O'Neill Fairness Opinion") which is substantially identical to the June 17, 1998
opinion. THE FULL TEXT OF THE SANDLER O'NEILL FAIRNESS OPINION, WHICH SETS FORTH
THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND QUALIFICATIONS
AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH RENDERING SUCH
OPINION, IS ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT- PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE. THE DESCRIPTION OF THE OPINION SET FORTH
HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX B. HOLDERS OF
SHARES OF NSS COMMON ARE URGED TO READ THE SANDLER O'NEILL FAIRNESS OPINION IN
ITS ENTIRETY IN CONNECTION WITH THEIR CONSIDERATION OF THE PROPOSED
REORGANIZATION.
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THE SANDLER O'NEILL FAIRNESS OPINION WAS PROVIDED TO THE NSS BOARD FOR ITS
INFORMATION AND IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF
VIEW, OF THE EXCHANGE RATIO TO HOLDERS OF SHARES OF NSS COMMON. IT DOES NOT
ADDRESS THE UNDERLYING BUSINESS DECISION OF NSS TO ENGAGE IN THE REORGANIZATION
OR ANY OTHER ASPECT OF THE REORGANIZATION AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY HOLDER OF SHARES OF NSS COMMON AS TO HOW SUCH SHAREHOLDER
SHOULD VOTE AT THE SPECIAL MEETING WITH RESPECT TO THE REORGANIZATION OR ANY
OTHER MATTER RELATED THERETO.
In connection with rendering its June 17, 1998 opinion, Sandler O'Neill
performed a variety of financial analyses. The following is a summary of the
material analyses performed by Sandler O'Neill, but does not purport to be a
complete description of all the analyses underlying Sandler O'Neill's opinion.
The preparation of a fairness opinion is a complex process involving subjective
judgments and is not necessarily susceptible to a partial analysis or summary
description. Sandler O'Neill believes that its analyses must be considered as a
whole and that selecting portions of such analyses and the factors considered
therein, without considering all factors and analyses, could create an
incomplete view of the analyses and processes underlying its opinion. In
performing its analyses, Sandler O'Neill made numerous assumptions with respect
to industry performance, business and economic conditions and various other
matters, many of which cannot be predicted and are beyond the control of NSS,
Summit and Sandler O'Neill. Any estimates contained in Sandler O'Neill's
analyses are not necessarily indicative of future results or values, which may
be significantly more or less favorable than such estimates. Estimates on the
values of companies do not purport to be appraisals or necessarily reflect the
prices at which companies or their securities may actually be sold. Because such
estimates are inherently subject to uncertainty, neither Summit, NSS nor Sandler
O'Neill assumes responsibility for their accuracy.
SUMMARY OF PROPOSAL
Sandler O'Neill reviewed the financial terms of the proposed transaction.
Based on the closing price of Summit Common on June 17, 1998 of $47.75 and an
Exchange Ratio of 1.232, Sandler O'Neill calculated an implied transaction value
per share of NSS of $58.83. Based upon such implied transaction value and NSS's
March 31, 1998 financial information, Sandler O'Neill calculated the price to
tangible book value and price to last twelve months' normalized earnings. This
analysis yielded a price to tangible book value multiple of 2.64x and a price to
last twelve months' earnings multiple of 26.74x.
STOCK TRADING HISTORY
Sandler O'Neill reviewed the history of the reported trading prices and
volume of NSS Common and Summit Common, and the relationship between the
movements in the prices of NSS Common and Summit Common, respectively, to
movements in certain stock indices, including the Standard & Poor's 500 Index
(the "S&P Index"), the NASDAQ Banking Index (the "Bank Index") and a selected
composite group of publicly traded savings institutions (in the case of NSS) and
publicly traded commercial banks (in the case of Summit) in geographic proximity
and of similar asset size to NSS and Summit, respectively. During the one-year
period ended June 12, 1998, NSS Common outperformed each of the indices to which
it was compared, and Summit Common outperformed each of the S&P Index and the
Bank Index and slightly under performed the peer group index.
COMPARABLE COMPANY ANALYSIS
Sandler O'Neill used publicly available information to compare selected
financial and market trading information, including balance sheet composition,
asset quality ratios, loan loss reserve levels, profitability, capital adequacy,
dividends and trading multiples, for NSS and two groups of savings institutions.
The first group consisted of NSS and the following 12 publicly traded regional
savings institutions (the "Regional Group"): Medford Bancorp Inc., BostonFed
Bancorp Inc., First Federal of East Hartford, MECH Financial Inc., MASSBANK
Corp., People's Bancshares Inc., American Bank of Connecticut, MetroWest Bank,
Abington Bancorp Inc., Bancorp Connecticut Inc., Warren Bancorp Inc., and NewMil
Bancorp Inc. Sandler O'Neill also compared NSS to a group of 10 publicly traded
savings institutions which had a return on average equity (based on last twelve
months' earnings) of greater than 16% and a price to tangible book value of
greater than 230% (the
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"Highly Valued Group"). The Highly Valued Group included the following
institutions: Metropolitan Financial Corp., People's Bancshares Inc., CFSB
Bancorp Inc., Great Southern Bancorp Inc., Home Federal Bancorp, MetroWest Bank,
Coastal Financial Corp., PVF CapitalCorp., Warren Bancorp Inc. and First
Citizens Corp. The analysis compared publicly available financial information
for NSS and the median data for each of the Regional Group and the Highly Valued
Group as of and for each of the years ended December 31, 1993 through December
31, 1997 and as of and for the twelve months ended March 31, 1998.
Sandler O'Neill also used publicly available information to perform a
similar comparison of selected financial and market trading information for
Summit and two different groups of commercial banks. The first group consisted
of Summit and the following five publicly traded commercial banks (the "Peer
Group"): Bank of New York Co., Republic New York Corp., HSBC Americas Inc.,
First Maryland Bancorp and M&T Bank Corporation. Sandler O'Neill also compared
Summit to a group of eight publicly traded commercial banks which had a return
on average equity (based on last twelve months' earnings) of greater than 18%
and a price to tangible book value of greater than 320% (the "Commercial Highly
Valued Group"). The Commercial Highly Valued Group was comprised of State Street
Corp., Comerica Inc., Northern Trust Corp., Fifth Third Bancorp, Firstar Corp.,
First Tennessee National Corp., First Empire State Corp. and Old Kent Financial
Corp. The analysis compared publicly available financial information for Summit
and the median data for each of the Peer Group and the Commercial Highly Valued
Group as of and for each of the years ended December 31, 1993 through December
31, 1997 and as of and for the twelve months ended March 31, 1998.
ANALYSIS OF SELECTED MERGER TRANSACTIONS
Sandler O'Neill reviewed 28 transactions announced from January 1, 1998 to
June 16, 1998 involving publicly traded savings institutions nationwide as
acquired institutions with transaction values greater than $15 million
("Nationwide Transactions"), and 9 transactions announced from July 25, 1997 to
June 16, 1998 involving public savings institutions in the New England Region
(Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont) as
acquired institutions with transaction values greater than $15 million ("New
England Transactions"). Sandler O'Neill reviewed the ratios of transaction
values to last four quarters' earnings, transaction value to book value,
transaction value to tangible book value, tangible book premium to core
deposits, transaction value to total deposits and transaction value to total
assets and computed high, low, mean, and median ratios and premiums for the
respective groups of transactions. These multiples were applied to NSS's
financial information as of and for the twelve months ended March 31, 1998.
Based upon the median multiples for Nationwide Transactions, Sandler O'Neill
derived an imputed range of values per share of NSS Common of $51.07 to $67.37.
Based upon the median multiples for New England Transactions, Sandler O'Neill
derived an imputed range of values per share of NSS Common of $47.10 to $57.15.
No company involved in the transactions included in the above analysis is
identical to NSS or Summit and no transaction included in the above analysis is
identical to the Reorganization. Accordingly, an analysis of the results of the
foregoing analysis is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of NSS and Summit and the companies to which they are being
compared.
DISCOUNTED DIVIDEND STREAM AND TERMINAL VALUE ANALYSIS
Sandler O'Neill also performed an analysis which estimated the future
stream of after-tax dividend flows of NSS through the year 2002 under various
circumstances, assuming NSS performed in accordance with the earnings forecasts
of its management and certain variations thereof. To approximate the terminal
value of NSS Common at December 31, 2002, Sandler O'Neill applied price to
earnings multiples ranging from 8x to 26x and applied multiples of tangible book
value ranging from 140% to 320%. The dividend income streams and terminal values
were then discounted to present values using different discount rates (ranging
from 9% to 14%) chosen to reflect different assumptions regarding required rates
of return of holders or prospective buyers of NSS Common. This analysis,
assuming the current dividend payout ratio and management's earnings forecasts,
indicated an imputed range of values per share of NSS Common of between $13.91
and $51.60 when applying the price to earnings multiples, and an imputed range
of values per share of NSS Common of between $24.62 and
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$67.10 when applying multiples of tangible book value. In connection with its
analysis, Sandler O'Neill used sensitivity analyses to consider the effects
changes in the underlying assumptions (including variations with respect to the
growth rate of assets, net interest spread, non-interest income, non-interest
expenses and dividend payout ratio) would have on the resulting present value
and discussed these effects with the NSS Board. Sandler O'Neill noted that the
discounted dividend stream and terminal value analysis is a widely used
valuation methodology, but the results of such methodology are highly dependent
upon the numerous assumptions that must be made, and the results thereof are not
necessarily indicative of actual values or actual future results.
PRO FORMA MERGER ANALYSIS
Sandler O'Neill analyzed certain potential pro forma effects of the
Reorganization, based upon an Exchange Ratio of 1.232, NSS's and Summit's
current and projected income statements and balance sheets, and assumptions
regarding the economic environment, accounting and tax treatment of the
Reorganization, charges associated with the Reorganization, and other
adjustments discussed with senior managements of NSS and Summit. This analysis
indicated that the Reorganization would be slightly dilutive to Summit's
earnings per share and tangible book value per share in 1999. This analysis also
indicated that, from an NSS shareholder's perspective, as compared to the
projected stand-alone performance of NSS, the Reorganization would be accretive
to NSS's earnings per share, dilutive to tangible book value per share of NSS
Common and accretive to dividends per share for all periods analyzed. The actual
results achieved by the combined company may vary from projected results and the
variations may be material.
In connection with rendering its June 17, 1998 opinion, Sandler O'Neill
reviewed, among other things: (i) the Reorganization Agreement and exhibits
thereto; (ii) the Reorganization Option Agreement; (iii) certain publicly
available financial statements of NSS and other historical financial information
provided by NSS that Sandler O'Neill deemed relevant; (iv) certain publicly
available financial statements of Summit and other historical financial
information provided by Summit that Sandler O'Neill deemed relevant; (v) certain
financial analyses and forecasts of NSS prepared by and reviewed with management
of NSS and the views of senior management of NSS regarding NSS's past and
current business operations, results thereof, financial condition and future
prospects; (vi) certain financial analyses and forecasts of Summit prepared by
and reviewed with management of Summit and the views of senior management of
Summit regarding Summit's past and current business operations, results thereof,
financial condition and future prospects; (vii) the pro forma impact of the
Reorganization; (viii) the publicly reported historical price and trading
activity for NSS Common and Summit Common, including a comparison of certain
financial and stock market information for NSS and Summit with similar publicly
available information for certain other companies the securities of which are
publicly traded; (ix) the financial terms of recent business combinations in the
savings institution industry, to the extent publicly available; (x) the current
market environment generally and the banking environment in particular; and (xi)
such other information, financial studies, analyses and investigations and
financial, economic and market criteria as Sandler O'Neill considered relevant.
In connection with rendering the Sandler O'Neill Fairness Opinion, Sandler
O'Neill confirmed the appropriateness of its reliance on the analyses used to
render its June 17, 1998 opinion by performing procedures to update certain of
such analyses and by reviewing the assumptions upon which such analyses were
based and the factors considered in connection therewith.
In performing its reviews and analyses, Sandler O'Neill assumed and relied
upon, without independent verification, the accuracy and completeness of all the
financial information, analyses and other information that was publicly
available or otherwise furnished to, reviewed by or discussed with it, and
Sandler O'Neill does not assume any responsibility or liability therefor.
Sandler O'Neill did not make an independent evaluation or appraisal of the
specific assets, the collateral securing assets or the liabilities (contingent
or otherwise) of NSS or Summit or any of their respective subsidiaries, or the
collectibility of any such assets, nor was it furnished with any such
evaluations or appraisals. Sandler O'Neill is not an expert in the evaluation of
allowances for loan losses and it has not made an independent evaluation of the
adequacy of the allowance for loan losses of NSS or Summit, nor has it reviewed
any individual credit files relating to NSS or Summit. With NSS's consent,
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Sandler O'Neill has assumed that the respective aggregate allowances for loan
losses for both NSS and Summit are adequate to cover such losses and will be
adequate on a pro forma basis for the combined entity. In addition, Sandler
O'Neill has not conducted any physical inspection of the properties or
facilities of NSS or Summit. With respect to all financial information and
projections reviewed with each company's management, Sandler O'Neill assumed
that they had been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the respective managements of the
respective future financial performances of NSS and Summit and that such
performances will be achieved. Sandler O'Neill expressed no opinion as to such
financial projections or the assumptions on which they were based.
Sandler O'Neill's opinion was necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
such opinion. Sandler O'Neill assumed, in all respects material to its analysis,
that all of the representations and warranties contained in the Reorganization
Agreement and all related agreements are true and correct, that each party to
such agreements will perform all of the covenants required to be performed by
such party under such agreements and that the conditions precedent in the
Reorganization Agreement are not waived. Sandler O'Neill also assumed, with
NSS's consent, that there has been no material change in NSS's and Summit's
assets, financial condition, results of operations, business, or prospects since
the date of the last publicly filed financial statements available to them, that
NSS and Summit will remain as going concerns for all periods relevant to its
analyses, and that the Reorganization will be accounted for as a purchase and
will qualify as a tax-free reorganization for federal income tax purposes.
Under the Sandler O'Neill Agreement, NSS will pay Sandler O'Neill a
transaction fee in connection with the Reorganization, a substantial portion of
which is contingent upon the consummation of the Reorganization. Under the terms
of the Sandler O'Neill Agreement, NSS will pay Sandler O'Neill a transaction fee
equal to 1.0% of the aggregate purchase price paid in the transaction, which
price will be determined as of the day before the Closing Date. Based on the
closing price of Summit Common on _________ (the day preceding the date of this
Proxy Statement-Prospectus), assuming for purposes of such calculation that the
Reorganization was consummated as of the date of this
Proxy-Statement-Prospectus, NSS would pay Sandler O'Neill a transaction fee of
approximately $______ million, of which approximately $______ has been paid and
the balance will be paid when the Reorganization is consummated. Sandler O'Neill
has also received a fee of $75,000 for rendering its fairness opinion. NSS has
also agreed to reimburse Sandler O'Neill for its reasonable out-of-pocket
expenses incurred in connection with its engagement and to indemnify Sandler
O'Neill and its affiliates and their respective partners, directors, officers,
employees, agents, and controlling persons against certain expenses and
liabilities, including liabilities under securities laws.
Sandler O'Neill has in the past provided certain other financial advisory
services to NSS and has received compensation for such services. In the ordinary
course of its business, Sandler O'Neill may actively trade the debt or equity
securities of NSS and Summit and their respective affiliates for its own account
and for the accounts of customers and, accordingly, may at any time hold a long
or short position in such securities.
REORGANIZATION OPTION AGREEMENT
As an inducement and condition to Summit's willingness to enter into the
Reorganization Agreement, NSS (as issuer) entered into the Reorganization Option
Agreement with Summit (as grantee). Pursuant to the Reorganization Option
Agreement, NSS granted the NSS Option to Summit. The NSS Option is an option to
purchase (a) prior to the time and date the shareholders have approved the
Reorganization Option Agreement in accordance with the first paragraph of
Article Thirteen of the Certificate of Incorporation of NSS, up to 248,308
shares of NSS Common at a price of $45.00 per share or (b) after the date of
such shareholder approval, up to 494,629 shares of NSS Common at a price of
$45.00 per share, exercisable as described below. In addition, NSS agreed to pay
Summit a "break up" fee of $3.5 million in the event the NSS Option becomes
exercisable pursuant to the conditions set forth in (a) above. The purchase of
any shares of NSS Common pursuant to the NSS Option is subject to compliance
with applicable law.
Unless Summit is in breach of any material covenant or obligation contained
in the Reorganization Agreement and, if the Reorganization Agreement has not
terminated prior thereto, such breach would entitle NSS to terminate the
Reorganization Agreement, Summit may exercise the NSS Option, in whole or in
part, at any time
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and from time to time following the occurrence of a Purchase Event (as defined
below); provided that the NSS Option will terminate upon the earliest to occur
of certain events, including:
(1) the time immediately prior to the Effective Time;
(2) termination of the Reorganization Agreement prior to the occurrence of an
Extension Event (as defined below) (other than a termination by Summit
resulting from (i) a breach thereof by NSS which has not been cured or is
not capable of being cured within the time allotted (ii) nonsatisfaction
of a condition to Summit's obligation to close the Reorganization, or
(iii) the failure of the NSS shareholders to approve the Reorganization);
or
(3) 15 months after the termination of the Reorganization Agreement following
the occurrence of an Extension Event (as defined below) or the
termination of the Reorganization Agreement by Summit upon (i) a breach
by NSS which has not been cured or is not capable of being cured within
the time allotted, (ii) nonsatisfaction of a condition to Summit's
obligation to close the Reorganization, or (iii) the failure of NSS
shareholders to approve the Reorganization.
The term "Extension Event" shall mean the occurrence of certain events
without Summit's prior written consent, including:
(1) NSS, the NSS Board or any of its subsidiaries taking certain actions
(each an "Acquisition Transaction"), including recommending or entering
into an agreement with any third party to effect (a) a merger,
consolidation or similar transaction involving NSS or any of its banking
subsidiaries, (b) the purchase, lease, or other acquisition of 10 percent
or more of the aggregate value of the assets or deposits of NSS or any of
its banking subsidiaries, (c) the purchase or other acquisition of
securities representing 10 percent or more of the voting power of NSS or
any of its banking subsidiaries or (d) any substantially similar
transaction, in each case except as otherwise permitted by the
Reorganization Option Agreement;
(2) any third party acquiring beneficial ownership or the right to acquire
beneficial ownership of 10 percent or more of the aggregate voting power
of NSS or any of its banking subsidiaries;
(3) any third party making a bona fide proposal to NSS or its shareholders,
by public announcement or written communication that is or becomes
publicly disclosed, to engage in an Acquisition Transaction (including
the commencement of a tender offer or exchange offer to purchase 10
percent or more of the aggregate voting power of NSS or any of its
banking subsidiaries);
(4) after a proposal by a third party to NSS or its shareholders to engage in
an Acquisition Transaction, NSS breaches (without cure) any
representation or covenant in the Reorganization Agreement which would
entitle Summit to terminate the Reorganization Agreement;
(5) any third party filing an application with any federal or state bank
regulatory authority for approval to engage in an Acquisition
Transaction; or
(6) any Purchase Event (as defined below).
The term "Purchase Event" shall mean any of the following events or
transactions:
(1) any person other than Summit or a subsidiary of Summit acquiring
beneficial ownership of 25 percent or more of the aggregate voting power
of NSS or any of its banking subsidiaries, except as otherwise permitted
by the Reorganization Option Agreement; or
(2) failure of the shareholders of NSS to approve the Reorganization
Agreement, failure of the NSS Board to call a meeting for consideration
of the Reorganization or cancellation of such a meeting, or if the NSS
Board shall have withdrawn or modified in a manner adverse to the
consummation of the Reorganization its recommendation with respect to the
Reorganization Agreement, in each case after an Extension Event; or
(3) the occurrence of an Extension Event described in subparagraph (1) of the
definition of "Extension Event" above, except that the percentage
referred to in clauses (b) and (c) thereof shall be 25 percent.
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Upon the occurrence of certain events set forth in the Reorganization
Option Agreement, at the election of Summit, the NSS Option (or shares issued
pursuant to the exercise thereof) must be repurchased by NSS (the "Repurchase")
or converted into, or exchanged for, an option of another corporation or NSS
(the "Substitute Option"). In addition, the Reorganization Option Agreement
grants certain registration rights ("Registration Rights") to Summit with
respect to the shares represented by the NSS Option. The terms of such
Repurchase, Substitute Option and Registration Rights are set forth in the
Reorganization Option Agreement.
The Reorganization Option Agreement and the NSS Option are intended to
increase the likelihood that the Reorganization will be consummated according to
the terms set forth in the Reorganization Agreement and may be expected to
discourage offers by third parties to acquire NSS prior to the Reorganization.
To the knowledge of Summit and NSS, no event giving rise to the right to
exercise the NSS Option has occurred as of the date of this Proxy
Statement-Prospectus.
A copy of the Reorganization Option Agreement is set forth in Appendix C to
this Proxy Statement-Prospectus, and reference is made thereto for the complete
terms of the Reorganization Option Agreement and the NSS Option. The foregoing
discussion is qualified in its entirety by reference to the Reorganization
Option Agreement.
REGULATORY APPROVALS
The Reorganization is subject to approval by the Federal Reserve Board
under the Bank Holding Company Act of 1956, as amended (the "BHC Act"). The BHC
Act provides that the Federal Reserve Board may not approve any transaction (1)
that would result in a monopoly, or that would be in furtherance of any
combination or conspiracy to monopolize or to attempt to monopolize the business
of banking in any part of the United States, or (2) the effect of which in any
section of the country may be substantially to lessen competition, or to tend to
create a monopoly, or that in any other manner would be in restraint of trade,
unless the Federal Reserve Board finds that the anticompetitive effects of the
proposed transaction are clearly outweighed in the public interest by the
probable effect of the transaction in meeting the convenience and needs of the
communities to be served. In conducting its review of any application for
approval, the Federal Reserve Board is required to consider the financial and
managerial resources and future prospects of the company or companies and the
banks concerned, and the convenience and needs of the communities to be served.
Under the BHC Act, as interpreted by the Federal Reserve Board and the courts,
the Federal Reserve Board may deny any application if it determines that the
financial or managerial resources of the acquiring bank holding company are
inadequate. The acquisition by Summit of 5% or more of NSS's voting stock is
subject to the same requirement for approval. The BHC Act provides that a
transaction approved by the Federal Reserve Board may not be consummated for 30
days after such approval or, if certain conditions are met, a shorter period,
but, in the absence of an emergency, not less than 15 calendar days after the
date of approval. During such period, the Justice Department may commence legal
action challenging the transaction under the antitrust laws. If, however, the
Justice Department does not commence legal action during the specified waiting
period, it may not challenge the transaction thereafter except in an action
commenced under Section 2 of the Sherman Antitrust Act. Satisfactory financial
condition, particularly with regard to capital adequacy, and satisfactory
Community Reinvestment Act ratings generally are prerequisites to obtaining
Federal Reserve Board approval to make acquisitions. All of Summit's subsidiary
banks are currently rated "outstanding" or better under the Community
Reinvestment Act.
An application with respect to the Reorganization was filed by Summit with
the Federal Reserve Bank of New York on July 24, 1998. Regulations of the
Federal Reserve Board under the BHC Act require notice of an application for
approval of the Reorganization to be published in a newspaper of general
circulation and in the Federal Register and that the public have at least 30
days to comment on the application. In the event one or more comments protesting
approval of the application are received by the Federal Reserve Board within the
time period provided for in the respective notices, the Federal Reserve Board's
regulations permit the Federal Reserve Bank having jurisdiction over the
applicant, acting on delegated authority from the Federal Reserve Board, to
arrange a private meeting between the applicant and the protesters if the
Federal Reserve Bank decides such a meeting would be appropriate. In addition,
if an applicant or a protestor requests a hearing or if the Federal Reserve
Board determines such to be appropriate, the Federal Reserve Board may order
that a formal hearing
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on the application be held or that a proceeding permitting all interested
parties to present their views orally before the Federal Reserve Board or its
designated representative be conducted. Due to the possibility that a private
meeting, public hearing or proceeding providing for oral presentation will be
scheduled by the Federal Reserve Board following receipt of a protest, and due
additionally to the procedures relating thereto, Federal Reserve Board
processing of reorganization applications receiving one or more protests will
generally take longer than the processing of reorganization applications not
receiving such protests. The comment period relating to Summit's application for
approval of the Reorganization expires on or about August 28, 1998.
The acquisition of NSS and NSS Bank by Summit is also subject to the
approval by the Connecticut Commissioner of Banking under the Banking Law of
Connecticut (the "BLC"). Under the BLC, the Connecticut Commissioner of Banking,
in considering such acquisition, is to consider whether the acquisition is
reasonably expected to produce benefits to the public and whether such benefits
clearly outweigh possible adverse effects, including, but not limited to, an
undue concentration of resources and decreased or unfair competition. The
Connecticut Commissioner of Banking may not approve the acquisition without
considering whether: (i) The investment and lending policies of NSS Bank after
the Reorganization will be consistent with safe and sound banking practices and
will benefit the state; (ii) the services or proposed services of NSS Bank after
the Reorganization will be consistent with safe and sound banking practices and
will benefit the economy of the state; (iii) the acquisition of NSS by Summit
will not substantially lessen competition in the banking industry in the state
and (iv) Summit and NSS Bank will have sufficient capital to ensure and will
ensure that NSS Bank will comply with applicable minimum capital requirements
and will have sufficient managerial resources to operate NSS Bank in a safe and
sound manner. In addition, the Connecticut Commissioner of Banking may not
approve the acquisition of NSS Bank by Summit unless he finds that Summit and
NSS Bank have a record of compliance with the Community Reinvestment Act of 1977
and Connecticut community reinvestment and consumer protection banking laws and
that following the acquisition of NSS Bank by Summit, NSS Bank will provide
adequate services to meet the banking needs of all community residents,
including low income residents and moderate income residents. An application for
approval of the acquisition of NSS and NSS Bank by Summit was filed with the
Connecticut Commissioner of Banking on July 24, 1998.
NSS shareholders should be aware that regulatory approvals of the
Reorganization may be based upon different considerations than those that would
be important to such shareholders in determining whether or not to approve the
Reorganization. Any such approvals should in no event be construed by a NSS
shareholder as a recommendation by any regulatory agency with respect to the
Reorganization.
INTERESTS OF CERTAIN PERSONS IN THE REORGANIZATION
Directors and executive officers of NSS have interests in the
Reorganization that are in addition to their interests as NSS shareholders.
These interests are described in more detail below.
INDEMNIFICATION
In the Reorganization Agreement, Summit has agreed to indemnify and to
advance expenses in matters that may be subject to indemnification to persons
who served as directors and officers of NSS or any subsidiary of NSS on or
before the Effective Time with respect to liabilities and claims (and related
expenses including fees and disbursements of counsel) made against them
resulting from their service as such prior to the Effective Time in accordance
with and subject to the requirements and other provisions of the Summit Restated
Certificate of Incorporation and By-Laws in effect on the date the
Reorganization Agreement was executed and applicable provisions of law to the
same extent as Summit is obliged thereunder to indemnify and advance expenses to
its own directors and officers with respect to liabilities and claims made
against them resulting from their service to Summit. During such time as NSS or
its subsidiaries remains a separate entity organized under Connecticut law, the
directors and officers thereof will be entitled to indemnification and
advancement of expenses as provided by NSS's or such subsidiary's Certificate of
Incorporation and by-laws and Connecticut law.
In the Reorganization Agreement, Summit also agreed that, subject to NSS's
covenant to take all requisite action to preserve its rights under its directors
and officers liability insurance policies with respect to matters occurring
prior to the Effective Time (other than matters arising in connection with the
Reorganization Agreement and the transaction contemplated thereby), for a period
of six (6) years after the Effective Time, Summit
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would use its best efforts to provide to the persons who served as directors or
officers of NSS or any subsidiary of NSS on or before the Effective Time
insurance against liabilities and claims (and related expenses) made against
them resulting from their service prior to the Effective Time comparable in
coverage to that provided by Summit to its own directors and officers, but, if
not available on commercially reasonable terms, then coverage substantially
similar in all material respects to the insurance coverage provided to them in
such capacities on the date of the Reorganization Agreement ("Comparable
Coverage"); provided that in no event is Summit required to expend in the
aggregate for the six years of post-Reorganization coverage more than 200% of
the amount expended by NSS prior to the execution of the Reorganization
Agreement for one year of coverage ("Coverage Amount"). Summit has agreed to use
its best efforts to obtain as much comparable insurance as is available for the
Coverage Amount if it is unable to maintain or obtain Comparable Coverage. NSS
must renew any existing insurance or purchase any "discovery period" insurance
provided for under existing insurance at Summit's request.
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
NSS has employment agreements and change of control agreements with Messrs.
Judson, Howell, Dorney and Braverman. The employment agreements, which extend
through March 1, 2001, provide for, among other items, base salaries for Messrs,
Judson, Howell, Dorney and Braverman of $185,680, $126,500, $99,000, and
$99,000, respectively, and incentive compensation as determined by the NSS
Board. The employment agreements also provide that if the executive's employment
is terminated without cause, the executive is entitled to receive a lump-sum
payment equal to the greater of (i) the balance of salary that would have been
paid for the remainder of term of the agreement calculated at current base
salary or (ii) an amount equal to the number of the executive's full years of
service to NSS Bank at the time of termination multiplied by a fraction
determined by dividing current annual base salary by twenty-six. The change of
control agreements provide that in the event a change of control of NSS or NSS
Bank occurs while the executive is a full-time officer of NSS or NSS Bank, the
executive is entitled to receive a lump-sum payment equal to three times the
greater of (1) the executive's compensation for the last calendar year preceding
the change of control or (2) the executive's average annual compensation during
the three most recent taxable years. Under the change of control agreements,
compensation includes salary and incentive compensation (including deferred
compensation) as well as a cash and non-cash long-term compensation on an
accelerated basis assuming the maximum award is earned. The change of control
agreements also provide for reimbursement of excise taxes payable as a result of
the change of control payments. Payments under the change of control agreements
are in lieu of severance payments under the employment agreements and the change
of control agreements expressly supersede provisions contained in the employment
agreements relating to payments in the event of a change of control. The
Reorganization will constitute a "change of control" for purposes of such change
of control agreements. The amount of payments to Messrs. Judson, Howell, Dorney,
and Braverman, pursuant to the foregoing change of control agreements would be
$1,140,383, $779,348, $609,509, and $609,117, respectively.
EXECUTIVE LONG-TERM INCENTIVE PLAN PAYMENTS
The NSS 1995 Executive Incentive Plan provides that in the event of a
change in control, each grantee of performance stock will receive a cash payment
based upon the maximum award payable under the plan, pro-rated for the length of
time elapsed during the uncompleted performance period. Upon consummation of the
Reorganization, the estimated payments under this plan to Messrs. Judson,
Howell, Dorney and Braverman, respectively, would be $135,041, $92,001, $72,000,
and $72,000.
ANNUAL INCENTIVE PLANS PAYMENTS
Pursuant to the Annual Incentive Plans, cash awards are made to executive
officers and directors of NSS upon satisfaction of pre-established performance
targets of NSS for the fiscal year. The Annual Incentive Plans provide that in
the event of a change of control, each participant will receive a cash payment
based upon the maximum award payable under the plan, pro-rated for the length of
time elapsed during the uncompleted fiscal year. Upon consummation of the
Reorganization, the estimated payments under these plans to Messrs. Judson,
Howell, Dorney and Braverman, respectively, would be $92,840, $63,250, $49,500,
and $49,500 and an estimated payment to Mr. St. John of $25,300 and to each of
Messrs. Fitzgerald, Jay, Kelley, Segall and Stack of $16,400.
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SEVERANCE POLICY
Pursuant to NSS's severance policy, all full-time and regular part-time
employees with at least one year of service who do not have employment
agreements with NSS are entitled to severance payments in the event that their
employment is terminated within one-year of a change of control. Severance
payments for full-time employees are calculated at the rate of two weeks base
pay for each full year of service up to 26 years.
NSS EMPLOYEE STOCK OWNERSHIP PLAN
Upon consummation of the Reorganization, the NSS ESOP will be terminated
and all accrued benefits, included benefits accelerated as result of early
termination, will be distributed to participants.
BOARD OF DIRECTORS
Under the Reorganization Agreement, members of the Board of Directors of
NSS Bank on the date of the Reorganization Agreement are entitled to continue
their service as Directors of NSS Bank after the Effective Time until the
earlier of (i) one year following the Effective Time or (ii) the merger of NSS
Bank into a wholly-owned bank subsidiary of Summit not organized under the laws
of the State of Connecticut (provided that if such merger occurs within one year
of the Effective Time, such members may continue to serve for the balance of
such year on an advisory board of directors).
NSS STOCK OPTION PLANS
As described under "THE REORGANIZATION-Conversion of Stock Options,"
Original Options outstanding at the Effective Time will be automatically
converted into New Options, subject to the terms of the particular NSS Option
Plan and grant agreement governing the Original Option, including terms and
provisions governing exercises. The number of shares covered by the New Options
and the exercise price thereof will be set by, respectively, multiplying the
number of shares covered by, and dividing the exercise price of, the Original
Option by, the Exchange Ratio. Pursuant to the terms of the Employee Plan, all
Original Options granted under the Employee Plan will be converted into
immediately exercisable New Options whether or not the Original Option was
exercisable. In addition, in lieu of receiving Summit Common, for a thirty day
period holders of Original Options granted under the Employee Plan have the
right to receive cash payments equal to the difference between the value of the
underlying Summit Common and the adjusted option exercise price.
The following table sets forth certain information relating to Original
Options held by Messrs. Judson, Howell, Dorney and Braverman and all directors
and executive officers of NSS as a group as follows: (i) the number of Original
Options held by such persons; (ii) the number of Original Options held by such
persons that are currently exercisable; (iii) the number of unexercisable
Original Options held by such persons that will be converted into exercisable
New Options at the Effective Time; (iv) the weighted average exercise price for
currently exercisable Original Options; (v) the weighted average exercise price
for unexercisable Original Options that will be converted into exercisable New
Options at the Effective Time; and (vi) the aggregate net unrealized value of
all Original Options based on the number of shares of Summit Common covered by,
and the exercise price of, the New Options into which the Original Options are
convertible and using the last sale price of a share of Summit Common on
September __, 1998 of $________ as the market price for purposes of the
calculation.
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<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
OPTIONS AVERAGE AVERAGE EXERCISE AGGREGATE
EXERCISABLE EXERCISE PRICE PRICE OF OPTIONS NET
OPTIONS IN CONNECTION OF OPTIONS EXERCISABLE IN UNREALIZED
OPTIONS CURRENTLY WITH THE CURRENTLY CONNECTION WITH VALUE OF
HELD EXERCISABLE REORGANIZATION EXERCISABLE THE REORGANIZATION OPTIONS
---------------- ------------- ---------------- ---------------- -------------------- -----------
<S> <C> <C> <C> <C> <C>
Robert T. Judson ......... 63,267 51,267 12,000 $17.57 $25.17
Charles F. Howell ...... 44,201 36,201 8,000 17.45 25.17
Jeremiah T. Dorney ...... 27,634 22,634 5,000 17.40 25.17
Marcus I. Braverman ...... 24,600 19,600 5,000 17.77 25.17
Directors & Executive
Officers as a Group
(10 Persons in Total) ... 217,463(1) 175,463 30,000 25.17
</TABLE>
- --------
(1) Includes 12,000 options to be granted to NSS directors prior to or at the
Special Meeting in lieu of the option grant that would otherwise have
occured at the 1998 annual meeting.
THE REORGANIZATION AGREEMENT
AMENDMENT
NSS and Summit may jointly amend the Reorganization Agreement at any time;
provided, however, that, after the Special Meeting, no amendment may reduce the
amount of, or change the form of consideration to be received by NSS
shareholders unless such modification is submitted to a vote of NSS
shareholders.
NSS COVENANTS
Pursuant to the Reorganization Agreement, NSS has covenanted, among other
things, that, until termination of the Reorganization Agreement, NSS will advise
Summit of any material adverse change in NSS's business and of certain other
circumstances, and the business of NSS and its subsidiaries will be carried on
substantially in the same manner as prior to the execution of the Reorganization
Agreement. Furthermore, until termination of the Reorganization Agreement,
without the prior written consent of Summit, NSS will not declare or pay any
dividend other than a quarterly cash dividend at a rate up to $.13 per share
(provided that if Summit increases its dividend after the date of the
Reorganization Agreement, NSS may increase the $.13 per share by a percentage
equal to the percentage increase in the Summit dividend) and will refrain from
taking certain other actions, including certain actions relating to changes in
its capital stock, the incurrence of extraordinary liabilities and the issuance
of capital stock.
In order to ensure that NSS shareholders would be paid at least one, but no
more than one, dividend in each calendar quarter between the date of the
Reorganization Agreement and the Effective Time, NSS agreed in the
Reorganization Agreement to coordinate with Summit the declaration of any
dividends and the setting of any dividend record or payment dates.
NSS also has agreed that, until termination of the Reorganization Agreement
or the Effective Time, neither NSS nor any of its subsidiaries nor any of the
officers or directors of NSS or its subsidiaries shall, and that NSS shall
direct and use its best efforts to cause its employees, agents, affiliates and
representatives (including investment bankers, brokers, financial or investment
advisors, attorneys or accountants retained by NSS or any of its subsidiaries)
not to, initiate, solicit or encourage, directly or indirectly, any inquiries,
proposals or offers with respect to, or engage in any negotiations or
discussions with any person or provide any nonpublic information or authorize or
enter into any agreement or agreement in principle concerning, or recommend,
endorse or otherwise facilitate any effort or attempt to induce or implement any
Acquisition Proposal (as defined below). "Acquisition Proposal" is defined as
any offer, including an exchange offer or tender offer, or proposal concerning a
merger, consolidation, business combination or takeover transaction involving
NSS or any of its subsidiaries, or the acquisition of any assets (other than
those permitted under the Reorganization Agreement) or any securities of NSS or
any of its subsidiaries. Further, NSS is to immediately cease any activities,
discussions, or negotiations with respect to the foregoing. In addition, NSS has
agreed to notify Summit, by telephone call to
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its chief executive officer or general counsel, promptly upon receipt of any
inquiry with respect to a proposed Acquisition Proposal with another person or
receipt of a request for information from any governmental or regulatory
authority with respect to a proposed acquisition of NSS or any of its
subsidiaries or assets by another party and to deliver as soon as possible by
facsimile transmission to such Summit officer a copy of any document relating
thereto promptly after any such document is received by NSS.
SUMMIT COVENANTS
Pursuant to the Reorganization Agreement, Summit has covenanted, among
other things, that, until termination of the Reorganization Agreement, Summit
will advise NSS of any material adverse change in Summit's business and certain
other circumstances.
CONDITIONS TO THE REORGANIZATION; TERMINATION
The obligations of both parties to consummate the Reorganization are
subject to the satisfaction of certain conditions including: (1) approval of the
Reorganization Agreement by the requisite vote of the holders of NSS Common; (2)
receipt of all required regulatory approvals by Summit and NSS without
restrictions or limitations, that, in the reasonable opinion of Summit , would
materially adversely affect the financial condition of Summit following the
consummation of the Reorganization and the expiration of any waiting periods
required by such approvals; (3) continued effectiveness of the registration
statement; (4) the receipt by Summit and NSS of an opinion from Thomson Coburn
as to certain federal income tax consequences of the Reorganization; (5) an
indication by the NYSE that the shares of Summit Common to be issued in the
Reorganization are to be listed on the NYSE, subject to official notice of
issuance; (6) the absence of material litigation; (7) the absence of regulatory
agreements relating to the parties; (8) the delivery of officers' certificates
by NSS and Summit; and (9) other customary conditions described in the
Reorganization Agreement. Any of such conditions may be waived by the party for
whose benefit the condition was included. However, the Reorganization will not
be consummated without the receipt of the requisite shareholder and regulatory
approvals.
Either party may terminate the Reorganization Agreement if (1) NSS
Shareholders, in a vote on the Reorganization Agreement at a meeting held for
such purpose, fail to approve the Reorganization Agreement by the requisite
vote, (2) the other party materially breaches a warranty, representation or
covenant and such breach is not cured or capable of being cured within 30 days
of the giving of written notice thereof (provided that the terminating party is
not in material breach of any representation, warranty, covenant or other
agreement), (3) on the date for Closing designated by Summit in the Closing
Notice, all the conditions precedent to such parties' obligations to close are
not met, or (4) the Closing is not consummated on or before March 1, 1999,
provided, however, that a party does not have the termination right described by
this clause (4) if the failure to close by March 1, 1999 is due to its failure
to perform or observe an agreement which the Reorganization Agreement requires
it to perform or observe by the Closing Date. In addition, the parties may
terminate the Reorganization Agreement at any time by mutual agreement. In
addition, the NSS Board may terminate the Reorganization Agreement if the
average closing prices of a share of Summit Common on the NYSE Composite
Transactions List for the 10 consecutive full trading days ending on the date of
the Required Approval given by the FRB is less than $39.11 and the number
obtained by dividing the Summit Price by $47.125 is more than .17 less than the
number obtained by dividing the average closing price per share of the common
stocks of 18 bank holding companies for the 10 consecutive full trading days
ending on the FRB Approval Date by the average closing price per share of the
common stocks of the Index Group on June 16, 1998. The Summit Board may
terminate the Reorganization Agreement if the NSS Board fails to recommend
approval of the Reorganization Agreement or withdraws such recommendation or if
the cost of certain environmental matters exceeds thresholds set forth in the
Reorganization Agreement.
EXPENSES
Should either party terminate the Reorganization Agreement because the
other party has materially breached a warranty, representation or covenant or
because the other party has not met its conditions of closing or if Summit
terminates because the NSS Board fails to recommend the Reorganization or
because of the environmental contingency referred to above, then the terminating
party shall be reimbursed by the defaulting party for
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the terminating party's out of pocket expenses reasonably incurred in connection
with the Reorganization Agreement, including counsel fees, printing fees and
filing fees, but excluding any brokers', finders' or investment bankers' fees.
In the event that the Reorganization Agreement is terminated by either party
other than under circumstances described in the immediately preceding sentence,
each party is mutually released and discharged from liability to the other party
or to any third party thereunder, and no party is liable to any other party for
any costs or expenses incurred in connection with the Reorganization Agreement,
except that each party is responsible for one-half of the expenses incurred in
connection with the printing of this Proxy Statement-Prospectus and the
Registration Statement and the filing fees with the Commission, the Federal
Reserve Board, the Connecticut Department of Banking and the NYSE. Each party
has agreed to indemnify the other for claims for brokerage commissions and
finders fees.
CHARTER AND BY-LAWS OF SURVIVING CORPORATION
Pursuant to the Reorganization Agreement, the Restated Certificate of
Incorporation and By-Laws of Summit, as in effect at the Effective Time, will be
the Restated Certificate of Incorporation and By-Laws of the surviving
corporation (the "Surviving Corporation"), unless and until amended.
BOARD OF DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
The Reorganization Agreement provides that the directors and officers of
Summit immediately prior to the Effective Time will continue to be the directors
and officers, respectively, of the Surviving Corporation.
DISSENTERS' RIGHTS
Any NSS shareholder who objects to the Reorganization Agreement has the
right to be paid the fair value of all shares of NSS Common owned by such
shareholder in accordance with the provisions of Sections 33-855 to 33-872 of
the CBCA, a copy of which is set forth in Appendix D to this Proxy
Statement-Prospectus. The following discussion is not a complete statement of
the law pertaining to such rights, and is qualified in its entirety by reference
to such sections of the CBCA.
If the Reorganization is consummated, a shareholder of NSS who does not
vote in favor of the approval and adoption of the Reorganization Agreement, and
who follows the statutory provisions of the dissenters' rights statute
summarized herein may require Summit to pay the fair value of his or her shares
of NSS Common, determined as provided in the dissenters' rights statute.
A shareholder of NSS who desires to pursue his or her dissenters' rights
must deliver to NSS, before the taking of the vote on the Reorganization
Agreement, a written notice of intent to demand payment for his or her shares if
the Reorganization is effectuated. Notice of an intention to demand payment
should be addressed to Jeremiah T. Dorney, Corporate Secretary, NSS Bancorp,
Inc., 48 Wall Street, Norwalk, Connecticut 06852. The shareholder must then not
vote any shares in favor of the approval and adoption of the Reorganization
Agreement. A vote against the approval and adoption of the Reorganization
Agreement, whether by proxy or in person at the NSS Meeting, is not required to
preserve a shareholder's dissenters' rights, nor will a negative vote be
considered a demand for payment in and of itself without compliance with the
requirements set forth in Appendix D, including the delivery prior to the
shareholder vote of the notice of intent to demand payment. A NSS shareholder
who votes in favor of the Reorganization Agreement will be precluded from
exercising dissenters' rights.
If the Reorganization Agreement is approved and all conditions to the
Reorganization are satisfied or waived, Summit will send a dissenters' notice to
shareholders who have given written notice of intent to demand payment within
ten days after the consummation of the Reorganization. The dissenters' notice
will state where the shareholder's demand for payment must be sent and where and
when certificates for certificated shares must be deposited; inform holders of
uncertified shares to what extent transfer of the shares will be restricted
after the payment demand is received; supply a form for demanding payment that
includes the date of the first announcement to news media or to shareholders of
the terms of the Reorganization Agreement (June 18, 1998);
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and require that each shareholder asserting dissenters' rights certify whether
or not such shareholder acquired beneficial ownership of the shares before that
date. Finally, Summit will set a date by which Summit must receive the payment
demand, which date will not be fewer than 30 nor more than 60 days after the
date of the written dissenters' notice. Each such dissenters' notice will
include a copy of CBCA Sections 33-855 to 33-872.
Within the time period set forth in Summit's dissenters' notice, a
dissenting shareholder must demand payment for his or her shares and certify
whether he or she beneficially owned such shares prior to June 18, 1998. A
shareholder who demands payment must deposit the certificate or certificates
representing such shares with Summit in accordance with the terms of the
dissenters' notice. Failure to demand payment or deposit share certificates
terminates a shareholder's dissenters' rights.
A demand for payment may be executed by or for the record shareholder, as
the shareholder's name appears on the share certificate. A beneficial owner of
shares of NSS Common who is not the record owner may demand payment with respect
to all (but not less than all) shares held on his or her behalf if the
beneficial owner submits to NSS at or before the assertion of his or her
dissenters' rights written consent of the record holder. A record owner, such as
a broker, who holds NSS Common for others, may demand payment with respect to
less than all of the shares of NSS Common held of record by such person. In that
event, the record owner must demand payment with respect to all shares owned
beneficially by the same person, and must provide NSS with the name and address
of each person on whose behalf such demand is being made.
With respect to shares acquired by a dissenting shareholder before June 18,
1998, Summit will pay, as soon as the Reorganization is consummated or promptly
after receipt of a post-Reorganization demand, to each shareholder who makes a
proper demand for payment, the amount Summit estimates to be fair value of such
shareholder's shares (plus accrued interest). The payment by Summit to such
shareholder will be accompanied by: NSS's balance sheet for the fiscal year
ending not more than 16 months before the date of payment; an income statement
for that year; a statement of changes in shareholders' equity for that year; the
latest available interim financial statements, if any, a statement of Summit's
estimate of the fair value of the shares; an explanation of how the interest was
calculated; a statement of the dissenting shareholder's rights to demand
payment; and a copy of the dissenters' rights sections of the CBCA.
Summit may elect to withhold payment to a shareholder who makes a demand
for payment if the shareholder was not the beneficial owner of NSS Common before
June 18, 1998. If Summit elects to withhold payment to such shareholder, Summit
will send to the dissenting shareholder its offer of payment (plus accrued
interest) accompanied by a statement of Summit's estimate of the fair value of
the shares, an explanation of how the interest was calculated and a statement of
the shareholder's right to demand payment if dissatisfied. A shareholder's
acceptance of such offer is in full satisfaction of the shareholder's demand.
If dissatisfied with Summit's payment or offer, a dissenting NSS
shareholder must, within 30 days after Summit makes or offers payment, notify
Summit in writing of such shareholder's own estimate of the fair value of his
shares and the amounts of interest due, and demand payment of his or her
estimate, less any payment by Summit, or may reject Summit's offer and demand
payment for the fair value of his or her shares and interest owing. Such action
may be taken only if (a) the shareholder believes that the amount paid or
offered is less than the fair value of the shareholder's shares or that the
interest due is incorrectly calculated; or (b) Summit fails to make payment
within 60 days after the date set for the shareholder's demand for payment.
Failure to make such a demand within the 30 day period will be treated as a
waiver of the shareholder's right to demand payment in an amount exceeding the
amount previously paid or offered by NSS.
If a NSS shareholder's demand for payment remains unsettled, Summit will
commence a proceeding within 60 days after receipt of shareholder's payment
demand in Connecticut Superior Court for the judicial district of
Stamford/Norwalk to determine fair value of the shares (plus accrued interest
thereon) making each dissenting shareholder whose demand remains unsettled a
party to the proceeding. If Summit fails to timely commence such proceeding,
Summit shall pay each dissenting shareholder whose demand remains unsettled the
amount demanded. The court may, if it so elects, appoint appraisers to recommend
the fair value of NSS Common. Each NSS shareholder made a party to the
proceeding is entitled to the excess of fair value of such shareholder's shares
(as determined by the court), plus interest over the amount paid by Summit, or
to the fair value (plus
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accrued interest) of the after acquired shares for which Summit elected to
withhold payment. The costs and expenses, including the reasonable compensation
and expenses of court appointed appraisers, will be assessed against Summit. All
or any part of such costs and expenses may be apportioned and assessed against
any or all shareholders who are parties to the proceedings to whom Summit has
made an offer for payment if the court finds that the action of such
shareholders was arbitrary or vexatious or not in good faith.
Any holder of NSS Common who intends to object to the Reorganization
Agreement should carefully review the text of the applicable provisions of the
CBCA set forth in Appendix D to this Proxy Statement-Prospectus and should also
consult with such holder's attorney. THE FAILURE OF A HOLDER OF NSS COMMON TO
FOLLOW PRECISELY THE PROCEDURES SUMMARIZED ABOVE AND SET FORTH IN APPENDIX D MAY
RESULT IN LOSS OF DISSENTERS' RIGHTS. No further notice of the events giving
rise to dissenters' rights or any steps associated therewith will be furnished
to holders of NSS Common, except as otherwise required by law.
In general, any objecting shareholder who perfects the right to be paid the
fair value of such holder's NSS Common in cash will recognize taxable gain or
loss for federal income tax purposes upon receipt of such cash in an amount
equal to the difference between the amount of cash received and their adjusted
tax basis in the NSS Common.
NEW YORK STOCK EXCHANGE LISTING
Summit has agreed in the Reorganization Agreement to use its best efforts
to cause the shares of Summit Common to be issued in the Reorganization to be
listed on the NYSE. The NYSE's indication that such shares of Summit Common are
to be listed on the NYSE (subject to official notice of issuance) is a condition
to the consummation of the Reorganization.
ACCOUNTING TREATMENT
It is anticipated that the Reorganization, when consummated, will be
treated as a purchase. Under the purchase method of accounting, the amount by
which the purchase price paid by Summit exceeds the fair value of the net assets
acquired will be treated as goodwill, which will be amortized over a period not
to exceed 20 years.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
The following discussion is based upon an opinion of Thompson Coburn,
special counsel to Summit ("Counsel"), and except as otherwise indicated,
reflects Counsel's opinion. The discussion is a summary of the material United
States federal income tax ("federal income tax") consequences of the
Reorganization to certain NSS shareholders and does not purport to be a complete
analysis or listing of all potential tax considerations or consequences relevant
to a decision whether to vote for the approval of the Reorganization Agreement.
The discussion does not address all aspects of federal income taxation that may
be applicable to NSS shareholders in light of their status or personal
investment circumstances, nor does it address the federal income tax
consequences of the Reorganization that are applicable to NSS shareholders
subject to special federal income tax treatment including (without limitation)
foreign persons, insurance companies, tax-exempt entities, retirement plans,
dealers in securities, persons who acquired their NSS Common pursuant to the
exercise of employee stock options or otherwise as compensation, and persons who
hold their NSS Common as part of a "straddle," "hedge" or "conversion
transaction." In addition, the discussion does not address the effect of any
applicable state, local or foreign tax laws, or the effect of any federal tax
laws other than those pertaining to the federal income tax. As a result, each
NSS shareholder is urged to consult his or her own tax advisor to determine the
specific tax consequences of the Reorganization to such shareholder. The
discussion assumes that shares of NSS Common are held as capital assets (within
the meaning of Section 1221 of the Code) at the Effective Time.
NSS has received an opinion from Counsel to the effect that, assuming the
Reorganization occurs in accordance with the Reorganization Agreement, the
Reorganization will constitute a "reorganization" for federal income tax
purposes under Section 368(a)(1) of the Code, with the following federal income
tax consequences:
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(1) NSS shareholders will recognize no gain or loss as a result of the
exchange of their NSS Common solely for shares of Summit Common pursuant
to the Reorganization, except with respect to Cash in Lieu Amounts with
regard to fractional shares, if any, as discussed below.
(2) The aggregate adjusted tax basis of the shares of Summit Common received
by each NSS shareholder in the Reorganization (including any fractional
share of Summit Common deemed to be received, as described in paragraph 4
below) will be equal to the aggregate adjusted tax basis of the shares of
NSS Common surrendered.
(3) The holding period of the shares of Summit Common received by each NSS
shareholder in the Reorganization (including any fractional share of
Summit Common deemed to be received, as described in paragraph 4 below)
will include the holding period of the shares of NSS Common exchanged
therefor.
(4) An NSS shareholder who receives the Cash In Lieu Amount with regard to a
fractional share of Summit Common will be treated as if the fractional
share had been received by such shareholder in the Reorganization and
then redeemed by Summit in return for the Cash In Lieu Amount. The
receipt of such cash will cause the recipient to recognize capital gain
or loss equal to the difference between the amount of cash received and
the portion of such holder's adjusted tax basis in the shares of Summit
Common allocable to the fractional share.
Counsel's opinion is subject to the conditions and customary assumptions
that are stated therein and relies upon various representations made by Summit
and NSS. If any of these representations or assumptions is inaccurate, the tax
consequences of the Reorganization could differ from those described herein.
Counsel's opinion is also based upon the Code, regulations proposed or
promulgated thereunder, judicial precedent relating thereto, and current
administrative rulings and practice, all of which are subject to change. Any
such change, which may or may not be retroactive, could alter the tax
consequences discussed herein. The receipt of Counsel's opinion again as of the
date of the closing of the Reorganization is a condition to the consummation of
the Reorganization. An opinion of counsel, unlike a private letter ruling from
the Internal Revenue Service ("Service"), has no binding effect. The Service
could take a position contrary to Counsel's opinion and, if the matter were
litigated, a court may reach a decision contrary to the opinion. Neither Summit
nor NSS has requested an advance ruling as to the federal income tax
consequences of the Reorganization, and the Service is not expected to issue
such a ruling.
THE FOREGOING IS A SUMMARY OF THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES
OF THE REORGANIZATION TO CERTAIN NSS SHAREHOLDERS AND DOES NOT TAKE INTO ACCOUNT
THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH NSS SHAREHOLDER'S TAX STATUS AND
ATTRIBUTES. AS A RESULT, THE FEDERAL INCOME TAX CONSEQUENCES ADDRESSED IN THE
FOREGOING DISCUSSIONS MAY NOT APPLY TO EACH NSS SHAREHOLDER. ACCORDINGLY, EACH
NSS SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC
TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL,
STATE, LOCAL AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL
AND OTHER TAX LAWS.
RESALE OF SUMMIT COMMON
The shares of Summit Common into which shares of NSS Common are converted
on the Effective Date will be freely transferable under the Securities Act
except for shares issued to any shareholder who may be deemed to be an
"affiliate" of NSS for purposes of Rule 145 under the Securities Act as of the
date of Special Meeting. Affiliates may not sell their shares of Summit Common
acquired in connection with the Reorganization except pursuant to an effective
registration statement under the Securities Act covering such shares or in
compliance with Rule 145 under the Securities Act or another applicable
exemption from the registration requirements of the Securities Act. Persons who
may be deemed to be affiliates of NSS generally include individuals or entities
that control, are controlled by or are under common control with NSS and may
include certain officers and directors of NSS as well as principal shareholders
of NSS.
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NSS agreed in the Reorganization Agreement to use its best efforts to cause
each director, executive officer and other person deemed in the opinion of NSS's
counsel to be affiliates of NSS to enter into an agreement with Summit providing
that such persons agree to be bound by the restrictions of Rule 145.
DIFFERENCES IN SHAREHOLDERS' RIGHTS
The rights of NSS shareholders, which are determined by Connecticut
corporation law and the certificate of Incorporation and By-Laws of NSS, differ
from the rights accorded Summit shareholders, which are determined by New Jersey
corporation law and the Restated Certificate of Incorporation and By-Laws of
Summit. Some of the differences in shareholders' rights are attributable to
differences between the corporation law of Connecticut, the state of NSS's
incorporation, and the corporation law of New Jersey, the state of Summit's
incorporation. The remaining differences in shareholders' rights are
attributable to differences between the Certificate of Incorporation and By-Laws
of NSS and Restated Certificate of Incorporation and By-Laws of Summit. Certain
of the rights of NSS shareholders described below which are provided by
Connecticut corporation law or contained in the Certificate of Incorporation or
By-Laws of NSS and which are not provided by New Jersey corporation law or
contained in the Restated Certificate of Incorporation or By-Laws of Summit are
deemed to have an anti-takeover effect and will not be available to NSS
shareholders as Summit shareholders; however, certain rights provided for by New
Jersey corporation law or the Restated Certificate of Incorporation or By-Laws
of Summit are also deemed to have an anti-takeover effect and will be available
to NSS shareholders only after becoming Summit shareholders. The following is a
summary discussion of the most significant differences in shareholders' rights.
This summary is qualified in its entirety by reference to the corporation laws
of Connecticut and New Jersey and the governing documents of NSS and Summit
referred to above.
COMPARISON OF CERTIFICATES OF INCORPORATION AND BY-LAWS
CLASSIFIED BOARD AND RELATED PROVISIONS
NSS. The Certificate of Incorporation of NSS divides the NSS Board into
three classes, as nearly equal in number as possible, with each class of
directors serving a staggered term of three years and provides that the NSS
Board shall consist of not less than seven nor more than eleven directors.
Directors are elected by a plurality of votes cast by shareholders entitled to
vote. Presently, there are three directors in Class One, three directors in
Class Two and two directors in Class Three.
SUMMIT. The Restated Certificate of Incorporation of Summit provides that
the Summit Board shall consist of not less than five and not more than forty
persons and divides the Summit Board 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 Summit Board. Directors are elected by a plurality of
votes cast by shares entitled to vote. Presently there are seven directors in
Class I, five directors in Class II and six directors in Class III.
The Restated Certificate of Incorporation of Summit further requires that
resolutions increasing the number of directors be approved by 80% of, as the
case may be, directors holding office or shares of capital stock of Summit
entitled to vote generally in the election of directors, voting as a single
class.
The Restated Certificate of Incorporation of Summit also provides that the
affirmative vote of the holders of 80% or more of the combined voting shares of
Summit, voting as a single class, is required to amend, repeal or take any
action inconsistent with the classified board of directors or the requirement
for an 80% affirmative vote to approve any increase in the number of directors.
The effect of these provisions is to make it difficult for persons other than
those negotiating directly with the Summit Board to acquire seats on the Summit
Board and obtain control of Summit.
MEETINGS AND CONSENTS
NSS. NSS's Certificate of Incorporation and By-Laws provide that unless
otherwise required by law, a special meeting of shareholders may be called only
by the Chairman of the Board, the President, or a majority of the Board of
Directors. Pursuant to the CBCA, special meetings must be held upon the demand
of holders
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of not less than thirty-five percent of shares entitled to vote on a matter.
Under the NSS Certificate of Incorporation, actions required or permitted to be
taken by shareholders must be effected at a duly called annual or special
meeting and may not be taken by any consent in writing of shareholders.
SUMMIT. Under Summit's By-Laws, except as otherwise provided by law,
special meetings may be called only by the Chairman, Vice Chairman, President or
majority of the entire Board. The Restated Certificate of Incorporation of
Summit requires that, subject to the rights of holders of any series of
Preferred Stock or other class or series of stock having preference over the
Summit Common as to dividends or upon liquidation, all actions by the
shareholders of Summit be taken exclusively at a duly called annual or special
meeting of Summit's shareholders or by the unanimous, but not less than
unanimous, written consent of the shareholders. An additional provision in the
Restated Certificate of Incorporation of Summit provides that the affirmative
vote of the holders of 80% or more of the combined voting shares of Summit,
voting as a single class, is required to amend, alter, repeal or take any action
inconsistent with this requirement. Under the Summit By-Laws, except as
otherwise required by law or Summit's Restated Certificate of Incorporation, all
actions by shareholders must be taken at a meeting unless the Board determines
that such action shall be taken by written consent.
FAIR PRICE, EVALUATION OF BUSINESS COMBINATIONS AND BENEFICIAL OWNERSHIP
LIMITATIONS
NSS FAIR PRICE PROVISION. The NSS Certificate of Incorporation provides
that a "super-majority" vote of shareholders must approve certain business
combinations, including mergers, consolidations, share issuances, sales of
assets, liquidations, dissolutions or reclassifications, between NSS and an
"Interested Shareholder" (as such term is defined below) or any other
corporation (whether or not itself an Interested Shareholder) which is or after
such merger would be, an affiliate or associate of any Interested Shareholder,
unless the transaction is approved by the NSS Board or certain fair price
procedural requirements are satisfied. An "Interested Shareholder" is generally
defined as a person or entity who is the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the outstanding shares of
voting stock of NSS. Such transactions must first be approved by the NSS Board
and then by the affirmative vote of the holders of at least 80% of the voting
power of the then outstanding shares of voting stock, and by two-thirds of the
voting power of the outstanding shares of the voting stock exclusive of shares
held by or on behalf of the Interested Shareholder, unless: (1) the transaction
is approved by the NSS Board before the Interested Shareholder first became an
Interested Shareholder; (2) or in the case of a merger, consolidation or share
exchange, and in all other business combinations, certain fair price and
procedural provisions are met. In general, the fair price provisions require
that shareholders whose stock is acquired in a business combination be paid at
least as much as the highest price the Interested Shareholder paid for shares
within the two prior years or the price that the Interested Shareholder paid in
the transaction by which the Interested Shareholder first became an Interested
Shareholder, whichever is higher. The procedural provisions include prohibitions
against omissions of dividends on preferred stock, reductions in dividends on
NSS Common and acquisitions by the Interested Shareholder of more stock of NSS.
The provisions of the NSS Certificate of Incorporation are substantially similar
to applicable provisions of the CBCA. Summit's Restated Certificate of
Incorporation does not contain a similar fair price provision although the New
Jersey Shareholder's Protection Act contains a fair price provision. See
"Comparison of Corporation Laws".
EVALUATION OF OFFERS. The Certificate of Incorporation of NSS provides that
the NSS Board, when evaluating any tender or exchange offer for stock of the
corporation, offer or proposal to merge or consolidate the corporation with
another institution, or an offer or proposal to purchase or otherwise acquire
all or substantially all of the properties and assets of the corporation, shall,
in connection with the exercise of its judgment in determining what is in the
best interests of the corporation and its shareholders, give due consideration
to all relevant factors, including without limitation what it reasonably
believes to be in the best interests of the corporation including: (a) the
long-term as well as the short-term interests of the corporation; (b) the
long-term and short-term interests of shareholders, including the possibility
that those interests may be best served by continued independence; (c) the
interest of the corporation's employees, customers, creditors and suppliers; (d)
community and social considerations including those of any community in which
any office or other facility of the corporation is located; and (e) any other
factor which the director determines in his or her discretion to be appropriate
in determining what he reasonably believes to be in the best interests of the
corporation. The foregoing provisions are substantially similar to applicable
provisions in the CBCA. Summit's Restated Certificate
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of Incorporation does not contain a similar provision. However, New Jersey
corporation law provides that a director of a New Jersey corporation, in
discharging his or her duties to the corporation and in determining what he or
she reasonably believes to be in the best interests of the corporation, may, in
addition to considering the effects of any action on shareholders, consider any
of the following: (a) the effects of the action on the corporation's employees,
suppliers, creditors and customers; (b) the effects of the action on the
community in which the corporation operates; and (c) the long-term as well as
the short-term interests of the corporation and its shareholders, including the
possibility that these interests may best be served by the continued
independence of the corporation. Determinations resulting in the rejection of a
proposal or offer to acquire the corporation are expressly covered by this
provision of the New Jersey Business Corporation Act.
NSS BENEFICIAL OWNERSHIP LIMITATION. The NSS Certificate of Incorporation
prohibits any person or group from acquiring 10% or more of the voting stock of
NSS without the approval of the Connecticut Commissioner of Banking unless such
acquisition has been approved by an affirmative vote of two-thirds of each class
of voting stock and all requisite federal and state regulatory approvals have
been obtained. Further, no person may make an offer to acquire 10% or more of
the voting stock unless the NSS Board has been notified in writing of such offer
and has not disapproved thereof and the requisite regulatory approvals have been
obtained. Any person who does not comply with the foregoing provisions is
prohibited from voting shares held in excess of 10% and the NSS Board may direct
that such excess shares be sold. Summit's Restated Certificate of Incorporation
does not contain a similar beneficial ownership limitation provision.
SHAREHOLDER RIGHTS PLANS
NSS. NSS has a shareholder rights agreement ("NSS Rights Agreement") which
provides that automatically attached to each share of NSS Common is one right (a
"NSS Right") which, when exercisable, entitles the holder of the NSS Right to
purchase one one-hundredth of a share of Series A Preferred at a price of $40,
subject to adjustment. The NSS Rights become exercisable when a person acquires
an ownership interest in NSS (in general, 10% of the outstanding shares of NSS)
so as to become an "Acquiring Person" or commences an offer to acquire shares
which would make such person an "Acquiring Person" (such acquisition or offer
being referred to as the Distribution Date). Shares of Series A Preferred
entitle holders thereof to 100 times the dividend, voting and liquidation rights
of NSS Common, as well as the right to receive 100 times the consideration
received by holders of NSS Common in a merger. In the event NSS is acquired in a
merger after the occurrence of a "Distribution Date", the NSS Rights entitle the
holders thereof to receive, upon exercise of the right, common stock of the
acquiring company with a value of five times the exercise price of the right.
Accordingly, exercise of NSS rights may cause substantial dilution to a person
that attempts to acquire NSS without NSS Board approval and may have certain
anti-takeover effects. See "Description of NSS Capital Stock - Shareholder
Rights Agreement".
SUMMIT. Summit has in effect a shareholder rights plan pursuant to which
holders of shares of Summit Common possess one preferred stock purchase right
for each share of Summit Common held by them. Each preferred stock purchase
right entitles the holder to buy, as of the close of business on the tenth day
following the occurrence of certain takeover-related events ("effective time"),
one one hundred-fiftieth of a share of a new series of Preferred Stock,
designated the Series R Preferred Stock, at $60 per one one hundred-fiftieth
share ("exercise price"), with full shares having rights per share equal to 150
times the rights of Summit Common with respect to voting, dividends and
distributions upon liquidation or merger as well as entitling the holder to an
additional preferential dividend. Upon the occurrence of certain subsequently
occurring events, holders of the preferred stock purchase rights become entitled
to purchase either shares of the Series R Preferred Stock (if not already
purchased) or a number of shares of the "acquiring person" (as defined in the
rights plan) equal in market value to twice the exercise price of the preferred
stock purchase right. The Summit Board has the power to redeem the preferred
stock purchase rights at any time but, after the preferred stock purchase rights
become exercisable, it may do so only upon the majority vote of non-management
directors in connection with a business combination it has approved. For a
further description of Summit's shareholder rights plan, see "DESCRIPTION OF
SUMMIT CAPITAL STOCK-Shareholder Rights Plan." The combination of prohibitive
dilution of the acquiring person's share value and the power of the Summit Board
to redeem the preferred stock purchase
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rights is intended to encourage potential acquiring persons to negotiate with
the Summit Board with respect to the terms of any acquisition or business
combination and to the extent possible, discourage or defeat partial or
two-tiered acquisition proposals.
NOMINATIONS TO THE BOARD, SHAREHOLDER PROPOSALS AND CONDUCT OF MEETING
NSS. Pursuant to NSS's By-Laws, nominations for election to the Board of
Directors may be made by the Board of Directors or by any shareholder of any
outstanding class of capital stock entitled to vote for the election of
directors. NSS shareholders may nominate directors for election by providing
written notice to NSS's Secretary delivered or mailed not less than twenty (20)
days prior to the meeting. The presiding officer of the meeting shall disregard
any shareholder nomination to the NSS Board which is not made in accordance with
the Certificate of Incorporation. Holders of NSS Common may not cumulate their
votes in elections of directors.
SUMMIT. The By-Laws of Summit contain provisions that empower the Summit
Board to adopt rules, regulations and procedures governing meetings of Summit
shareholders and empower the chairman of a meeting of Summit shareholders,
subject to the rules and regulations adopted by the Summit Board, to adopt such
rules, regulations and procedures and to take such actions that the chairman
deems necessary, appropriate or convenient for the proper conduct of a
shareholder meeting. The Summit By-Laws also contain provisions that (1)
establish rules governing nominations for director and shareholder proposals
made at meetings of shareholders and, in general, empower the chairman of an
annual meeting to disallow nominations and shareholder proposals that are not
made at least 80 days in advance of the anniversary of the preceding year's
annual meeting or that otherwise fail to comply with the requirements of the
By-Laws and (2) establish rules governing nominations for directors made at
special meetings of shareholders and empower the chairman of a special meeting
to disallow nominations that are not made at least 70 days prior to such special
meeting or the 10th day following the day on which public announcement of such
special meeting is first made or that otherwise fail to comply with the
requirements of the By-Laws. Holders of Summit Common may not cumulate their
votes in elections of directors.
VOTE REQUIRED FOR CHARTER AND BY-LAW AMENDMENTS
NSS. In general, any amendment of the NSS Certificate of Incorporation
requires the affirmative vote of a majority of the outstanding voting shares of
NSS Common entitled to vote thereon. The amendment of certain provisions of the
NSS Certificate of Incorporation, including those dealing with capital stock,
the election of the NSS Board, amendment of By-Laws, approval of Business
Combinations, the calling of special meetings of shareholders, vacancies on the
NSS Board, removal of directors, notice of shareholder nominations of candidates
for the election of directors, the elimination of shareholders' actions by
consent, approval of acquisitions of 10% or more of the company's voting stock,
factors to be considered by the NSS Board in evaluating certain transactions
such as tender or exchange offers, the addition of an article imposing
cumulative voting for the election of directors, and any amendment of the
procedure for amending the foregoing provisions must be approved by the
affirmative vote of the holders of not less than 60% of shares of NSS entitled
to vote thereon. If there is an Interested Shareholder, such 60% vote must
include the affirmative vote of not less than two-thirds of the voting power of
the NSS Common held by shareholders other than the Interested Shareholder.
Pursuant to NSS's Certificate of Incorporation and By-Laws, the NSS Board may
make, adopt, alter, amend and repeal the By-Laws, subject to the right of
shareholders to adopt, alter, amend and repeal By-Laws made by the Board;
however, the affirmative vote of 60% of the voting power of the issued and
outstanding shares entitled to vote thereon is required to effect an amendment
or repeal of or adoption of a provision inconsistent with the NSS By-Laws, and
if there is an Interested Shareholder, such 60% vote must include the
affirmative vote of not less than two-thirds of the voting power of the issued
and outstanding shares entitled to vote thereon held by shareholders other than
the Interested Shareholder.
SUMMIT. As discussed above, the Restated Certificate of Incorporation of
Summit requires that certain provisions relating to increases in the number of
directors (which number may also be increased by the Board), changes to the
classified board provision and changes to the provision requiring that actions
by shareholders be
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effected at an annual or special meeting or by unanimous written consent,
receive the affirmative vote of holders of 80% of the combined voting shares of
Summit, voting as a single class. The By-Laws of Summit provide for amendments
upon two-thirds vote of the Board of Directors. Under the New Jersey Business
Corporation Act, by-laws made by a corporation's board may be altered or
repealed and new by-laws made by the shareholders.
REMOVAL OF DIRECTORS
NSS. Under the NSS Certificate of Incorporation, any individual director
may be removed for cause by the affirmative vote of the holders of two-thirds of
the directors then in office. The NSS By-Laws further provide that directors may
be removed for cause in accordance with the CBCA and that the office of any
director who fails to attend six consecutive meetings of the Board shall become
vacant if the majority of the Board determines such absence was without good
cause.
SUMMIT. The Summit Restated Certificate of Incorporation contains no
specific provisions with respect to removal of directors (other than for
directors elected by Preferred Shareholders). Under the New Jersey Business
Corporation Act, with respect to a classified board, directors may be removed by
shareholders for cause only, by the affirmative vote of the majority of votes
cast by the holders entitled to vote thereon.
AUTHORIZED SHARES
NSS. NSS has 7,000,000 authorized shares of NSS Common and 500,000 shares
of Serial Preferred Stock, $.01 par value, ("Serial Preferred") of which 50,000
shares have been designated Series A Junior Participating Preferred Stock
("Series A Preferred) and reserved for issuance under the NSS Shareholders
Rights Plan. As of June 30, 1998, there were 2,378,085 shares of NSS Common
outstanding. NSS's Certificate of Incorporation does not provide for preemptive
rights or cumulative voting to attach to the ownership of NSS Common.
SUMMIT. The Restated Certificate of Incorporation of Summit authorizes the
issuance of 390,000,000 shares of Summit Common and 6,000,000 shares of
preferred stock, no par value. As of June 30, 1998, there were approximately
173,934,000 shares of Summit Common outstanding and 1,500,000 shares of Summit
Series R Preferred created in Summit's Restated Certificate of Incorporation for
issuance under the Shareholder Rights Plan of Summit. The Restated Certificate
of Incorporation of Summit and the New Jersey Business Corporation Act authorize
the Summit Board to amend the Restated Certificate of Incorporation without
shareholder concurrence to divide the authorized shares of preferred stock into
series, to determine the designations and the number of shares of any such
series, and to determine the relative voting, dividend, conversion, redemption,
liquidation and other rights, preferences and limitations of the authorized
shares of preferred stock. No preemptive rights attach to the ownership of
Summit Common.
INDEMNIFICATION; LIMITATION OF LIABILITY
NSS. Article V of NSS's By-Laws provides that NSS shall indemnify the
directors, officers, employees and agents to the maximum extent permitted by
and/or required by the CBCA. The NSS By-Laws specifically incorporate certain
provisions of the CBCA relating to indemnification as from time to time amended.
Article IX of NSS's Certificate of Incorporation provides that the personal
liability of a director of NSS to NSS or its shareholders for monetary damages
for breach of duty owed as a director is limited to the amount of compensation
received during the year of the violation unless (1) the breach involved a
knowing and culpable violation of law by the director; (2) the breach enabled
the director or an "associate" (as that term is defined in Section 33-843 of the
Connecticut General Statutes) to receive an improper personal economic gain; (3)
the breach showed a lack of good faith and conscious disregard for the duty of
the director to NSS under circumstances in which the director was aware that his
or her conduct or omission created an unjustifiable risk of serious injury to
NSS; (4) the breach constitutes a sustained and unexcused pattern of inattention
that amounted to an abdication of the director's duties to NSS; or (5) the
breach created liability under Section 33-757 or Section 36a-58 of the
Connecticut General Statutes.
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SUMMIT. Summit's By-Laws provide that corporate agents (which term includes
directors, officers and employees) of Summit shall be indemnified and held
harmless by Summit to the fullest extent authorized by the laws of the State of
New Jersey against expenses and liabilities arising in connection with actions
performed by the corporate agent on behalf of Summit and that Summit may
maintain insurance for corporate agents against liabilities and expenses.
Summit's Restated Certificate of Incorporation limits the personal liability of
a director or officer for damages for breach of any duty owned to the company or
its shareholders except for liability for breach of duty based upon an act or
omission: (i) in breach of such person's duty of loyalty to the corporation or
its shareholders, (ii) not in good faith or involving a knowing violation of the
law, or (iii) resulting in receipt by such person of an improper personal
benefit.
COMPARISON OF CORPORATION LAWS
APPRAISAL RIGHTS IN MERGER OR CONSOLIDATION. Under New Jersey corporation
law, unless a certificate of incorporation otherwise provides, a dissenting
shareholder of a New Jersey corporation that is a party to a consolidation, or
that is not the surviving corporation in a merger, or that is the surviving
corporation in a merger requiring shareholder approval, has appraisal rights
with respect to any shares other than (1) shares listed on a national securities
exchange or held of record by not less that 1,000 holders, and (2) shares in
exchange for which, pursuant to the plan of merger or consolidation, the
shareholder will receive cash and/or securities which will be listed on a
national securities exchange or held of record by not less than 1,000 holders.
Summit's Restated Certificate of Incorporation contains nothing which provides
otherwise. Connecticut law provides dissenters' rights of appraisal to
shareholders of a corporation, such as NSS, in the event of a merger or
consolidation or similar transaction. If a shareholder properly exercises his or
her rights as an objecting shareholder, he or she will have the right to be paid
"fair value" of his or her shares based, initially, on the company's estimated
fair value of the shares. If a shareholder and the company do not agree on the
fair value of his or her shares, the dissenting shareholder may submit to the
company his or her own estimate of the fair value rejecting the company's
estimated fair value offer. The company must then commence a proceeding in the
Connecticut Superior Court for the judicial district where the company's
principal office is located to determine the fair value of the shares. The court
shall determine the fair value of the shares immediately before effectuation of
the Reorganization, exclusive of any element of value arising from the
expectation or accomplishment of the proposed transaction. The court may also
order the payment of interest and/or certain costs and expenses under equitable
principles. See "THE REORGANIZATION - Dissenters' Rights."
APPRAISAL RIGHTS RELATING TO DISPOSITION OF ASSETS. Under New Jersey
corporation law, a dissenting shareholder in a New Jersey corporation has
appraisal rights in the case of any sale, lease, exchange or other disposition
of all or substantially all of the assets of the corporation not in the usual or
regular course of business as conducted by the corporation (other than for
certain transfers of assets of a wholly owned subsidiary by the parent
corporation), except, unless the certificate of incorporation provides
otherwise, with respect to (1) shares listed on a national securities exchange
or held of record by not less than 1,000 holders, or (2) a transaction pursuant
to a plan of dissolution of the corporation which provides for the distribution
of substantially all of its net assets to shareholders according to their
interests within one year, where such transaction is wholly for cash and/or
securities which will be listed on a national securities exchange or held of
record by not less than 1,000 holders, or (3) a sale pursuant to court order.
The Connecticut dissenters right statute discussed in the preceding paragraph
also applies in the event of the sale of substantially all of the property of a
corporation, other than pursuant to a court order or a plan approved by
shareholders which provides that all of the net proceeds will be distributed to
shareholders within one year.
CLASS VOTING ON MERGER OR CONSOLIDATION. Under New Jersey corporation law,
any class or series of shares shall be entitled to vote as a class if the plan
of merger or consolidation contains any provisions that, if contained in a
proposed charter amendment, would entitle the class or series to vote as a class
on the amendment. Connecticut corporation law contains a similar provision on
class voting on a plan of merger.
SOURCE OF DIVIDENDS. Under New Jersey corporation law, dividends may not be
paid if, after giving effect to the dividend, either (1) the corporation would
be unable to pay its debts as they become due in the ordinary course of its
business or (2) the corporation's total assets would be less than its total
liabilities. Under Connecticut corporation law, dividends may be paid if, after
giving effect thereto, the corporation is able to pay its debts
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as they become due in the usual course of business and the total assets of the
corporation exceed its total liabilities, including amounts needed to satisfy
preferential rights of other shareholders.
SHAREHOLDER APPROVAL OF MERGERS AND CONSOLIDATIONS. While shareholder
approval of a merger or consolidation is generally required under both the New
Jersey and the Connecticut corporation laws, the New Jersey corporation law
provides that, unless otherwise provided in the corporation's certificate of
incorporation, approval of the shareholders of a surviving corporation in a
merger is not required if (i) the plan of merger does not make an amendment of
the certificate of incorporation of the surviving corporation that would
otherwise require shareholder approval, (ii) the shares outstanding immediately
before the effectiveness of the merger are not changed by the merger, and (iii)
the number of voting or participating shares outstanding (including shares
issuable upon conversion of other securities or upon exercise of rights or
warrants issued pursuant to the merger) after the merger, after giving effect to
the merger, will not exceed by more than 40% the number of voting and
participating shares, as the case may be, of the surviving corporation
outstanding immediately prior to the merger. The Connecticut corporation law has
a generally similar provision but the percentage threshold is 20% rather than
40%.
Under the New Jersey corporation law, unless otherwise provided in the
corporation's certificate of incorporation, a merger requiring shareholder
approval must be approved by the majority of the votes cast by shareholders
entitled to vote thereon. Under Connecticut corporation law, unless otherwise
provided in the certificate of incorporation or by the corporation's board of
directors, in the case of a corporation incorporated after January 1, 1997 (such
as NSS), a merger requiring shareholder approval requires the affirmative vote
of a majority of the votes entitled to be cast by each voting group.
SHAREHOLDER APPROVAL OF ASSET SALES. Under New Jersey corporation law, a
sale of all or substantially all of a corporation's assets outside the regular
course of business requires the approval of the board of directors and the
affirmative vote of a majority of the votes cast by shareholders entitled to
vote thereon. The Restated Certificate of Incorporation of Summit provides that
the Board of Directors of Summit may sell all the rights, franchises and
property of the company as an entirety with the approval of two-thirds of the
outstanding shares. Under Connecticut corporation law, a sale of all or
substantially all of the assets of a corporation incorporated after January 1,
1997 requires the approval of the holders of a majority of the outstanding stock
of the corporation entitled to vote thereon.
POWER TO ADOPT, AMEND OR REPEAL BY-LAWS. Under New Jersey corporation law,
the power to adopt, amend and repeal by-laws of a corporation is vested in the
Board of Directors unless such power is reserved to the shareholders in the
certificate of incorporation, but by-laws made by the Board of Directors may be
amended and repealed and new by-laws adopted by the shareholders and the
shareholders may prescribe in such by-laws that the Board may not amend or
repeal by-laws approved by shareholders. Under Connecticut corporation law, the
board of directors has the power to adopt, amend or repeal by-laws of a
corporation unless: (1) the corporation's certificate of incorporation reserves
power to the corporation's shareholders, or (2) the shareholders, in amending or
repealing a particular by-law provide expressly that the board of directors may
not amend or repeal that by-law. Furthermore, Connecticut corporation law allows
a corporation's shareholders to amend or repeal a corporation's by-laws even
though the by-laws may also be amended or repealed by its board of directors.
ACTION BY SHAREHOLDERS BY WRITTEN CONSENT IN LIEU OF A MEETING. Under New
Jersey corporation law, except as otherwise provided in a certificate of
incorporation, any action (other than the election of directors) required or
permitted to be taken at a meeting of the corporation's shareholders, may be
taken without a meeting upon the written consent of shareholders who would have
been entitled to cast the minimum number of votes that would have been necessary
to take such action at a meeting at which all shares entitled to vote thereon
were present and voted. The annual election of directors, if not conducted at a
shareholders' meeting, may only be effected by unanimous written consent. Under
New Jersey corporation law, a shareholder vote on a plan of merger,
consolidation or sale of substantially all of the assets of the corporation, if
not conducted at a shareholders' meeting, may only be effected by either: (i)
unanimous written consent of all shareholders entitled to
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vote on the matter with advance notice to any other shareholders, or (ii) unless
otherwise provided in the corporation's certificate of incorporation, written
consent of shareholders who would have been entitled to cast the minimum number
of votes necessary to authorize such action at a meeting, together with advance
notice to all other shareholders. As previously discussed, Summit's Restated
Certificate of Incorporation permits action by written consent only where the
consent is unanimous. Connecticut corporation law, except as otherwise provided
in a company's certificate of incorporation, permits any action which may be
taken at a meeting of shareholders to be taken without a meeting as follows: (i)
by consent in writing, setting forth the action so taken or to be taken, signed
by all of the persons who would be entitled to vote upon such action at a
meeting, or by their duly authorized attorneys; or (ii) if the certificate of
incorporation so provides, by consent in writing, setting forth the action to be
taken, signed by persons holding such designated proportion, not less than a
majority, of the voting power of shares, or the shares of any particular class,
entitled to vote thereon or to take such action, as may be provided in the
certificate of incorporation, or their duly authorized attorneys; except that
directors may not be elected by action of shareholders without a meeting of
shareholders other than by unanimous written consent, or pursuant to a plan of
merger.
REMOVAL OF DIRECTORS. Under New Jersey corporation law, one or more of all
directors of a corporation may be removed for cause or, unless otherwise
provided in the certificate of incorporation, without cause by shareholders by
the affirmative vote of the majority of the votes cast by the holders of shares
entitled to vote thereon. Unless otherwise provided in the certificate of
incorporation, shareholders of a corporation whose board of directors is
classified (such as Summit) may not remove a director except for cause. Under
Connecticut corporation law any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors unless the certificate of
incorporation provides that directors may be removed only for cause. The NSS
Certificate of Incorporation provides for removal for cause only, by two-thirds
vote of directors.
SPECIAL MEETINGS OF SHAREHOLDERS. Under New Jersey corporation law, special
meetings of shareholders may be called by the President or Board of Directors of
the corporation, or by such other officers, directors or shareholders as
provided for in the by-laws. In addition, holders of not less than 10% of a
corporation's voting stock may apply to the New Jersey Superior Court for an
order directing a special meeting of shareholders to be held. Under Connecticut
corporation law, special meetings of stockholders may be called by the Board of
Directors or by such person or persons as may be authorized by a company's
certificate of incorporation or the by-laws, and with respect to the
corporations with voting stock registered under the Exchange Act which had no
10% shareholders as of February 1, 1988 (such as NSS), by holders of not less
than 35% of the corporation's voting stock.
DEFACTO MERGER. Under New Jersey corporation law, shareholders have the
same voting and dissent and appraisal rights as if they were shareholders of a
surviving corporation in a reorganization, if (1) voting shares outstanding or
issuable after the transaction exceed by more than 40% voting shares outstanding
before the transaction or (2) shares entitled to participate without limitation
in distributions outstanding or issuable after the transaction exceed by more
than 40% such shares outstanding before the transaction. Connecticut corporation
law does not contain a comparable provision.
SHAREHOLDERS' DERIVATIVE ACTIONS. New Jersey corporation law contains
certain provisions that have the effect of discouraging derivative actions.
Specifically, New Jersey law authorizes the court having jurisdiction over the
action to award reasonable expenses and attorney's fees to the successful
defendants in a derivative action upon a finding that the action was brought
without reasonable cause. In addition, the corporation may require the plaintiff
or plaintiffs to give security for the reasonable expenses, including attorneys'
fees, that may be incurred by the corporation or by other named defendants for
which the corporation may become legally liable if plaintiff or plaintiffs are
holders of less than 5% of the outstanding shares of any class or series of such
corporation (or voting trust certificates therefor) unless the shares or trust
certificates so held have a market value in excess of $25,000. Connecticut
corporate law also contains a provision authorizing the court to award
reasonable expenses, including attorneys' fees to the defendant in a derivative
action if the court finds that the proceeding was commenced or maintained
without reasonable cause or for an improper purpose.
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INSPECTION OF BOOKS AND RECORDS. Under New Jersey corporation law, a
shareholder of record for at least 6 months immediately preceding his demand or
any holder (or a person authorized on behalf of such holder) of at least 5% of
the outstanding shares of any class or series shall have the right to examine
for any proper purpose the minutes of the proceedings of shareholders and record
of shareholders. Furthermore, upon establishing a proper purpose and receiving a
court order a shareholder may examine the books and records of account, minutes
and records of shareholders of a corporation. Under Connecticut corporation law,
upon five business days notice a shareholder (including a beneficial owner) is
entitled to inspect and copy the corporation's certificate of incorporation and
by-laws (and any amendments thereto), board resolutions creating series or
classes of shares and fixing rights, preferences and limitations thereto,
minutes of shareholders meetings and actions by consent for the past three
years, written communications to shareholders, including financial statements,
for the past 3 years, names and business addresses of directors and officers,
and the corporation's most recent annual report filed with the Secretary of
State, minutes of meetings of directors, committees, accounting records and
shareholder records, provided that the shareholder demand is in writing, is made
in good faith, states a proper purpose, describes with reasonable particularity
the purpose and records to be inspected and such records are directly related to
such purpose. Shareholders also have the right, upon written demand, to inspect
the shareholders list beginning two days after notice of a shareholders meeting
for which the list was proposed, continuing through the meeting.
ANTI-TAKEOVER STATUTES. New Jersey has adopted a type of anti-takeover
statute known as a "business combination" statute. Subject to numerous
qualifications and exceptions, the statute prohibits an interested stockholder
of a corporation from effecting a business combination with the corporation for
a period of five years unless the corporation's board approved the transaction
prior to the stockholder becoming an interested stockholder, the transaction
receives the approval of two-thirds of the voting stock of the corporation not
beneficially owned by the interested stockholder, or the transaction meets
certain minimum financial terms. An "interested stockholder" is defined to
include any beneficial owner of 10% or more of the voting power of the
outstanding voting stock of the corporation and any affiliate or associate of
the corporation who within the prior five-year period has at any time owned 10%
or more of the voting power. The term "business combination" is defined broadly
to include, inter alia, (1) the merger or consolidation of the corporation with
the interested stockholder or any corporation that after such merger or
consolidation would be an affiliate or associate of the interested stockholder,
(2) the sale, lease, exchange, mortgage, pledge, transfer or other disposition
to an interested stockholder or any affiliate or associate of the interested
stockholder of 10% or more of the corporation's assets; or (3) the issuance or
transfer to an interested stockholder or any affiliate or associate of the
interested stockholder of 5% or more of the aggregate market value of the stock
of the corporation. The effect of the statute is to protect non-tendering
post-acquisition minority shareholders from mergers in which they will be
"frozen out" after the merger, by prohibiting transactions in which an acquiror
could favor itself at the expense of minority stockholders. The New Jersey
statute does not apply to New Jersey corporations that do not have either their
principal executive offices or significant business operations located in New
Jersey.
Connecticut corporation law provides that any "business combination" must,
with certain exceptions, be approved by the board of directors and the
affirmative vote of at least the holders of 80% of the voting power of the
outstanding shares of voting stock of the corporation and the holders of
two-thirds of the voting power of the outstanding shares of voting stock of the
corporation other than voting stock held by the interested shareholder (as
defined below) who is, or whose affiliate or associate is, a party to the
business combination or held by an affiliate or associate of the interested
shareholder. A "business combination" is generally defined in the CBCA, to
include (A) any merger, consolidation or share exchange with (i) any interested
shareholder (as defined below) or (ii) any other domestic or foreign corporation
whether or not itself an interested shareholder, which is, or after the merger,
consolidation or share exchange would be, an affiliate or associate of an
interested shareholder that was an interested shareholder prior to the
transaction; (B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition, other than in the usual and regular course of business, in one
transaction or a series of transactions in any twelve-month period, to any
interested shareholder or any affiliate or associate of any interested
shareholder, other than the corporation, or any of its subsidiaries, of any
assets of the corporation or any subsidiary having an aggregate book value of
10% or more of the total market value of the outstanding shares of the
corporation or of its net worth, (C) the issuance or transfer by the
corporation, or any
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subsidiary, of any equity securities of the corporation or any subsidiary which
have an aggregate value of 5% or more of the total market value of the
outstanding shares of the corporation to any "interested shareholder" (generally
defined as the beneficial owner of 10% or more of the voting power of the
outstanding shares of voting stock of a corporation) or any affiliate or
associate of any interested shareholder, (D) the adoption of any resolution for
the liquidation or dissolution of the corporation or any subsidiary proposed by
or on behalf or an interested shareholder or any affiliate or associate of any
interested shareholder, other than the corporation or any of its subsidiaries;
or (E) any reclassification of securities, as defined therein, in each case
subject to certain limitations). This supermajority voting provision is not
applicable if (A) all of the fair price and procedural conditions set forth in
Section 33-842(b) of the CBCA are met or (B) the board of directors approves the
business combination prior to the time the interested shareholder became an
interested shareholder, unless the certificate of incorporation otherwise
provides.
In addition to the "business combination" statute described above, the CBCA
further provides that a resident domestic corporation (as defined in the CBCA)
may not engage in a business combination (which is defined similarly to the
definition set forth above) with an interested shareholder of such corporation
for a period of five years following the date that the interested shareholder
became such unless such business combination or the purchase of stock made by
such interested person on the date that the interested shareholder became such
is approved by the board of directors of the corporation and by a majority of
the nonemployee directors, of which there must be at least two, prior to the
interested shareholder's stock acquisition date. The foregoing provisions do not
apply to certain excepted transactions listed in Section 33-845 of the CBCA.
Under New Jersey corporation law, a director of a New Jersey corporation,
in discharging his or her duties to the corporation, and in determining what he
or she reasonably believes to be in the best interest of the corporation may, in
addition to considering the effects of any action on shareholders, consider any
of the following: (a) the effects of the action on the corporation's employees,
suppliers, creditors and customers; (b) the effects of the action on the
community in which the corporation operates; and (c) the long-term as well as
the short-term interest of the corporation and its shareholders, including the
possibility that these interests may best be served by the continued
independence of the corporation. Determinations resulting in the rejection of a
proposal or offer to acquire the corporation are expressly covered by this
provision of the New Jersey Business Corporation Act. The Connecticut Business
Corporation Law contains a similar "other constituency" provision with regard to
mergers, sales of assets and other business combinations.
INDEMNIFICATION. Under the New Jersey corporation law, a corporation may
indemnify any person who is or was a director, officer, trustee, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, trustee, employee or agent of another corporation,
partnership, joint venture, sole proprietorship, trust or other enterprise,
against his reasonable expenses (including counsel fees) in connection with any
pending, threatened or completed proceeding by or in the right of the
corporation to procure a judgment in its favor which involves such person by
reason of his corporate agent status, if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation. However, no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation, unless, and only to the extent that
the Superior Court of New Jersey or the court in which such proceeding was
brought shall determine that, despite the adjudication of liability but in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses that the Superior Court of New Jersey or
such other court shall deem proper. In connection with any other proceeding
involving the corporate agent by reason of his being or having been such a
corporate agent, a corporation may indemnify any such person against his
reasonable expenses and liabilities in connection with any such proceeding if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal proceeding, he or she had no reasonable cause to believe his or her
conduct was unlawful. New Jersey corporation law requires that a corporation
shall indemnify any such person against expenses to the extent such person has
been successful on the merits or otherwise in any of the foregoing proceedings
or in the defense of any claim, issue or matter therein, and provides that any
such person may apply to a court for an award of indemnification by the
corporation if the corporation has failed or refused to provide indemnification
as provided under the statute.
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New Jersey corporation law also permits a corporation to purchase and
maintain insurance on behalf of any such person against any expenses incurred in
any proceeding and any liabilities asserted against such person by reason of his
or her corporate agent status, whether or not the corporation would have the
power indemnify such person under the statute.
Similarly, Connecticut Corporation law provides that a corporation may
indemnify directors, officers, employees and agents with respect to certain
actions (including a suit by or in the right of the corporation to procure a
judgment in its favor) by reason of the fact that he or she is or was a
director, officer, employee or agent against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action, suit or proceeding if he or she conducted himself or herself in good
faith and he or she reasonably believed (a) in the case of conduct in his or her
official capacity with the corporation, that his or her conduct was in its best
interests and (b) in all other cases, that his or her conduct was not opposed to
its best interests and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his or her conduct was unlawful. With respect to
derivative actions, however, no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the court in which
such action or suit was brought shall determine upon adjudication that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expense
which the court shall deem proper. Connecticut corporation law requires that a
corporation shall indemnify any such person against expenses to the extent such
person has been successful on the merits or otherwise in any of the foregoing
proceedings or defense of any such claims.
The corporation law permits a Connecticut business corporation to purchase
and maintain insurance on behalf of any person who is or was director, officer,
employee or agent of the corporation, against any liability asserted against
such person and incurred by him or her in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify such person.
Both New Jersey and Connecticut corporation law permit advancement of
expenses incurred by directors and officers.
LIMITATION OF DIRECTOR AND OFFICER LIABILITY. New Jersey corporation law
provides that directors and members of any committee designated by the board of
directors are not liable to a corporation or its shareholders if acting in good
faith in discharging their duties they rely upon (i) the opinion of counsel for
the corporation, (ii) written reports setting forth financial data concerning
the corporation and prepared by an independent public accountant or certified
public accountant or firm of such accountants, (iii) financial statements, books
of account or reports of the corporation represented to them to be correct by
the president, the officer of the corporation having charge of its books of
account, or the person presiding at a meeting of the board, or (iv) written
reports of committees of the board. The Connecticut corporation law contains a
similar provision which provides that members of a board of directors are
entitled to rely in good faith upon the records of the corporation and upon such
information, opinions, reports or statements presented to the corporation by any
of the corporation's officers or employees, or committees of the board of
directors, or by any other person as to matters the member reasonably believes
are within such other person's professional or expert competence.
The New Jersey corporation law further provides that the certificate or
incorporation of domestic corporations may contain provisions which limit the
personal liability of directors and officers, in whole or in part, to the
corporation or its shareholders for damages for breach of any duty owed to the
corporation or its shareholders except for acts or omissions (i) in breach of
the director's or officer's duty of loyalty to the corporation or its
shareholders, (ii) not in good faith or involving a knowing violation of law, or
(iii) resulting in receipt by such person of an improper personal benefit. With
respect to the foregoing provisions, the New Jersey corporation law provides
that the duty of loyalty is breached by an act or omission known or believed by
a director or officer to be contrary to the best interests of the corporation or
its shareholders in connection with matters in which the director or officer has
a material conflict of interest. Under the CBCA, directors and officers of
Connecticut corporations are not liable for any actions taken as directors or
officers, or any failure to take action, if they acted, or failed to act, in a
manner consistent with the standard of care established for directors and
officers under Connecticut law. Under Connecticut corporation law a director or
officer must exercise his or her duties: (i) in
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good faith; (ii) with the care an ordinarily prudent person in a like position
would exercise under similar circumstances; and (iii) in a manner he or she
reasonably believes to be in the best interest of the corporation.
SUMMIT BANCORP
DESCRIPTION OF BUSINESS
Summit commenced operations on October 1, 1970 as a bank holding company
registered under the BHC Act. Summit owns two bank subsidiaries and several
active non-bank subsidiaries. At June 30, 1998, Summit had total consolidated
assets of $31.1 billion on the basis of which it ranked as the largest New
Jersey-based bank holding company.
The bank subsidiaries engage in a general banking business. Summit Bank
(Hackensack, NJ) is Summit's largest bank subsidiary, accounting for
approximately 91.5% of Summit's total consolidated assets at June 30, 1998.
Summit's non-bank subsidiaries engage primarily in securities brokerage,
insurance brokerage, venture capital investment, commercial finance lending,
lease financing, asset-based lending production, letter of credit issuance, data
processing and reinsuring credit life and disability insurance policies related
to consumer loans made by the bank subsidiaries.
The bank subsidiaries operated 450 banking offices located in major trade
centers and suburban areas in New Jersey and Pennsylvania as of June 30, 1998.
The following table lists, as of June 30, 1998, each bank subsidiary, the
location in New Jersey or Pennsylvania of its principal office, the number of
its banking offices and, in thousands of dollars, its total assets and deposits.
Both the New Jersey and Pennsylvania subsidiaries are state banks and members of
the Federal Reserve System.
<TABLE>
<CAPTION>
LOCATION OF NO. OF
PRINCIPAL OFFICES (2) BANKING OFFICES (1) TOTAL ASSETS (2) TOTAL DEPOSITS (2)
- ----------------------------------- --------------------- ------------------ -------------------
<S> <C> <C> <C>
Summit Bank, Hackensack, NJ ...... 382 $28,499,268 $20,141,349
Summit Bank, Bethlehem, PA ...... 68 2,792,575 1,966,999
</TABLE>
- --------
(1) Banking offices include 53 supermarket branches (46 in NJ; 7 in PA)
(2) Not adjusted to exclude interbank deposits or other transactions among the
subsidiaries.
Summit is a legal entity separate and distinct from its subsidiaries. There
are various legal limitations on the extent to which a bank subsidiary may
finance or otherwise supply funds to Summit or its nonbank subsidiaries. Under
federal law, no bank subsidiary may, subject to certain limited exceptions, make
loans or extensions of credit to, or investments in the securities of Summit or
its non-bank subsidiaries or take their securities as collateral for loans to
any borrower. Each bank subsidiary is also subject to collateral security
requirements for any loans or extensions of credit permitted by such exceptions.
In addition, certain bank regulatory limitations exist on the availability of
subsidiary bank undistributed net assets for the payment of dividends to Summit
without the prior approval of the bank regulatory authorities. The Federal
Reserve Act, which affects both bank subsidiaries, restricts the payment of
dividends in any calendar year to the net profit of the current year combined
with retained net profits of the preceding two years. Each bank, as a
state-chartered bank, may declare a dividend only if, after payment thereof, its
capital would be unimpaired and its remaining surplus would equal 50 percent of
its capital (New Jersey) or its surplus would not be reduced (New Jersey and
Pennsylvania). At June 30, 1998, the total undistributed net assets of Summit's
subsidiary banks were $2.4 billion of which $106.7 million was available under
the most restrictive limitations for the payment of dividends to Summit.
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DESCRIPTION OF SUMMIT CAPITAL STOCK
Summit is presently authorized to issue 390,000,000 shares of Summit Common
and 6,000,000 shares of Preferred Stock, without par value ("Summit Preferred").
As of June 30, 1998 there were approximately 173,934,000 shares of Summit Common
outstanding and 1,500,000 shares of Summit Series R Preferred designated in
Summit's Restated Certificate of Incorporation and reserved for issuance under
the Summit Rights Plan (as defined herein). On the date of this Proxy Statement
- -- Prospectus there were no shares of Summit Preferred outstanding. Pursuant to
the New Jersey Business Corporation Act, the Summit Board has authority to set
the terms and conditions of the authorized but unissued Summit Preferred. Summit
may issue any authorized Summit Common and Summit Preferred without further
shareholder vote, unless such a vote is required for a particular transaction by
applicable law or stock exchange rules, including rules of the NYSE, on which
the Summit Common is presently listed. The issuance of additional Summit Common
or Summit Preferred, including Summit Preferred that might be convertible into
Summit Common, may, among other things, affect the earnings per share applicable
to existing Summit Common and the equity and voting rights of existing holders
of Summit Common.
The following summary does not purport to be complete and is subject in all
respects to the applicable provisions of the New Jersey Business Corporation
Act, Summit's Restated Certificate of Incorporation and Summit's
Rights Plan.
COMMON STOCK
The rights of holders of Summit Common are subject to the preferences as to
dividends and liquidation rights and other prior rights, if any, of any class or
series of Summit Preferred that may be issued. The holders of Summit Common are
entitled to one vote for each share with respect to all matters voted upon by
shareholders, including the election of directors, and are entitled to receive
dividends when, as and if declared by the Summit Board out of funds of Summit
legally available therefor. Shares of Summit Common do not have cumulative
voting rights; accordingly, at any Special meeting of Summit shareholders (or at
any special meeting of shareholders where an election of directors is conducted)
the holders of 50 percent plus 1 of the shares represented at the meeting
(provided a quorum is present) can fill all positions on the Summit Board that
are up for election at such meeting if they so choose and, in such event, the
holders of the remaining less than 50 percent of the shares will not be able to
fill any of such positions. Summit has a classified Board of Directors, under
which approximately one-third of the directors are elected each year. In the
event of the liquidation of Summit, holders of Summit Common are entitled to
share pro rata in the distribution of Summit's assets available for such
purpose. All shares of Summit Common are fully paid and nonassessable. No
preemptive rights attach to the ownership of Summit Common and no personal
liability is imposed on the holders thereof by reason of the ownership of such
shares. First Chicago Trust Company of New York is the transfer agent, dividend
disbursing agent and registrar for the Summit Common. Summit Bank (Hackensack,
NJ) is the co-transfer agent.
In April 1998, the Summit Board authorized the repurchase from time to time
of up to five percent, or 8.9 million shares, of outstanding Summit Common. In
addition, the Summit Board has authorized the repurchase of shares of Summit
Common for the Reorganization. Through June 30, 1998, Summit had repurchased 3.9
million shares of Summit Common pursuant to its repurchase program and for the
acquisition of NSS.
TRUST PREFERRED SECURITIES
On March 20, 1997, Summit Capital Trust 1 ("Trust"), a statutory business
trust created under the laws of the State of Delaware and wholly-owned
subsidiary of Summit, issued $150.0 million of 8.4% Capital Trust Pass-through
Securities, representing undivided beneficial interests in the assets of the
Trust ("Capital Securities"), and $4.6 million of Common Securities,
representing undivided beneficial interests in the assets of the Trust ("Common
Securities") (collectively, the Capital Securities and Common Securities are
referred to as the "Trust Securities"). The Trust used the proceeds received
from the sale of the Trust Securities to purchase $154.6 million of 8.4% Junior
Subordinated Deferrable Interest Debentures due 2027 issued by Summit
("Subordinated
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Debentures"). The Trust was created solely for the purpose of investing the
proceeds received from the sale of the Trust Securities in the Subordinated
Debentures. Summit has guaranteed that, to the extent the Trust has received
certain payments from Summit, the Trust will distribute such funds.
SHAREHOLDER RIGHTS PLAN
In August 1989, Summit adopted a shareholder rights plan ("Rights Plan"),
under which preferred stock purchase rights ("Rights") attached to Summit Common
outstanding as of the close of business on August 28, 1989. Holders of shares of
Summit Common issued subsequent to that date receive the Rights with their
shares. Except as indicated below, each Right entitles the registered holder to
purchase from Summit one one-hundred and fiftieth of a share of a new series of
Summit Preferred Stock, designated the Series R Preferred Stock ("Summit Series
R Preferred"). The Rights expire on August 16, 1999, and are subject to
redemption and amendment in certain circumstances. The Rights trade
automatically with shares of Summit Common and become exercisable only under
certain circumstances as described below.
In general, the Rights will become exercisable upon the earlier to occur (a
"Distribution Date", as defined in the Rights Plan) of the following: (1) ten
days following a public announcement that a person or group has acquired
beneficial ownership of 15% or more of the Summit Common outstanding at that
time or voting securities of Summit representing 15% or more of the total voting
power of Summit (such person or group becoming an "Acquiring Person", as defined
in the Rights Plan) or (2) ten business days (or such later date as the Summit
Board may determine) after the commencement of a tender offer or exchange offer
that would result in a person or group beneficially owning 30% or more of the
outstanding Summit Common or voting securities representing 30% or more of the
total voting power of Summit.
Generally, in the event a Distribution Date occurs by virtue of a person or
group becoming an Acquiring Person (other than pursuant to an offer for all
outstanding shares of Summit Common and other voting securities that the Summit
Board determines to be fair to shareholders and otherwise in the best interests
of Summit), each Right, other than Rights owned by the Acquiring Person, will
thereafter entitle the holder to receive, upon exercise of the Right, Summit
Series R Preferred having a value equal to two times the exercise price of the
Right.
In the event that a Distribution Date occurs (under either of the
circumstances described above) and Summit is acquired in a reorganization or
other business combination, or more than 50% of Summit's assets or earning power
is sold or transferred, each Right will thereafter entitle the holder there to
receive, upon the exercise of the Right, common stock of the acquiror having a
value equal to two times the exercise price of the Right.
The combination of prohibitive dilution of the Acquiring Person's share
values and the power of the Summit Board to redeem the Rights is intended to
encourage potential acquiring persons to negotiate with the Summit Board with
respect to the terms of any acquisition or business combination and, to the
extent possible, discourage or defeat partial or two-tiered acquisition
proposals.
The foregoing description of the Rights Plan does not purport to be
complete and is qualified in its entirety by reference to the terms of the
Rights Plan, which is more fully described in Summit's Registration Statement on
Form 8-A filed August 28, 1989.
NSS BANCORP, INC.
DESCRIPTION OF BUSINESS
NSS is a Connecticut chartered bank holding company whose principal
operating subsidiary is NSS Bank, a Connecticut chartered capital stock savings
bank. The only significant asset of NSS is its investment in the capital stock
of NSS Bank.
NSS Bank conducts business from eight offices located in the Connecticut
towns of Norwalk, Darien, Fairfield, Georgetown, Wilton, and Westport, all of
which are part of Fairfield County, Connecticut. The principal business of NSS
Bank is to attract deposits from the general public, to extend loans to
individuals in the
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community for the purchase or construction of one-to-four family residences, to
make consumer installment loans, to invest in securities, and to provide typical
consumer banking services. NSS Bank also makes loans secured by multi-family
(e.g., five or more units) and commercial real estate, as well as construction
loans, land acquisition and development loans and, to a lesser extent,
commercial business, consumer and other loans. NSS Bank's principal sources of
income are interest on loans and interest and dividends on investments,
primarily U.S. Government agency and mortgage-backed securities and other
short-term investments. In recent years, NSS Bank has realized income from the
sale of loans and mortgage-backed and investment securities and, to a lesser
extent, NSS Bank realizes other non-interest income, including income from
service charges on deposit accounts, trust fees and credit card fees. NSS Bank's
deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") to
the maximum extent permitted by law. The principal sources of funds for NSS
Bank's activities are deposit accounts, amortization and prepayment of loans,
borrowings from the Federal Home Loan Bank (FHLB) and funds provided from
operations. NSS and NSS Bank are subject to regulation by the Federal Reserve
Board, the FDIC and the Connecticut Banking Commissioner.
DESCRIPTION OF NSS CAPITAL STOCK
COMMON STOCK
NSS is presently authorized to issue 7,000,000 shares of NSS Common and
500,000 shares of Serial Preferred, of which 50,000 have been designated Series
A Preferred. As of June 30, 1998, there were 2,378,085 shares of NSS Common
outstanding.
DIVIDENDS. The holders of NSS Common are entitled to receive and share
equally in such dividends as may be declared by the NSS Board out of funds
legally available therefor.
VOTING RIGHTS. The holders of NSS Common elect the NSS Board and act on
such other matters as are required to be presented to them under the CBCA, NSS's
Certificate of Incorporation or as are otherwise presented to them by the NSS
Board. Each holder of NSS Common is entitled to one vote per share. Holders of
NSS Common may not cumulate votes. Directors of NSS are elected by a plurality
of votes cast.
PREEMPTIVE RIGHTS. Holders of NSS Common are not entitled to preemptive
rights with respect to any shares that may be issued.
SHAREHOLDERS' RIGHTS AGREEMENT
On May 10, 1996 (the "Declaration Date"), NSS Bank declared a dividend
distribution of one NSS Right for each outstanding share of common stock of NSS
Bank. The dividend was paid on May 28, 1996 to the shareholders of record as of
the close of business on such date. The description and terms of the NSS Rights
are set forth in a Rights Agreement (the "Rights Agreement") between NSS Bank
and Chase Mellon Shareholder Services, LLC (the "Rights Agent"). In connection
with its reorganization into a bank holding company structure in 1997, NSS Bank
assigned to NSS, and NSS assumed, all rights and obligations of NSS Bank under
the Rights Agreement. NSS capital stock was substituted in place of NSS Bank
capital stock under the Rights Agreement. When exercisable, each NSS Right
entitles the registered holder of NSS Common to purchase from NSS one
one-hundredths of a share of Series A Junior Preferred at a price of $40.00 per
one one-hundredths of a share, subject to adjustment.
Until such time that a person or group of persons acquires a controlling
interest in NSS so as to be deemed an Acquiring Person (the "Distribution
Date"), the NSS Rights will be evidenced by NSS Common certificates and NSS
Rights are transferred with and only with NSS Common. The transfer of any of the
common stock certificates constitutes the transfer of the NSS Rights associated
with the common stock represented by such certificate. The purchase price
payable, and the number of Series A Preferred Shares of NSS or other securities
or property issuable, upon exercise of the NSS Rights are subject to adjustment
from time to time to prevent dilution. The number of outstanding NSS Rights and
the number of one one-hundredths of a Series A Preferred issuable upon exercise
of each NSS Right are also subject to adjustment, prior to the Distribution
Date.
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If NSS is acquired in a merger or other business combination, the Rights
Agreement requires that proper provisions be made by NSS so that each holder of
a NSS Right shall thereafter have the right to receive, upon the exercise
thereof at the then current exercise price of the NSS Right, that number of
shares of common stock of the surviving company (or its parent company or other
controlling entity) which at the time of such transaction would have a market
value of four times the exercise price of the NSS Right. In the event that NSS
were the surviving corporation in a merger with any person, the Rights Agreement
requires that proper provision be made so that each holder of a NSS Right, other
than the Acquiring Person (whose Rights would thereafter be null and void) and
certain of its transferees, would thereafter have the right to receive upon
exercise that number of shares of NSS common stock having a market value of four
times the exercise price of the NSS Right (i.e., a 75% discount to market
value). If insufficient shares are available to satisfy the NSS Right, NSS may
substitute other consideration, as appropriate, or make an adjustment to the
exercise price of the NSS Right to achieve substantially the intended economic
benefit to shareholders (other than the Acquiring Person) of the 75% discount.
In approving and recommending the Reorganization, the NSS Board has
formally determined that Summit shall not be deemed to be an Acquiring Person
and that Rights shall not be exercisable as a result of the execution of the
Reorganization Agreement or Reorganization Option Agreement or effectuation
thereof.
PROPOSAL II-ADJOURNMENT OF SPECIAL MEETING
In the event there are not sufficient votes to constitute a quorum or to
approve the Reorganization Agreement at the time of the Special Meeting, the
Reorganization Agreement could not be approved unless the Special Meeting were
adjourned in order to permit further solicitation of proxies. In order to allow
proxies that have been received by NSS at the time of the Special Meeting to be
voted for such adjournment, if necessary, NSS has submitted the question of
adjournment under the circumstances to its shareholders as a separate matter for
their consideration. In order to approve any such adjournment more votes must be
cast in favor of Proposal II than against. The NSS Board recommends that
shareholders vote their proxies in favor of such adjournment so that their
proxies may be used for such purposes in the event it should become necessary.
Properly executed proxies will be voted in favor of any such adjournment unless
otherwise indicated thereon. If it is necessary to adjourn the Special Meeting,
no notice of the time and place of the adjourned meeting is required to be given
to shareholders other than an announcement of such time and place at the Special
Meeting unless such adjournment exceeds 90 days.
SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in NSS's proxy materials for NSS's
Annual Meeting of Shareholders in the event that the Reorganization is not
consummated prior to such meeting, any shareholder proposal to take action at
such meeting would have been required to be received at NSS's main office at 48
Wall Street, Norwalk, Connecticut 06852 within a reasonable time before NSS
begins to print its proxy materials. NSS will provide prior notice to
shareholders of an intent to hold an annual meeting. Any such proposals shall be
subject to the requirements of the proxy rules adopted under the Exchange Act.
The Summit Board will consider and include in the Summit Proxy Statement
for the 1999 Annual Meeting of Summit shareholders proposals which meet the
regulations of the Commission and New Jersey law and which comply with Summit
By-Laws. In order to be considered for inclusion, proposals must be received on
or before November 6, 1998. Proposals should be addressed to the Secretary of
Summit.
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 80 and not more than 100 days before the anniversary of the
preceding year's annual meeting provided, however, that, if the date of the
annual meeting is more than 30 days before or more than 60 days after such
anniversary date, the notice of a shareholder proposal, to be timely, must be
received by the Secretary not later than the close of business on the later of
the 80th day prior to such annual meeting
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or the tenth day following the day on which public announcement of the meeting
date is first made. 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 Commission.
LEGAL MATTERS
The legality of the Summit Common offered hereby will be passed upon for
Summit by Richard F. Ober, Jr., Esq., Executive Vice President, General Counsel
and Secretary of Summit. Mr. Ober owns 43,473 shares of Summit Common and
options to purchase 123,934 shares of Summit Common at a weighted average
exercise price of $19.90. Certain federal tax matters will be passed upon for
Summit and NSS by Thompson Coburn, Saint Louis, Missouri. Certain legal matters
will be passed upon for NSS by Tyler Cooper & Alcorn, LLP, Hartford, CT.
EXPERTS
The consolidated financial statements of Summit Bancorp. and subsidiaries
as of December 31, 1997 and 1996 and for each of the years in the three-year
period ended December 31, 1997, included in Summit's Annual Report on Form 10-K,
incorporated by reference herein and in the Registration Statement, have been
incorporated by reference herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by referenced herein, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of NSS Bancorp, Inc. and subsidiaries
as of December 31, 1997 and 1996 and for each of the years in the three-year
period ended December 31, 1997, included in NSS's Annual Report on Form 10-K,
incorporated by reference herein and in the Registration Statement, have been
incorporated by reference herein and in the Registration Statement in reliance
upon the report of Friedberg, Smith & Co., P.C., independent certified public
accountants, incorporated by reference herein, and upon authority of said firm
as experts in accounting and auditing.
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APPENDIX A
REORGANIZATION AGREEMENT
REORGANIZATION AGREEMENT dated June 17, 1998 between Summit Bancorp., a New
Jersey business corporation ("Summit"), and NSS Bancorp, Inc., a Connecticut
business corporation ("NSS").
W I T N E S S E T H:
WHEREAS, the respective boards of directors of Summit and NSS deem it
advisable and in the best interests of their respective shareholders to adopt a
plan of reorganization in accordance with the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended ("Code") providing for the acquisition
of NSS by Summit on the terms and conditions provided for in this Reorganization
Agreement ("Agreement");
WHEREAS, the Board of Directors of Summit and NSS have each determined that
the reorganization contemplated by this Agreement (Reorganization) is consistent
with, and in furtherance of, their respective business strategies and goals;
WHEREAS, Summit and NSS intend on the day after the date of this Agreement
and in consideration of this Agreement to enter into the Stock Option Agreement
(Option Agreement) attached hereto as Exhibit B; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Reorganization and also to prescribe certain
other terms and conditions of the Reorganization.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein and in the Option
Agreement, the parties hereto, intending to be legally bound, agree as follows:
ARTICLE I.
GENERAL PROVISIONS
Section 1.01. THE REORGANIZATION.
(a) Upon the terms and subject to the conditions contained in this
Agreement, at the Effective Time (as defined at Section 1.06), the
Reorganization shall be effected as follows:
(1) NSS shall be merged with and into Summit pursuant to and in accordance
with the provisions of, and with the effect provided in, the New Jersey
Business Corporation Act, as amended ("New Jersey Act") and the
Connecticut Business Corporation Act, as amended (Connecticut Act);
(2) NSS shall be merged into a wholly owned subsidiary of Summit or a wholly
owned subsidiary of Summit shall be merged into NSS, in either case
pursuant to and in accordance with the provisions of, and with the
effect provided in, the corporate law of the jurisdiction of
incorporation of the surviving corporation in such merger (such
wholly-owned subsidiary of Summit being referred to herein as
SummitSub); or
(3) Summit Stock (as defined at Section 1.02 below) shall be exchanged for
NSS Stock (as defined at Section 1.03(a)(1) below) pursuant to and in
accordance with the provisions of, and with the effect provided in, the
Connecticut Act.
(b) Summit shall prior to the Effective Time elect the method for carrying
out the Reorganization from among those methods set forth at Section 1.01(a).
(c) In the event Summit elects to carry out the Reorganization by a merger
provided for in Section 1.01(a)(2) above, Summit shall (i) cause SummitSub to
approve, execute and deliver this Agreement, (ii) approve this Agreement as the
sole shareholder of SummitSub, (iii) and cause SummitSub to take all actions
appropriate to accomplish the Reorganization and the other transactions
contemplated by this Agreement.
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Section 1.02. CAPITAL STOCK OF SUMMIT. All shares of the capital stock of
Summit issued or issued and outstanding immediately prior to the Effective Time,
including the Common Stock, par value $.80 per share, of Summit and the rights
attached thereto (Summit Rights) pursuant to the Rights Agreement dated as of
August 16, 1989 between Summit and First Chicago Trust Company of New York, as
Rights Agent (Summit Rights Agreement) (references to Summit Stock herein shall
mean the Common Stock of Summit with Summit Rights attached thereto), shall be
unaffected by the Reorganization and shall remain issued or issued and
outstanding, as the case may be, immediately thereafter.
Section 1.03. TERMS OF CONVERSION OF NSS CAPITAL STOCK.
(a) At the Effective Time, by virtue of the Reorganization and without any
action on the part of any shareholder of NSS:
(1) All shares of the Common Stock, par value $.01 per share, of NSS and the
rights attached thereto (NSS Rights) pursuant to the Rights Agreement
dated as of May 10, 1996 between NSS and ChaseMellon Shareholder
Services, LLC, as Rights Agent (NSS Rights Agreement) (references to NSS
Stock herein shall mean the Common Stock of NSS with NSS Rights attached
thereto) which immediately prior to the Effective Time are beneficially
owned either directly, or indirectly through a bank, broker or other
nominee, by Summit or a subsidiary of Summit or by NSS or a subsidiary
of NSS (other than NSS Stock held as a result of foreclosures or debts
previously contracted), if any, or held in the treasury of NSS, if any,
shall be canceled and retired and no cash, securities or other
consideration shall be payable or paid or delivered under this Agreement
in exchange for such NSS Stock; and
(2) Subject to Section 1.03(a)(1), outstanding shares of NSS Stock held as
of the Effective Time by each NSS Shareholder (as defined at Section
1.07(c) below) shall be converted into the right to receive whole shares
of Summit Stock and cash in lieu of fractional shares of Summit Stock as
follows: the aggregate number of shares of NSS Stock held by each NSS
Shareholder shall be multiplied by the Exchange Ratio (as defined at
Section 1.03(c) below) and (i) the number of whole shares of Summit
Stock that a NSS Shareholder shall become entitled to receive pursuant
to this Section 1.03(a)(2) shall equal the whole number resulting from
the foregoing multiplication, and (ii) the cash in lieu of a fractional
share of Summit Stock (Cash In Lieu Amount) a NSS Shareholder shall
become entitled to receive pursuant to this Section 1.03(a)(2) shall
equal the product obtained by multiplying the fraction, if any, which
results from the foregoing multiplication by the closing price of one
share of Summit Stock on the New York Stock Exchange (NYSE) Composite
Transactions List (as reported in THE WALL STREET JOURNAL or, in the
absence thereof, as reported by another authoritative source mutually
agreed upon by NSS and Summit) on the last trading day ending prior to
the Effective Time. (The shares of Summit Stock issuable in accordance
with this Section 1.03(a)(2) are sometimes referred to herein as the
"Shares"). (The Shares and any Cash In Lieu Amounts payable in the
Reorganization, both adjusted as and if necessary in accordance with
Section 1.03(b) below, are sometimes collectively referred to herein as
the Reorganization Consideration).
(b) In the event that, from the date hereof to the Effective Time, the
outstanding Summit Stock shall have been increased, decreased, changed into or
exchanged for a different number or kind of shares or securities through
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or there occur other like changes in the outstanding shares
of Summit Stock (Capital Change), the Exchange Ratio and, if necessary, the form
and amount of Summit capital stock issuable in the Reorganization in exchange
for NSS Stock shall be appropriately adjusted to give effect to the Capital
Change.
(c) The Exchange Ratio is hereby defined to be one and two hundred
thirty-two thousandths (1.232), adjusted as and if necessary in accordance with
Section 1.03(b).
Section 1.04. RESERVATION OF SUMMIT STOCK; ISSUANCE OF SHARES PURSUANT TO
THE REORGANIZATION. Summit shall reserve and make available for issuance to
holders of NSS Stock in connection with the Reorganization, on the terms and
subject to the conditions of this Agreement, sufficient shares of Summit Stock
to effect the conversion contemplated by Section 1.03 and related terms of this
Agreement, which shares, when issued and delivered, will be duly authorized,
legally and validly issued, fully paid and non-assessable and subject to no
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preemptive rights. Upon the terms and subject to the conditions of this
Agreement, particularly Sections 1.03 and 1.07, Summit shall issue the Shares
upon the effectiveness of the Reorganization to NSS Shareholders.
Section 1.05. EXCHANGE AGENT ARRANGEMENTS. Prior to the Effective Time,
Summit shall appoint First Chicago Trust Company of New York, or another entity
reasonably satisfactory to NSS, as the exchange agent ("Exchange Agent")
responsible for exchanging, in connection with and upon consummation of the
Reorganization and subject to Sections 1.03 and 1.07, certificates representing
whole shares of Summit Stock (Summit Certificates) and Cash In Lieu Amounts for
certificates representing shares of NSS Stock (NSS Certificates) and Summit
shall deliver to the Exchange Agent sufficient Summit Certificates and cash as
shall be required to satisfy Summits obligations to NSS Shareholders under
Section 1.07(c), prior to the time such obligations arise.
Section 1.06. EFFECTIVE TIME.
(a) The Reorganization shall be effective at the time and date ("Effective
Time") specified in such of the following as shall be applicable:
(1) if the Reorganization is a merger pursuant to Sections 1.01(a)(1) or
(2), the time and date specified in the certificate or certificates of
merger required to be filed with the jurisdiction or jurisdictions of
incorporation of each of the constituent corporations to the merger,
which time and date shall be identical in the event two certificates of
merger are required; and
(2) if the Reorganization is an exchange pursuant to Section 1.01(a)(3), the
time and date specified in the certificate of exchange required to be
filed by the Connecticut Act.
(b) The certificate or certificates of merger or certificate of exchange
determined to be applicable to the Reorganization in accordance with Section
1.06(a) is (are collectively) referred to in this Agreement as the
Reorganization Certificate.
(c) In the event the corporate law of the jurisdiction in which a
Reorganization Certificate is required to be filed requires that the
Reorganization Certificate set forth, as the case may be in accordance with
Summits election pursuant to Section 1.01(a), a plan of merger or a plan of
share exchange, or that one of such plans be attached thereto, then:
(1) If Summit has elected a method for carrying out the Reorganization
provided for at Section 1.01(a)(1) or Section 1.01(a)(3), Summit shall
revise the title of this Agreement where it appears herein to, as
appropriate in accordance with the election made by Summit, Agreement
and Plan of Merger or Agreement and Plan of Share Exchange and shall
attach a copy of this Agreement so revised to such Reorganization
Certificate in satisfaction of the relevant corporate law requirement;
or
(2) If Summit has elected to carry out the Reorganization by a merger
provided for at Section 1.01(a)(2), Summit shall attach a plan of
mergerto this Agreement as Exhibit A and such Exhibit A shall constitute
a part of this Agreement as fully as if attached hereto on the date
hereof and Summit shall include such plan in the Reorganization
Certificate in satisfaction of the relevant corporate law requirement.
Plan of merger for purposes of this Section 1.06(c)(2) means a plan of
merger (i) dated as of the date hereof, (ii) meeting the minimum
requirements of the corporate laws which require a plan of merger as
part of the Reorganization Certificate, and (iii) containing terms and
conditions consistent in all material respects to the terms and
conditions contained in this Article I, including where appropriate
provisions governing SummitSubs role in such merger, and such other
terms and conditions as Summit shall determine in its discretion to be
desirable, including terms and conditions governing certificates or
articles of incorporation and amendments thereto or restatements
thereof, by-laws and amendments thereto, and directors and officers of
the corporation surviving the merger; provided, however, that no such
other term or condition shall (x) alter or change the amount or kind of
consideration to be received by Shareholders of NSS as provided for in
this Agreement, (y) adversely affect the tax treatment of the
Reorganization Consideration (as defined in Section 1.03(a)(2) below) to
be received by Shareholders of NSS or (z) materially impede or delay
consummation of the transactions contemplated by this Agreement.
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Section 1.07. EXCHANGE OF NSS CERTIFICATES.
(a) After the Effective Time and subject to Section 1.07(c) below, each NSS
Shareholder (except as provided otherwise in Section 1.03(a)(1) above), upon
surrender to the Exchange Agent of all NSS Certificates registered to the NSS
Shareholder, shall be entitled to receive in exchange therefor a Summit
Certificate representing the number of whole shares of Summit Stock such NSS
Shareholder becomes entitled to receive pursuant to Section 1.03(a)(2) and the
Cash In Lieu Amount, payable by check, such NSS Shareholder may become entitled
to receive pursuant to Section 1.03(a)(2); provided, however, that a NSS
Affiliate (as defined at Section 4.11) shall not become entitled to exchange NSS
Certificates for the Reorganization Consideration as described in this Section
1.07(a) until such time as Summit shall have received from the particular NSS
Affiliate an executed Affiliate Agreement (as defined at Section 4.11). Until so
surrendered, outstanding NSS Certificates held by each NSS Shareholder, other
than NSS certificates governed by Section 1.03(a)(1), shall be deemed for all
purposes (other than as provided below with respect to unsurrendered NSS
Certificates and Summit's right to refuse payment of dividends or other
distributions, if any, in respect of Summit Stock) to represent only the right
to receive the number of whole shares of Summit Stock and the Cash In Lieu
Amount, if any, determined in accordance with Section 1.03(a)(2). Until so
surrendered, Summit may, at its option, refuse to pay to the holders of the
unsurrendered NSS Certificates dividends or other distributions, if any, on
Summit Stock declared after the Effective Time; provided, however, that upon the
surrender and exchange of NSS Certificates following a dividend or other
distribution on Summit Stock there shall be paid to such NSS Shareholders the
amount, without interest, of dividends and other distributions, if any, which
became payable prior thereto but which were not paid.
(b) Holders of NSS Certificates as of the Effective Time shall cease to be,
and shall have no further rights as, shareholders of NSS.
(c) As promptly as practicable, but in no event more than 10 days, after
the Exchange Agent receives an accurate and complete list of all holders of
record of outstanding NSS Stock as of the Effective Time (NSS Shareholders)
(including the address and social security number of and the number of shares of
NSS Stock held by each NSS Shareholder) from NSS (Final Shareholder List),
Summit shall cause the Exchange Agent to send to each NSS Shareholder
instructions and transmittal materials for use in surrendering and exchanging
NSS Certificates for the Reorganization Consideration. If NSS Certificates are
properly presented to the Exchange Agent (with proper presentation including
satisfaction of all requirements of the letter of transmittal), Summit shall as
soon as practicable, but in no event more than 10 days, after the later to occur
of such presentment or the receipt by the Exchange Agent of an accurate and
complete Final Shareholder List from NSS cause the Exchange Agent to cancel and
exchange NSS Certificates for Summit Certificates and Cash In Lieu Amounts, if
any; provided, however, that if the Exchange Agent, in order to satisfy its
obligations under the Code with respect to the reporting of dividend income to
former shareholders of NSS, must suspend the exchange process provided for in
the second sentence of this Section 1.07(c) in order to preserve and report the
required reporting information, the 10-day exchange requirement shall be
extended 5 business days for exchanges being processed by the Exchange Agent at
the commencement of, or which are received during, the period of the suspension.
(d) At and after the Effective Time there shall be no transfers on the
stock transfer books of NSS of the shares of NSS Stock which were outstanding
immediately prior to the Effective Time.
Section 1.08. RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS. In the
event the method of Reorganization set forth at Section 1.01(a)(1) is elected by
Summit:
(a) the Restated Certificate of Incorporation of Summit in effect
immediately prior to the Effective Time shall be the Restated Certificate of
Incorporation of the surviving corporation in such merger (Surviving
Corporation), except as duly amended thereafter and except to the extent such is
deemed by law to be affected by the Reorganization Certificate; and
(b) the By-Laws of Summit in effect immediately prior to the Effective Time
shall be the By-Laws of the Surviving Corporation, except as duly amended
thereafter.
Section 1.09. BOARD OF DIRECTORS AND OFFICERS. In the event the method of
Reorganization set forth at Section 1.01(a)(1) is elected by Summit:
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(a) the Board of Directors of the Surviving Corporation shall consist of
the members of the Board of Directors of Summit at the Effective Time; and
(b)the officers of the Surviving Corporation shall consist of the officers of
Summit at the Effective Time. Such directors and officers shall serve as such
for the terms prescribed in the Restated Certificate of Incorporation and
By-Laws of Summit, or as otherwise provided by law or until their earlier
deaths, resignation or removal.
Section 1.10. NSS STOCK OPTIONS.
(a) At the Effective Time, each NSS Option (as defined in Section 1.10(b)
below) shall be deemed to constitute, and shall automatically be converted at
the Exchange Ratio into, options to purchase Summit Stock (Converted Options)
and each Converted Option shall be administered in all material respects in
accordance with the terms and conditions provided for in the NSS Stock
Compensation Plan under which the related NSS Option was granted and the stock
option agreement by which it was evidenced. The number of shares of Summit Stock
which may be purchased upon exercise of a particular Converted Option shall be
the number of shares of NSS Stock which would have been issuable upon exercise
in full of the related NSS Option multiplied by the Exchange Ratio and rounded
down to the nearest whole number (Converted Number). The exercise price per
share of Summit Stock purchasable upon exercise of a Converted Option shall
equal the aggregate exercise price that would have been payable upon an exercise
in full of the related NSS Option divided by the Converted Number and rounded up
to the nearest ten-thousandth decimal place. In the event a Capital Change shall
occur prior to the Effective Time, an appropriate adjustment shall be made to
the terms of the NSS Options at the time of the foregoing conversion so that
Converted Options give effect to the Capital Change. Within 45 days after the
receipt by Summit of an accurate and complete list of all holders of NSS
Options, all information about the NSS Options and the holders thereof
(including the address and social security number of each such holder and a
description of the NSS Options held by such holder specifying, at a minimum, the
plan under which issued, type (incentive or nonqualified), grant date,
expiration date, exercise price and the number of shares of NSS Stock subject
thereto) and copies of each form of option agreement, warrant agreement or
letter agreement entered into between NSS and a holder of a NSS Option (all of
the foregoing being collectively referred to as the Final Option List and
Materials), Summit shall issue to the holders of such NSS Options appropriate
instruments confirming the rights of such holders with respect to Summit Stock,
on the terms and conditions provided by this Section 1.10, upon surrender of the
outstanding instruments representing such NSS Options; provided, however, that
Summit shall not be obligated to issue any such confirming instruments which
relate to the issuance of Summit Stock, or issue any shares of Summit Stock,
until such time as the shares of Summit Stock issuable upon exercise of
Converted Options shall have been registered with the Securities and Exchange
Commission (the SEC) pursuant to an effective registration statement and
authorized for listing on the NYSE and for sale by any appropriate state
securities regulators, which such registrations and authorizations Summit shall
use its best efforts to effect within 30 days after NSS shall have delivered to
Summit the Final Option List and Materials. Summit shall use its best efforts to
maintain the effectiveness of such registration statement (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as the Converted Options remain outstanding. Summit shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of Summit
Stock for delivery upon exercise of Converted Options. Notwithstanding anything
in the foregoing to the contrary, NSS Options intended to qualify as incentive
stock options under the Code shall be converted into Converted Options in a
manner consistent with the preservation of such qualification under the Code.
(b) For purposes of this Section 1.10, NSS Option is hereby defined to mean
an option relating to the purchase of NSS Stock, and any rights appurtenant
thereto including Equity Based Rights (as defined at Section 2.01(d)(2) below),
granted under a NSS Stock Compensation Plan (as defined at Section 2.01(d)(3)
below), outstanding both on the date hereof and at the Effective Time.
Section 1.11. ADDITIONAL ACTIONS. If, at any time after the Effective Time,
the surviving corporation to any of the mergers contemplated by Sections
1.01(a)(1) or (2) shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in such surviving
corporation its right, title or interest in, to or under any of the rights,
properties or assets of the nonsurviving corporation or otherwise to carry out
this Agreement, the officers and directors of the surviving corporation shall be
authorized to execute and deliver, in the name and on
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behalf of the nonsurviving corporation or otherwise, all such deeds, bills of
sale, assignments and assurances and to take, in the name and on behalf of the
nonsurviving corporation, all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties or assets in the surviving corporation
or otherwise to carry out this Agreement.
Section 1.12. UNCLAIMED REORGANIZATION CONSIDERATION. If, upon the
expiration of one year following the Effective Time, Reorganization
Consideration remains with the Exchange Agent due to the failure of NSS
Shareholders to surrender and exchange NSS Certificates for Reorganization
Consideration, Summit may, at its election, continue to retain the Exchange
Agent for purposes of the surrender and exchange of NSS Certificates or take
possession of such unclaimed Reorganization Consideration, in which such latter
case, NSS Shareholders who have theretofore failed to surrender and exchange NSS
Certificates shall thereafter look only to Summit for payment of the
Reorganization Consideration and the unpaid dividends and distributions on the
Summit Stock declared after the Effective Time, without any interest thereon.
Notwithstanding the foregoing, none of Summit, NSS, the Exchange Agent or any
other person shall be liable to any former holder of shares of NSS Stock for any
property properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
Section 1.13. LOST NSS CERTIFICATES. In the event any NSS Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such NSS Certificate to be lost, stolen or destroyed
and the posting by such person of a bond in such amount as Summit may determine
is reasonably necessary as indemnity against any claim that may be made against
it with respect to such NSS Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed NSS Certificate the Reorganization
Consideration deliverable in respect thereof pursuant to this Agreement.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF NSS
NSS represents and warrants to Summit as follows (where an item required to
be disclosed on a NSS Schedule is required to be disclosed on one or more
additional NSS Schedules, or where a copy of an item required to be attached to
a NSS Schedule is required to be attached to one or more additional NSS
Schedules, such disclosure or copy need not be provided on more than one NSS
Schedule provided the NSS Schedules with respect to which the disclosure or copy
is required but not provided contain a cross reference to the location of the
required disclosure or copy in the NSS Schedules which is clear and
unambiguous):
Section 2.01. ORGANIZATION, CAPITAL STOCK.
(a) Each of NSS and its nonbank subsidiaries, including the nonbank
subsidiaries of bank subsidiaries (the term "subsidiary", as used in this
Agreement, shall mean any corporation or other organization of which 10% or more
of the shares or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or other group performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned; the term indirect ownership means ownership through a
succession of one or more other subsidiaries), all of which are listed, together
with their respective states of incorporation and direct and indirect beneficial
owners, on NSS Schedule 2.01(a), is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
qualified to transact business under the laws of all jurisdictions where the
failure to be so qualified would be likely to have a material adverse effect on
(i) the business, results of operations, assets or financial condition of NSS
and its subsidiaries, on a consolidated basis, or (ii) the ability of NSS to
perform its obligations under, and to consummate the transactions contemplated
by, this Agreement ("NSS Material Adverse Effect). However, a NSS Material
Adverse Effect or NSS Material Adverse Change (as defined at Section 2.03 below)
will not include a change resulting from a change in law, rule, regulation,
generally accepted or regulatory accounting principle or other matter affecting
banking institutions or their holding companies generally or from charges or
expenses incident to the Reorganization. Each of NSS and its nonbank
subsidiaries has all corporate power and authority and all material licenses,
franchises, certificates, permits and other governmental authorizations which
are legally required to own
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and lease its properties and assets, to occupy its premises and to engage in its
business and activities as presently engaged in, and each has complied in all
material respects with all applicable laws, regulations and orders.
(b) NSS is registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended (BHCA).
(c) NSS or one of its subsidiaries is the holder and beneficial owner of
all of the outstanding capital stock of all of NSSs direct and indirect nonbank
subsidiaries.
(d) (1) The authorized capital stock of NSS consists of 7,000,000 shares of
Common Stock, par value $0.01 per share, with the NSS Rights attached thereto
pursuant to the NSS Rights Agreement, of which 2,485,571 shares are issued and
outstanding, and 500,000 shares of Preferred Stock, par value $0.01 per share,
of which no shares are issued or outstanding and 2,485 shares of Series A Junior
Participating Preferred Stock are reserved for issuance. All issued and
outstanding shares of the capital stock of NSS and of each of its nonbank
subsidiaries have been fully paid, were duly authorized and validly issued, are
nonassessable and have been issued pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the Securities Act) or
an appropriate exemption from registration under the Securities Act and were not
issued in violation of the preemptive rights of any shareholder.
(2) Except as set forth in Section 2.01(d)(1), all Equity Securities of
NSS and its nonbank subsidiaries outstanding, in existence, the subject of an
agreement or reserved for issuance (Current Equity Securities), and all rights
or entitlements appurtenant to, based upon, derived from or valued based on the
performance or value of Equity Securities of NSS outstanding, in existence, the
subject of an agreement or reserved for issuance (Equity Based Rights) are
listed on NSS Schedule 2.01(d)(2) and all significant information relating to
such Current Equity Securities and Equity Based Rights is listed on NSS Schedule
2.01(d)(2) including without limitation, where applicable, name of holder,
address and relationship to NSS if not an employee of NSS or a subsidiary, date
of grant, award or issuance, expiration dates, vesting dates, the NSS Stock Plan
(as defined in Section 2.01(d)(3) below) under which granted, awarded or issued,
any intended qualification or nonqualification or other status under the Code,
those Current Equity Securities or Equity Based Rights granted in tandem with
other Current Equity Securities or Equity Based Rights, exercise price, number
of shares, valuation formula and performance goals. All Current Equity
Securities have been (to the extent such is capital stock or similar equity
interest) fully paid, were duly authorized and validly issued, are (to the
extent such is capital stock or similar equity interest) nonassessable and have
been issued pursuant to an effective registration statement under the Securities
Act or an appropriate exemption from registration under the Securities Act and
were not issued in violation of the preemptive rights of any shareholder.
(3) All contracts, plans and arrangements, whether oral or written or
formal or informal, pursuant to which Current Equity Securities or Equity Based
Rights were granted, awarded or issued or which provide for the granting,
awarding or issuance of Equity Securities or Equity Based Rights or are relevant
in any fashion to Current Equity Securities or Equity Based Rights (NSS Stock
Plan) are listed in and appended in their entirety (including any amendments) to
NSS Schedule 2.01(d)(3). All NSS Stock Plans constituting a compensatory
contract, plan or arrangement (NSS Stock Compensation Plan), including all
amendments thereto, have been duly approved by the shareholders of NSS and such
approvals have been obtained in compliance with all applicable laws and all
applicable regulations of governmental or self-regulatory authorities.
(4) Equity Securities of an issuer means (i) the capital stock or other
equity securities or equity interests of such issuer, (ii) options, warrants,
scrip, interests in, rights (including preemptive rights) to subscribe to,
purchase or acquire, calls on or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
capital stock or other equity securities or equity interests or any security or
right convertible into or exchangeable for the capital stock or other equity
security or equity interests of such issuer, and (iii) contracts, commitments,
obligations, agreements, understandings or arrangements entitling anyone to
acquire from the issuer, or by which such issuer is or may become bound to
issue, capital stock or other equity security or equity interest or any security
or right convertible into or exchangeable for the capital stock or other equity
security or equity interest of such issuer.
(e) NSS owns no bank subsidiary other than the NSS Bank (Bank) ("bank" is
hereby defined to include commercial banks, savings banks, private banks, trust
companies, savings and loan associations, building and
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loan associations and similar institutions receiving deposits and making loans).
Bank is a bank duly organized, validly existing, and in good standing under the
jurisdiction of its organization and is qualified to transact business under the
laws of all jurisdictions where the failure to be so qualified would be likely
to have a NSS Material Adverse Effect. Bank is duly authorized to conduct all
activities and exercise all powers of a capital stock savings bank contemplated
by the laws of Connecticut. Bank is an insured bank as defined in the Federal
Deposit Insurance Act and has all corporate power and authority and all material
licenses, franchises, certificates, permits and other governmental
authorizations which are legally required to own and lease its properties and
assets, to occupy its premises, and to engage in its business and activities as
presently engaged in, and has complied in all material respects with all
applicable laws, regulations and orders.
(f) The authorized and outstanding capital stock of Bank is as set forth on
NSS Schedule 2.01(f). NSS is the holder and beneficial owner of all of the
issued and outstanding Equity Securities of Bank. All issued and outstanding
shares of the capital stock of Bank have been fully paid, were duly authorized
and validly issued, are non-assessable, and were not issued in violation of the
preemptive rights of any shareholder. All Equity Securities of Bank outstanding,
in existence, the subject of an agreement or reserved for issuance are described
in all material respects on NSS Schedule 2.01(f).
(g) All Equity Securities of its direct and indirect subsidiaries
beneficially owned by NSS or a subsidiary of NSS are held free and clear of any
claims, liens, encumbrances or security interests.
Section 2.02. FINANCIAL STATEMENTS. The financial statements (and related
notes and schedules thereto) contained in or incorporated by reference into NSSs
(a) annual report to shareholders for the fiscal year ended December 31, 1997,
(b) annual report on Form 10-K filed pursuant to the Securities Exchange Act of
1934, as amended (Exchange Act) for the fiscal year ended December 31, 1997 and
(c) the quarterly report on Form 10-Q filed pursuant to the Exchange Act for the
fiscal quarter ended March 31, 1998 (the "NSS Financial Statements") are true
and correct in all material respects as of their respective dates and each
fairly presents (subject, in the case of unaudited statements, to recurring
audit adjustments normal in nature and amount), in accordance with generally
accepted accounting principles, the consolidated statements of condition,
income, changes in stockholders' equity and cash flows of NSS and its
subsidiaries at its respective date and for the period to which it relates,
except as may otherwise be described therein and except that, in the case of
unaudited statements, no consolidated statements of changes in stockholders
equity are included. The NSS Financial Statements do not, as of the dates
thereof, include any material asset or omit any material liability, absolute or
contingent, or other fact, the inclusion or omission of which renders the NSS
Financial Statements, in light of the circumstances under which they were made,
misleading in any respect.
Section 2.03. NO CONFLICTS. Except as set forth on NSS Schedule 2.03, NSS
and each of its subsidiaries is not in violation or breach of or default under,
and has received no notice of violation, breach, revocation or threatened or
contemplated revocation of or default or denial of approval under, nor will the
execution, delivery and performance of this Agreement by NSS, or the
consummation of the transactions contemplated hereby including the
Reorganization by NSS upon the terms provided herein (assuming receipt of the
Required Consents, as that term is defined in Section 4.01), violate, conflict
with, result in the breach of, constitute a default under, give rise to a claim
or right of termination, cancellation, revocation of, or acceleration under, or
result in the creation or imposition of any lien, charge or encumbrance upon any
of the material rights, permits, licenses, assets or properties of NSS or any of
its subsidiaries or upon any of the Equity Securities of NSS or any of its
subsidiaries, or constitute an event which could, with the lapse of time, action
or inaction by NSS or any of its subsidiaries or a third party, or the giving of
notice and failure to cure, result in any of the foregoing, under any of the
terms, conditions or provisions, as the case may be, of:
(i) the Certificate of Incorporation or the By-Laws of NSS or any of its
subsidiaries;
(ii) any applicable law, statute, rule, ruling, determination, ordinance or
regulation of or agreement with any governmental or regulatory authority;
(iii)any judgment, order, writ, award, injunction or decree of any court or
other governmental authority; or
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(iv) any material note, bond, mortgage, indenture, lease, policy of insurance
or indemnity, license, contract, agreement or other instrument;
to which NSS or any of its subsidiaries is a party or by which NSS or any
of its subsidiaries or any of their assets or properties are bound or committed,
the consequences of which individually or in the aggregate would be likely to
result in a material adverse change in the business, results of operations,
assets or financial condition of NSS and its subsidiaries, on a consolidated
basis, from that reflected in the NSS Financial Statements as of and for the
three months ended March 31, 1998 (NSS Material Adverse Change), or enable any
person to enjoin the transactions contemplated hereby.
Section 2.04. ABSENCE OF UNDISCLOSED LIABILITIES. NSS and its subsidiaries
have no liabilities, whether contingent or absolute, direct or indirect, matured
or unmatured (including but not limited to liabilities for federal, state and
local taxes, penalties, assessments, lawsuits or claims against NSS or any of
its subsidiaries), and no loss contingency (as defined in Statement of Financial
Accounting Standards No. 5), other than (a) those reflected in the NSS Financial
Statements or disclosed in the notes thereto, (b) commitments made by NSS or any
of its subsidiaries in the ordinary course of its business which are not in the
aggregate material to NSS and its subsidiaries, on a consolidated basis, and (c)
liabilities arising in the ordinary course of its business since March 31, 1998,
which are not in the aggregate material to NSS and its subsidiaries, on a
consolidated basis. Other than as may be set forth on NSS Schedule 2.04, neither
NSS nor any of its subsidiaries has, since March 31, 1998, become obligated on
any debt due in more than one year from the date of this Agreement in excess of
$100,000, other than intra-corporate debt and deposits received, repurchase
agreements and borrowings from the Federal Home Loan Bank of Boston entered into
in the ordinary course of business.
Section 2.05. ABSENCE OF LITIGATION; AGREEMENTS WITH BANK REGULATORS. There
is no outstanding order, injunction or decree of any court or governmental or
self-regulatory body against or affecting NSS or any of its subsidiaries which
materially and adversely affects NSS and its subsidiaries, on a consolidated
basis, and there are no actions, arbitrations, claims, charges, suits,
investigations or proceedings (formal or informal) material to NSS and its
subsidiaries, on a consolidated basis, pending or, to NSSs knowledge,
threatened, against or involving NSS or any of its subsidiaries or their
officers or directors (in their capacity as such) in law or equity or before any
court, panel or governmental agency, except as may be disclosed in the Forms
10-K and 10-Q of NSS referred to in Section 2.02. Neither Bank nor NSS is a
party to any agreement or memorandum of understanding with, or is a party to any
commitment letter to, or has submitted a board of directors resolution or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, any governmental or
regulatory authority which restricts materially the conduct of its business, or
in any manner relates to material statutory or regulatory noncompliance
discovered in any regulatory examinations, its capital adequacy, its credit or
reserve policies or its management. Neither Bank nor NSS has been advised by any
governmental or regulatory authority that it is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
of the foregoing. Neither Bank nor NSS has failed to resolve to the satisfaction
of the applicable regulatory agency any significant deficiencies cited by any
such agency in its most recently completed examination of each aspect of Banks
and of NSSs business nor has Bank or NSS been advised of any significant
deficiencies by any such agency in connection with any current examination of
Bank or of NSS by any such agency.
Section 2.06. BROKERS' FEES. NSS has entered into this Agreement with
Summit as a result of direct negotiations without the assistance or efforts of
any finder, broker, financial advisor or investment banker, other than Sandler
O'Neill & Partners, L.P. (Sandler O'Neill). NSS Schedule 2.06 consists of true
and complete copies of all agreements between NSS and Sandler O'Neill with
respect to the transactions contemplated by this Agreement or similar
transactions.
Section 2.07. REGULATORY FILINGS. At the time of filing, all filings made
by NSS and its subsidiaries after December 31, 1992 with the SEC and the
appropriate bank regulatory authorities do not or did not contain any untrue
statement of a material fact and do not or did not omit to state any material
fact required to be stated herein or therein or necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading. To the extent such filings were subject to the Securities Act or
Exchange Act, such filings complied in all material respects with the Securities
Act or Exchange Act, as appropriate, and
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all applicable rules and regulations thereunder of the SEC. Each of the
financial statements (including related notes and schedules thereto) contained
in or incorporated by reference into such filings are true and correct in all
material respects as of their respective dates and each fairly presents
(subject, in the case of unaudited statements, to recurring audit adjustments
normal in nature and amount), in accordance with generally accepted accounting
principles, the consolidated statements of condition, income, changes in
stockholders' equity and cash flows of NSS and its subsidiaries at its
respective date and for the period to which it relates, except as may otherwise
be described therein and except that, in the case of unaudited statements, no
consolidated statements of changes in stockholders equity is included. NSS and
its subsidiaries have since December 31, 1992, to the extent legally required,
timely made all filings required by the Securities Act and the Exchange Act,
Federal and state banking laws and regulations and the rules and regulations of
the NASD and any other self-regulatory organization, and have paid all fees and
assessments due and payable in connection therewith.
Section 2.08. CORPORATE ACTION. Assuming due execution and delivery by
Summit, and subject to the requisite approval by the shareholders of NSS of this
Agreement, the Reorganization and the other transactions contemplated hereby in
accordance with NSSs Certificate of Incorporation and the Connecticut Act at a
meeting of such holders to be duly called and held, NSS has the corporate power
and is duly authorized by all necessary corporate action to execute, deliver and
perform this Agreement. The Board of Directors of NSS has taken all action
required by law, its Certificate of Incorporation (including specific approval
of the Reorganization pursuant to Article SIXTH, Paragraph C.(1) thereof), its
By-Laws or otherwise, including the NSS Rights Agreement, (i) to authorize the
execution and delivery of this Agreement and (ii) provided Summit elects a
method for carrying out the Reorganization set forth at Section 1.01(a)(1) or
Section 1.01(a)(2) of this Agreement, for shareholders of NSS to approve this
Agreement and the transactions contemplated hereby including the Reorganization
by a simple majority of the votes entitled to be cast on the matter at the
meeting held in accordance with Section 4.03. Assuming due execution and
delivery by Summit, this Agreement is a valid and binding agreement of NSS
enforceable in accordance with its terms except as such enforcement may be
limited by applicable principles of equity, and by bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or other laws of general
applicability presently or hereafter in effect affecting the enforcement of
creditors' rights generally or institutions, the deposits of which are insured
by the Federal Deposit Insurance Corporation, or the affiliates of such
institutions. The Board of Directors of NSS in authorizing the execution of this
Agreement has determined to recommend to the shareholders of NSS the approval of
this Agreement, the Reorganization and the other transactions contemplated
hereby and such other proposals as may be requested by Summit pursuant to
Section 4.03.
Section 2.09. ABSENCE OF CHANGES. There has not been, since March 31, 1998,
any NSS Material Adverse Change except as may be set forth in NSS Schedule 2.09.
Except as may be set forth in NSS Schedule 2.09, neither NSS nor any of its
subsidiaries has since March 31, 1998: (a) (i) declared, set aside or paid any
dividend or other distribution in respect of its Equity Securities, other than
dividends from subsidiaries to NSS or other subsidiaries of NSS, and an ordinary
cash dividend to NSS shareholders of $0.10 per share or less per fiscal quarter,
or, (ii) directly or indirectly purchased, redeemed or otherwise acquired any
shares of any Equity Securities; (b) incurred current liabilities since that
date other than in the ordinary course of business; (c) sold, exchanged or
otherwise disposed of any of their assets except in the ordinary course of
business; (d) except with respect to any employment agreement or termination
agreement disclosed in and appended in its entirety (including any amendments)
to NSS Schedule 2.09 (Officer Agreements), made any officers salary increase or
wage increase not consistent with past practices, entered into any employment,
consulting, severance or change of control contract with any present or former
director, officer or salaried employee, or instituted any employee or director
welfare, bonus, stock option, profit-sharing, retirement, severance or other
benefit plan or arrangement or modified any of the foregoing so as to increase
its obligations thereunder in any material respect; (e) suffered any taking by
condemnation or eminent domain or other damage, destruction or loss in excess of
$50,000, whether or not covered by insurance, adversely affecting its business,
property or assets, or waived any rights of value in excess of $50,000; (f)
entered into transactions other than in the ordinary course of business which in
the aggregate exceeded $100,000; or (g) acquired assets or capital stock of
another company of whatsoever amount, except in a fiduciary capacity or in the
course of securing or collecting loans or leases.
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Section 2.10. ALLOWANCE FOR CREDIT LOSSES. At March 31, 1998 and thereafter
the allowances for credit losses of NSS and its subsidiaries were and are
adequate in all material respects to provide for all losses on loans and leases
outstanding and, to the best of NSSs knowledge, the loan and lease portfolios of
NSS in excess of such allowances are collectible in the ordinary course of
business. NSS Schedule 2.10 constitutes a list of all loans and leases made by
NSS or any of its subsidiaries that have been classified as to quality by any
internal or external auditor, accountant or examiner, and such list is accurate
and complete in all material respects.
Section 2.11. TAXES AND TAX RETURNS. Neither NSS nor any of its
subsidiaries has at any time filed a consent pursuant to Section 341(f) of the
Code or consented to have the provisions of Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by NSS or any of its subsidiaries. None of the
property being acquired by Summit or its subsidiaries in the Reorganization is
property which Summit or its subsidiaries will be required to treat as being
owned by any other person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986 or is "tax-exempt use property" within
the meaning of Section 168(h)(1) of the Code. All amounts required to be
withheld have been withheld from employees by NSS and each of its subsidiaries
for all periods in compliance with the tax, social security, unemployment and
other applicable withholding provisions of applicable federal, state and local
law. Proper and accurate federal, state and local returns (as defined below)
have been timely filed by NSS and each of its subsidiaries for all periods for
which returns were due, including with respect to employee income tax
withholding, social security, unemployment and other applicable taxes (as
defined below), and the amounts shown thereon to be due and payable, as well as
any interest, additions, and penalties due with respect to completed and settled
examinations or concluded litigation relating to NSS or any of its subsidiaries,
have been paid in full or adequate provision therefor has been included on the
books of NSS or its appropriate subsidiary. Neither NSS nor any of its
subsidiaries is required to file tax returns with any state other than the State
of Connecticut. Provision has been made on the books of NSS or its appropriate
subsidiary for all unpaid taxes, whether or not disputed, that may become due
and payable by NSS or any of its subsidiaries in future periods in respect of
transactions, sales or services occurring or performed prior to the date of this
Agreement. The Internal Revenue Service ("IRS") has audited the consolidated
federal income tax returns of NSS for all taxable years ended on or prior to
1990 and the State of Connecticut has not, since 1992, audited the Connecticut
income tax returns of NSS and its subsidiaries. Neither NSS nor any of its
subsidiaries is subject to an audit or review of its tax returns by any state
other than the State of Connecticut. NSS is not and has not been a United States
real property holding corporation as defined in Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
Neither NSS nor any of its subsidiaries is currently a party to any tax sharing
or similar agreement with any third party. There are no material matters,
claims, assessments, examinations, notices of deficiency, demands for taxes,
refund litigation, proceedings, audits or proposed deficiencies pending or, to
NSSs knowledge, threatened against NSS or any of its subsidiaries, including a
claim or assessment by any authority in a jurisdiction where NSS or any of its
subsidiaries do not file tax returns and NSS or any such subsidiary is subject
to taxation, and there have been no waivers of statutes of limitations or
agreements related to assessments or collection in respect of any federal, state
or local taxes. Neither NSS nor any of its subsidiaries has agreed to or is
required to make any adjustment pursuant to Section 481(a) of the Code by reason
of a change in accounting method initiated by NSS or any of its subsidiaries,
and neither NSS nor any of its subsidiaries has any knowledge that the IRS has
proposed any such adjustment or change in accounting method. NSS and its
subsidiaries have complied in all material respects with all requirements
relating to information reporting, including tax identification number
reporting, and withholding (including back-up withholding) and other
requirements relating to the reporting of interest, dividends and other
reportable payments under the Code and state and local tax laws and the
regulations promulgated thereunder and other requirements relating to reporting
under federal law including record keeping and reporting on monetary instruments
transactions.
For purposes of this Agreement, taxes shall mean all taxes, charges, fees,
levies, penalties or other assessments imposed by any United States Federal,
state, local, or foreign taxing authority, including, but not limited to,
income, excise, property, sales, transfer, franchise, payroll, withholding,
social security or other taxes,
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including any interest, penalties or additions attributable thereto; and return
shall mean any return, report, information return or other documents (including
any related or supporting information) with respect to taxes.
Section 2.12. PROPERTIES. NSS has, directly or through its subsidiaries,
good and marketable title to all of its properties and assets, tangible and
intangible, including those reflected in the NSS Financial Statements (except
individual properties and assets disposed of since March 31, 1998 in the
ordinary course of business), which properties and assets are not subject to any
mortgage, pledge, lien, charge or encumbrance other than as reflected in the NSS
Financial Statements or which in the aggregate do not materially adversely
affect or impair the operation of NSS and its subsidiaries, on a consolidated
basis. NSS and each of its subsidiaries enjoys peaceful and undisturbed
possession under all material leases under which it or any of its subsidiaries
is the lessee, where the failure to enjoy such peaceful and undisturbed
possession would be likely to have a NSS Material Adverse Effect, and none of
such leases contains any unusual or burdensome provision which would be likely
to materially and adversely affect or impair the operations of NSS and its
subsidiaries, on a consolidated basis.
Section 2.13. CONDITION OF PROPERTIES; INSURANCE. All real and tangible
personal properties owned by NSS or any of its subsidiaries or used by NSS or
any of its subsidiaries in its business are in a good state of maintenance and
repair, are in good operating condition, subject to normal wear and tear,
conform in all material respects to all applicable ordinances, regulations and
zoning laws, and are adequate for the business conducted by NSS or such
subsidiary subject to exceptions which are not, in the aggregate, material to
NSS and its subsidiaries, on a consolidated basis. NSS and each of its
subsidiaries maintains insurance (with companies which, to the best of NSSs
knowledge, are approved by all appropriate state insurance regulators to sell
such insurance where purchased by NSS) against loss relating to such properties
and such other risks as companies engaged in similar business located in
Connecticut, would, in accordance with good business practice, be customarily
insured in amounts which are customary, usual and prudent for corporations or
banks, as the case may be, of their size. Such policies are in full force and
effect and are carried in an amount and form and are otherwise adequate to
protect NSS and each of its subsidiaries from any adverse loss resulting from
risks and liabilities reasonably foreseeable at the date hereof, and are
disclosed on NSS Schedule 2.13. All material claims thereunder have been filed
in a due and timely fashion. Since December 31, 1992, neither NSS nor any of its
subsidiaries has been refused insurance for which it has applied or had any
policy of insurance terminated (other than at its request) nor have NSS or any
of its subsidiaries received notice from any insurance carrier that (i) such
insurance will be canceled or that coverage thereunder will be reduced or
eliminated or (ii) premium costs with respect to such insurance will be
increased.
Section 2.14. CONTRACTS.
(a) Except as set forth in NSS Schedule 2.14(a), neither NSS nor any of its
subsidiaries is a party to and neither they nor any of their assets are bound by
any written or oral lease or license with respect to any property, real or
personal, as tenant or licensee involving an annual consideration in excess of
$50,000.
(b) Except as set forth in NSS Schedule 2.09 or in NSS Schedule 2.14(b),
neither NSS nor any of its subsidiaries is a party to and neither they nor any
of their assets are bound by any written or oral: (i) employment or severance
contract (including, without limitation, any NSS bargaining contract or union
agreement) or other agreement with any director, executive officer or other key
employee of NSS or any subsidiary, the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence of a transaction
involving NSS or any of its subsidiaries of the nature contemplated by this
Agreement which is not terminable without penalty by NSS or a subsidiary, as
appropriate, on 60 days or less notice; (ii) contract or commitment for capital
expenditures in excess of $50,000 for any one project or in excess of $100,000
in the aggregate for all projects; (iii) contract or commitment whether for the
purchase of materials or supplies or for the performance of services involving
consideration in excess of $50,000 (including advertising and consulting
agreements, data processing agreements, and retainer agreements with attorneys,
accountants, actuaries, or other professionals); (iv) contract or option to
purchase or sell any real or personal property, other than to sell OREO
property, involving consideration in excess of $50,000; (v) agreement or plan,
including any stock option plan, stock appreciation rights plan, restricted
stock plan, stock purchase plan, or any other non- qualified compensation plan,
any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated,
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by the occurrence of any of the transactions contemplated by this Agreement or
the value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement, (vi) agreement containing
covenants that limit the ability of NSS or any of its subsidiaries to compete in
any line of business or with any person, or that involve any restriction on the
geographic area in which or method by which NSS (including any successor
thereof) or any of its subsidiaries may carry on its business (other than as may
be required by law or any regulatory agency), (vii) agreement which by its terms
limits the payment of dividends by NSS or any of its subsidiaries, (viii)
contract (other than this Agreement) limiting the freedom of NSS or its
subsidiaries to engage in any type of banking or bank-related business
permissible under law; (ix) contract, plan or arrangement which provides for
payments of benefits payable to any participant therein or party thereto, and
which might render any portion of any such payments or benefits subject to
disallowance of deduction therefor as a result of the application of Section
280G of the Code or (x) any other contract material to the business of NSS and
its subsidiaries, on a consolidated basis, and not made in the ordinary course
of business.
(c) Neither NSS nor any of its subsidiaries is a party to or otherwise
bound by any contract, agreement, plan, lease, license, commitment or
undertaking which, in the reasonable opinion of management of NSS, is materially
adverse, onerous, or harmful to any aspect of the business of NSS and its
subsidiaries, on a consolidated basis.
Section 2.15. PENSION AND BENEFIT PLANS.
(a) Neither NSS nor any of its subsidiaries maintains an employee pension
benefit plan, within the meaning of Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or has made any contributions
to any such employee pension benefit plan, except employee pension benefit plans
listed in NSS Schedule 2.15(a) (individually a "NSS Pension Plan" and
collectively the "NSS Pension Plans"). In its present form each NSS Pension Plan
complies in all material respects with all applicable requirements under ERISA
and the Code. Each NSS Pension Plan and the trust created thereunder is
qualified and exempt under Sections 401(a) and 501(a) of the Code, and NSS or
the subsidiary whose employees are covered by such NSS Pension Plan has received
from the IRS a determination letter to that effect and such determination letter
may still be relied on. No event has occurred and there has been no omission or
failure to act which would adversely affect such qualification or exemption.
Each NSS Pension Plan has been administered and communicated to the participants
and beneficiaries in all material respects in accordance with its terms and
ERISA. No employee or agent of NSS or any subsidiary whose employees are covered
by a NSS Pension Plan has engaged in any action or failed to act in such manner
that, as a result of such action or failure, (i) the IRS could revoke, or refuse
to issue (as the case may be), a favorable determination as to such NSS Pension
Plans qualification and the associated trusts exemption or impose any liability
or penalty under the Code, or (ii) a participant or beneficiary or a
nonparticipating employee has been denied benefits properly due or to become due
under such NSS Pension Plan or has been misled as to his or her rights under
such NSS Pension Plan. No NSS Pension Plan is subject to Section 412 of the Code
or Title IV of ERISA. No person has engaged in any prohibited transaction
involving any NSS Pension Plan or associated trust within the meaning of Section
406 of ERISA or Section 4975 of the Code. There are no pending or threatened
claims (other than routine claims for benefits) against the NSS Pension Plans or
any fiduciary thereof which would subject NSS or any of its subsidiaries to a
material liability. All reports, filings, returns and disclosures and other
communications which have been required to be made to the participants and
beneficiaries, other employees, the Pension Benefit Guaranty Corporation (PBGC),
the SEC, the IRS, the U.S. Department of Labor or any other governmental agency
pursuant to the Code, ERISA, or other applicable statute or regulation have been
made in a timely manner and all such reports, communications, filings, returns
and disclosures were true and correct in all material respects. No liability has
been, or is likely to be, incurred on account of delinquent or incomplete
compliance or failure to comply with such requirements. ERISA Affiliate where
used in this Agreement means any trade or business (whether or not incorporated)
which is a member of a group of which NSS is a member and which is under common
control within the meaning of Section 414 of the Code. Neither NSS nor any of
its subsidiaries has any material liability under ERISA or the Code as a result
of its being a member of a group described in Sections 414(b), (c), (m) or (o)
of the Code. There are no unfunded benefit or pension plans or arrangements, or
any individual agreements whether qualified or not, to which NSS or any of its
subsidiaries or ERISA Affiliates has any obligation
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to contribute and the present value of all benefits vested and all benefits
accrued under each NSS Pension Plan which is subject to Title IV of ERISA did
not, in each case, as of the last applicable annual valuation date, exceed the
value of the assets of the NSS Pension Plan allocable to such vested or accrued
benefits. No NSS Pension Plan or any trust created thereunder has been
terminated, nor has there been any reportable events with respect to any NSS
Pension Plan, as that term is defined in Section 4043 of ERISA since January 1,
1990. No NSS Pension Plan or any trust created thereunder has incurred any
accumulated funding deficiency as such term is defined in Section 302 of ERISA
(whether or not waived). No NSS Pension Plan is a multiemployer plan as that
term is defined in Section 3(37) of ERISA. There has been no change in control
of any NSS Pension Plan.
(b) All bonus, deferred compensation, profit-sharing, retirement, pension,
stock option, stock award and stock purchase plans and all other employee
benefit, health and welfare plans, arrangements or agreements, including without
limitation the NSS Stock Compensation Plans and medical, major medical,
disability, life insurance or dental plans covering employees generally, other
than the NSS Pension Plans, maintained by NSS or any of its subsidiaries with an
annual cost in excess of $50,000 (collectively "NSS Benefit Plans") are listed
in NSS Schedule 2.15(b) (unless already listed in NSS Schedule 2.15(a) or NSS
Schedule 2.01(d)(3)) and comply in all material respects with all applicable
requirements imposed by the Securities Act, the Exchange Act, ERISA, the Code,
and all applicable rules and regulations thereunder. The NSS Benefit Plans have
been administered and communicated to the participants and beneficiaries in all
material respects in accordance with their terms and ERISA (as applicable), and
no employee or agent of NSS or any of its subsidiaries has engaged in any action
or failed to act in such manner that, as a result of such action or failure: (i)
the IRS could revoke, or refuse to issue, a favorable determination as to a NSS
Benefit Plans qualification and any associated trusts exemption or impose any
liability or penalty under the Code; or (ii) a participant or beneficiary or a
nonparticipating employee has been denied benefits properly due or to become due
under the NSS Benefit Plans or has been misled as to their rights under the NSS
Benefit Plans. There are no pending or threatened claims (other than routine
claims for benefits) against the NSS Benefit Plans which would subject NSS or
any of its subsidiaries to liability. Any trust which is intended to be
tax-exempt has received a determination letter from the IRS to that effect and
no event has occurred which would adversely affect such exemption. All reports,
filings, returns and disclosures required to be made to the participants and
beneficiaries, other employees of NSS or any of its subsidiaries, the PBGC, the
SEC, the IRS, the U.S. Department of Labor and any other governmental agency
pursuant to the Code, ERISA, or other applicable statute or regulation, if any,
have been made in a timely manner and all such reports, filings, returns and
disclosures were true and correct in all material respects. No material
liability has been, or is likely to be, incurred on account of delinquent or
incomplete compliance or failure to comply with such requirements.
(c) There is no pending or, to NSSs knowledge, threatened litigation,
administrative action or proceeding relating to any NSS Benefit Plan or NSS
Pension Plan. There has been no announcement or commitment by NSS or any
subsidiary of NSS to create an additional NSS Benefit Plan or NSS Pension Plan,
or to amend a NSS Benefit Plan or NSS Pension Plan, except for amendments
required by applicable law, which may materially increase the cost of such NSS
Benefit Plan or NSS Pension Plan and, except for any plans or amendments
expressly described on NSS Schedule 2.01(d)(3), NSS Schedule 2.15(a) or NSS
Schedule 2.15(b), NSS and its subsidiaries do not have any obligations for
post-retirement or post-employment benefits under any NSS Benefit Plan
(exclusive of any coverage mandated by the Consolidated Omnibus Reconciliation
Act of 1986 (COBRA) that cannot be amended or terminated upon more than sixty
(60) days notice without incurring any liability thereunder. Disclosed on and
appended to NSS Schedule 2.15(c) with respect to each NSS Benefit Plan and NSS
Pension Plan, to the extent applicable, is (A) the most recent annual report on
the applicable form of the Form 5500 series filed with the IRS with all the
attachments filed, (B) such NSS Benefit Plan or NSS Pension Plan, including all
amendments thereto, (C) each trust agreement and insurance contract relating to
such plan, including amendments thereto, (D) the most recent summary plan
description for such plan, including amendments thereto, if the plan is subject
to Title I of ERISA, (E) the most recent actuarial report or valuation if such
plan is a pension plan and (F) the most recent determination letter issued by
the IRS if such plan is qualified under Section 401(a) of the Code.
Section 2.16. FIDELITY BONDS. Since December 31, 1992, NSS and each of its
subsidiaries has continuously maintained fidelity bonds insuring them against
acts of dishonesty in such amounts as are customary, usual
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and prudent for organizations of its size and business. All material claims
thereunder have been filed in a due and timely fashion. Since December 31, 1992,
the aggregate amount of all claims under such bonds has not exceeded the policy
limits of such bonds (excluding, except in the case of excess coverage, a
deductible amount of not more than $50,000) and neither NSS nor any of its
subsidiaries is aware of any facts which would form the basis of a claim or
claims under such bonds aggregating in excess of the applicable deductible
amounts under such bonds. Neither NSS nor any of its subsidiaries has reason to
believe that its respective fidelity coverage will not be renewed by its carrier
on substantially the same terms as the existing coverage, except for possible
premium increases unrelated to NSSs and its subsidiaries' past claim experience.
Section 2.17. LABOR MATTERS. Hours worked by and payment made to employees
of NSS and each of its subsidiaries have not been in violation of the Fair Labor
Standards Act or any applicable law dealing with such matters; and all payments
due from NSS and each of its subsidiaries on account of employee health and
welfare insurance have been paid or accrued as a liability on the books of NSS
or its appropriate subsidiary. NSS is in compliance in all material respects
with all other laws and regulations relating to the employment of labor,
including all such laws and regulations relating to NSS bargaining,
discrimination, civil rights, safety and health, plant closing (including the
Worker Adjustment Retraining and Notification Act), workers' compensation and
the collection and payment of withholding and Social Security and similar taxes.
No labor dispute, strike or other work stoppage has occurred and is continuing
or is to NSSs knowledge threatened with respect to NSS or any of its
subsidiaries. Since December 31, 1992, no employee of NSS or any of its
subsidiaries has been terminated, suspended, disciplined or dismissed under
circumstances which could constitute a material claim, suit, action, complaint
or proceeding likely to result in a material liability. No employees of NSS or
any of its subsidiaries are unionized nor has union representation been
requested by any group of employees or any other person within the last two
years. There are no organizing activities involving NSS pending with, or, to the
knowledge of NSS, threatened by, any labor organization or group of employees of
NSS.
Section 2.18. BOOKS AND RECORDS. The minute books of NSS and each of its
subsidiaries contain complete and accurate records of and fairly reflect all
actions taken at all meetings and accurately reflect all other corporate action
of the shareholders and the boards of directors and each committee thereof. The
books and records of NSS and each of its subsidiaries fairly and accurately
reflect the transactions to which NSS and each of its subsidiaries is or has
been a party or by which their properties are subject or bound, and such books
and records have been properly kept and maintained.
Section 2.19. CONCENTRATIONS OF CREDIT. No customer or affiliated group of
customers (a) is owed by NSS or any subsidiary of NSS an aggregate amount equal
to more than 5% of the shareholders equity of NSS or such subsidiary (including
deposits, other debts and contingent liabilities) or (b) owes to NSS or any of
its subsidiaries an aggregate amount equal to more than 5% of the shareholders
equity of NSS or such subsidiary (including loans and other debts, guarantees of
debts of third parties, and other contingent liabilities).
Section 2.20. TRADEMARKS AND COPYRIGHTS. Neither NSS nor any of its
subsidiaries has received notice or otherwise knows that the manner in which NSS
or any of its subsidiaries conducts its business including its current use of
any material trademark, trade name, service mark or copyright violates asserted
rights of others in any trademark, trade name, service mark, copyright or other
proprietary right.
Section 2.21. EQUITY INTERESTS. Neither NSS nor any of its subsidiaries
owns, directly or indirectly, except for the equity interests of NSS in Bank,
the equity interests disclosed on NSS Schedule 2.01(a), and the equity interests
disclosed on NSS Schedule 2.21, any equity interest, other than by virtue of a
security interest securing an obligation not presently in default, in any bank,
corporation, partnership or other entity, except: (a) in a fiduciary capacity;
or (b) an interest valued at less than $25,000 acquired in connection with a
debt previously contracted. None of the investments reflected in the
consolidated balance sheet of NSS as of March 31, 1998, and none of such
investments made by it or any of its subsidiaries since March 31, 1998, is
subject to any restriction (contractual or statutory), other than applicable
securities laws, that would materially impair the ability of the entity holding
such investment freely to dispose of such investment at any time, except to the
extent any such investments are pledged in the ordinary course of business
(including in connection with hedging arrangements or programs or reverse
repurchase arrangements) consistent with prudent banking practice to secure
obligations of NSS or any of its subsidiaries.
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Section 2.22. ENVIRONMENTAL MATTERS.
(a) Except as disclosed on NSS Schedule 2.22 or as may be disclosed in the
Forms 10-K and 10-Q of NSS referred to in Section 2.02 hereof:
(1) No Hazardous Substances (as hereinafter defined) have been stored,
treated, dumped, spilled, disposed, discharged, released or deposited
at, under or on (1) any property now owned, occupied, leased or held or
managed in a representative or fiduciary capacity ("Present Property")
by NSS or any of its subsidiaries, (2) any property previously owned,
occupied, leased or held or managed in a representative or fiduciary
capacity ("Former Property") by NSS or any of its subsidiaries during
the time of such previous ownership, occupancy, lease, holding or
management or (3) any Participation Facility (as hereinafter defined)
during the time that NSS or any of its subsidiaries participated in the
management of, or may be deemed to be or to have been an owner or
operator of, such Participation Facility;
(2) Neither NSS nor any of its subsidiaries has disposed of, or arranged for
the disposal of, Hazardous Substances from any Present Property, Former
Property or Participation Facility, and no owner or operator of a
Participation Facility disposed of, or arranged for the disposal of,
Hazardous Substances from a Participation Facility during the time that
NSS or any of its subsidiaries participated in the management of, or may
be deemed to be or to have been an owner or operator of, such
Participation Facility;
(3) No Hazardous Substances have been stored, treated, dumped, spilled,
disposed, discharged, released or deposited at, under or on any Loan
Property (as hereinafter defined), nor is there, with respect to any
such Loan Property, any violation of environmental law which could
materially adversely affect the value of such Loan Property to an extent
which could prevent or delay NSS or any of its subsidiaries from
recovering the full value of its loan in the event of a foreclosure on
such Loan Property.
(b) Neither NSS nor any subsidiary (i) is aware of any investigations
contemplated, pending or completed by any environmental regulatory authority
with respect to any Present Property, Former Property, Loan Property or
Participation Facility, (ii) has received any information requests from any
environmental regulatory authority, or (iii) been named as a potentially
responsible or liable party in any Superfund, Resource Conservation and Recovery
Act, Toxic Substances Control Act or Clean Water Act proceeding or other
equivalent state or federal proceeding.
(c) As used in this Agreement, (a) "Participation Facility" shall mean any
property or facility of which the relevant person or entity (i) has at any time
participated in the management or (ii) may be deemed to be or to have been an
owner or operator, (b) "Loan Property" shall mean any real property in which the
relevant person or entity holds a security interest in an amount greater than
$50,000 and (c) "Hazardous Substances" shall mean (i) any flammable substances,
explosives, radioactive materials, hazardous materials, hazardous substances,
hazardous wastes, toxic substances, pollutants, contaminants and any related
materials or substances specified in any applicable federal or state law or
regulation relating to pollution or protection of human health or the
environment (including, without limitation, ambient or indoor air, surface
water, groundwater, land surface or subsurface strata) and (ii) friable
asbestos, polychlorinated biphenyls, urea formaldehyde, and petroleum and
petroleum-containing products and wastes.
Section 2.23. ACCOUNTING, TAX AND REGULATORY MATTERS. Neither NSS nor any
of its subsidiaries has taken or agreed to take any action or has any knowledge
of any fact or circumstance that would (i) prevent the transactions contemplated
hereby from qualifying as a reorganization within the meaning of Section 368 of
the Code, or (ii) materially impede or delay receipt of any approval referred to
in Section 4.01 or the consummation of the transactions contemplated by this
Agreement.
Section 2.24. INTEREST OF MANAGEMENT AND AFFILIATES.
(a) All loans presently on the books of NSS or any of its subsidiaries to
present or former directors or executive officers of NSS or any subsidiary of
NSS, or their associates, or any members of their immediate
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families, have been made in the ordinary course of business and on the same
terms and interest rates as those prevailing for comparable transactions with
others and do not involve more than the normal risk of repayment or present
other unfavorable features.
(b) Except as set forth and described in NSS Schedule 2.24, no present or
former officer or director of NSS or any of its subsidiaries or any Associated
Person (as defined in Section 2.24(d) below):
(1) has any interest in any property, real or personal, tangible or
intangible, used in or pertaining to the business of NSS or any of its
subsidiaries except for the normal rights of a shareholder;
(2) has an agreement, understanding, contract, commitment or pending
transaction relating to the purchase, sale or lease of real or personal
property, goods, materials, supplies or services, whether or not in the
ordinary course of business, with NSS or any of its subsidiaries;
(3) has received from NSS or any of its subsidiaries any commitment, whether
written or oral, to lend any funds to any such person;
(4) is owed any amounts by NSS or any of its subsidiaries except for
deposits taken in the ordinary course of business and amounts due for
normal compensation or reimbursement of expenses incurred in furtherance
of the business of such persons employer and reimbursable according to a
policy of NSS or such subsidiary, as appropriate, as in effect
immediately prior to the date hereof.
(c) Except as set forth on NSS Schedule 2.24(c), the consummation of the
transactions contemplated hereby will not (either alone, or upon the occurrence
of any act or event, the lapse of time, or the giving of notice and failure to
cure) result in any payment (severance or other) or provision of a benefit
becoming due from NSS or any of its subsidiaries or any successor or assign
thereof to any director, officer or employee of NSS or any of its subsidiaries
or any successor or assign of such subsidiary, other than payments and benefits
provided for in the Officer Agreements.
(d) Associated Person means (i) any holder of 10% or more of the
outstanding shares of NSS Stock, (ii) any relative or associate of a present or
former director or executive officer of NSS or any of its subsidiaries (as
associate is defined at Rule 14a-1(a) of the SEC under the Exchange Act), (iii)
any entity controlled, directly or indirectly, individually or in the aggregate,
by any present or former director or executive officer of NSS or any of its
subsidiaries or any relative or associate of any of such persons and (iv) any
entity 25% or more or the equity interests of which are owned individually or in
the aggregate by any present or former director or executive officer of NSS or
any of its subsidiaries or any relative or associate of any of such persons.
Section 2.25 REGISTRATION OBLIGATIONS. Neither NSS nor any of its
subsidiaries is under any obligation, contingent or otherwise, to register any
of its securities under the Securities Act.
Section 2.26 CORPORATE DOCUMENTS. NSS Schedule 2.26 contains true and
complete copies of the articles or certificate of incorporation and by-laws, as
amended to date, which are currently in full force and effect, of NSS and of
each of its subsidiaries.
Section 2.27 COMMUNITY REINVESTMENT ACT COMPLIANCE. NSS and Bank are in
substantial compliance with the applicable provisions of the Community
Reinvestment Act of 1977 and the regulations promulgated thereunder, and
received a CRA rating of at least satisfactory as of its last completed
examination. As of the date of this Agreement, NSS has not been advised of the
existence of any fact or circumstance or set of facts or circumstances which, if
true, would cause NSS to fail to be in substantial compliance with such
provisions.
Section 2.28 BUSINESS OF NSS. Since March 31, 1998, NSS has conducted its
business only in the ordinary course. For purposes of the foregoing, NSS has
not, since March 31, 1998, controlled expenses through (i) elimination of
employee benefits, (ii) deferral of routine maintenance of real property or
leased premises, (iii) elimination of reserves where the liability related to
such reserve has remained, (iv) reduction of capital improvements from previous
levels, (v) failure to depreciate capital assets in accordance with past
practice or to eliminate capital assets which are no longer used in the business
of seller, (vi) capitalized loan production expenses other than in accordance
with Statement of Financial Accounting Standard No. 91, or (vii) extraordinary
reduction or deferral of ordinary or necessary expenses.
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Section 2.29 INTEREST RATE RISK MANAGEMENT INSTRUMENTS.
(a) Set forth on NSS Schedule 2.29(a) is a list as of the date hereof of
all interest rate swaps, caps, floors and option agreements, and other interest
rate risk management arrangements to which NSS or any of its subsidiaries is a
party or by which any of their properties or assets may be bound.
(b) All such interest rate swaps, caps, floors and option agreements and
other interest rate risk management arrangements to which NSS or any of its
subsidiaries is a party or by which any of their properties or assets may be
bound were entered into the ordinary course of business and, in accordance with
prudent banking practice and applicable rules, regulations and policies of
regulatory authorities and with counterparties believed, at the time entered
into and at the date of this Agreement, to be financially responsible and are
legal, valid and binding obligations of NSS or a subsidiary and are in full
force and effect. NSS and each of its subsidiaries has duly performed in all
material respects all of its obligations thereunder to the extent that such
obligations to perform have accrued, and there are no material breaches,
violations or defaults or allegations or assertions of such by any party
thereunder.
Section 2.30. YEAR 2000 COMPLIANT. To the best knowledge of NSS, all
computer software and hardware utilized by NSS or any of its subsidiaries is, or
NSS has taken all required steps to be Year 2000 compliant, which, for purposes
of this Agreement, shall mean that the data outside the range 1900- 1999 will be
correctly processed in any level of computer hardware or software including, but
not limited to, microcode, firmware, applications programs, files and databases.
All computer software is, or NSS has taken steps (including obtaining warranties
from the vendors thereof in respect of compliance) to ensure that all computer
software will be, designed to be used prior to, during and after the calendar
year 2000 AD and such software will be operated during each such time period,
without error relating to date data, specifically including any error relating
to, or the product of, date data that represents or references different
centuries or more than one century.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SUMMIT
Summit represents and warrants to NSS as follows:
Section 3.01. ORGANIZATION, CAPITAL STOCK.
(a) Summit is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey with authorized capital stock
consisting of 390,000,000 shares of Common Stock, par value $.80 per share, with
the Summit Rights attached thereto pursuant to the Rights Agreement, of which
177,667,801 shares were issued and outstanding as of April 30, 1998 and
6,000,000 shares of Preferred Stock, each without par value, of which no shares
were issued and outstanding and 1,500,000 shares of Series R Preferred Stock
were reserved for issuance as of the date hereof.
(b) Summit is qualified to transact business in and is in good standing
under the laws of all jurisdictions where the failure to be so qualified would
have a material adverse effect on (i) the business, results of operations,
assets or financial condition of Summit and its subsidiaries, on a consolidated
basis, or (ii) the ability of Summit to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement (a "Summit Material
Adverse Effect). However, a Summit Material Adverse Effect or Summit Material
Adverse Change (as defined at Section 3.03) will not include a change resulting
from a change in law, rule, regulation, generally accepted or regulatory
accounting principle or other matter affecting financial institutions or their
holding companies generally or from charges or expenses incident to the
Reorganization. The bank subsidiaries of Summit are duly organized, validly
existing and in good standing under the laws of their jurisdiction of
organization. Summit and its bank subsidiaries have all corporate power and
authority and all material licenses, franchises, certificates, permits and other
governmental authorizations which are legally required to own and lease their
respective properties, occupy their respective premises, and to engage in their
respective businesses and activities as presently engaged in. Summit is duly
registered as a bank holding company under the BHCA.
(c) All issued shares of the capital stock of Summit and of each of its
bank subsidiaries have been fully paid, were duly authorized and validly issued,
are non-assessable, have been issued pursuant to an effective
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registration statement under the Securities Act or an appropriate exemption from
registration under the Securities Act and were not issued in violation of the
preemptive rights of any shareholder. Summit or one of its subsidiaries is the
holder and beneficial owner of all of the issued and outstanding Equity
Securities of its bank subsidiaries. There are no Equity Securities of Summit
outstanding, in existence, the subject of an agreement, or reserved for
issuance, except as set forth at Section 3.01(a) and except for Summit Stock
issuable upon the exercise of employee stock options granted under stock option
plans of Summit, Summit Stock issuable pursuant to Summit's Dividend
Reinvestment and Stock Purchase Plan, Savings Incentive Plan and 1993 Incentive
Stock and Option Plan and Series R Preferred Stock issuable pursuant to the
Rights Agreement.
(d) Except as disclosed on Summit Schedule 3.01, all Equity Securities of
its direct and indirect subsidiaries beneficially owned by Summit or a
subsidiary of Summit are held free and clear of any claims, liens, encumbrances
or security interests.
Section 3.02. FINANCIAL STATEMENTS. The financial statements (and related
notes and schedules thereto) contained in or incorporated by reference into
Summit's (a) annual report to shareholders for the fiscal year ended December
31, 1997, (b) annual report on Form 10-K pursuant to the Exchange Act for the
fiscal year ended December 31, 1997 and (c) the quarterly report on Form 10-Q
filed pursuant to the Exchange Act for the fiscal quarter ended March 31, 1998
(the "Summit Financial Statements") are true and correct in all material
respects as of their respective dates and each fairly presents (subject, in the
case of unaudited statements, to recurring audit adjustments normal in nature
and amount), in accordance with generally accepted accounting principles
consistently applied, the consolidated balance sheets, statements of income,
statements of shareholders' equity and statements of cash flows of Summit and
its subsidiaries at its respective date and for the period to which it relates,
except as may otherwise be described therein and except that, in the case of
unaudited statements, no consolidated statements of changes in stockholders
equity are included. The Summit Financial Statements do not, as of the dates
thereof, include any material asset or omit any material liability, absolute or
contingent, or other fact, the inclusion or omission of which renders the Summit
Financial Statements, in light of the circumstances under which they were made,
misleading in any respect.
Section 3.03. NO CONFLICTS. Summit is not in violation or breach of or
default under, and has received no notice of violation, breach, revocation or
threatened or contemplated revocation of or default or denial of approval under,
nor will the execution, delivery and performance of this Agreement by Summit, or
the consummation of the Reorganization by Summit upon the terms and conditions
provided herein (assuming receipt of the Required Consents), violate, conflict
with, result in the breach of, constitute a default under, give rise to a claim
or right of termination, cancellation, revocation of, or acceleration under, or
result in the creation or imposition of any lien, charge or encumbrance upon any
rights, permits, licenses, assets or properties material to Summit and its
subsidiaries, on a consolidated basis, or upon any of the capital stock of
Summit, or constitute an event which could, with the lapse of time, action or
inaction by Summit, or a third party, or the giving of notice and failure to
cure, result in any of the foregoing, under any of the terms, conditions or
provisions, as the case may be, of:
(i) the Restated Certificate of Incorporation or the By-Laws of Summit;
(ii) any law, statute, rule, ruling, determination, ordinance, or regulation
of any governmental or regulatory authority;
(iii) any judgment, order, writ, award, injunction, or decree of any court
or other governmental authority; or
(iv) any material note, bond, mortgage, indenture, lease, policy of insurance
or indemnity, license, contract, agreement, or other instrument;
to which Summit is a party or by which Summit or any of its assets or properties
are bound or committed, the consequences of which would be a material adverse
change in the business, results of operations, assets or financial condition of
Summit and its subsidiaries, on a consolidated basis, from that reflected in the
Summit Financial Statements as of and for the three months ended March 31, 1998
(a Summit Material Adverse Change), or enable any person to enjoin the
transactions contemplated hereby.
Section 3.04. ABSENCE OF LITIGATION, AGREEMENTS WITH BANK REGULATORS. There
is no outstanding order, injunction, or decree of any court or governmental or
self-regulatory body against or affecting Summit or its
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subsidiaries which materially and adversely affects Summit and its subsidiaries,
on a consolidated basis, and there are no actions, arbitrations, claims,
charges, suits, investigations or proceedings (formal or informal) material to
Summit and its subsidiaries, on a consolidated basis, pending or, to Summit's
knowledge, threatened, against or involving Summit or their officers or
directors (in their capacity as such) in law or equity or before any court,
panel or governmental agency, except as may be disclosed in the Forms 10-K and
10-Q of Summit referred to in Section 3.02. Neither Summit nor any bank
subsidiary of Summit is a party to any agreement or memorandum of understanding
with, or is a party to any commitment letter to, or has submitted a board of
directors resolution or similar undertaking to, or is subject to any order or
directive by, or is a recipient of any extraordinary supervisory letter from,
any governmental or regulatory authority which restricts materially the conduct
of its business, or in any manner relates to its capital adequacy, its credit or
reserve policies or its management. Neither Summit nor any bank subsidiary of
Summit, has been advised by any governmental or regulatory authority that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any of the foregoing. Summit and the bank subsidiaries of
Summit have resolved to the satisfaction of the applicable regulatory agency any
significant deficiencies cited by any such agency in its most recent
examinations of each aspect of Summit or such bank subsidiary's business except
for examinations, if any, received within the 30 days prior to the date hereof.
Section 3.05. REGULATORY FILINGS. At the time of filing, all filings made
by Summit and its subsidiaries after December 31, 1992 with the SEC and
appropriate bank regulatory authorities did not contain any untrue statement of
a material fact and did not omit to state any material fact required to be
stated herein or therein or necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. To the extent such filings were subject to the Securities Act or
Exchange Act, such filings complied in all material respects with the Securities
Act or Exchange Act, as appropriate, and all applicable rules and regulations
thereunder of the SEC. Summit has since December 31, 1992 timely made all
filings required by the Securities Act and the Exchange Act.
Section 3.06. CORPORATE ACTION.
(a) Assuming due execution and delivery by NSS, Summit has the corporate
power and is duly authorized by all necessary corporate action to execute,
deliver, and perform this Agreement. The Board of Directors of Summit has taken
all action required by law or by the Restated Certificate of Incorporation or
By-Laws of Summit or otherwise to authorize the execution and delivery of this
Agreement. Approval by the shareholders of Summit of this Agreement, the
Reorganization or the transactions contemplated by this Agreement are not
required by applicable law. Assuming due execution and delivery by NSS, this
Agreement is a valid and binding agreement of Summit enforceable in accordance
with its terms except as such enforcement may be limited by applicable
principles of equity, and by bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium or other laws of general applicability presently or
hereafter in effect affecting the enforcement of creditors' rights generally or
institutions, the deposits of which are insured by the Federal Deposit Insurance
Corporation, or the affiliates of such institutions.
(b) In the event Summit elects to effect the Reorganization as a merger
pursuant to Section 1.01(a)(2), upon the due and valid approval of this
Agreement by the Board of Directors and sole shareholder of SummitSub and its
execution and delivery, assuming due execution and delivery by each of the other
parties hereto, this Agreement will be a valid and binding agreement of
SummitSub enforceable in accordance with its terms except as such enforcement
may be limited by applicable principles of equity, and by bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium or other laws of
general applicability presently or hereafter in effect affecting the enforcement
of creditors' rights generally or institutions, the deposits of which are
insured by the Federal Deposit Insurance Corporation, or the affiliates of such
institutions.
Section 3.07. ABSENCE OF CHANGES. There has not been, since March 31, 1998,
any Summit Material Adverse Change.
Section 3.08. NON-BANK SUBSIDIARIES. The non-bank subsidiaries of Summit
did not, taken in the aggregate, constitute a "significant subsidiary" of
Summit, as that term is defined in Rule 1-02(v) of Regulation S-X of the SEC (17
CFR '210.1-02(v)), at March 31, 1998.
Section 3.09 ABSENCE OF UNDISCLOSED LIABILITIES. There are no liabilities,
whether contingent or absolute, direct or indirect, or loss contingencies (as
defined in Statement of Financial Accounting Standards No. 5) other
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than (a) disclosed in the Summit Financial Statements or disclosed in the notes
thereto, (b) commitments made by Summit or any of its subsidiaries in the
ordinary course of its business which are not in the aggregate material to
Summit and its subsidiaries, on a consolidated basis, and (c) liabilities
arising in the ordinary course of its business since March 31, 1998 which are
not in the aggregate material to Summit and its subsidiaries, on a consolidated
basis.
Section 3.10. ALLOWANCE FOR LOAN AND LEASE LOSSES. At March 31, 1998 and
thereafter, the allowances for loan and lease losses of Summit and its
subsidiaries are adequate in all material respects to provide for all losses on
loans and leases outstanding, and to the best of Summit's knowledge, the loan
and lease portfolios of Summit and its subsidiaries in excess of such allowances
are collectible in the ordinary course of business.
ARTICLE IV.
COVENANTS OF NSS
NSS hereby covenants and agrees with Summit that:
Section 4.01. PREPARATION OF REGISTRATION STATEMENT AND APPLICATIONS FOR
REQUIRED CONSENTS. NSS will cooperate with Summit in the preparation of a
Registration Statement on Form S-4 (the "Registration Statement") to be filed
with the SEC under the Securities Act for the registration of the offering of
Summit Stock to be issued as Reorganization Consideration and the proxy
statement-prospectus constituting part of the Registration Statement
(Proxy-Prospectus) that will be used by NSS to solicit shareholders of NSS for
approval of the Reorganization. In connection therewith, NSS will furnish all
financial or other information, including using best efforts to obtain customary
consents, certificates, opinions of counsel and other items concerning NSS,
deemed necessary by counsel to Summit for the filing or preparation for filing
under the Securities Act and the Exchange Act of the Registration Statement
(including the Proxy- Prospectus). NSS will cooperate with Summit and provide
such information as may be advisable in obtaining an order of effectiveness for
the Registration Statement, appropriate permits or approvals under state
securities and "blue sky" laws, the required approval under the BHCA of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board")
and any other governmental or regulatory consents or approvals or the taking of
any other governmental or regulatory action necessary to consummate the
Reorganization that would not have a Summit Material Adverse Effect following
the Reorganization (the "Required Consents"). Summit, reasonably in advance of
making such filings, will provide NSS and its counsel a reasonable opportunity
to comment on such filings and regulatory applications and will give due
consideration to any comments of NSS and its counsel before making any such
filing or application, and Summit will provide NSS and its counsel with copies
of all such filings and applications at the time filed if such filings and
applications are made at any time before the Effective Time. NSS covenants and
agrees that all information furnished by NSS for inclusion in the Registration
Statement, the Proxy-Prospectus, all applications to appropriate regulatory
agencies for approval of the Reorganization, and all information furnished by
NSS to Summit pursuant to this Agreement or in connection with obtaining
Required Consents, will comply in all material respects with the provisions of
applicable law, including the Securities Act and the Exchange Act and the rules
and regulations of the SEC thereunder, and will not contain any untrue statement
of a material fact and will not omit to state any material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading. NSS will
furnish to Sandler O'Neill such information as Sandler O'Neill may reasonably
request for purposes of the opinion referred to in Section 8.07.
Section 4.02. NOTICE OF ADVERSE CHANGES. NSS will promptly advise Summit in
writing of (a) any event occurring subsequent to the date of this Agreement
which would render any representation or warranty of NSS contained in this
Agreement or the NSS Schedules or the materials furnished pursuant to the
Post-Signing Document List (as defined in Section 4.09), if made on or as of the
date of such event or the Closing Date, untrue or inaccurate in any material
respect, (b) any NSS Material Adverse Change, (c) any inability or perceived
inability of NSS to perform or comply with the terms or conditions of this
Agreement, (d) the institution or threat of institution of litigation or
administrative proceedings involving NSS or any of its subsidiaries or assets,
which, if determined adversely to NSS or any of its subsidiaries, would have a
NSS Material Adverse Effect or an
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adverse material effect on the ability of the parties to timely consummate the
Reorganization and the related transactions, (e) any governmental complaint,
investigation, hearing, or communication indicating that such litigation or
administrative proceeding is contemplated, (f) any written notice of, or other
communication relating to, a default or event which, with notice or lapse of
time or both, would become a default, received by NSS or a subsidiary subsequent
to the date hereof and prior to the Effective Time, under any agreement,
indenture or instrument to which NSS or a subsidiary is a party or is subject
and which is material to the business, operation or condition (financial or
otherwise) of NSS and its subsidiaries, on a consolidated basis, and (g) any
written notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement including the Reorganization. NSS
agrees that the delivery of such notice shall not constitute a waiver by Summit
of any of the provisions of Articles VI or VII.
Section 4.03. MEETING OF SHAREHOLDERS. NSS will call a meeting of NSS
shareholders for the purpose of voting upon this Agreement, the Reorganization
and the other transactions contemplated hereby and such other proposals related
to NSSs Certificate of Incorporation and By-Laws and the NSS Rights Agreement as
Summit upon the advice of counsel shall request to effectuate the purposes of
this Agreement and the Option Agreement, including a proposal to approve under
Article THIRTEENTH of NSSs Certificate of Incorporation the acquisition of NSS
Stock contemplated by the Option Agreement and a proposal to annul or void such
Article THIRTEENTH with respect to the Option Agreement and the transactions
contemplated thereby. The meeting of NSS shareholders contemplated by this
Section 4.03 will be held as promptly as practicable and, in connection
therewith, will comply with the Connecticut Act and the Exchange Act and all
regulations promulgated thereunder governing shareholder meetings and proxy
solicitations. In connection with such meeting, NSS shall mail the
Proxy-Prospectus to NSS shareholders and use, unless in the written opinion of
counsel such action would be a breach of their fiduciary duties by the directors
under applicable law, its best efforts to obtain shareholder approval of this
Agreement, the Reorganization and the other transactions contemplated hereby and
any other proposals requested by Summit pursuant to this Section 4.03.
Section 4.04. COPIES OF FILINGS. Without limiting the provisions of Section
4.01, NSS will deliver to Summit, at least 48 hours prior to an anticipated date
of filing or distribution, all documents to be filed with the SEC or any bank
regulatory authority or to be distributed in any manner to the shareholders of
NSS, or to the news media or to the public, other than the press releases and
other information subject to Section 10.01.
Section 4.05. NO MATERIAL TRANSACTIONS. Until the Effective Time, NSS will
not and will not allow any of its subsidiaries to, without the prior written
consent of Summit:
(a) pay (or make a declaration which creates an obligation to pay) any cash
dividends, other than dividends from subsidiaries of NSS to NSS or other
subsidiaries of NSS except that NSS may declare, set aside and pay a dividend of
$0.13 per quarter; provided, however, if Summit declares a dividend between the
date hereof and the Effective Time which represents an increase over the last
dividend declared by Summit prior to the date hereof, NSS may after the date of
such declaration declare, set aside and pay a dividend of $0.13 per quarter
increased by a percentage equal to the percentage increase in the Summit
dividend.
(b) declare or distribute any stock dividend or authorize or effect a stock
split;
(c) merge with, consolidate with, or sell any material asset to any other
corporation, bank, or person (except for mergers of subsidiaries of NSS into
other subsidiaries of NSS) or enter into any other transaction not in the
ordinary course of the banking business;
(d) incur any liability or obligation other than intracompany obligations,
make or agree to make any commitment or disbursement, acquire or dispose or
agree to acquire or dispose of any property or asset (tangible or intangible),
make or agree to make any contract or agreement or engage or agree to engage in
any other transaction, except transactions in the ordinary course of business or
other transactions involving not more than $50,000;
(e) subject any of its properties or assets to any lien, claim, charge,
option or encumbrance, except in the ordinary course of business and for amounts
not material in the aggregate to NSS and its subsidiaries, on a consolidated
basis;
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(f) pay any employee bonuses or increase or enter into any agreement to
increase the rate of compensation of any employee at the date hereof which is
not consistent with past practices and policies and which when considered with
all such increases or agreements to increase constitutes an average annualized
rate not exceeding four percent (4%);
(g) create, adopt or modify any employment, termination, severance,
pension, supplemental pension, profit sharing, bonus, deferred compensation,
death benefit, retirement, stock option, stock award, stock purchase or other
employee or director benefit or welfare plan, arrangement or agreement of
whatsoever nature, including without limitation the NSS Pension Plans and the
NSS Benefit Plans (collectively, NSS Plans), or change the level of benefits,
reduce eligibility, performance or participation standards, or increase any
payment or benefit under any NSS Plan;
(h) distribute, issue, sell, award, grant, permit to become outstanding or
enter into any agreement respecting any Equity Securities or any Equity Based
Rights except pursuant to the Option Agreement or pursuant to the exercise of
director and employee stock options and warrants granted prior to the date
hereof under the NSS Stock Compensation Plans and exercisable and outstanding
under the terms of a NSS Stock Compensation Plan at the date of such exercise;
(i) except in a fiduciary capacity, purchase, redeem, retire, repurchase,
or exchange, or otherwise acquire or dispose of, directly or indirectly, any of
its Equity Securities or Equity Based Rights, whether pursuant to the terms of
such Equity Securities or Equity Based Rights or otherwise, or enter into any
agreement providing for any of the foregoing transactions;
(j) amend its certificate or articles of incorporation, charter or by-laws;
(k) modify, amend or cancel any of its existing borrowings other than
intra-corporate borrowings and borrowings of federal funds from correspondent
banks and the Federal Reserve Bank of New York or the Federal Home Loan Bank of
Boston or enter into any contract, agreement, lease or understanding, or any
contracts, agreements, leases or understandings other than those in the ordinary
course of business or which do not involve the creation of any material
obligation or release of any material right of NSS or any of its subsidiaries,
on a consolidated basis;
(l) create, amend, increase, enhance, accelerate the exerciseability of, or
release or waive any forfeitures, terminations or expirations of or restrictions
on any rights, awards, benefits, entitlements, options or warrants under the NSS
Plans including Equity Securities and Equity Based Rights outstanding;
(m) make any employer contribution to a NSS Plan which under the terms of
the particular plan is voluntary and within the discretion of NSS to make;
(n) make any determination or take any action, discretionary or otherwise,
under or with respect to any NSS Plan other than routine administration in
accordance with past precedent;
(o) notwithstanding any other provision of this Agreement, enter into any
agreement, understanding, contract, commitment or transaction, or amend, renew,
extend, give any notice or consent with respect to, waive any provision under,
or accept any new fees, rates or other costs or charges of whatsoever nature,
schedule, exhibit or other attachment under (whether through an action or
inaction) any agreement, understanding, contract, commitment or transaction,
relating to indebtedness or to the purchase, sale or lease of real or personal
property, goods, materials, supplies or services with a director or officer of
NSS or any direct or indirect subsidiary of Bancorp or any Associated Person,
except to the extent permitted by Section 4.12;
(p) enter into, increase or renew any loan or credit commitment (including
standby letters of credit) to any executive officer or director of NSS or any of
its subsidiaries, any holder of 10% of more of the outstanding shares of NSS
Stock, or any entity controlled, directly or indirectly, by any of the foregoing
or engage in any transaction with any of the foregoing which is of the type or
nature sought to be regulated in 12 U.S.C. (section)371c and 12 U.S.C.
(section)371c-1. For purposes of this Section 4.05(p), control shall have the
meaning associated with that term under 12 U.S.C. (section)371c; or
(q) take any discretionary action or fail to take any discretionary action
under any plan or agreement affecting one or more directors or employees or any
affiliates of such where the effect of such act or failure to act is or would be
to give or confer a right or benefit not existing on the date hereof.
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Section 4.06. OPERATION OF BUSINESS IN ORDINARY COURSE. NSS, on behalf of
itself and its subsidiaries, covenants and agrees that from and after the date
hereof and until the Effective Time, it and its subsidiaries: (a) will carry on
their business substantially in the same manner as heretofore and will not
institute any unusual or novel methods of management or operation of their
properties or business and will maintain such in their customary manner; (b)
will use their best efforts to continue in effect their present insurance
coverage on all properties, assets, business and personnel; (c) will use their
best efforts to preserve their business organization intact, preserve their
present relationships with customers, suppliers, and others having business
dealings with them, and keep available their present employees, provided,
however, that NSS or any of its subsidiaries may terminate any employee for
unsatisfactory performance or other reasonable business purpose, and provided
further, however, that NSS will notify and consult with Summit prior to
terminating any of the five highest paid employees of NSS; (d) will use their
best efforts to continue to maintain fidelity bonds insuring NSS and its
subsidiaries against acts of dishonesty by each of their employees in such
amounts (not less than present coverage) as are customary, usual and prudent for
corporations or banks, as the case may be, of their size; (e) will not do
anything or fail to do anything which will cause a breach of or default under
any representation, warranty or covenant of NSS or any contract, agreement,
commitment or obligation to which they or any one of them is a party or by which
they or any of their assets or properties may be bound or committed; and (f)
will not change their methods of accounting in effect at March 31, 1998, or
change any of their methods of reporting income and deductions for Federal
income tax purposes from those employed in the preparation of their Federal
income tax returns for the taxable year ending March 31, 1998, except as
required by changes in laws, regulations or generally accepted accounting
principles or changes that are to a preferable accounting method, and approved
in writing by NSSs independent certified public accountants.
Section 4.07. FURTHER ACTIONS. NSS will: (a) execute and deliver such
instruments and take such other actions as Summit may reasonably require to
carry out the intent of this Agreement; (b) use all reasonable efforts to obtain
consents of all third parties and governmental bodies necessary or reasonably
desirable for the consummation of the transactions contemplated by this
Agreement; (c) diligently support this Agreement in any proceeding before any
regulatory authority whose approval of any of the transactions contemplated
hereby is required or reasonably desirable or before any court in which
litigation in respect thereof is pending; and (d) use its best efforts so that
the other conditions precedent to the obligations of Summit set forth in
Articles VI and VII hereof are satisfied.
Section 4.08. COOPERATION. Until the Effective Time, NSS will give to
Summit and to its representatives, including its accountants, KPMG Peat Marwick
LLP, and its legal counsel, full access during normal business hours to all of
its property, documents, contracts and records relevant to this Agreement and
the Reorganization, will provide such information with respect to its business
affairs and properties as Summit from time to time may reasonably request, and
will cause its managerial employees, and will use its best efforts to cause its
counsel and independent certified public accountants, to be available on
reasonable request to answer questions of Summit's representatives covering the
business and affairs of NSS or any of its subsidiaries.
Section 4.09. COPIES OF DOCUMENTS. As promptly as practicable, but not
later than 30 days after the date hereof, NSS will furnish to or make available
to Summit all the documents, contracts, agreements, papers, and writings
referred to in the NSS Schedules or called for by the list attached hereto as
Exhibit C (the "Post-Signing Document List").
Section 4.10. APPLICABLE LAWS. NSS and its subsidiaries will use their best
efforts to comply promptly with all requirements which federal or state law may
impose on NSS or any of its subsidiaries with respect to the Reorganization and
will promptly cooperate with and furnish information to Summit in connection
with any such requirements imposed upon Summit or on any of its subsidiaries in
connection with the Reorganization.
Section 4.11. AGREEMENTS OF AFFILIATED SHAREHOLDERS. NSS agrees to furnish
to Summit, not later than 10 business days prior to the date of mailing of the
Proxy-Prospectus, a writing setting forth the names of those persons (which will
include all individual and beneficial ownership of NSS Stock by such persons and
also identifies the manner in which all such beneficially owned shares of NSS
Stock are registered on the stock record books of NSS) who in the written
opinion of Tyler, Cooper & Alcorn, L.L.P., corporate counsel to NSS (which such
opinion need be delivered only to NSS and cited by NSS in its letter),
constitute all the affiliates of NSS for the purposes of Rule 145 under the
Securities Act (an NSS Affiliate) and NSS shall use its best efforts to
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cause each NSS Affiliate to enter into, prior to the date of mailing of the
Proxy-Prospectus and effective prior to that date, an agreement, satisfactory in
form and substance to Summit, substantially in the form of Exhibit D-1, with
respect to Affiliates who are directors or officers of NSS or a subsidiary of
NSS, or substantially in the form of Exhibit D-2, with respect to Affiliates who
are not directors or officers of NSS or a subsidiary of NSS (an "Affiliate
Agreement"); provided, however, that until an Affiliate executes and delivers an
Affiliate Agreement to Summit, Summit may refuse to exchange for the
Reorganization Consideration the NSS Certificates held by such Affiliate.
Section 4.12. LOANS AND LEASES TO AFFILIATES. All loans and leases
hereafter made by NSS or any of its subsidiaries to any of its present or former
directors or executive officers or their respective related interests shall be
made only in the ordinary course of business and on the same terms and at the
same interest rates as those prevailing for comparable transactions with others
and shall not involve more than the normal risk of repayment or present other
unfavorable features.
Section 4.13. CONFIDENTIALITY. All information furnished by Summit to NSS
or its representatives pursuant hereto shall be treated as the sole property of
Summit and, if the Reorganization shall not occur, NSS and its representatives
shall return to Summit all of such written information and all documents, notes,
summaries or other materials containing, reflecting or referring to, or derived
from, such information, except that any such confidential information or notes
or abstracts therefrom presented to the Board of Directors of NSS or any
committee thereof for the purpose of considering this Agreement, the
Reorganization and the related transactions may be kept and maintained by NSS
with other records of Board, and Board committee, meetings subject to a
continuing obligation of confidentiality. NSS shall, and shall use its best
efforts to cause its representatives to, keep confidential all such information,
and shall not directly or indirectly use such information for any purposes other
than the performance of this Agreement. The obligation to keep such information
confidential shall continue for five years from the date the proposed
Reorganization is abandoned and shall not apply to: (i) any information which
(x) was legally in NSSs possession prior to the disclosure thereof by Summit,
(y) was then generally known to the public, or (z) was disclosed to NSS by a
third party not bound by an obligation of confidentiality; or (ii) disclosures
made as required by law. It is further agreed that if, in the absence of a
protective order or the receipt of a waiver hereunder, NSS is nonetheless, in
the written opinion of its outside counsel, compelled to disclose information
concerning Summit to any tribunal or governmental body or agency or else stand
liable for contempt or suffer other censure or penalty, NSS may disclose such
information to such tribunal or governmental body or agency without liability
hereunder and shall so notify Summit. This Section 4.13 shall survive any
termination of this Agreement.
Section 4.14. DIVIDENDS. NSS will coordinate with Summit the declaration of
any dividends and the record and payment dates thereof so that the holders of
NSS Stock will not be paid two dividends for a single calendar quarter with
respect to their shares of NSS Stock and any shares of Summit Stock they become
entitled to receive in the Reorganization or fail to be paid one dividend in
each calendar quarter between the date hereof and the Effective Time. NSS will
notify Summit at least five business days prior to any proposed dividend
declaration date.
Section 4.15. ACQUISITION PROPOSALS. NSS agrees that neither NSS nor any of
its subsidiaries nor any of the respective officers and directors of NSS or its
subsidiaries shall, and NSS shall direct and use its best effort to cause its
employees, affiliates, agents and representatives (including, without
limitation, any investment banker, broker, financial or investment advisor,
attorney or accountant retained by NSS or any of its subsidiaries) not to,
initiate, solicit or encourage, directly or indirectly, any inquiries, proposals
or offers with respect to, or engage in any negotiations or discussions with any
person, provide any nonpublic information, or authorize or enter into any
agreement or agreement in principle concerning, or recommend, endorse or
otherwise facilitate any effort or attempt to induce or implement, any
Acquisition Proposal (as defined below). Acquisition Proposal is hereby defined
to be any offer, including an exchange offer or tender offer, or proposal
concerning a merger, consolidation, or other business combination or takeover
transaction involving NSS or any of its subsidiaries or the acquisition of any
assets (otherwise than as permitted by Section 4.05) or securities of NSS or any
of its subsidiaries. NSS will immediately cease and cause to be terminated any
existing activities, discussion or negotiations with any parties conducted
heretofore with respect to any of the foregoing. NSS will take the necessary
steps to inform the individuals or entities referred to in the first sentence
hereof of the obligations
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undertaken in this Section. In addition, NSS will notify Summit by telephone to
its chief executive officer or general counsel promptly upon receipt of any
communication with respect to a proposed Acquisition Proposal with another
person or receipt of a request for information from any governmental or
regulatory authority with respect to a proposed acquisition of NSS or any of its
subsidiaries or assets by another party, and will immediately deliver as soon as
possible by facsimile transmission, receipt acknowledged, to the Summit officer
notified as required above a copy of any document relating thereto promptly
after any such document is received by NSS.
Section 4.16 TAX OPINION CERTIFICATES. NSS shall execute and deliver to
Thompson Coburn any tax opinion certificate reasonably required by Thompson
Coburn in connection with the issuance of the Tax Opinions (as defined at
Section 6.03), dated as of the date of effectiveness of the Registration
Statement and as of the Closing Date (and as of the date the Closing occurs if
different than the Closing Date), and NSS shall use reasonable efforts to cause
each of its executive officers, directors and holders of five percent (5%) or
more of outstanding NSS Stock (including shares beneficially held) to execute
and deliver to Thompson Coburn any tax opinion certificate reasonably required
by Thompson Coburn in connection with the issuance of one or more of the Tax
Opinions, dated as of the date of effectiveness of the Registration Statement
and as of the Closing Date (and as of the date the Closing occurs if different
than the Closing Date).
Section 4.17 DIRECTORS AND OFFICERS INSURANCE. NSS and each of its
subsidiaries has taken or will take all requisite action (including, without
limitation, the making of claims and the giving of notices) pursuant to its
directors and officers liability insurance policy or policies (D&O Insurance) in
order to preserve all rights thereunder with respect to all matters (other than
matters arising in connection with this Agreement and the transactions
contemplated hereby) occurring prior to the Effective Time that are known to
NSS. NSS shall renew any existing D&O Insurance or purchase any discovery period
D&O Insurance provided for thereunder at Summits request.
Section 4.18. CONFORMING ENTRIES.
(a) Notwithstanding that NSS believes that NSS and its subsidiaries have
established reserves and taken all provisions for possible loan and lease losses
required by generally accepted accounting principles and applicable laws, rules
and regulations, NSS recognizes that Summit may have adopted different loan,
accrual and reserve policies (including loan classification and levels of
reserves for possible loan and lease losses). From and after the date of this
Agreement, NSS and Summit shall consult and cooperate with each other with
respect to conforming the loan, accrual and reserve policies of NSS and its
subsidiaries to those policies of Summit, as specified in each case in writing
to NSS, based upon such consultation and as hereinafter provided.
(b) In addition, from and after the date of this Agreement, NSS and Summit
shall consult and cooperate with each other with respect to determining
appropriate accruals, reserves and charges for NSS to establish and take in
respect of excess equipment write-off or write-down of various assets and other
appropriate charges and accounting adjustments taking into account the parties
business plan following the Reorganization, as specified in each case in writing
to NSS, based upon such consultation and as hereinafter provided.
(c) NSS and Summit shall consult and cooperate with each other with respect
to determining the amount and the timing for recognizing for financial
accounting purposes NSS's expenses of the Reorganization and the restructuring
charges, if any, related to or to be incurred in connection with the
Reorganization.
(d) With respect to clauses (a) through (c) of this Section 4.19, it is the
objective of NSS and Summit that such reserves, accruals, charges and
divestitures, if any, to be taken shall be consistent with generally accepted
accounting principles.
Section 4.19 COOPERATION WITH POLICIES AND PROCEDURES. NSS, prior to the
Effective Time, shall (i) consult and cooperate with Summit regarding the
implementation of those policies and procedures established by Summit for its
governance and that of its subsidiaries and not otherwise referenced in Section
4.19 of this Agreement, including, without limitation, policies and procedures
pertaining to the accounting, asset/liability management, audit, credit, human
resources, treasury and legal functions, and (ii) at the reasonable request of
Summit, conform NSSs existing policies and procedures in respect thereof, unless
to do so would cause NSS
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or any of its subsidiaries to be in violation of any law, rule or regulation or
requirement of any governmental regulatory authority having jurisdiction over
NSS or any of its subsidiaries affected thereby.
Section 4.20 ENVIRONMENTAL REPORTS. NSS shall disclose to Summit all
matters of the types described in Section 2.22 above which NSS would have been
required to disclose to Summit on the date hereof if known to NSS on the date
hereof, as such become known to NSS between the date hereof and the Effective
Time. In addition, Summit may perform, or cause to be performed, a phase one
environmental investigation, an asbestos survey, or both of the foregoing, (i)
within 90 days following the date of this Agreement, on all real property owned,
leased or operated by NSS or any of its subsidiaries as of the date of this
Agreement (but excluding space in retail or similar establishments leased by NSS
for automatic teller machines or leased bank branch facilities where the space
leased by NSS comprises less than 20% of the total space leased to all tenants
of such property), and (ii) within 15 days after being notified by NSS of the
acquisition or lease of any real property by it or its subsidiaries after the
date of this Agreement, on the real property so acquired or leased (but
excluding space in retail or similar establishments leased by NSS for automatic
teller machines or leased bank branch facilities where the space leased by NSS
comprises less than 20% of the total space leased to all tenants of such
property). If the results of the phase one investigation indicate, in the
reasonable opinion of Summit, that additional investigation is warranted, Summit
may at its expense, within 15 days after receipt of the particular phase one
report, perform or cause to be performed a phase two investigation on the
property or properties deemed by Summit to warrant such additional study or
notify NSS and an environmental consulting firm within 15 days after the receipt
of the particular phase one report that the environmental consulting firm should
promptly commence a phase two investigation. If the cost of taking all remedial
or other corrective actions and measures (as required by applicable law, as
recommended or suggested by phase one or phase two investigation reports or as
may be prudent in light of serious life, health or safety concerns), if any, is
in the aggregate in excess of $1,000,000, as reasonably estimated by an
environmental expert retained for such purpose by Summit at its sole expense, or
if the cost of such actions and measures cannot be so reasonably estimated by
such expert to be such amount or less with any reasonable degree of certainty,
Summit shall have the right pursuant to Section 9.02(d)(3) of this Agreement to
terminate this Agreement.
ARTICLE V.
COVENANTS OF SUMMIT
Summit hereby covenants and agrees with NSS that:
Section 5.01. APPROVALS AND REGISTRATIONS. Based on such assistance and
cooperation of NSS as Summit shall reasonably request, Summit will use its best
efforts to prepare and file (a) with the SEC, the Registration Statement, (b)
with the Federal Reserve Board, an application for approval of the
Reorganization, (c) with the Connecticut Commissioner of Banking, an application
for approval of the Reorganization the other transactions contemplated hereby,
and (d) with the NYSE, an application for the listing of the shares of Summit
Stock issuable upon the Reorganization, subject to official notice of issuance,
except that Summit shall have no obligation to file a new registration statement
or a post-effective amendment to the Registration Statement covering any
reoffering of Summit Stock by NSS Affiliates. Summit covenants and agrees that
all information furnished by Summit for inclusion in the Registration Statement,
the Proxy-Prospectus, and all applications and submissions for the Required
Consents will comply in all material respects with the provisions of applicable
law, including the Securities Act and the Exchange Act and the rules and
regulations of the SEC and the Federal Reserve Board and will not contain any
untrue statement of a material fact and will not omit to state any material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading. Summit will furnish to Sandler O'Neill such information as Sandler
O'Neill may reasonably request for purposes of the opinion referred to in
Section 8.07.
Section 5.02. NOTICE OF ADVERSE CHANGES. Summit will promptly advise NSS in
writing of (a) any event occurring subsequent to the date of this Agreement
which would render any representation or warranty of Summit contained in this
Agreement or the Summit Schedules, if made on or as of the date of such event or
the Closing Date, untrue or inaccurate in any material respect, (b) any Summit
Material Adverse Change, (c)
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any inability or perceived inability of Summit to perform or comply with the
terms or conditions of this Agreement, (d) the institution or threat of
institution of litigation or administrative proceeding involving Summit or its
assets which, if determined adversely to Summit, would have a Summit Material
Adverse Effect or a material adverse effect on the Reorganization, (e) any
governmental complaint, investigation, or hearing or communication indicating
that such litigation or administrative proceeding is contemplated, (f) any
written notice of, or other communication relating to, a default or event which,
with notice or lapse of time or both, would become a default, received by Summit
subsequent to the date hereof and prior to the Effective Time, under any
agreement, indenture or instrument to which Summit is a party or is subject and
which is material to the business, operation or condition (financial or
otherwise) of Summit and its subsidiaries, on a consolidated basis, and (g) any
written notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement including the Reorganization. Summit
agrees that the delivery of such notice shall not constitute a waiver by NSS of
any of the provisions of Articles VI or VIII.
Section 5.03. COPIES OF FILINGS. Summit shall promptly provide to NSS and
its counsel copies of the application filed with the Federal Reserve Board, all
reports filed by it with the SEC on Forms 10-Q, 8-K and 10-K and all documents
to be distributed in any manner to the shareholders of Summit.
Section 5.04. FURTHER ACTIONS. Summit will: (a) execute and deliver such
instruments and take such other actions as NSS may reasonably require to carry
out the intent of this Agreement; (b) use all reasonable efforts to obtain
consents of all third parties and governmental bodies necessary or reasonably
desirable for the consummation of the transactions contemplated by this
Agreement; (c) diligently support this Agreement in any proceeding before any
regulatory authority whose approval of any of the transactions contemplated
hereby is required or reasonably desirable or before any court in which
litigation in respect thereof is pending; and (d) use its best efforts so that
the other conditions precedent to the obligations of NSS set forth in Articles
VI and VIII hereof are satisfied.
Section 5.05. APPLICABLE LAWS. Summit will use its best efforts to comply
promptly with all requirements which federal or state law may impose on Summit
with respect to the Reorganization and will promptly cooperate with and furnish
information to NSS in connection with any such requirements imposed upon NSS or
on any of its subsidiaries in connection with the Reorganization.
Section 5.06. UNPAID NSS DIVIDENDS. By virtue of the Reorganization and
without further action on anyone's part, Summit shall assume the obligation of
NSS to pay dividends, if any, on NSS Stock which have a record date prior to the
Effective Time but which are not payable until after the Effective Time.
Section 5.07. COOPERATION. Until the Effective Time, Summit will provide
such information with respect to its business affairs and properties as NSS from
time to time may reasonably request, and will cause its managerial employees,
counsel and independent certified public accountants to be available on
reasonable request to answer questions of NSSs representatives covering the
business and affairs of Summit or any of its subsidiaries.
Section 5.08. CONFIDENTIALITY. All information furnished by NSS to Summit
or its representatives pursuant hereto shall be treated as the sole property of
NSS and, if the Reorganization shall not occur, Summit and its representatives
shall return to NSS all of such written information and all documents, notes,
summaries or other materials containing, reflecting or referring to, or derived
from, such information, except that any such confidential information or notes
or abstracts therefrom presented to the Board of Directors of Summit or any
committee thereof for the purpose of considering this Agreement, the
Reorganization and the related transactions may be kept and maintained by Summit
with other records of Board, and Board committee, meetings subject to a
continuing obligation of confidentiality. Summit shall, and shall use its best
efforts, to cause its representatives to, keep confidential all such
information, and shall not directly or indirectly use such information for any
competitive or other commercial purposes. The obligation to keep such
information confidential shall continue for five years from the date the
proposed Reorganization is abandoned and shall not apply to: (i) any information
which (x) was legally in Summit's possession prior to the disclosure thereof by
NSS, (y) was then generally known to the public, or (z) was disclosed to Summit
by a third party not bound by an obligation of
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confidentiality; or (ii) disclosures made as required by law. It is further
agreed that if, in the absence of a protective order or the receipt of a waiver
hereunder, Summit is nonetheless, in the written opinion of its counsel,
compelled to disclose information concerning NSS to any tribunal or governmental
body or agency or else stand liable for contempt or suffer other censure or
penalty, Summit may disclose such information to such tribunal or governmental
body or agency without liability hereunder and shall so notify NSS in advance to
the extent practicable. This Section 5.08 shall survive any termination of this
Agreement.
Section 5.09. FURTHER TRANSACTIONS. Summit continually evaluates possible
acquisitions and may prior to the Effective Time enter into one or more
agreements providing for, and may consummate the acquisition by it of another
bank, association, bank holding company, savings and loan holding company or
other company (or the assets thereof) for consideration that may include Summit
Stock. In addition, prior to the Effective Time, Summit may, depending on market
conditions and other factors, otherwise determine to issue Equity Securities or
other securities for financing purposes. Notwithstanding the foregoing, Summit
will not take any such action that would (i) prevent the transactions
contemplated hereby from qualifying as a reorganization within the meaning of
Section 368 of the Code or (ii) materially impede or delay receipt of any
Required Consent or the consummation of the transactions contemplated by this
Agreement for more than 60 days.
Section 5.10. INDEMNIFICATION.
(a) Summit shall indemnify, and advance expenses in matters that may be
subject to indemnification to, persons who served as directors and officers of
NSS or any subsidiary of NSS on or before the Effective Time with respect to
liabilities and claims (and related expenses, including fees and disbursements
of counsel) made against them resulting from their service as such prior to the
Effective Time in accordance with and subject to the requirements and other
provisions of the Restated Certificate of Incorporation and By-Laws of Summit in
effect on the date of this Agreement and applicable provisions of law to the
same extent as Summit is obliged thereunder to indemnify and advance expenses to
its own directors and officers with respect to liabilities and claims made
against them resulting from their service for Summit; provided, however, that
during such time as NSS or any subsidiary of NSS shall remain a separate
corporate entity organized under the laws of the State of Connecticut, then the
indemnification and advancement of expenses provided for in this Section 5.01(a)
for the directors and officers of such separate corporate entity shall be made
in accordance with and subject to the requirements of the certificate of
incorporation and by-laws of the particular separate corporate entity in effect
on the date of this Agreement and applicable provisions of Connecticut law.
(b) Subject to NSSs obligation set forth at Section 4.18: For a period of
six (6) years after the Effective Time, Summit will use its best efforts to
provide to the persons who served as directors or officers of NSS or any
subsidiary of NSS on or before the Effective Time insurance against liabilities
and claims (and related expenses) made against them resulting from their service
as such prior to the Effective Time comparable in coverage to that provided by
Summit to its own directors and officers, but, if not available on commercially
reasonable terms, then coverage substantially similar in all material respects
to the insurance coverage provided to them in such capacities at the date
hereof; provided, however, that in no event shall Summit be required to expend
more than 200% of the current amount expended by NSS on an annual basis (the
Insurance Amount) to maintain or procure insurance coverage pursuant hereto,
and, further provided, that if Summit is unable to maintain or obtain the
insurance called for by this Section 5.10, Summit shall use its best efforts to
obtain as much comparable insurance as is available for the Insurance Amount.
(c) This Section 5.10 shall be construed as an agreement as to which the
directors and officers of NSS referred to herein are intended to be third party
beneficiaries and shall be enforceable by the such persons and their heirs and
representatives.
Section 5.11. EMPLOYEE MATTERS.
(a) After the Effective Time, Summit may in its discretion maintain,
terminate, merge or dispose of the NSS Plans; provided, however, that any action
taken by Summit shall comply with ERISA and any other applicable laws, including
laws regarding the preservation of employee pension benefit plan benefits and,
provided further, that if Summit maintains a defined contribution plan, defined
benefit plan or health and welfare plan available to all its employees generally
which is similar a NSS Plan which is, respectively, a defined contribution plan,
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defined benefit plan or health and welfare plan available to all NSS employees
generally, then, if such NSS Plan is terminated by Summit or is otherwise
rendered inactive by Summit, Summit shall offer to the former employees of NSS
affected by such plan termination or cessation of activity the opportunity to
participate in the similar plan of Summit.
(b) Summit shall assume the obligations of NSS under the Officer
Agreements.
(c) Members of the Board of Directors of Bank on the date hereof (Bank
Board Members) shall be entitled to continue their service as Directors of the
Bank after the Effective Time until the earlier to occur of (i) the expiration
of one year following the Effective Time, or (ii) the merger of Bank into a
wholly owned bank subsidiary of Summit not organized under the laws of the State
of Connecticut (the Bank Merger), provided that if the Bank Merger occurs prior
to the expiration of a one year period following the Effective Time, Bank Board
Members may continue to serve for the balance of such one year period on a
separately constituted Connecticut advisory board of directors to the surviving
bank in the Bank Merger, and provided further that service on the Bank Board of
Directors after the Effective Time shall continue to be subject to applicable
provisions of the Banks certificate of incorporation, by-laws and Connecticut
law.
ARTICLE VI.
CONDITIONS PRECEDENT TO THE RESPECTIVE OBLIGATIONS OF
SUMMIT AND NSS
The respective obligations of Summit and NSS under this Agreement to
consummate the Reorganization are subject to the simultaneous satisfaction of
all the following conditions, compliance with which or the occurrence of which
may only be waived in whole or in part in writing by Summit and NSS in
accordance with Section 10.09:
Section 6.01. RECEIPT OF REQUIRED CONSENTS. Summit and NSS shall have
received the Required Consents; the Required Consents shall not, in the
reasonable opinion of Summit, contain restrictions or limitations which would
materially adversely affect the financial condition of Summit after consummation
of the Reorganization; the Required Consents and the transactions contemplated
hereby shall not be contested by any federal or state governmental authority;
and the Required Consents needed for the Reorganization shall have been obtained
and shall not have been withdrawn or suspended.
Section 6.02. EFFECTIVE REGISTRATION STATEMENT. The Registration Statement
shall have been declared effective by the SEC; no stop order suspending the
effectiveness of the Registration Statement shall have been issued and remain in
effect; and no proceeding for that purpose shall have been initiated or, to the
knowledge of Summit or NSS, shall be contemplated or threatened by the SEC.
Section 6.03. TAX MATTERS. At the time of effectiveness of the Registration
Statement and at the Closing Date (and at the date the Closing occurs if
different than the Closing Date), Summit and NSS shall have received from
Thompson Coburn an opinion (the Tax Opinion), reasonably satisfactory in form
and substance to them, to the effect that (a) the Reorganization will constitute
a tax-free reorganization within the meaning of Section 368 of the Code, (b)
except with respect to fractional share interests, holders of NSS Stock who
receive solely Summit Stock in the Reorganization will not recognize gain or
loss for federal income tax purposes, (c) the basis of such Summit Stock
(including any fractional share for which cash is received) will equal the basis
of the NSS Stock for which it is exchanged and (d) the holding period of such
Summit Stock (including any fractional share for which cash is received) will
include the holding period of the NSS Stock for which it is exchanged, assuming
that such NSS Stock is a capital asset in the hands of the holder thereof at the
Effective Time.
In addition, no condition or set of facts or circumstances shall exist
which will either (x) preclude any of the parties to this Agreement from
satisfying the terms or conditions of, or assumptions made in, the Tax Opinion,
as the case may be, or (y) result in any of the factual assumptions contained in
the Tax Opinion being untrue.
Section 6.04. ABSENCE OF LITIGATION. No investigation by any state or
federal agency, and no action, suit, arbitration or proceeding before any court,
state or federal agency, panel or governmental or regulatory body or
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authority, shall have been instituted or threatened against Summit or any of its
subsidiaries, or NSS or any of its subsidiaries, that is material to the
Reorganization or to the financial condition of Summit and its subsidiaries, on
a consolidated basis, or NSS and its subsidiaries, on a consolidated basis, as
the case may be. No order, decree, judgment, or regulation shall have been
entered or law or regulation adopted by any such agency, panel, body or
authority which enjoined or has a material adverse effect upon the
Reorganization or on the financial condition of Summit and its subsidiaries, on
a consolidated basis, or NSS and its subsidiaries, on a consolidated basis, as
the case may be.
Section 6.05. NYSE LISTING. The NYSE shall have indicated that the shares
of Summit Stock to be issued in the Reorganization are to be listed on the NYSE,
subject to official notice of issuance.
ARTICLE VII.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SUMMIT
The obligation of Summit to consummate the Reorganization is subject to the
simultaneous satisfaction of all of the following conditions, compliance with
which or the occurrence of which may be waived in whole or in part by Summit in
writing in accordance with Section 10.09:
Section 7.01. NO ADVERSE CHANGES. There shall not have occurred at any time
after March 31, 1998 any NSS Material Adverse Change or any material loss or
damage to the properties of NSS or any of its subsidiaries, whether or not
insured, which materially affects the ability of NSS and its subsidiaries, on a
consolidated basis, to conduct their business.
Section 7.02. REPRESENTATIONS AND COVENANTS. Except with respect to matters
resulting from transactions specifically contemplated by this Agreement, all
representations and warranties made by NSS in this Agreement and the NSS
Schedules and the material furnished pursuant to the Post-Signing Document List
shall be true and correct in all material respects on the date of this Agreement
and on the date the Closing occurs with the same force and effect as if such
representations and warranties were being made on such date. NSS shall have
complied in all material respects with all covenants and agreements contained
herein to be performed by NSS.
Section 7.03. SECRETARY'S CERTIFICATE. NSS shall have furnished to Summit a
certificate dated the date the Closing occurs to which shall be attached copies
of all resolutions adopted or minutes of actions taken by the Board of Directors
(including committees thereof) and shareholders of NSS relating to this
Agreement, the Option Agreement and the Reorganization and related transactions,
which such certificate shall be signed by the Secretary of NSS and certify to
the satisfaction of the condition set forth in Section 7.09 and the trueness,
correctness, completeness and continuing effectiveness of all resolutions and
actions contained or referenced in the aforementioned attachments.
Section 7.04. OFFICER'S CERTIFICATE. NSS shall have furnished to Summit a
certificate signed by the Chief Executive Officer of NSS, dated the date the
Closing occurs, certifying to the satisfaction of the conditions set forth at
Sections 6.01, 6.02 (last clause), 6.03 (last paragraph) and Section 6.04, as
they relate to NSS, and at Sections 7.01, 7.02, 7.07 and 7.10.
Section 7.05. OPINION OF NSSS COUNSEL. Summit shall have received an
opinion of counsel to NSS, dated the date the Closing occurs and reasonably
satisfactory in form and substance to counsel for Summit, substantially to the
effect provided in Exhibit E.
Section 7.06. APPROVALS OF LEGAL COUNSEL. All actions, proceedings,
instruments and documents required to carry out the transactions contemplated by
this Agreement or incidental thereto and all related legal matters shall be
reasonably satisfactory to counsel to Summit, and such counsel shall have been
furnished with certified copies of actions and proceedings and such other
documents and instruments as they shall have reasonably requested.
Section 7.07. CONSENTS TO NSS CONTRACTS. All consents, approvals or
waivers, in form and substance reasonably satisfactory to Summit, required to be
obtained in connection with the Reorganization from other
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parties to each mortgage, note, lease, permit, franchise, loan or other
agreement or contract to which NSS or any of its subsidiaries is a party or by
which they or any of their assets or properties may be bound or committed, which
contract is material to the business, franchises, operations, assets or
condition (financial or otherwise) of NSS and its subsidiaries, on a
consolidated basis, shall have been obtained.
Section 7.08. FIRPTA AFFIDAVIT.
NSS shall have delivered to Summit an affidavit of an executive officer of
NSS dated the date the Closing occurs stating, under penalties of perjury, that
NSS is not and has not been a United States real property holding company (as
defined in Section 897(c)(2) of the Code) during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Code.
Section 7.09. SHAREHOLDER APPROVAL. The shareholders of NSS, at the meeting
contemplated by this Agreement, shall have authorized and approved the
Reorganization and this Agreement and all transactions contemplated by this
Agreement as and to the extent required by all applicable laws and regulations
and the provisions of NSSs Certificate of Incorporation and By-Laws.
Section 7.10. ABSENCE OF REGULATORY AGREEMENTS. Neither NSS nor any NSS
subsidiary shall be a party to any agreement or memorandum of understanding
with, or commitment letter to, or board of directors resolution submitted to or
similar undertaking made to, or be subject to any order or directive by, or be a
recipient of any extraordinary supervisory letter from, any governmental or
regulatory authority which restricts materially the conduct of its respective
business or has a material adverse effect upon the Reorganization or upon the
financial condition of Bank or of NSS and its subsidiaries, on a consolidated
basis, and neither NSS nor Bank shall have been advised by any governmental or
regulatory authority that such authority is contemplating issuing or requesting,
or considering the appropriateness of issuing or requesting, any of the
foregoing.
Section 7.11. AFFILIATE AGREEMENTS. After the Effective Time, Summit may
refuse to exchange for the Reorganization Consideration the NSS Certificates of
a NSS Affiliate who has failed to deliver an executed Affiliate Agreement to
Summit and Summit may treat such NSS Affiliate for all purposes as an
unexchanged NSS Shareholder until such time as the NSS Affiliate shall deliver
to it an executed Affiliate Agreement.
The receipt of the documents required by this Article VII by Summit shall
in no way constitute a waiver by Summit of any of the provisions of or its
rights under this Agreement.
ARTICLE VIII.
CONDITIONS PRECEDENT TO THE OBLIGATION OF NSS
The obligation of NSS to consummate the Reorganization is subject to the
simultaneous satisfaction of all of the following conditions, compliance with
which or the occurrence of which may be waived in whole or in part by NSS in
writing in accordance with Section 10.09:
Section 8.01. NO ADVERSE CHANGES. There shall not have occurred at any time
after March 31, 1998 any Summit Material Adverse Change or any material loss or
damage to the properties of Summit or its subsidiaries, whether or not insured,
which materially affects the ability of Summit and its subsidiaries, on a
consolidated basis, to conduct their business.
Section 8.02. REPRESENTATIONS AND COVENANTS. Except with respect to matters
resulting from transactions specifically contemplated by this Agreement, all
representations and warranties made by Summit in this Agreement and in the
Summit Schedules shall be true and correct in all material respects on the date
of this Agreement and on the date the Closing occurs with the same force and
effect as if such representations and warranties were made on such date. Summit
shall have complied in all material respects with all covenants and agreements
contained herein or therein to be performed by Summit. By way of illustration
and not limitation, the entry by Summit after the date hereof into any agreement
to acquire any company or other entity, the issuance of up to $1 billion of debt
or equity or a combination of debt and equity in public or private offerings,
the issuance of Series R Preferred Stock pursuant to the Summit Rights
Agreement, the redemption or repurchase by Summit
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of its capital stock, the Summit Rights or the Series R Preferred Stock issuable
pursuant to the Rights Agreement, and any transactions reasonably necessary or
appropriate in connection therewith, are specifically permitted by this
Agreement; provided, however, that Summit agrees that it will not permit any
such transaction to cause any unreasonable delay in the consummation of the
Reorganization or other transactions contemplated by this Agreement.
Section 8.03. SECRETARY'S CERTIFICATE.
(a) Summit shall have furnished to NSS a certificate dated the date the
Closing occurs to which shall be attached copies of all resolutions adopted or
minutes of actions taken by the Board of Directors (including committees
thereof) of Summit relating to this Agreement, the Option Agreement and the
Reorganization and related transactions, which such certificate shall be signed
by the Secretary of Summit and certify to the trueness, correctness,
completeness and continuing effectiveness of all resolutions and actions
contained or referenced in the aforementioned attachments.
(b) In the event Summit has elected to effect the Reorganization as a
merger pursuant to Section 1.01(a)(2), SummitSub shall have furnished to NSS a
certificate dated the date the Closing occurs to which shall be attached copies
of all resolutions adopted or minutes of actions taken by the Board of Directors
(including committees thereof) of SummitSub relating to this Agreement, the
Reorganization and related transactions, which such certificate shall be signed
by the Secretary of SummitSub and certify to the trueness, correctness,
completeness and continuing effectiveness of all resolutions and actions
contained or referenced in the aforementioned attachments.
Section 8.04. OFFICER'S CERTIFICATE. Summit shall have furnished to NSS a
certificate signed by the Chairman, Vice Chairman, President or an Executive
Vice President of Summit, dated the date the Closing occurs, certifying to the
satisfaction of the conditions set forth at Sections 6.01 and 6.02, the last
paragraph of Section 6.03, and Sections 6.04 and 6.05, as they relate to Summit,
and Sections 8.01, 8.02 and 8.08.
Section 8.05. OPINION OF SUMMIT COUNSEL. NSS shall have received an opinion
of the General Counsel of Summit, dated the date the Closing occurs and
reasonably satisfactory in form and substance to counsel for NSS, substantially
to the effect provided in Exhibit F.
Section 8.06. APPROVALS OF LEGAL COUNSEL. All actions, proceedings,
instruments and documents required to carry out the transactions contemplated by
this Agreement or incidental thereto and all related legal matters shall be
reasonably satisfactory to counsel to NSS, and such counsel shall have been
furnished with certified copies of actions and proceedings and such other
documents and instruments as they shall have reasonably requested.
Section 8.07. FAIRNESS OPINION. The Proxy-Prospectus shall have contained
the favorable signed opinion of Sandler O'Neill, dated the date of the
Proxy-Prospectus or a date not more than five business days prior thereto,
regarding the fairness from a financial point of view of the Exchange Ratio to
the shareholders of NSS in the Reorganization.
Section 8.08. ABSENCE OF REGULATORY AGREEMENTS. Neither Summit nor any of
its bank subsidiaries shall be a party to any agreement or memorandum of
understanding with, or commitment letter to, or board of directors resolution
submitted to or similar undertaking made to, or be subject to any order or
directive by, or be a recipient of any extraordinary supervisory letter from,
any governmental or regulatory authority which restricts materially the conduct
of Summit's business or has a material adverse effect upon the Reorganization or
upon the financial condition of Summit and its subsidiaries taken as a whole,
and neither Summit nor any of its bank subsidiaries shall have been advised by
any governmental or regulatory authority that such authority is contemplating
issuing or requesting, or considering the appropriateness of issuing or
requesting, any of the foregoing.
Section 8.09. NSS AND SUMMITSUB SHAREHOLDER APPROVAL. The shareholders of
NSS, at the meeting contemplated by this Agreement, shall have authorized and
approved the Reorganization and this Agreement and all transactions contemplated
by this Agreement as and to the extent required by all applicable laws and
regulations and the provisions of NSSs Certificate of Incorporation and By-Laws,
and, in the event Summit has elected to effect the Reorganization as a merger
pursuant to Section 1.01(a)(2), the sole shareholder of SummitSub shall have
authorized and approved the Reorganization and this Agreement and all
transactions contemplated
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by this Agreement as and to the extent required by all applicable laws and
regulations and the provisions of SummitSubs certificate or articles of
incorporation and by-laws.
The receipt of the documents required by this Article VIII by NSS shall in
no way constitute a waiver by NSS of any of the provisions of or its rights
under this Agreement.
ARTICLE IX.
CLOSING; TERMINATION RIGHTS
Section 9.01. CLOSING. The closing of the Reorganization (the "Closing")
shall take place on the date which is 32 days after the last to occur of the
following (Scheduled Date), unless Summit, subject to the second sentence of
this Section 9.01, shall designate a date for the Closing which is prior to the
Scheduled Date in a writing (Closing Notice) delivered to NSS at least five (5)
business days prior to the date designated therein for Closing, or unless prior
to the Scheduled Date the parties agree to a different date:
(i) the date of the approval of the Reorganization by the shareholders of
NSS in accordance with Section 7.09;
(ii) if the transactions contemplated by this Agreement are being contested
in any legal proceeding, the date that such proceeding has been brought
to a conclusion favorable, in the judgment of Summit and NSS, to the
consummation of the transactions contemplated herein or such prior date
as Summit and NSS shall elect, whether or not such proceeding has been
brought to a conclusion; or
(iii)the date of receipt of the last of the Required Consents (and the
expiration of any required waiting period required by statute or
incorporated into such Required Consents);
and the date of Closing determined in accordance with the foregoing provisions
is referred to herein as the Closing Date. Summit will use its best efforts, to
the extent it has discretion to set a Closing Date pursuant to the first
sentence of this Section 9.01, to set a Closing Date which is on or prior to
January 2, 1999 and to fullfill its obligation under this Agreement to close on
such date. The Closing shall take place at the office of Summit, 301 Carnegie
Center, Princeton, New Jersey, commencing at 10:00 a.m. on the date the Closing
is held, unless the parties agree to a different place or commencement time. At
the Closing, the parties will exchange certificates, legal opinions and other
documents for the purpose of determining whether the conditions precedent to the
obligations of the parties set forth herein have been satisfied or waived. After
all such conditions have been satisfied or waived, Summit shall cause the
Reorganization Certificate to be filed as promptly as practicable following the
Closing, but in no event later than one business day following the date the
Closing shall occur. All proceedings to be taken and all documents to be
executed and delivered by all parties at the Closing shall be deemed so taken,
executed and delivered simultaneously, and no proceedings shall be deemed taken
or any documents executed or delivered until all have been taken, executed or
delivered.
Section 9.02. TERMINATION RIGHTS.
(a) The Board of Directors of NSS or Summit may terminate this Agreement in
the event that:
(1) the shareholders of NSS at the meeting of shareholders contemplated by
Section 4.03, called for the purpose of approving the Reorganization,
this Agreement and the transactions contemplated by this Agreement, upon
voting, shall have failed to approve the Reorganization, this Agreement
and the transactions contemplated hereby by the requisite vote;
(2) a material breach of a warranty or representation or covenant made by
the other party shall have occurred and such breach has not been cured,
or is not capable of being cured, within 30 days after written notice of
the existence thereof shall have been given to the other party (provided
that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein);
(3) NSSs investment banker is unable to deliver to NSS by October 31, 1998
the opinion required by Section 8.07; or
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(4) the Closing is not consummated on or before March 1, 1999, unless the
failure of such occurrence shall be due solely to a material breach of
any representation, warranty, covenant or other agreement contained
herein by the party seeking to terminate this Agreement or the failure
of such party to fulfill a condition to Closing provided for herein or
observe or perform an agreements set forth in this Agreement required to
be performed or observed by such party prior to Closing.
(b) If either party shall refuse to close on the Closing Date because all
the conditions to its obligation to close set forth in Article VI shall not have
been met, the parties shall conduct the Closing as promptly as practicable after
all such conditions have been satisfied. In the event the failure of such a
condition is due to one or more material breaches of a representation, warranty,
covenant or other agreement contained herein, the Board of Directors of a party
not in breach may, during the period any breach remains uncured, terminate this
Agreement by giving written notice of such termination to the other party.
(c) If either party shall refuse to close on the Closing Date because all
the conditions to its obligation to close set forth in Article VII or VIII shall
not have been met (other than a failure of the condition set forth at Section
7.09 or 8.09 due to the circumstances set forth in Section 9.02(a)(1) hereof, a
failure of the condition set forth at Section 8.07 due to the circumstances set
forth at Section 9.02(a)(3) hereof or a refusal of Summit to close due to a
failure of the condition set forth at Section 7.12 hereof caused by an act or
omission of Summit): (i) the parties shall conduct the Closing as promptly as
practicable after all such conditions have been satisfied, and (ii) the Board of
Directors of such party may, during the period the failed condition continues,
terminate this Agreement by giving written notice of such termination to the
other party unless such party itself has failed to satisfy a condition to the
other partys Closing obligation or is in material breach of a representation,
warranty, covenant or other agreement contained herein.
(d) The Board of Directors of Summit may terminate this Agreement:
(1) at any time if NSS does not execute and deliver the Option Agreement by
the day immediately following the date hereof;
(2) at any time prior to the meeting of NSS shareholders contemplated by
Section 4.03, if the Board of Directors of NSS fails to recommend
approval of this Agreement and the Reorganization and other transactions
contemplated hereby in the Proxy-Prospectus (Recommendation) or
withdraws, modifies or changes, or votes to withdraw, modify or change,
its Recommendation or its intention to make the Recommendation as
represented and warranted at Section 2.08; or
(3) as provided at Section 4.20.
(e) The Board of Directors of NSS may terminate this Agreement at any time
during the ten-day period commencing the second day after the Determination Date
(as defined at (i) below) if the Summit Price (as defined at (ii) below) is less
than $39.11 and the quotient obtained by dividing the Summit Price by $47.125 is
more than .17 less than the quotient obtained by dividing the Determination Date
Index Price (as defined at (iii) below) by the Starting Date Index Price (as
defined at (iv) below). For purposes of this Section 9.02(e):
(i) Determination Date means the date of the Required Consent given by the
Federal Reserve Board.
(ii) Summit Price means the average of the closing prices of a share of
Summit Stock on the NYSE Composite Transactions List (as reported in The
Wall Street Journal or, in the absence thereof, as reported by another
authoritative source mutually agreed upon by NSS and Summit) for the 10
consecutive full trading days, ending on the Determination Date, on which
one share of Summit Stock is traded.
(iii)Determination Date Index Price means the average of the closing prices
of the common stock of the companies in the Index Group (as defined at
(v) below) on the NYSE Composite Transactions List (as reported in The
Wall Street Journal or, in the absence thereof, as reported by another
authoritative source mutually agreed upon by NSS and Summit) for the 10
consecutive full trading days ending on the Determination Date.
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(iv) Starting Date Index Price means the average of the closing prices on the
Starting Date (as defined at (vi) below) of the companies in the Index
Group as of the Determination Date.
(v)Index Group means the bank holding companies listed below; provided,
however, that if between the Starting Date and the Determination Date the
common stock of any such company ceases to be publicly traded, an
announcement is made of a proposal for such company to be acquired or an
announcement is made of a proposal by such company to acquire another
company or companies in transactions with a value exceeding 25% of such
acquirors market capitalization as of the Starting Date, then, in such
event, for purposes of calculating the Index Price in all cases, such
company will be removed from the Index Group. If any company in the Index
Group or Summit declares or effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares or similar
transaction between the Starting Date and the Determination Date, the
closing price of the common stock of such company or Summit, as the case
may be, on the Starting Date shall be appropriately adjusted for the
purposes of applying this Section 9.02(e). The bank holding companies in
the Index Group are as follows:
Bank Holding Companies
AmSouth Bancorp
BB&T Corporation
Comerica Incorporated
Crestar Financial Corporation
Fifth Third Bancorp
FirstarCorporation
First Security Corp.
Huntington Bancshares, Inc.
Keystone Financial, Inc.
Marshall & Ilsley Corporation
Mellon Bank Corporation
Mercantile Bancorp
Old Kent Financial Corporation
Regions Financial Corporation
SouthTrust Corporation
Star Banc Corporation
Union Planters Corp.
Wilmington Trust Corporation
(vi) Starting Date means June 16, 1998.
Section 9.03. EFFECTS OF A TERMINATION; CERTAIN EXPENSES.
(a) Upon a termination of this Agreement pursuant to this Section 9.02 hereof:
(1) the obligations of the parties under this Agreement (except for those
under this Section 9.03 and Sections 4.13 and 5.08) shall terminate and
be of no further force or effect and each party shall be mutually
released and discharged from liability to the other party or to any
third parties hereunder, and
(2) no party shall be liable to any other party for any costs or expenses
paid or incurred in connection herewith by such other party, except
that expenses incurred in connection with printing the Proxy-Prospectus
and the Registration Statement, and the filing fees of regulatory
authorities or self-regulatory organizations, shall be borne equally by
Summit and NSS; provided, however, that: (A) if NSS terminates this
Agreement pursuant to Section 9.02(a)(2) or Section 9.02(c), Summit shall
reimburse NSS for its out-of-pocket expenses reasonably incurred in
connection with this Agreement, including counsel fees and the printing
and filing fees referred to above, but excluding any brokers', finders'
or investment bankers' fees; and (B) if Summit terminates this Agreement
pursuant to Section 9.02(a)(2), Section 9.02(c) or Section 9.02(d), NSS
shall reimburse Summit for its out-of-pocket
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expenses reasonably incurred in connection with this Agreement, including
counsel fees and the printing and filing fees referred to above, but
excluding any brokers', finders' or investment bankers' fees.
(b) Notwithstanding any termination of this Agreement, (i) NSS shall
indemnify and hold Summit harmless from and against any claim by any broker or
finder asserting a right to brokerage commissions or finders' fees as a result
of any action allegedly taken by or understanding allegedly reached with NSS and
(ii) Summit shall indemnify and hold NSS harmless from and against any claim by
any broker or finder asserting a right to brokerage commissions or finders' fees
as a result of any action allegedly taken by or understanding allegedly reached
with Summit.
(c) Except as provided otherwise herein in the event of a termination of
this Agreement, NSS and its subsidiaries shall bear their own expenses incident
to preparing, entering into and carrying out this Agreement and to consummating
the Reorganization, provided, however, that Summit shall pay all printing
expenses and filing fees associated with the Registration Statement, the
Proxy-Prospectus and regulatory applications.
ARTICLE X.
MISCELLANEOUS
Section 10.01. PRESS RELEASES. At all times until the Closing Date or the
termination of this Agreement, each party shall promptly advise and consult with
the other prior to issuing, or permitting any of its subsidiaries, directors,
officers, employees or agents to issue, any press release or other information
to the press or any third party with respect to this Agreement or the
transactions contemplated hereby.
Section 10.02. ARTICLE AND SECTION HEADINGS. Article and section headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
Section 10.03. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the NSS
Schedules, the Summit Schedules and the Exhibits hereto and the Option Agreement
to be entered into by the parties hereto constitute the entire agreement between
the parties pertaining to the subject matter hereof and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as specifically set forth herein or therein. No
supplement, modification, waiver or termination of this Agreement shall be
binding unless executed in writing by the party to be bound thereby (or in the
case of a termination occurring pursuant to Section 9.02 hereof by the party
exercising a right to terminate this Agreement). No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof or thereof (whether or not similar), nor shall any waiver
constitute a continuing waiver unless otherwise expressly provided in the
instrument granting such waiver. The parties hereto may amend or modify this
Agreement in such manner as may be agreed upon by a written instrument executed
by the parties, except that, after the meeting described in Section 7.09 hereof,
no such amendment or modification shall reduce the amount of, or change the
forms of consideration to be received by the shareholders of NSS contemplated by
this Agreement, unless such modification is submitted to a vote of the
shareholders of NSS.
Section 10.04. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. No
investigation made by the parties hereto made heretofore or hereafter shall
affect the representations and warranties of the parties which are contained
herein and each such representation and warranty shall survive such
investigation. None of the representations, warranties, covenants and agreements
in this Agreement or in any instrument delivered pursuant to this Agreement
shall survive the Effective Time, except for those representations, covenants
and agreements contained herein and therein which by their terms apply in whole
or in part after the Effective Time.
Section 10.05. NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing, and shall be deemed to have been given,
unless otherwise specified in a particular provision of this Agreement, if
placed in the mail, registered or certified, postage prepaid, or if delivered
personally or by courier, receipt requested, or by facsimile transmission,
receipt acknowledged addressed as follows:
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Summit: Summit Bancorp.
Attn: John G. Collins
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
Telephone No.: 609-987-3422
Facsimile No.: 609-987-3435
With a copy to: Richard F. Ober, Jr., Esq.
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
Telephone No.: 609-987-3430
Facsimile No.: 609-987-3435
NSS: NSS Bancorp, Inc.
Attn: Robert T. Judson
48 Wall Street
Norwalk, Connecticut 06850
Telephone No.: 203-838-4545
Facsimile No.: 203-899-2523
With a copy to: William W. Bouton III, Esq.
Tyler, Cooper & Alcorn, L.L.P.
City Place - 35th Floor
Hartford, Connecticut 06103
Telephone No.: 860-725-6210
Facsimile No.: 860-278-3802
or to such other address as such party may designate by notice to the others,
which change of address shall be deemed to have been given upon receipt.
A notice or other communication hereunder shall be deemed delivered (i) if
mailed by certified or registered mail to the proper address, with adequate
postage prepaid, on the fifth business day following posting or (ii) if
delivered by other means, when received by the party to whom it is directed.
Section 10.06. GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New Jersey,
without giving effect to the provisions, policies or principles thereof relating
to choice or conflict of laws.
Section 10.07. COUNTERPARTS. This Agreement is being executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same agreement.
Section 10.08. BINDING EFFECT. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
Section 10.09. EXTENSIONS; WAIVERS AND CONSENTS. Either party hereto, by
written instrument signed by its Chairman, Vice Chairman, President, or Chief
Financial Officer, may extend the time for the performance of any of the
obligations of the other party hereto, and may waive, at any time before or
after approval of this Agreement and the transactions contemplated hereby by the
shareholders of NSS, subject to the provisions of Section 10.03 hereof: (i) any
inaccuracies of the other party in the representations and warranties in this
Agreement or any other document delivered pursuant hereto or thereto; (ii)
compliance with any of the covenants or agreements of the other party contained
in this Agreement; (iii) the performance (including performance to the
satisfaction of a party or its counsel) by the other party of any of its
obligations hereunder or thereunder; and (iv) the satisfaction of any conditions
to the obligations of the waiving party hereunder or thereunder. Any
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consent or approval of a party hereunder shall be effective only if signed by
the Chairman, Vice Chairman, President or Chief Financial Officer of such party.
IN WITNESS WHEREOF, the parties have caused this Reorganization Agreement
between Summit Bancorp. and NSS Bancorp, Inc. to be executed in counterparts by
their duly authorized officers on this 17th day of June, 1998.
SUMMIT BANCORP.
By: /s/ T. JOSEPH SEMROD
-----------------------------------
T. Joseph Semrod
Chairman and Chief Executive
Officer
NSS BANCORP, INC.
By: /s/ ROBERT T. JUDSON
-----------------------------------
Robert T. Judson
President and Chief Executive
Officer
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APPENDIX B
[LETTER HEAD TO COME]
, 1998
Board of Directors
NSS Bancorp, Inc.
48 Wall Street
Norwalk, CT 06850
Gentlemen:
NSS Bancorp, Inc. ("NSS") and Summit Bancorp ("Summit") have entered into a
Reorganization Agreement, dated as of June 17, 1998 (the "Agreement"), pursuant
to which NSS will be acquired by Summit (the "Reorganization"). Upon
consummation of the Reorganization, each share of NSS common stock, par value
$.01 per share (together with the rights attached thereto issued pursuant to the
Rights Agreement dated as of May 10, 1996 between NSS and ChaseMellon
Shareholder Services, LLC, as Rights Agent, the "NSS Shares"), issued and
outstanding immediately prior to the Reorganization, other than certain shares
specified in the Agreement, will be converted into the right to receive 1.232
shares (the "Exchange Ratio") of Summit common stock, par value $.80 per share
(together with the rights attached thereto issued pursuant to the Rights
Agreement dated as of August 16, 1989 between Summit and First Chicago Trust
Company of New York, as Rights Agent). The terms and conditions of the
Reorganization are more fully set forth in the Agreement. You have requested our
opinion as to the fairness, from a financial point of view, of the Exchange
Ratio to the holders of NSS Shares.
Sandler O'Neill & Partners, L.P., as part of its investment banking
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other corporate
transactions. In connection with this opinion, we have reviewed, among other
things: (i) the Agreement and exhibits thereto; (ii) the Stock Option Agreement,
dated June 18, 1998, by and between NSS and Summit; (iii) certain publicly
available financial statements of NSS and other historical financial information
provided by NSS that we deemed relevant; (iv) certain publicly available
financial statements of Summit and other historical financial information
provided by Summit that we deemed relevant; (v) certain financial analyses and
forecasts of NSS prepared by and reviewed with management of NSS and the views
of senior management of NSS regarding NSS's past and current business
operations, results thereof, financial condition and future prospects; (vi)
certain financial analyses and forecasts of Summit prepared by and reviewed with
management of Summit and the views of senior management of Summit regarding
Summit's past and current business operations, results thereof, financial
condition and future prospects; (vii) the pro forma impact of the
Reorganization; (viii) the publicly reported historical price and trading
activity for NSS's and Summit's common stock, including a comparison of certain
financial and stock market information for NSS and Summit with similar publicly
available information for certain other companies the securities of which are
publicly traded; (ix) the financial terms of recent business combinations in the
savings institution industry, to the extent publicly available; (x) the current
market environment generally and the banking environment in particular; and (xi)
such other information, financial studies, analyses and investigations and
financial, economic and market criteria as we considered relevant.
In performing our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of all the financial
information, analyses and other information that was publicly available or
otherwise furnished to, reviewed by or discussed with us, and we do not assume
any responsibility or liability for the accuracy or completeness thereof. We did
not make an independent evaluation or appraisal of the specific assets, the
collateral securing assets or the liabilities (contingent or otherwise) of NSS
or Summit
B-1
<PAGE>
or any of their subsidiaries, or the collectibility of any such assets, nor have
we been furnished with any such evaluations or appraisals. With respect to the
financial projections reviewed with management, we have assumed that they have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the respective managements of the respective future
financial performances of NSS and Summit and that such performances will be
achieved, and we express no opinion as to such financial projections or the
assumptions on which they are based. We have also assumed that there has been no
material change in NSS's or Summit's assets, financial condition, results of
operations, business or prospects since the date of the most recent financial
statements made available to us. We have assumed in all respects material to our
analysis that NSS and Summit will remain as going concerns for all periods
relevant to our analyses, that all of the representations and warranties
contained in the Agreement and all related agreements are true and correct, that
each party to such agreements will perform all of the covenants required to be
performed by such party under such agreements and that the conditions precedent
in the Agreement are not waived.
Our opinion is necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof. Events occurring after the date hereof could materially affect this
opinion. We have not undertaken to update, revise or reaffirm this opinion or
otherwise comment upon events occurring after the date hereof. We are expressing
no opinion herein as to what the value of Summit common stock will be when
issued to NSS's shareholders pursuant to the Agreement or the prices at which
NSS's or Summit's common stock will trade at any time.
We have acted as NSS's financial advisor in connection with the
Reorganization and will receive a fee for our services, a significant portion of
which is contingent upon consummation of the Reorganization. We will also
receive a fee for rendering this opinion. In the past, we have also provided
certain other investment banking services for NSS and have received compensation
for such services.
In the ordinary course of our business, we may actively trade the equity
securities of NSS and Summit for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
Our opinion is directed to the Board of Directors of NSS in connection with
its consideration of the Reorganization and does not constitute a recommendation
to any stockholder of NSS as to how such stockholder should vote at any meeting
of stockholders called to consider and vote upon the Reorganization. Our opinion
is not to be quoted or referred to, in whole or in part, in a registration
statement, prospectus, proxy statement or in any other document, nor shall this
opinion be used for any other purposes, without Sandler O'Neill's prior written
consent; provided, however, that we hereby consent to the inclusion of this
opinion as an appendix to NSS's and Summit's Proxy Statement-Prospectus dated
the date hereof and to the references to this opinion therein.
Based upon and subject to the foregoing, it is our opinion, as of the date
hereof, that the Exchange Ratio is fair, from a financial point of view, to the
holders of NSS Shares.
Very truly yours,
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APPENDIX C
NSS BANCORP, INC. STOCK OPTION AGREEMENT
THE TRANSFER OF THE OPTION GRANTED BY THIS AGREEMENT IS SUBJECT TO RESALE
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
STOCK OPTION AGREEMENT, dated as of the 18th day of June, 1998 (this
"Agreement"), between Summit Bancorp., a New Jersey corporation ("Grantee"), and
NSS Bancorp, Inc., a Connecticut corporation ("Issuer").
W I T N E S S E T H :
WHEREAS, Grantee and Issuer have on a date prior to the date hereof,
entered into an Agreement and Plan of Reorganization, dated as of the 17th day
of June, 1998 (the "Reorganization Agreement"). (Capitalized terms used in this
Agreement and not defined herein but defined in the Reorganization Agreement
shall have the meanings assigned thereto in the Reorganization Agreement); and
WHEREAS, as a condition and inducement to Grantee's entering into the
Reorganization Agreement and in consideration therefor, Grantee has required
that Issuer agree, and Issuer has agreed, to grant Grantee the Option (as
defined below);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Reorganization Agreement, the parties
hereto agree as follows:
Section 1. GRANT OF OPTION; BREAKUP FEE.
(a) Issuer hereby grants to Grantee, subject to the further terms and
conditions in this Agreement:
(1) an unconditional, irrevocable option ("Option A") to purchase, after the
time and date the shareholders of Issuer have approved this Agreement in
accordance with the first paragraph of Article THIRTEENTH of the
Certificate of Incorporation of Issuer, up to 494,629 fully paid and
nonassessable shares of the common stock, par value $0.01 per share, of
Issuer ("Common Stock") at a price equal to $45.00 per share (such
price, as adjusted as hereinafter provided, the "Option Price"); and
(2) an unconditional, irrevocable option ("Option B") to purchase, prior to
the time and date the shareholders of Issuer have approved this
Agreement in accordance with the first paragraph of Article THIRTEENTH
of the Cerrtificate of Incorporation of Issuer, up to 248,308 fully paid
and nonassessable shares of the Common Stock of Issuer at the Option
Price per share.
(b) The term Option as used in this Agreement shall mean Option A and
Option B considered collectively.
(c) In the event the Option becomes exerciseable at such time as the terms
governing Option B are applicable, Issuer agrees to pay Grantee a breakup fee
equal to $3,500,000 (the Breakup Fee) in accordance with Section 2.
(d) The number of shares of Common Stock that may be received upon the
exercise of the Option and the Option Price are subject to adjustment as herein
set forth. In no event shall the number of shares of Common Stock for which this
Option is exercisable exceed 19.9% of the number of shares of Common Stock then
issued and outstanding (without consideration of any shares of Common Stock
subject to or issued pursuant to the Option).
Section 2. EXERCISE OF OPTION.
(a) Grantee may exercise the Option (subject to the terms and conditions
governing the mutually exclusively exerciseability of each of Option A and
Option B set forth in Section 1(a) above), in whole or part, at any time and
from time to time following the occurrence of a Purchase Event (as defined
below); provided that the Option shall terminate and be of no further force and
effect upon the earliest to occur of (i) the time immediately prior
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to the Effective Time, (ii) the termination of the Reorganization Agreement in
accordance with the terms thereof prior to the occurrence of an Extension Event,
other than a termination of the Reorganization Agreement by the Grantee pursuant
to Section 9.02(a)(2) or Sections 9.02(b), (c) or (d)(2) thereof, or (iii) 15
months after the termination of the Reorganization Agreement following the
occurrence of an Extension Event (as defined below), or the termination of the
Reorganization Agreement by Grantee pursuant to Section 9.02(a)(2) or Sections
9.02(b), (c) or (d)(2) thereof, and provided further, that any purchase of
Common Stock upon exercise of the Option shall be subject to applicable law, and
provided further, that the Option may not be exercised, nor may Grantee require
Issuer to repurchase the Option (as set forth in Section 7 hereof), if, at the
time of exercise or repurchase, Grantee is in material breach of any material
covenant or obligation contained in the Reorganization Agreement and, if the
Reorganization Agreement has not terminated prior thereto, such breach would
entitle Issuer to terminate the Reorganization Agreement. The events described
in clauses (i) (iii) in the preceding sentence are hereinafter collectively
referred to as Exercise Termination Events. As provided in Section 8, the rights
set forth therein shall terminate upon an Exercise Termination Event and, as
provided in Sections 6 and 7 hereof, the rights to deliver requests pursuant to
Sections 6 or 7 shall terminate 12 months after an Exercise Termination Event,
subject, in such case, to the provisions of Section 9.
(b) The term "Extension Event" shall mean any of the following events or
transactions occurring without the Grantee's prior written consent after the
date hereof:
(i)Issuer or any of its subsidiaries (each an "Issuer Subsidiary"), shall
have entered into an agreement to engage in an Acquisition Transaction
(as defined below) with any person (the term "person" for purposes of
this Agreement having the meaning assigned thereto in Sections 3(a)(9)
and 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Securities Exchange Act"), and the rules and regulations thereunder)
other than Grantee or any of its subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer shall have recommended
that the shareholders of Issuer approve or accept any Acquisition
Transaction with any person other than Grantee or any Grantee Subsidiary.
For purposes of this Agreement, "Acquisition Transaction" shall mean (w)
a merger or consolidation, or any similar transaction, involving Issuer
or any of Issuer's banking subsidiaries ("Bank Subsidiaries"), (x) a
purchase, lease or other acquisition of 10% or more of the aggregate
value of the assets or deposits of Issuer or any Bank Subsidiary, (y) a
purchase or other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of securities representing 10% or more of
the voting power of Issuer or a Bank Subsidiary, or (z) any substantially
similar transaction, provided, however, that in no event shall (i) any
merger, consolidation or similar transaction involving Issuer or any Bank
Subsidiary in which the voting securities of Issuer outstanding
immediately prior thereto continue to represent (either by remaining
outstanding or being converted into voting securities of the surviving
entity of any such transaction) at least 75% of the combined voting power
of the voting securities of the Issuer or the surviving entity
outstanding after the consummation of such merger, consolidation, or
similar transaction, or (ii) any internal merger or consolidation
involving only Issuer and/or Issuer Subsidiaries, be deemed to be an
Acquisition Transaction, provided that any such transaction is not
entered into in violation of the terms of the Reorganization Agreement;
(ii) Any person (other than Grantee or any Grantee Subsidiary) shall have
acquired beneficial ownership or the right to acquire beneficial
ownership of securities representing 10% or more of the aggregate voting
power of Issuer or any Bank Subsidiary (the term "beneficial ownership"
for purposes of this Agreement having the meaning assigned thereto in
Section 13(d) of the Securities Exchange Act, and the rules and
regulations thereunder);
(iii)Any person other than Grantee or any Grantee Subsidiary shall have made
a bona fide proposal to Issuer or its shareholders, by public
announcement or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction (including,
without limitation, any situation in which any person other than Grantee
or any Grantee Subsidiary shall have commenced (as such term is defined
in Rule 14d-2 under the Exchange Act), or shall have filed a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect
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to, a tender offer or exchange offer to purchase any shares of Common
Stock such that, upon consummation of such offer, such person would own
or control securities representing 10% or more of the aggregate voting
power of Issuer or any Bank Subsidiary);
(iv) After any person other than Grantee or any Grantee Subsidiary has made
or disclosed an intention to make a proposal to Issuer or its
shareholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Reorganization
Agreement and such breach (x) would entitle Grantee to terminate the
Reorganization Agreement and (y) shall not have been cured prior to the
Notice Date (as defined below);
(v)Any person other than Grantee or any Grantee Subsidiary shall have filed
an application with, or given a notice to, whether in draft or final
form, the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") or other governmental authority or regulatory or
administrative agency or commission, domestic or foreign (each, a
"Governmental Authority"), for approval to engage in an Acquisition
Transaction; or
(vi) any Purchase Event (as defined below).
(c) The term "Purchase Event" shall mean either of the following events or
transactions occurring after the date hereof:
(i)The acquisition by any person other than Grantee or any Grantee
Subsidiary of beneficial ownership of securities representing 25% or more
of the aggregate voting power of Issuer or any Bank Subsidiary;
(ii) The occurrence of the event described in Section 2(b)(i), except that
for purposes of determining whether the event described in Section
2(b)(i) has occurred for purposes of this subsection (ii) the percentage
referred to in clauses (x) and (y) of the definition of Acquisition
Transaction which is incorporated into said Section 2(b)(i) shall be 25%;
or
(iii)the meeting of NSS shareholders required by Section 4.03 of the
Reorganization Agreement shall not have been called by the Board of
Directors of Issuer or held or shall have been canceled prior to
termination of the Reorganization Agreement or Issuer's Board of
Directors shall have withdrawn or modified in a manner adverse to the
consummation of the Reorganization the recommendation of Issuer's Board
of Directors with respect to the Reorganization Agreement, in each case
after an Extension Event.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Extension Event or Purchase Event; provided however, that the giving of such
notice by Issuer shall not be a condition to the right of Grantee to exercise
the Option.
(e) In the event that Grantee is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares of
Common Stock it will purchase pursuant to such exercise, (ii) a place and date
not earlier than three business days nor later than 90 business days from the
Notice Date for the closing of such purchase (the "Closing Date") and (iii) that
the proposed exercise of the Option shall be revocable by Grantee in the event
that the transaction constituting a Purchase Event that gives rise to such
written notice shall not have been consummated prior to exercise of the Option;
provided that if prior notification to or approval of the Federal Reserve Board
or any other Governmental Authority is required in connection with such
purchase, Grantee shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run from the later of (x)
the date on which any required notification periods have expired or been
terminated and (y) the date on which such approvals have been obtained and any
requisite waiting period or periods shall have expired. For purposes of Section
2(a), any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto. Grantee shall have the right to revoke its proposed exercise
of the Option in the event that the transaction constituting a Purchase Event
that gives rise to such right to exercise shall not have been consummated prior
to exercise of the Option, pursuant to the statement of such right in the
written notice exercising the Option as provided in clause 2(e)(iii) above.
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(f) At the closing referred to in Section 2(e), Grantee shall surrender
this Agreement (and the Option granted hereby) to Issuer and pay to Issuer the
Aggregate Option Price (as defined in this Section 2(f) below) for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer;
provided, however, that failure or refusal of Issuer to designate such a bank
account shall not preclude Grantee from exercising the Option. Aggregate Option
Price means the amount obtained by subtracting (b) from (a) where (a) is the
amount obtained by multiplying the number of shares with respect to which the
Option is being exercised by the Option Price, and (b) is zero unless Option B
is being exercised in whole or in part in which case (b) is the amount of the
Breakup Fee (or such portion of the Breakup Fee not in excess of the amount
determined in clause (a)). The terms of this Section 2(f) are specifically
intended not to provide a discount from the fair market value of Issuers Common
Stock on the date the Option is granted and this Agreement signed, but instead
to provide for a procedure which (i) aligns Grantees right to receive the
Breakup Fee with its right to exercise Option B in those circumstances where
exercise of Option A is unavailable, and (ii) offsets the obligation of Grantee
to pay the aggregate purchase price provided for in connection with an exercise
of Option B with the obligation of Issuer to pay the Breakup Fee and thereby
facilitates and assures Granees receipt of the benefits of the Breakup Fee which
the parties have mutually agreed Grantee is entitled to on the terms provided
for herein.
(g) At such closing, simultaneously with the delivery of the Aggregate
Option Price in immediately available funds as provided in Section 2(f), Issuer
shall deliver to Grantee a certificate or certificates representing the number
of shares of Common Stock purchased by Grantee and, if the Option should be
exercised in part only, a new Option Agreement granting a new Option evidencing
the rights of Grantee thereof to purchase the balance of the shares of Common
Stock purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder shall be
endorsed with a restrictive legend substantially as follows:
"The transfer of the shares represented by this certificate is subject to
resale restrictions arising under the Securities Act of 1933, as amended, and
to certain provisions of an agreement between Summit Bancorp. and NSS
Bancorp, Inc. ("Issuer") dated as of the 18th day of June, 1998. A copy of
such agreement is on file at the principal office of Issuer and will be
provided to the holder hereof without charge upon receipt by Issuer of a
written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if Grantee shall
have delivered to Issuer a copy of a letter from the staff of the Securities and
Exchange Commission (the "SEC"), or an opinion of counsel, in form and substance
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the Securities Act; (ii) the reference to the provisions of this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by Grantee to Issuer of the written notice of exercise of
the Option provided for in Section 2(e) and the tender of the Aggregate
Option Price on the Closing Date in immediately available funds, Grantee
shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer
books of Issuer shall then be closed or that certificates representing
such shares of Common Stock shall not then actually be delivered to
Grantee. Issuer shall pay all expenses and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates
under this Section 2 in the name of Grantee or its nominee.
Section 3. RESERVATION OF SHARES. Issuer agrees: (i) that it shall at all
times until the termination of this Agreement have reserved for issuance upon
the exercise of the Option that number of authorized shares of Common Stock
equal to the maximum number of shares of Common Stock at any time and from time
to time issuable hereunder, all of which shares will, upon issuance pursuant
hereto, be duly authorized, validly issued,
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fully paid, nonassessable, and delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights;
(ii) that it will not, by amendment of its certificate of incorporation or
through reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act, avoid or seek to avoid the observance or performance
of any of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to time
be required (including (x) complying with all premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. (section)18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"), or the Change in Bank Control
Act of 1978, as amended, or any state banking law, prior approval of or notice
to the Federal Reserve Board or to any other Governmental Authority is necessary
before the Option may be exercised, cooperating with Grantee in preparing such
applications or notices and providing such information to the Federal Reserve
Board and each other Governmental Authority as they may require) in order to
permit Grantee to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; and (iv) to take all action provided
herein to protect the rights of Grantee against dilution.
Section 4. DIVISION OF OPTION. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Grantee, upon
presentation and surrender of this Agreement at the principal office of Issuer,
for other agreements providing for Options of different denominations entitling
the holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of shares
of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any agreements and related options for which this Agreement
(and the Option granted hereby) may be exchanged. Upon receipt by Issuer of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
Section 5. ADJUSTMENT UPON CHANGE OF CAPITALIZATION. The number of shares
of Common Stock purchasable upon the exercise of the Option shall be subject to
adjustment from time to time as follows:
(a) Subject to the last sentence of Section 1, in the event of any change
in the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like, the type and number of shares of Common Stock purchasable upon
exercise hereof shall be appropriately adjusted and proper provision shall be
made so that, in the event that any additional shares of Common Stock are to be
issued or otherwise to become outstanding as a result of any such change (other
than pursuant to an exercise of the Option), the number of shares of Common
Stock that remain subject to the Option shall be increased so that, after such
issuance and together with shares of Common Stock previously issued pursuant to
the exercise of the Option (as adjusted on account of any of the foregoing
changes in the Common Stock), it equals, in the case of Option A, 19.9%, and in
the case of Option B, 9.99%, of the number of shares of Common Stock then issued
and outstanding (without consideration of any shares of Common Stock subject to
or issued pursuant to the Option).
(b) Whenever the number of shares of Common Stock purchasable upon exercise
hereof is adjusted as provided in this Section 5, the Option Price shall be
adjusted by multiplying the Option Price by a fraction, the numerator of which
shall be equal to the number of shares of Common Stock purchasable prior to the
adjustment and the denominator of which shall be equal to the number of shares
of Common Stock purchasable after the adjustment. In no event shall the Option
Price be adjusted to less than the par value of the Common Stock to be issued at
such Option Price.
(c) It is intended by the parties hereto that the adjustments provided by
this Section 5 shall fully preserve the economic benefits of this Agreement for
Grantee.
Section 6. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. After the occurrence of a Purchase Event
that occurs prior to an Exercise Termination Event, Issuer shall, at the request
of Grantee (whether on its own behalf or on behalf of any
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subsequent holder of the Option (or part thereof) delivered prior to an Exercise
Termination Event or at the request of a holder of any of the shares of Common
Stock issued pursuant hereto) delivered no later than 12 months after an
Exercise Termination Event, promptly prepare, file and keep current a
registration statement under the Securities Act relating to a delayed or
continuous offering (as contemplated by Rule 415 of the SEC under the Securities
Act) (a shelf registration) covering this Option and any shares issued and
issuable pursuant to the Option (the "Option Shares") and shall use its best
efforts to cause such registration statement to become effective and remain
current and to qualify this Option or any such Option Shares or other securities
for sale under any applicable state securities laws in order to permit the sale
or other disposition of this Option or any Option Shares in accordance with any
plan of disposition requested by Grantee; provided, however, that Issuer may
postpone filing a registration statement relating to a registration request by
Grantee under this Section 6 for a period of time (not in excess of 90 days) if
in its judgment such filing would require the disclosure of material information
that Issuer has a bona fide business purpose for preserving as confidential.
Issuer will use its best efforts to cause such registration statement first to
become effective as soon as practicable after the filing thereof and then to
remain effective for such period not in excess of 180 days from the day such
registration statement first becomes effective, or such shorter time as may be
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. Grantee shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. In connection with any such registration, Issuer and Grantee
shall provide each other with representations, warranties, and other agreements
customarily given in connection with such registrations. If requested by any
Grantee in connection with such registration, Issuer and Grantee shall become a
party to any underwriting agreement relating to the sale of Option Shares, but
only to the extent of obligating themselves in respect of representations,
warranties, indemnities and other agreements customarily included in such
underwriting agreements. Notwithstanding the foregoing, if Grantee revokes any
exercise notice or fails to exercise any Option with respect to any exercise
notice pursuant to Section 2(e), Issuer shall not be obligated to continue any
registration process with respect to the sale of Option Shares.
(b) ADDITIONAL PERSONS WITH REGISTRATION RIGHTS. Upon receiving any request
under this Section 6 from any Grantee, Issuer agrees to send a copy thereof to
any other person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event shall
Issuer be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement.
(c) EXPENSES. Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of counsel), legal expenses, including the reasonable fees and expenses of one
counsel to the holders whose Option Shares are being registered, printing
expenses and the costs of special audits or "cold comfort" letters, expenses of
underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to this Section 6 (including the related
offerings and sales by holders of Option Shares) and all other qualifications,
notification or exemptions pursuant to Section 6.
(d) INDEMNIFICATION. In connection with any registration under this Section
6, Issuer hereby indemnifies the Grantee, and each officer, director and
controlling person of Grantee, and each underwriter thereof, including each
person, if any who controls such holder or underwriter within the meaning of
Section 15 of the Securities Act, against all expenses, losses, claims, damages
and liabilities caused by any untrue, or alleged untrue, statement contained in
any registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission, or alleged omission, to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such expenses, losses, claims, damages or
liabilities of such indemnified party are caused by any untrue statement or
alleged untrue statement that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements
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thereto) in reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Grantee, or by such underwriter, as the case may be, for all
such expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement, that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such holder or such underwriter,
as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 6(d) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 6(d), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 6(d). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party either agrees to pay the same, (ii) the indemnifying party
fails to assume the defense of such action with counsel satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interests of the indemnified party. No indemnifying party
shall be liable for the fees and expenses of more than one separate counsel for
all indemnified parties or for any settlement entered into without its consent,
which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 6(d) is unavailable to
a party otherwise entitled to be indemnified in respect of any expenses, losses,
claims, damages or liabilities referred to herein, then the indemnifying party,
in lieu of indemnifying such party otherwise entitled to be indemnified, shall
contribute to the amount paid or payable by such party to be indemnified as a
result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of Issuer, the
Grantee and the underwriters in connection with the statements or omissions
which resulted in such expenses, losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The amount paid or payable by a
party as a result of the expenses, losses, claims, damages and liabilities
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim; provided, however, that in no case shall any Grantee be
responsible, in the aggregate, for any amount in excess of the net offering
proceeds attributable to its Option Shares included in the offering. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. Any obligation by any Grantee
to indemnify shall be several and not joint with other Grantees.
(e) MISCELLANEOUS REPORTING. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Grantee thereof in
accordance with and to the extent permitted by any rule or regulation
promulgated by the SEC from time to time, including, without limitation, Rule
144A. Issuer shall at its expense provide the Grantee with any information
necessary in connection with the completion and filing of any reports or forms
required to be filed by Grantee under the Securities Act or the Exchange Act, or
required pursuant to any state securities laws or the rules of any stock
exchange.
Section 7. REPURCHASE AT THE OPTION OF GRANTEE OR OWNER.
(a) (1) Upon the occurrence of a Repurchase Event (as defined below):
(i)at the request (the date of such request being the "Request Date") of
Grantee, delivered prior to an Exercise Termination Event, Issuer (or any
successor thereto) shall repurchase the Option from Grantee and in
connection therewith shall pay to Grantee an amount equal to the sum of
(y) plus (z)
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where (y) is the amount by which (A) the market/offer price (as defined
below) exceeds (B) the Option Price, multiplied by the maximum number of
shares for which this Option may then be exercised and (z) is the Breakup
Fee, if Option A is not exerciseable, unless the Breakup Fee has already
been paid in connection with a prior partial exercise of Option B or is
zero, if Option A is exerciseable (such amount equal to the sum of (y)
plus (z) is referred to as the "Option Repurchase Price") and
(ii) at the request (the date of such request being the "Request Date") of
the owner of Option Shares from time to time (the "Owner"), delivered within
12 months of the occurrence of a Repurchase Event (or such later period as
provided in Section 9), Issuer shall repurchase such number of the Option
Shares from the Owner as the Owner shall designate at a price (the "Option
Share Repurchase Price") equal to the market/offer price multiplied by the
number of Option Shares so designated.
(2) The term "market/offer price" shall mean the highest of (i) the price
per share of Common Stock at which a tender offer or exchange offer
therefor has been made by a third party after the date hereof and on or
prior to the Request Date, (ii) the price per share of Common Stock
paid or to be paid by any third party pursuant to an agreement with
Issuer (whether by way of a merger, consolidation or otherwise), (iii)
the highest last sale price for shares of Common Stock within the
90-day period ending on the Request Date quoted on the Nasdaq National
Market (as reported by The Wall Street Journal, or, if not reported
thereby, another authoritative source), (iv) in the event of a sale of
all or substantially all of Issuer's assets, the sum of the price paid
in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally-recognized
independent investment banking firm selected by Grantee or the Owner,
as the case may be, divided by the number of shares of Common Stock
outstanding at the time of such sale. In determining the market/offer
price, the value of consideration other than cash shall be determined
by a nationally-recognized independent investment banking firm selected
by Grantee or the Owner, as the case may be, whose determination shall
be conclusive and binding on all parties.
(b) Grantee or the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and/or any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that Grantee or
the Owner, as the case may be, elects to require Issuer to repurchase the Option
and/or the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within the later to occur of (x) five
business days after the surrender of the Option and/or certificates representing
Option Shares and the receipt of such notice or notices relating thereto and (y)
the time that is immediately prior to the occurrence of a Repurchase Event,
Issuer shall deliver or cause to be delivered to Grantee the Option Repurchase
Price or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that Issuer is not then prohibited from so delivering under applicable
law and regulation.
(c) Issuer hereby undertakes to use its reasonable efforts to obtain all
required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish any repurchase contemplated by
this Section 7. Nonetheless, to the extent that Issuer is prohibited under
applicable law or regulation from repurchasing the Option and/or the Option
Shares in full, Issuer shall promptly so notify Grantee and/or the Owner and
thereafter deliver or cause to be delivered, from time to time, to Grantee
and/or the Owner, as appropriate, the portion of the Option Repurchase Price and
the Option Share Repurchase Price, respectively, that it is no longer prohibited
from delivering, within five business days after the date on which Issuer is no
longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to Section 7(b) is prohibited under
applicable law or regulation, from delivering to Grantee and/or the Owner, as
appropriate, the Option Repurchase Price or the Option Share Repurchase Price,
respectively, in full or in any substantial part, Grantee or the Owner, as
appropriate, may revoke its notice of repurchase of the Option or the Option
Shares either in whole or in part whereupon, in the case of a revocation in
part, Issuer shall promptly (i) deliver to Grantee and/or the Owner, as
appropriate, that portion of the Option Purchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering after taking into
account any such revocation and (ii) deliver, as appropriate, either (A) to
Grantee, a new Agreement evidencing the right of
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Grantee to purchase that number of shares of Common Stock equal to the number of
shares of Common Stock purchasable immediately prior to the delivery of the
notice of repurchase less the number of shares of Common Stock covered by the
portion of the Option repurchased or (B) to the Owner, a certificate for the
number of surrendered Option Shares covered by the revocation. For purposes of
this Section 7(c), to the extent the Option Repurchase Price includes the
Breakup Fee and a partial delivery of the Option Repurchase Price occurs
pursuant to this Section 7(c), the partial delivery shall first be allocated as
a payment of the Breakup Fee and second as a repurchase of the Option. To the
extent such partial delivery is less than the Breakup Fee, Issuers obligation
with respect to the balance of the Breakup Fee shall remain in full force and
effect hereunder and to the extent the partial delivery is greater than the
Breakup Fee, the shares purchaseable pursuant to any new Agreement delivered
pursuant to clause (ii)(A) above shall be appropriately adjusted.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed to
have occurred (i) upon the consummation of any Acquisition Transaction, or (ii)
upon the acquisition by any person of beneficial ownership of securities
representing 25% or more of the aggregate voting power of Issuer or any Bank
Subsidiary, provided that no such event shall constitute a Repurchase Event
unless an Extension Event shall have occurred prior to an Exercise Termination
Event. The parties hereto agree that Issuer's obligations to repurchase the
Option or Option Shares under this Section 7 shall not terminate upon the
occurrence of an Exercise Termination Event if an Extension Event shall have
occurred prior to the occurrence of an Exercise Termination Event.
(e) Issuer shall not enter into any agreement with any party (other than
Grantee or a Grantee Subsidiary) for an Acquisition Transaction unless the other
party thereto assumes all the obligations of Issuer pursuant to this Section 7
in the event that Grantee or the Owner elects, in its sole discretion, to
require such other party to perform such obligations.
Section 8. SUBSTITUTE OPTION IN THE EVENT OF CORPORATE CHANGE.
(a) In the event that prior to an Exercise Termination Event, Issuer shall
enter into an agreement (i) to consolidate or merge with any person, other than
Grantee or a Grantee Subsidiary, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any person, other
than Grantee or a Grantee Subsidiary, to merge into Issuer and Issuer shall be
the continuing or surviving corporation, but, in connection with such merger,
the then outstanding shares of Common Stock shall be changed into or exchanged
for stock or other securities of any other person or cash or any other property
or the then outstanding shares of Common Stock shall after such merger represent
less than 50% of the aggregate voting power of the merged company, or (iii) to
sell or otherwise transfer all or substantially all of its assets to any person,
other than Grantee or a Grantee Subsidiary, then, and in each such case, the
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Grantee, of either (x) the Acquiring
Corporation (as defined below) or (y) any person that controls the Acquiring
Corporation (the Acquiring Corporation and any such controlling person being
hereinafter referred to as the Substitute Option Issuer)
(b) The Substitute Option shall be exercisable for such number of shares of
the Substitute Common Stock (as is hereinafter defined) as is equal to the
market/offer price (as defined in Section 7) multiplied by the number of shares
of the Common Stock for which the Option was theretofore exercisable, divided by
the Average Price (as is hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Option Price multiplied by a
fraction in which the numerator is the number of shares of the Common Stock for
which the Option was theretofore exercisable and the denominator is the number
of shares of Substitute Common Stock for which the Substitute Option is
exercisable.
(c) The Substitute Option shall otherwise have the same terms as the
Option, provided that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to Grantee, provided further that the terms of
the Substitute Option shall include (by way of example and not limitation)
provisions for the repurchase of the Substitute Option and Substitute Common
Stock by the Substitute Option Issuer on the same terms and conditions as
provided in Section 7.
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(d) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than Issuer),
(ii) Issuer in a merger in which Issuer is the continuing or surviving person,
and (iii) the transferee of all or any substantial part of the Issuer's assets
(or the assets of Issuer Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock issued by the
Substitute Option Issuer upon exercise of the Substitute Option.
(iii)"Average Price" shall mean the average last sale price of a share of
the Substitute Common Stock (as reported by The Wall Street Journal or,
if not reported therein, by another authoritative source) for the one
year immediately preceding the consolidation, merger or sale in
question, but in no event higher than the last sale price of the shares
of the Substitute Common Stock on the day preceding such consolidation,
merger or sale; provided that if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect to a share of
common stock issued by Issuer, the person merging into Issuer or by any
company which controls or is controlled by such person, as Grantee may
elect.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to the exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for this clause (e), the Substitute Option Issuer shall make a cash payment
to Grantee equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in the clause (e). This
difference in value shall be determined by a nationally recognized investment
banking firm selected by Grantee and the Substitute Option Issuer.
Section 9. EXTENSION OF TIME FOR REGULATORY APPROVALS. Notwithstanding
Sections 2(e), 6, 7 and 11, if Grantee has given the notice referred to in one
or more of such Sections, the exercise of the rights specified in any such
Section shall be extended (a) if the exercise of such rights requires obtaining
regulatory approvals, to the extent necessary to obtain all regulatory approvals
for the exercise of such rights, and (b) to the extent necessary to avoid
liability under Section 16(b) of the Securities Exchange Act by reason of such
exercise; provided that in no event shall any closing date occur more than 18
months after the related Notice Date, and, if the closing date shall not have
occurred within such period due to the failure to obtain any required approval
by the Federal Reserve Board or any other Governmental Authority despite the
reasonable efforts of Issuer or the Substitute Option Issuer, as the case may
be, to obtain such approvals, the exercise of the Option shall be deemed to have
been rescinded as of the related Notice Date. In the event (a) Grantee receives
official notice that an approval of the Federal Reserve Board or any other
Governmental Authority required for the purchase and sale of the Option Shares
will not be issued or granted or (b) a closing date has not occurred within 18
months after the related Notice Date due to the failure to obtain any such
required approval, Grantee shall be entitled to exercise the Option in
connection with the resale of the Option Shares pursuant to a registration
statement as provided in Section 6. Nothing contained in this Agreement shall
restrict Grantee from specifying alternative exercising of rights pursuant to
Sections 2(e), 6, 7 and 11, hereof in the event that the exercising of any such
rights shall not have occurred due to the failure to obtain any required
approval referred to in this Section 9.
Section 10. ISSUER WARRANTIES. Issuer hereby represents and warrants to
Grantee as follows:
(a) Issuer has the requisite corporate power and authority to execute and
deliver this Agreement and, subject in the case of Option A to shareholder
approval in accordance with Article THIRTEENTH of Issuers Certificate of
Incorporation, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly approved by the Board of Directors of Issuer
and, other than in the case of Option A with respect to shareholder approval in
accordance with Article THIRTEENTH of Issuers Certificate of Incorporation, no
other corporate proceedings on the part of Issuer are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This Agreement
has been duly executed and delivered by, and constitutes a valid and binding
obligation
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of, Issuer, enforceable against Issuer in accordance with its terms, except as
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally and institutions the deposits of which are insured
by the Federal Deposit Insurance Corporation and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
(c) Upon receipt of the necessary regulatory approvals as contemplated by
this Agreement, the execution, delivery and performance of this Agreement does
not or will not, and the consummation by Issuer of any of the transactions
contemplated hereby will not, constitute or result in (i) a breach or violation
of, or a default under, its certificate of incorporation or by-laws, or the
comparable governing instruments of any of its subsidiaries, or (ii) a breach or
violation of, or a default under, any agreement, lease, contract, note,
mortgage, indenture, arrangement or other obligation of it or any of its
subsidiaries (with or without the giving of notice, the lapse of time or both)
or under any law, rule, ordinance or regulation or judgment, decree, order,
award or governmental or non-governmental permit or license to which it or any
of its subsidiaries is subject, that would in any case give any other person the
ability to prevent or enjoin Issuer's performance under this Agreement in any
material respect.
Section 11. ASSIGNMENT OF OPTION BY GRANTEE.
(a) Neither of the parties hereto may assign any of its rights or delegate
any of its obligations under this Agreement or the Option created hereunder to
any other person without the express written consent of the other party, except
that Grantee may assign this Agreement to a wholly owned subsidiary of Grantee
and Grantee may assign its rights hereunder in whole or in part after the
occurrence of a Purchase Event; provided, however, that until the date 15 days
following the date at which the Federal Reserve Board approves an application by
Grantee under the BHC Act to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase securities representing in excess of 2% of
the aggregate voting power of Issuer, (iii) an assignment to a single party
(e.g., a broker or investment banker) for the purpose of conducting a widely
dispersed public distribution on Grantee's behalf, or (iv) any other manner
approved by the Federal Reserve Board. Grantee will pay any reasonable
out-of-pocket costs and expenses of Issuer in connection with any such
assignment. The term "Grantee" as used in this Agreement shall also be deemed to
refer to Grantee's permitted assigns.
(b) Any assignment of rights of Grantee to any permitted assignee of
Grantee hereunder shall bear the restrictive legend at the beginning thereof
substantially as follows:
"The transfer of the option represented by this assignment and the related
option agreement is subject to resale restrictions arising under the
Securities Act of 1933, as amended and to certain provisions of an agreement
between Summit Bancorp. and NSS Bancorp, Inc. ("Issuer") dated as of the
18th day of June, 1998. A copy of such agreement is on file at the principal
office of Issuer and will be provided to any permitted assignee of the
Option without change upon receipt by Issuer of a written request therefor."
It is understood and agreed that (i) the reference to the resale
restrictions of the Securities Act in the above legend shall be removed by
delivery of substitute assignments without such reference if Grantee shall have
delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion
of counsel, in form and substance satisfactory to Issuer, to the effect that
such legend is not required for purposes of the Securities Act; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute assignments without such reference if the
Option has been sold or transferred in compliance with the provisions
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of this Agreement and under circumstances that do not require the retention of
such reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such assignments shall bear any other legend as may be required by
law.
Section 12. APPLICATION FOR REGULATORY APPROVAL. If Grantee is entitled to
exercise the Option and has sent a notice to Issuer pursuant to Section 2(e),
each of Grantee and Issuer will use its reasonable efforts to make all filings
with, and to obtain consents of, all third parties and the Federal Reserve Board
and other Governmental Authorities necessary to the consummation of the
transactions contemplated by this Agreement, including, without limitation,
making application for listing or quotation, as the case may be, of the shares
of Common Stock issuable hereunder on the NASDAQ National Market System and
applying to the Federal Reserve Board under the BHC Act and to state banking
authorities for approval to acquire the shares issuable hereunder.
Section 13. SPECIFIC PERFORMANCE. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement by either
party hereto and that the obligations of the parties shall hereto be enforceable
by either party hereto through injunctive or other equitable relief. Both
parties further agree to waive any requirement for the securing or posting of
any bond in connection with the obtaining of any such equitable relief and that
this provision is without prejudice to any other rights that the parties hereto
may have for any failure to perform this Agreement.
Section 14. SEPARABILITY OF PROVISIONS. If any term, provision, covenant or
restriction contained in this Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Agreement shall remain in full force and effect,
and shall in no way be affected, impaired or invalidated. If for any reason such
court or regulatory agency determines that Grantee is not permitted to acquire,
or Issuer is not permitted to repurchase, pursuant to Section 7, the full number
of shares of Common Stock provided in Section 1 (as adjusted pursuant hereto),
it is the express intention of Issuer to allow Grantee to acquire or to require
Issuer to repurchase such lesser number of shares as may be permissible, without
any amendment or modification hereof.
Section 15. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable, telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Reorganization Agreement.
Section 16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
Section 17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 18. EXPENSES. Except as otherwise expressly provided herein, each
of the parties hereto shall bear and pay all costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
Section 19. ENTIRE AGREEMENT; No Third-Party Beneficiaries. Except as
otherwise expressly provided herein or in the Reorganization Agreement, this
Agreement contains the entire agreement between the parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
Section 20. REORGANIZATION AGREEMENT. Nothing contained in this Agreement
shall be deemed to authorize Issuer or Grantee to breach any provision of the
Reorganization Agreement.
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Section 21. MAJORITY IN INTEREST. In the event that any selection or
determination is to be made by Grantee or the Owner hereunder and at the time of
such selection or determination there is more than one Grantee or Owner, such
selection shall be made by a majority in interest of such Grantees or Owners.
Section 22. FURTHER ASSURANCES. In the event of any exercise of the Option
by Grantee, Issuer and such Grantee shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
Section 23. NO RIGHTS AS SHAREHOLDER. Except to the extent Grantee
exercises the Option, Grantee shall have no rights to vote or receive dividends
or have any other rights as a shareholder with respect to shares of Common Stock
covered hereby.
Section 24. GRANTEE REPRESENTATION. The Option and any Option Shares or
other securities acquired by Grantee upon exercise of the Option are not being,
and will not be, as the case may be, acquired with a view to the public
distribution thereof in the United States except as provided for in Sections 6
and 11 hereof and neither the Option nor any Option Shares or other securities
acquired by Grantee upon exercise of the Option will be transferred or otherwise
disposed of by Grantee except in a transaction registered or exempt from
registration under the Securities Act.
Section 25. COVENANT AGAINST ACTION UNDER CERTIFICATE OF INCORPORATION. The
Grantor covenants that it shall not, and by approving this Agreement the Board
of Directors of Grantor hereby resolves, represents, warrants and covenants that
it shall not, following any exercise of the Option provided for in this
Agreement, act under authority of Article THIRTEENTH of Grantors Certificate of
Incorporation or otherwise to cause any excess shares, as that term is defined
in said Article THIRTEENTH, held beneficially or of record by Summit to be
transferred to an independent trustee for sale on the open market or otherwise
as permitted by said Article THIRTEENTH, or take any other action or fail to
take any other action the effect of which is to impede or interfere with the
free exercise of ownership rights of Summit with respect to such Common Stock of
Grantor, other than the restrictions specifically required by Article THIRTEENTH
with respect to voting rights and any restrictions imposed on all shareholders
of NSS generally, and any such action shall be null and void and of no force or
effect against Summit and Summit shall be entitled to apply to a court of equity
to enforce the covenants made in this Section 25 without the posting of bond
which Grantor hereby waives.
IN WITNESS WHEREOF, each of the parties has caused this NSS Stock Option
Agreement between NSS Bancorp, Inc., as Issuer, and Summit Bancorp., as Grantee,
to be executed on its behalf by their officers thereunto duly authorized, all as
of the 18th day of June, 1998.
Summit Bancorp.
By: /s/ T. Joseph Semrod
-----------------------------
T. Joseph Semrod
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
NSS Bancorp, Inc.
By: /s/ Robert T. Judson
----------------------------
Robert T. Judson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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APPENDIX D
CONNECTICUT GENERAL STATUTES (section)(section)33-855-872
DISSENTERS RIGHTS
(A)
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 33-855. DEFINITIONS. As used in sections 33-855 to 33-872, inclusive:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 33-856 and who exercises that right when
and in the manner required by sections 33-860 to 33-868, inclusive.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by
the corporation on its principal bank loans or, if none, at a rate that
is fair and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on
file with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7)"Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 33-856. RIGHT TO DISSENT.
(a) A shareholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of, any of the following corporate
actions:
(1) Consummation of a plan of merger to which the corporation is a party (A)
if shareholder approval is required for the merger by section 33-817 or
the certificate of incorporation and the shareholder is entitled to vote
on the merger or (B) if the corporation is a subsidiary that is merged
with its parent under section 33-818;
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the certificate of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares; (B) creates,
alters or abolishes a right in respect to redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (C) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (D) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes,
other than a limitation by dilution through issuance of
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shares or other securities with similar voting rights; or (E) reduces the
number of shares owned dy the shareholder to a fraction of a share if the
fractional share so created is to be acquired for cash under section 33-
668; or
(5) Any corporate action taken pursuant to a shareholder vote to the extent
the certificate of incorporation, bylaws or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) Where the right to be paid the value of shares is made available to a
shareholder by this section, such remedy shall be his exclusive remedy as holder
of such shares against the corporate transactions described in this section,
whether or not he proceeds as provided in sections 33-855 to 33-872, inclusive.
SEC. 33-857. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters rights as to shares held
on his behalf only if: (1) He submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and (2) he does so with
respect to all shares of which he is the beneficial shareholder or over which he
has power to direct the vote.
SEES. 33-858 AND 33-859. Reserved for future use.
(B)
PROCEDURE FOR EXERCISE OF DISSENTERS RIGHTS
SEC. 33-860. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under section
33-856 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights under sections 33-855 to 33-872, inclusive, and be accompanied by a copy
of said sections.
(b) If corporate action creating dissenters' rights under section 33-856 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in section 33-862.
SEC. 33-861. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under section
33-856 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights (1) shall deliver to the corporation before
the vote is taken written notice of his intent to demand payment for his shares
if the proposed action is effectuated and (2) shall not vote his shares in favor
of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
of this section is not entitled to payment for his shares under sections 33-855
to 33-872, inclusive.
SEC. 33-862. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under section
33-856 is authorized at a shareholders' meeting, the corporation shall deliver a
written dissenters' notice to all shareholders who satisfied the requirements of
section 33-861.
(b) The dissenters' notice shall be sent no later than ten days after the
corporate action was taken and shall:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
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(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial
ownership of the shares before that date;
(4) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty nor more than sixty days after
the date the subsection (a) of this section notice is delivered; and
(5) Be accompanied by a copy of sections 33-855 to 33-872, inclusive.
SEC. 33-863. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in section 33-862
must demand payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the dissenters, notice
pursuant to subdivision (3) of subsection (b) of said section and deposit his
certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) of this section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under sections 33-855 to 33-872,
inclusive.
SEC. 33-864. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under section 33-866.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 33-865. PAYMENT.
(a) Except as provided in section 33-867, as soon as the proposed corporate
action is taken, or upon receipt of a payment demand, the corporation shall pay
each dissenter who complied with section 33-863 the amount the corporation
estimates to be the fair value of his shares, plus accrued interest.
(b) The payment shall be accompanied by: (1) the corporation's balance
sheet as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, a statement of changes
in shareholders' equity for that year and the latest available interim financial
statements, if any; (2) a statement of the corporation's estimate of the fair
value of the shares; (3) an explanation of how the interest was calculated; (4)
a statement of the dissenter's right to demand payment under section 33-860; and
(5) a copy of sections 33-855 to 33-872, inclusive.
SEC. 33-866. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within sixty days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 33- 862 and repeat the payment demand
procedure.
SEC. 33-867. AFTER-ACQUIRED SHARES.
(a) A corporation may elect to withhold payment required by section 33-865
from a dissenter unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action.
D-3
<PAGE>
(b) To the extent the corporation elects to withhold payment under
subsection (a) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated and a statement of the dissenter's right to demand payment under
section 33-868.
SEC. 33-868. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate, less any payment under section 33-865, or reject the
corporation's offer under section 33-867 and demand payment of the fair value of
his shares and interest due, if:
(1) The dissenter believes that the amount paid under section 33-865 or
offered under section 33-867 is less than the fair value of his shares
or that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under section 33-865 within sixty
days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set
for demanding payment.
(b) A dissenter waives his right to demand payment under this section unless
he notifies the corporation of his demand in writing under subsection
(a) of this section within thirty days after the corporation made or
offered payment for his shares.
SECS. 33-869 AND 33-870. Reserved for future use.
(C)
JUDICIAL APPRAISAL OF SHARES
SEC. 33-871. COURT ACTION.
(a) If a demand for payment under section 33-868 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding in the superior court for
the judicial district where a corporation's principal office or, if none in this
state, its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the superior court for the judicial district where the registered
office of the domestic corporation merged with or whose shares were acquired by
the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy ofthe
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law. (d) The jurisdiction of the court in which the
proceeding is commenced under subsection (b) of this section is plenary and
exclusive. The court may appoint one or more persons as appraisers to receive
evidence and recommend decision on the question of fair value. The appraisers
have the powers described in the order appointing them, or in any amendment to
it. The dissenters are entitled to the same discovery rights as parties in other
civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment
(1) for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation, or (2) for
the fair value, plus accrued interest, of his after- acquired shares for which
the corporation elected to withhold payment under section 33-867.
D-4
<PAGE>
SEC. 33-872. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under section 33-871
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously or not
in good faith in demanding payment under section 33-868.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable: (I) Against
the corporation and in favor of any or all dissenters if the court finds the
corporation did not substantially comply with the requirements of sections
33-860 to 33-868, inclusive; or (2) against either the corporation or a
dissenter, in favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted arbitrarily, vexatiously
or not in good faith with respect to the rights provided by sections 33-855 to
33-872, inclusive.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
As revised through June __, 1998.
D-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
With respect to the indemnification of directors and officers, Section 5
of Article IX of the By-Laws of Summit Bancorp. provides:
Section 5. INDEMNIFICATION AND INSURANCE
(a) Each person who was or is made a party or is threatened to be made a
party to or is involved in any proceeding, by reason of the fact that he or
she is or was a corporate agent of the Corporation, whether the basis of such
proceeding is alleged action in an official capacity as a corporate agent or
in any other capacity while serving as a corporate agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the laws of the State of New Jersey as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide
prior to such amendment), against all expenses and liabilities in connection
therewith, and such indemnification shall continue as to a person who has
ceased to be a corporate agent and shall inure to the benefit of such
corporate agent's heirs, executors, administrators and other legal
representatives; PROVIDED, HOWEVER, that except as provided in Section 5(c)
of this By-Law, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated
by such person only if such proceeding (or part thereof) was authorized by
the Board of Directors. The right to indemnification conferred in this By-Law
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance
of its final disposition, such advances to be paid by the Corporation within
20 days after the receipt by the Corporation of a statement or statements
from the claimant requesting such advance or advances from time to time;
PROVIDED, HOWEVER, that the advancement of counsel fees to a claimant other
than a claimant who is or was a director or Executive Vice President or
higher ranking officer of the Corporation shall be made only when the Board
of Directors or the General Counsel of the Corporation determines that
arrangements for counsel are satisfactory to the Corporation; and PROVIDED,
FURTHER, that if the laws of the State of New Jersey so require, the payment
of such expenses incurred by a corporate agent in such corporate agent's
capacity as a corporate agent (and not in any other capacity in which service
was or is rendered by such person while a corporate agent, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding shall be made only upon delivery to the
Corporation of an undertaking by or on behalf of such corporate agent to
repay all amounts so advanced if it shall ultimately be determined that such
corporate agent is not entitled to be indemnified under this By-Law or
otherwise.
(b) To obtain indemnification under this By-Law, a claimant shall submit
to the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to the claimant and
is reasonably necessary to determine whether and to what extent the claimant
is entitled to indemnification. Upon written request by a claimant for
indemnification pursuant to the first sentence of this Section 5(b), a
determination, if required by applicable law, with respect to the claimant's
entitlement thereto shall be made as follows: (1) if requested by a claimant
who is or was a director or Executive Vice President or higher ranking
officer of this Corporation, by independent counsel (as hereinafter defined)
in a written opinion to the Board of Directors, a copy of which shall be
delivered to the claimant; or (2) if the claimant is not a person described
in Section 5(b)(1), or is such a person and if no request is made by such a
claimant for a determination by independent counsel, (A) by the Board of
Directors by a majority vote of a quorum consisting of disinterested
directors (as hereinafter defined), or (B) if a quorum of the Board of
Directors consisting of disinterested directors is not obtainable or, even if
obtainable, such quorum of disinterested directors so directs, by independent
counsel in a written opinion to the Board of Directors, a copy of which shall
be delivered to the claimant. In the event the determination of entitlement
to indemnification is to be made by independent counsel at the request of the
claimant, the independent
II-1
<PAGE>
counsel shall be selected by the Board of Directors and paid by the
Corporation. If it is so determined that the claimant is entitled to
indemnification, payment to the claimant shall be made within 20 days after
such determination.
(c) If a claim under Section 5(a) of this By-Law is not paid in full by
the Corporation within thirty days after a written claim pursuant to Section
5(b) of this By-Law has been received by the Corporation, the claimant may
[000c]at any time thereafter bring suit against the Corporation to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled to be paid also the expense of prosecuting such
claim, including attorney's fees. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the
required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standard of conduct which
makes it permissible under the laws of the State of New Jersey for the
Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of
the Corporation (including its Board of Directors or independent counsel) to
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because the
claimant has met the applicable standard of conduct set forth in the laws of
the State of New Jersey, nor an actual determination by the Corporation
(including its Board of Directors or independent counsel) that the claimant
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct.
(d) If a determination shall have been made pursuant to Section 5(b) of
this By-Law that the claimant is entitled to indemnification, the Corporation
shall be bound by such determination in any judicial proceeding commenced
pursuant to Section 5(c) of this By-Law.
(e) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
By-Law shall not be exclusive of any other rights which any person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Laws, agreement, vote of shareholders or disinterested
directors or otherwise. No repeal or modification of this By-Law shall in any
way diminish or adversely affect the rights of any corporate agent of the
Corporation hereunder in respect of any occurrence or matter arising prior to
any such repeal or modification.
(f) The Corporation may maintain insurance, at its expense, to protect
itself and any corporate agent of the Corporation or other enterprise against
any expense or liability, whether or not the Corporation would have the power
to indemnify such person against such expense or liability under the laws of
the State of New Jersey. (g) If any provision or provisions of this By-Law
shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (1) the validity, legality and enforceability of the remaining
provisions of this By-Law (including, without limitation, each portion of any
section of this By-Law containing any such provision held to be invalid,
illegal or unenforceable) shall not in any way be affected or impaired
thereby; and (2) to the fullest extent possible, the provisions of this
By-Law (including, without limitation, each such portion of any section of
this By-Law containing any such provision held to be invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
(h) For purposes of this By-Law:
(1) "disinterested director" means a director of the Corporation who is
not and was not a party to or otherwise involved in the matter in
respect of which indemnification is sought by the claimant.
(2) "independent counsel" means a law firm, a member of a law firm, or an
independent practitioner that is experienced in matters of corporation
law and shall include any person who, under the applicable standards of
professional conduct then prevailing, would not have a conflict of
interest in representing either the Corporation or the claimant in an
action to determine the claimant's rights under this By-Law.
II-2
<PAGE>
(3) "corporate agent" means any person who is or was a director, officer,
employee or agent of the Corporation or of any constituent corporation
absorbed by the Corporation in an consolidation or merger and any person
who is or was a director, officer, trustee, employee or agent of any
subsidiary of the Corporation or of any other enterprise, serving as
such at the request of this Corporation, or of any such constituent
corporation, or the legal representative of any such director, officer,
trustee, employee or agent;
(4) "other enterprise" means any domestic or foreign corporation, other
than the Corporation, and any partnership, joint venture, sole
proprietorship, trust or other enterprise, whether or not for profit,
served by a corporate agent;
(5) "expenses" means reasonable costs, disbursements and counsel fees;
(6) "liabilities" means amounts paid or incurred in satisfaction of
settlements, judgments, fines and penalties;
(7) "proceeding" means any pending, threatened or completed civil,
criminal, administrative, legislative, investigative or arbitrative
action, suit or proceeding, and any appeal therein and any inquiry or
investigation which could lead to such action, suit or proceeding; and
(8) References to "other enterprises" include employee benefit plans;
references to "fines" include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the
request of the indemnifying corporation" include any service as a
corporate agent which imposes duties on, or involves services by, the
corporate agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and
in a manner the person reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of
the corporation."
(i) Any notice, request or other communication required or permitted to
be given to the Corporation under this By-Law shall be in writing and either
delivered in person or sent by facsimile, telex, telegram, overnight mail or
courier service, or certified or registered mail, postage prepaid, return
receipt requested, to the Secretary of the Corporation and shall be
effective only upon receipt by the Secretary.
(j) This By-Law shall be implemented and construed to provide any
corporate agent described above who is found to have acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the
best interests of the Corporation the maximum indemnification, advancement of
expenses, and reimbursement for liabilities and expenses allowed by law.
Such provision is consistent with Section 14A:3-5 of the Business
Corporation Act of the State of New Jersey, the state of Summit's incorporation,
which permits the indemnification of officers and directors, under certain
circumstances and subject to specified limitations, against liability which any
officer or director may incur in such capacity.
Article 7 of Summit's Restated Certificate of Incorporation provides that:
Except to the extent prohibited by law, no Director or officer of the
Corporation shall be personally liable to the Corporation or its shareholders
for damages for breach of any duty owned to the Corporation or its
shareholders provided that a Director or officer shall not be relieved from
liability for any breach of duty based upon an act or omission (a) in breach
of such persons duty of loyalty to the Corporation or its shareholders, (b)
not in good faith or involving a knowing violation of law or (c) resulting in
receipt of an improper personal benefit. Neither the amendment or repeal of
this Article 7, nor the adoption of any provision of this Restated
Certificate of Incorporation inconsistent with this Article 7, nor the
adoption of any provision of this Restated Certificate of Incorporation
inconsistent with this Article 7, shall eliminate or reduce the effect of
this Article 7 in respect of any matter which occurred, or any cause of
action, suit or claim which but for this Article 7 would have accrued or
arisen, prior to such amendment, repeal or adoption.
II-3
<PAGE>
Summit carries officers' and directors' liability insurance policies which
provide coverage against judgments, settlements and legal costs incurred because
of actual or asserted acts or omissions of such officers and directors of Summit
arising out of their duties as such, subject to certain exceptions, including,
but not limited to, damages based upon illegal personal profits or adjudicated
dishonesty of the person seeking indemnification. The policies provide coverage
of $50,000,000 in the aggregate.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
This Registration Statement includes the following exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------
<S> <C>
2 Reorganization Agreement dated June 17, 1998 between NSS and
Summit. (Included without exhibits as Appendix A to the Proxy
Statement-Prospectus included in this Registration Statement; with
Exhibit A thereto included as Appendix C to the Proxy
Statement-Prospectus included in this Registration Statement and
Exhibits B through E thereto incorporated by reference to Exhibit
10(a) to the Schedule 13D filed by Summit with respect to NSS
Bancorp, Inc. Common Stock (File No.
000-22937) dated June 18, 1998).
3(a) Restated Certificate of Incorporation of Summit, as restated
August 8, 1997, as amended through September 24, 1997
(incorporated by reference to Exhibit (2)A on Form 10-K for the
year ending December 31, 1997).
(b) By-Laws of Summit as amended through October 18, 1995
(incorporated by reference to Exhibit (2)B on Form 10-K for the
year ending December 31, 1995).
4(a) Rights Agreement, dated as of August 16, 1989, by and between
Summit Bancorp. (under the former name UJB Financial Corp.) and
First Chicago Trust Company of New York, as Rights Agent
(incorporated by reference to Exhibit 2 to the Registration
Statement on Form 8-A, filed August 28, 1989).
(b) Notice to Rights Agent dated August 20, 1997 (incorporated by
reference to Exhibit (3)(A)(i) on Form 10-Q for the quarter ended
September 30, 1997).
*5 Opinion of Richard F. Ober, Jr., Esq. regarding legality of
securities being issued.
*8 Opinion of Thompson Coburn, regarding tax matters.
10 NSS Stock Option Agreement - included as Appendix C to the Proxy
Statement-Prospectus included with this Registration Statement.
23(a) Consent of KPMG Peat Marwick LLP.
(b) Consent of Friedberg Smith & Company, P.C.
*(c) Consent of Richard F. Ober, Jr., Esq. - included in his opinion
filed as Exhibit 5 to this Registration Statement.
*(d) Consent of Thompson Coburn - included in its opinion filed as
Exhibit 8 to this Registration Statement.
24 Power of Attorney - included on the signature page of the original
filing.
99(a) Form of NSS proxy.
(b) Opinion of Sandler O'Neill & Partners, L.P. - Included as Appendix
B to the Proxy Statement- Prospectus included in this Registration
Statement.
*(c) Consent of Sandler O'Neill & Partners, L.P.
</TABLE>
- --------
* To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES.
All financial statement schedules either are not required or are included
in the notes to the financial statements incorporated by reference herein.
II-4
<PAGE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) of this
section do not apply if the registration statement is on Form S-3, Form
S-8 or Form F-3, and the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions set forth in response to Item 20
hereof, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Township of West Windsor and the
State of New Jersey on this 20th day of August, 1998.
SUMMIT BANCORP.
By: /s/ T. Joseph Semrod
-------------------------------
T. Joseph Semrod
Chairman of the Board of Directors
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints T. Joseph Semrod, John R. Haggerty, William J.
Healy and Richard F. Ober, Jr., and each of them, the undersigned's true and
lawful attorney-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned and in the undersigned's name, place and
stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this Registration Statement, and to file the same
with all exhibits thereto and other documents in connection therewith, with the
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the 20th day of August, 1998 by
the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES
---------- ------
<S> <C>
/s/ T. Joseph Semrod Chairman of the Board
- ------------------------------- of Directors (Chief Executive Officer)
T. Joseph Semrod
/s/ Robert G. Cox President and Director
- -------------------------------
Robert G. Cox
/s/ John R. Haggerty Senior Executive Vice
- ------------------------------- President-Finance
John R. Haggerty (Principal Financial Officer)
/s/ William J. Healy Executive Vice President
- ------------------------------- and Comptroller
William J. Healy (Principal Accounting Officer)
/s/ S. Rodgers Benjamin Director
- -------------------------------
S. Rodgers Benjamin
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLES
---------- ------
<S> <C>
/s/ Robert L. Boyle Director
- -------------------------------
Robert L. Boyle
/s/ James C. Brady, Jr. Director
- -------------------------------
James C. Brady, Jr.
/s/ John G. Collins Director
- -------------------------------
John G. Collins
/s/ T.J. Dermot Dunphy Director
- -------------------------------
T.J. Dermot Dunphy
/s/ Anne Evans Estabrook Director
- ------------------------------
Anne Evans Estabrook
/s/ Elinor J. Ferdon Director
- -------------------------------
Elinor J. Ferdon
/s/ Thomas H. Hamilton Director
- -------------------------------
Thomas H. Hamilton
/s/ Fred G. Harvey Director
- -------------------------------
Fred G. Harvey
/s/ Francis J. Mertz Director
- -------------------------------
Francis J. Mertz
/s/ George L. Miles, Jr. Director
- -------------------------------
George L. Miles, Jr.
/s/ William R. Miller Director
- -------------------------------
William R. Miller
/s/ Raymond Silverstein Director
- -------------------------------
Raymond Silverstein
Director
- -------------------------------
Orin R. Smith
/s/ Joseph M. Tabak Director
- -------------------------------
Joseph M. Tabak
/s/ Douglas G. Watson Director
- -------------------------------
Douglas G. Watson
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
2 Reorganization Agreement dated June 17, 1998 between NSS and
Summit. (Included without exhibits as Appendix A to the Proxy
Statement-Prospectus included in this Registration Statement; with
Exhibit A thereto included as Appendix C to the Proxy
Statement-Prospectus included in this Registration Statement and
Exhibits B through E thereto incorporated by reference to Exhibit
10(a) to the Schedule 13D filed by Summit with respect to NSS
Bancorp, Inc. Common Stock (File No.
000-22937) dated June 18, 1998).
3(a) Restated Certificate of Incorporation of Summit, as restated
August 8, 1997, as amended through September 24, 1997
(incorporated by reference to Exhibit (2)A on Form 10-K for the
year ending December 31, 1997).
(b) By-Laws of Summit as amended through October 18, 1995
(incorporated by reference to Exhibit (2)B on Form 10-K for the
year ending December 31, 1995).
4(a) Rights Agreement, dated as of August 16, 1989, by and between
Summit Bancorp. (under the former name UJB Financial Corp.) and
First Chicago Trust Company of New York, as Rights Agent
(incorporated by reference to Exhibit 2 to the Registration
Statement on Form 8-A, filed August 28, 1989).
(b) Notice to Rights Agent dated August 20, 1997 (incorporated by
reference to Exhibit (3)(A)(i) on Form 10-Q for the quarter ended
September 30, 1997).
*5 Opinion of Richard F. Ober, Jr., Esq. regarding legality of
securities being issued.
*8 Opinion of Thompson Coburn, regarding tax matters.
10 NSS Stock Option Agreement - included as Appendix C to the Proxy
Statement-Prospectus included with this Registration Statement.
23(a) Consent of KPMG Peat Marwick LLP.
(b) Consent of Friedberg Smith & Company, P.C.
*(c) Consent of Richard F. Ober, Jr., Esq. - included in his opinion
filed as Exhibit 5 to this Registration Statement.
*(d) Consent of Thompson Coburn - included in its opinion filed as
Exhibit 8 to this Registration Statement.
24 Power of Attorney - included on the signature page of the original
filing.
99(a) Form of NSS proxy.
(b) Opinion of Sandler O'Neill & Partners, L.P. - Included as Appendix
B to the Proxy Statement- Prospectus included in this Registration
Statement.
*(c) Consent of Sandler O'Neill & Partners, L.P.
- --------
* To be filed by amendment.
Exhibit 23(a)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Summit Bancorp.:
We consent to the use of our report dated January 20, 1998 relating to the
consolidated balance sheets of Summit Bancorp., and subsidiaries as of December
31, 1997 and 1996 and the related consolidated statements of income, changes in
shareholder's equity and cash flows for each of the years in the three-year
period ended December 31, 1997, which report appears in the December 31, 1997
Annual Report on Form 10-K of Summit Bancorp., incorporated by reference in the
Registration Statement on Form S-4 of Summit Bancorp. We also consent to the
reference to our Firm under the caption "Experts".
/s/ KPMG Peat Marwick, LLP
---------------------------------
KPMG Peat Marwick, LLP
Short Hills, New Jersey
August 20, 1998
Exhibit 23(b)
Consent of Independent Auditors
The Board of Directors
NSS Bancorp, Inc.
We consent to the incorporation by reference of our report dated February 11,
1998 on our audit of the consolidated financial statements of NSS Bancorp, Inc.
and Subsidiary as of December 31, 1997 and 1996 and for each of the years in the
three year period ended December 31, 1997 included in the Annual Report of NSS
Bancorp, Inc. on Form 10-K for the year ended December 31, 1997 which is
incorporated by reference in the registration statement on Form S-4 filed by
Summit Bancorp, and to the reference to our firm in the registration statement
on Form S-4 and the proxy statement-prospectus contained therein under the
caption "Experts".
Friedberg, Smith & Co., P.C.
Bridgeport, Connecticut
August 20, 1998
NSS BANCORP, INC.
48 WALL STREET, NORWALK, CONNECTICUT 06852
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints ---------- and ----------, and each of
them, with full power of substitution, as the proxies of the undersigned, to
vote all of the shares of Common Stock of NSS Bancorp, Inc. held of record by
the undersigned on [the Record Date] at the Special Meeting to be held on
- --------- ---, 1998 or at any adjournment thereof;
1. To consider and vote upon a proposal to approve and adopt the
Reorganization Agreement dated June 17, 1998 (the "Reorganization
Agreement") between NSS and Summit Bancorp. ("Summit") and the
transactions contemplated thereby, including (1) the acquisition of
NSS by Summit through one of the following alternative structures (the
"Reorganization"): (i) the merger of NSS into Summit; (ii) the merger
of NSS into a wholly owned subsidiary of Summit; (iii) the merger of a
wholly owned subsidiary of Summit into NSS; or (iv) the exchange of
shares of Summit for shares of NSS in accordance with the share
exchange provisions of the Connecticut Business Corporation Act;
pursuant to which shares of NSS Common Stock will be converted into
the right to receive whole shares of Summit Common Stock and cash in
lieu of fractional shares based upon an exchange ratio of Summit
Common Stock to NSS Common Stock of 1.232 and (2) the NSS Bancorp Inc.
Stock Option Agreement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. A proposal to approve in advance an adjournment of the Special Meeting
in the event there are not sufficient votes to constitute a quorum or
approve the Reorganization Agreement at the scheduled time of the
Special Meeting, in order to permit further solicitation of proxies.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To transact such other business as may properly come before the
Special Meeting.
Dated at Norwalk, Connecticut this ------ day of -------, 1998.
- -------------------- ------------------------------
Number of Shares Registered Name of Shareholder
<PAGE>
If you are voting pursuant to a proxy
given to you by a registered
shareholder, sign and print your name
below and attach the proxy to this
ballot.
------------------------------
Name of Proxy Attorney
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ITEMS 1 AND 2.
Please check here if you plan on attending the annual meeting. |_|
Please sign exactly as your name appears on this ballot. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other duly
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Date: ----------, 1998
- -----------------------------
(Signature)
- -----------------------------
(Signature if held jointly)
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope.
