<PAGE>
As filed with the Securities and Exchange Commission on June 23, 1999
Registration No. 333-77155
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
Amendment No. 2
to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
SUMMIT BANCORP.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<CAPTION>
<S> <C> <C>
New Jersey 6711 22-1903313
(State or other jurisdiction of incorporation (Primary Standard Industrial (I.R.S. Employer
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) 987-3430
---------------------
Copy To:
David F. Scranton, Esq.
Stradley, Ronon, Stevens & Young, LLP
Great Valley Corporate Center
30 Valley Stream Parkway
Malvern, PA 19355-1481
(610) 640-5806
---------------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of this Registration
Statement and upon consummation of the merger of Prime Bancorp, Inc. into a
wholly owned subsidiary of the 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. [ ]
---------------------
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.
================================================================================
<PAGE>
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
The Boards of Directors of Summit Bancorp. and Prime Bancorp, Inc. have
agreed upon a merger combining Prime and Summit. We cannot complete the merger
unless the shareholders of Prime approve it. A special meeting of shareholders
of Prime will be held on Wednesday, July 28, 1999 at the DoubleTree Guest
Suites, 640 West Germantown Pike, Plymouth Meeting, Pennsylvania at 10:00 a.m.,
local time, to vote on this merger. Summit shareholders do not have to approve
the merger.
Under the terms of the merger agreement, which was signed February 17,
1999, Prime will merge into First Valley Corporation, a wholly-owned subsidiary
of Summit. First Valley will be the surviving corporation.
If the merger is completed, Prime shareholders will receive 0.675 shares of
Summit common stock (together with an equal number of preferred stock purchase
rights under Summit's shareholder rights plan) for each share of Prime common
stock they own, plus cash instead of fractional shares. Based upon the number of
outstanding shares of each company on May 31, 1999, current Prime shareholders
will own approximately 4.2% of the outstanding Summit common stock if the merger
is completed.
On June 18, 1999, Summit common stock, which is traded on the New York
Stock Exchange under the symbol "SUB", closed at $42.69 per share and Prime
common stock, which is traded on the Nadsaq National Market under the trading
symbol "PBNK", closed at $28.38 per share. If the merger is completed, Prime
common stock will no longer be traded on Nasdaq.
This Proxy Statement-Prospectus gives you detailed information about the
merger we are proposing and it includes our merger agreement as an appendix. It
is a proxy statement that Prime is using to solicit proxies for use at the Prime
special shareholder meeting. It is also a prospectus relating to Summit's
issuance of up to 7,870,316 shares of Summit common stock (and the associated
preferred stock purchase rights) in connection with the merger.
This Proxy Statement-Prospectus also includes a formal Notice of Special
Meeting of Shareholders. A proxy card and return envelope are enclosed to
facilitate your voting if you can not attend the meeting. Also enclosed is
Prime's Annual Report on Form 10-K for the year ended December 31, 1998. You are
encouraged to read these documents carefully before deciding how to vote your
shares. YOUR VOTE IS VERY IMPORTANT. Please mail your proxy promptly.
The Prime Board of Directors has unanimously determined that the merger is
fair to and in the best interests of Prime and its shareholders and other
constituencies. Accordingly, it unanimously recommends that you vote "FOR"
approval of the merger.
---------------------
Neither the Securities and Exchange Commission nor any state securities
commision has approved or disapproved these securities or determined if this
Proxy Statement-Prospectus is accurate or adequate. Any representation to the
contrary is a criminal offense. The securities of Summit being offered through
this document are not savings accounts, deposits or other obligations of any
bank or savings association and are not insured by the Federal Deposit Insurance
Corporation or any other governmental agency.
This Proxy Statement-Prospectus is dated June 23, 1999 and was first mailed
to Prime shareholders on or about June 25, 1999.
<PAGE>
PRIME BANCORP, INC.
7111 Valley Green Road
Fort Washington, PA 19034
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held July 28, 1999
---------------------
TO OUR SHAREHOLDERS:
A Special Meeting of Shareholders (the "Special Meeting") of Prime Bancorp,
Inc. ("Prime") will be held at 10:00 a.m., local time, on Wednesday, July 28,
1999 at the DoubleTree Guest Suites, 640 West Germantown Pike, Plymouth Meeting,
Pennsylvania, 19462 for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger dated February 17, 1999 (the "Merger Agreement")
between Prime and Summit Bancorp. ("Summit") and the transactions
contemplated thereby, including the merger of Prime into First Valley
Corporation, a wholly owned subsidiary of Summit (the "Merger"), pursuant
to which shares of Prime 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 0.675 of a share of Summit common
stock for each share of Prime common stock, as more fully described in the
accompanying Proxy Statement-Prospectus;
2. A proposal to approve in advance of voting on the Merger Agreement an
adjournment of the Special Meeting in the event there are not sufficient
votes to constitute a quorum or to approve the Merger Agreement at the
scheduled time of the Special Meeting, in order to permit further
solicitation of proxies; and
3. To transact such other business as may properly come before the Special
Meeting.
The Prime Board of Directors has unanimously approved the Merger Agreement
and unanimously recommends that you vote "FOR" approval of the Merger Agreement
and the transactions contemplated thereby and "FOR" approval of the proposal
regarding adjournment.
Shareholders of record as of the close of business on June 21, 1999 are
entitled to notice of and to vote at the Special Meeting. All shareholders are
cordially invited to attend the meeting.
Holders of Prime common stock will have the right to be paid the "fair
value" of all shares owned by the shareholder by exercising dissenters rights in
connection with the Merger. See "THE MERGER--Dissenters Rights" in, and Appendix
D to, the accompanying Proxy Statement-Prospectus for a description of the
procedures which a shareholder must follow in order to exercise dissenters
rights.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Joseph A. Fluehr, III
-------------------------------------
Joseph A. Fluehr, III
Secretary
June 23, 1999
Fort Washington, PA
Whether or not you expect to attend the Special Meeting, please complete,
date and sign the enclosed proxy card and promptly mail the proxy card in the
enclosed envelope in order to assure representation of your shares at the
Special Meeting. No postage is required if mailed in the United States. If you
attend the Special Meeting, you may vote either in person or by proxy. Any proxy
given may be revoked by you in writing at any time before the proxy is voted at
the meeting.
<PAGE>
FINDING IMPORTANT INFORMATION
This Proxy Statement--Prospectus contains important information about our
companies and the merger that you should read and consider carefully before you
vote your shares. The principal sections of this document are located at the
pages referenced in the Table of Contents below. Some of the documents related
to the merger are included as appendices to this document. In addition, we have
incorporated important business and financial information about our companies
from documents filed with the Securities and Exchange Commission that have not
been included in or delivered with this document.
Information that is incorporated by reference in this document is available
to you without charge upon your written or oral request. You can obtain
documents incorporated by reference in this document, excluding exhibits, by
requesting them in writing or by telephone from the appropriate company at the
following addresses:
SUMMIT BANCORP. PRIME BANCORP, INC.
Attention: Corporate Secretary Attention: Corporate Secretary
301 Carnegie Center 7111 Valley Green Rd.
Princeton, NJ 08543 Fort Washington, PA 19034
Telephone: (609) 987-3442 Telephone: (215) 836-2400
We will mail to you any incorporated documents you request by first class
mail, or another equally prompt means, within one business day after we receive
your request. In order to ensure timely delivery of these documents to you, we
must receive your request by July 21, 1999. See "WHERE YOU CAN FIND MORE
INFORMATION" on page 57 for more information about the documents incorporated by
reference in this Proxy Statement-Prospectus.
TABLE OF CONTENTS
Page
----
SUMMARY ............................................. 1
General ....................................... 1
The Companies ................................. 1
Prime Special Meeting ......................... 2
The Merger .................................... 2
Market Prices and Dividends ................... 6
CAUTIONARY STATEMENT REGARDING
FORWARD LOOKING INFORMATION ...................... 7
INTRODUCTION ........................................ 8
SPECIAL MEETING ..................................... 8
Record Date ................................... 8
Quorum and Vote Required ...................... 8
Voting of Proxies ............................. 8
How to Revoke a Proxy ......................... 9
Solicitation of Proxies ....................... 9
Stock Held by Prime Directors and Others ...... 10
SELECTED FINANCIAL DATA ............................. 11
COMPARATIVE AND PRO FORMA
PER SHARE FINANCIAL
INFORMATION ...................................... 13
MARKET PRICE AND DIVIDEND
MATTERS .......................................... 14
Market Price and Dividend History ............. 14
Coordination and Determination of
Dividends Under Merger Agreement ........... 14
Dividend Limitations .......................... 15
PROPOSAL I -- APPROVAL OF THE
MERGER AGREEMENT ................................. 15
THE MERGER .................................... 15
General ....................................... 15
Closing and Effective Time .................... 15
<PAGE>
Page
----
Exchange of Prime Certificates ................ 16
Conversion of Prime Stock Options ............. 17
Recommendation of Prime Board ................. 17
Background .................................... 17
Reasons for the Merger ........................ 19
Opinion of Prime's Financial Advisor .......... 21
Stock Option Agreement ........................ 25
Regulatory Approvals .......................... 26
Interests of Certain Persons in the
Merger ..................................... 27
The Merger Agreement .......................... 32
Dissenters Rights ............................. 35
New York Stock Exchange Listing ............... 37
Accounting Treatment .......................... 37
Certain Federal Income Tax
Consequences of the Merger ................. 37
Resale of Summit Common ....................... 38
Differences in Shareholders' Rights ........... 39
SUMMIT BANCORP ...................................... 51
Description of Business ....................... 51
DESCRIPTION OF SUMMIT CAPITAL
STOCK ............................................ 52
Common Stock .................................. 52
Shareholder Rights Plans ...................... 52
PRIME BANCORP, INC .................................. 53
Description of Business ....................... 53
Recent Developments ........................... 54
DESCRIPTION OF PRIME CAPITAL
STOCK ............................................ 54
General ....................................... 54
Common Stock .................................. 54
i
<PAGE>
Page
----
Preferred Stock .................. 55
PROPOSAL II -- ADJOURNMENT OF
SPECIAL MEETING .................... 55
SHAREHOLDER PROPOSALS ................. 56
OTHER MATTERS ......................... 57
LEGAL MATTERS ......................... 57
EXPERTS ............................... 57
WHERE YOU CAN FIND MORE
INFORMATION ........................ 57
Page
----
MERGER AGREEMENT
(without exhibits)............. Appendix A
OPINION OF FOX-PITT,
KELTON, INC. ................. Appendix B
PRIME BANCORP, INC.
STOCK OPTION AGREEMENT ....... Appendix C
PENNSYLVANIA STATUTORY
PROVISIONS RELATING TO
DISSENTERS RIGHTS ............ Appendix D
We have not authorized anyone to give any information or make any
representation about the merger or our companies that differs from, or adds to,
the information in this Proxy Statement -- Prospectus or the documents that are
publicly filed with the Securities and Exchange Commission. Therefore, if anyone
does give you different or additional information, you should not rely on it.
The information contained in this Proxy Statement -- Prospectus speaks only as
of its date unless the information specifically indicates that another date
applies.
Information in this Proxy Statement -- Prospectus about Summit has been
supplied by Summit and information about Prime has been supplied by Prime.
ii
<PAGE>
SUMMARY
This summary highlights selected information from this document. It does
not contain all of the information that is important to you. We urge you to read
carefully this entire document and the documents we have referred you to in
order to fully understand the merger. Generally, each of the headings in this
summary is followed by a reference to other pages of this document where you can
read more about that particular topic. See "WHERE YOU CAN FIND MORE INFORMATION"
to find out how you can obtain more information about Summit and Prime (p. 57).
General
We are proposing a merger of Prime into First Valley Corporation, a
wholly-owned subsidiary of Summit. In the merger, you will receive 0.675 shares
of Summit common stock and associated preferred stock purchase rights in
exchange for each share of Prime common stock you own, plus cash instead of any
fractional share. We sometimes refer to this ratio of one share of Prime common
stock to 0.675 shares of Summit common stock as the exchange ratio. Summit
common stock is listed on the New York Stock Exchange and Prime common stock is
listed on the Nasdaq National Market. For information on the historical market
price of and dividends paid on Summit common stock and Prime common stock see
page 14. We encourage you to obtain current quotations for Summit and Prime
common stock. If the merger is completed, Prime common stock will no longer be
listed on Nasdaq.
The Companies (see pages 50 and 53)
Summit Bancorp. Summit Bancorp. is a New Jersey corporation and a
registered bank holding company with principal executive offices located at 301
Carnegie Center, Princeton, New Jersey. Summit's subsidiary banks, Summit Bank
(New Jersey), Summit Bank (Pennsylvania), and Summit Bank (Connecticut),
operated 455 banking offices located in New Jersey, eastern Pennsylvania and
southwestern Connecticut as of March 31, 1999. Summit's telephone number is
(609) 987-3200. Summit's subsidiary banks are engaged in a general banking
business, offering the following services and products:
o demand and interest bearing deposit accounts;
o asset management accounts;
o business, real estate, personal and installment loans; and
o lease financing, fiduciary, investment management, investment advisory,
custodial, correspondent, capital markets, financial advisory, money
desk and treasury services.
In addition, Summit owns subsidiaries that are engaged in:
o securities products and services;
o life, health, property and casualty insurance products and services;
o venture capital investment;
o commercial finance lending, lease financing and asset based lending;
o letter of credit issuance;
o data processing; and
o reinsuring credit life and disability insurance policies related to
consumer loans made by the bank subsidiaries.
Prime Bancorp, Inc. Prime Bancorp, Inc. is a bank holding company
incorporated under the laws of the Commonwealth of Pennsylvania. Prime's
principal subsidiary is Prime Bank, which is a Pennsylvania chartered commercial
bank and a member of the Federal Reserve System. Prime Bank's main business is
attracting deposits and obtaining borrowings, then converting those deposits and
borrowings into various types of loans and investments. Banking services include
lending money, gathering money and other complementary fee generating services.
Prime's loan products include commercial, commercial real estate, consumer and
residential mortgages. Deposits are gathered along five (5) major lines which
are checking, savings, retail certificates of deposit, jumbo certificates of
deposit and commercial cash management. As of March 31, 1999, Prime Bank
operated through 24 branches in the Philadelphia metropolitan area. The
prinicipal executive offices for Prime are located at 7111 Valley Green Road,
Fort Washington, PA 19034-2209. Prime's telephone number is (215) 836-2400.
1
<PAGE>
Prime Special Meeting (see page 8)
Time, Date, Place and Purpose. (see page 8). Prime will hold a special
meeting of its shareholders on July 28, 1999 at 10:00 a.m., local time, at the
DoubleTree Guest Suites, 640 West Germantown Pike, Plymouth Meeting,
Pennsylvania, 19462. At the meeting you will vote on (1) the merger and (2)
adjournment of the special meeting, if necessary to obtain a quorum or to obtain
additional votes in favor of the merger.
Record Date, Quorum and Vote Required. (see page 8) You can vote at the
Prime special meeting if you owned shares of Prime common stock at the close of
business on June 21, 1999. One-third of the outstanding shares of Prime common
stock on June 21, 1999 must be present, in person or by proxy, to constitute a
quorum at the special meeting. The merger will be approved if a majority of the
shares of Prime common stock voted at the meeting is voted for approval of the
merger. If a quorum is not present or there are not sufficient votes to approve
the merger, the special meeting may be adjourned in order to permit further
solicitation of proxies by Prime's board of directors if a majority of the
shares of Prime common stock voted at the meeting is voted for adjournment.
The directors and executive officers of Prime have agreed in writing to
vote their shares of Prime common stock in favor of the merger. If these
executive officers and directors exercised all presently exercisable options to
purchase Prime common stock, they would own approximately 8.6% of the
outstanding shares of Prime common stock. In addition, a trust which was
established by a director of Prime owns approximately 9.1% and Summit owns
approximately 1% of the outstanding shares of Prime common stock.
The Merger (see page 15)
Anticipated Effective Date of the Merger. (see page 15) If the merger is
approved by Prime's shareholders and all the conditions to closing are
satisfied or waived:
o we will file articles of merger with the Commonwealth of Pennsylvania
which will specify the date and time at which the merger will become
effective; and
o we currently expect that the merger will become effective during the
third calendar quarter of 1999.
A copy of the merger agreement is attached as Appendix A to this Proxy
Statement-Prospectus.
Conversion of Prime Stock Options. (see page 17) In the merger, each
outstanding option to buy Prime common stock under Prime's stock option plans
will automatically be converted into an option to purchase Summit common stock.
The exercise price per share and the number of shares of Summit common stock
subject to each converted option will be determined as provided in the merger
agreement based on the exchange ratio.
Recommendation and Reasons of Prime Board of Directors. (see pages 17
and 19) Prime's board of directors unanimously recommends that Prime
shareholders vote to approve the merger and the proposal to adjourn the meeting
if necessary.
Prime's board of directors has concluded that the proposed merger is in
the best interest of Prime, its shareholders, employees and customers, and the
communities which Prime Bank serves. The Prime board considered a number of
important factors, some of which are listed below:
o the cost of capital needed for people, technology, facilities and
acquisitions to increase its market penetration in the eastern
Pennsylvania markets;
o Prime Bank's need to expand product offerings to its customers to
generate other revenue enhancing opportunities;
o Summit's asset base and financial strength;
o the value of the Summit common stock and the increase in dividend
payments to Prime's shareholders resulting from the merger;
o the premium offered by Summit for Prime's common stock in terms of
market price and other recognized financial ratios; and
o Summit's desire to maintain Prime Bank's management, commercial lending
personnel and branch network.
Opinion of Prime's Financial Advisor. (see page 21) In deciding to
approve the merger agreement, Prime's board of directors engaged
2
<PAGE>
Fox-Pitt, Kelton Inc. to act as financial advisor to Prime and to give its
opinion to the Prime board as to whether the exchange ratio is fair, from a
financial point of view, to the shareholders of Prime.
Fox-Pitt, Kelton has delivered to the Prime board an opinion dated as of
the date of this Proxy Statement-Prospectus stating that, as of this date, and
subject to the limitations described in the opinion, the exchange ratio is fair,
from a financial point of view, to Prime's shareholders. If the merger is
completed, Fox-Pitt, Kelton will be paid a fee equal to 0.75% of the total
consideration payable by Summit in the merger for its advice and the fairness
opinion. We have attached Fox-Pitt, Kelton's opinion as Appendix B to this Proxy
Statement-Prospectus. You should read it in its entirety.
Dissenters Rights. (see page 35) Under Pennsylvania law, which governs
the rights of Prime shareholders, you will have the right to dissent from the
merger, in which event you will be entitled to receive the "fair value" of your
shares of Prime common stock by complying with the specific dissenters rights
procedures under Pennsylvania law which are described in this Proxy
Statement-Prospectus. The dissenters rights provisions of the Pennsylvania
Business Corporation Law are attached as Appendix D to this Proxy
Statement-Prospectus.
Federal Income Tax Consequences. (see page 37) You will not recognize any
gain or loss for federal income tax purposes in the merger, except for gain or
loss arising from cash received instead of fractional shares or if you exercise
dissenters rights. We have conditioned the merger on our receipt of a legal
opinion that the federal income tax treatment for Prime shareholders who
exchange their shares of Prime common stock for Summit common stock will be as
we have discussed in this document.
Accounting Treatment. (see page 37) Summit expects to account for the
merger under the purchase method of accounting. 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. Intangible
assets, including goodwill, recorded in the transaction will be amortized over a
period not to exceed 20 years.
Regulatory Approvals. (see page 26) The Board of Governors of the Federal
Reserve System and the Department of Banking of the Commonwealth of Pennsylvania
must approve the acquisition of Prime by Summit. The approval of the Board of
Governors of the Federal Reserve System was given on May 17, 1999 and the
approval of the Pennsylvania Department of Banking was given on June 15, 1999.
Conditions to the Merger. (see page 33) The completion of the merger
depends on a number of conditions being satisfied or waived. Some of these
conditions include:
o approval of the merger by Prime's shareholders; and
o approval of the merger by the regulatory authorities mentioned in the
preceding paragraph without burdensome demands, and the expiration of
any waiting period following such approval.
There are other normal and customary conditions to completion of the
merger, including receipt of legal opinions, the New York Stock Exchange's
indication that the shares of Summit common stock to be issued in the merger
will be listed on the Exchange, and the receipt of the opinion of Thompson
Coburn, special tax counsel to Summit, as to certain federal income tax
consequences of the merger.
The merger agreement provides that conditions to the merger, other than
Prime shareholder approval and receipt of required regulatory approvals, may be
waived by the company for whose benefit the condition was included.
Termination of the Merger Agreement. (see page 33) The companies may
agree to terminate the merger agreement at any time without completing the
merger. Generally, either Summit or Prime, without the consent of the other, may
terminate the merger agreement if any of the following occurs:
o the shareholders of Prime do not approve the merger;
o the other party materially breaches a warranty, representation or
covenant and does not cure the breach or the breach cannot be cured
within 30 days of notice; or
3
<PAGE>
o the merger is not completed by January 3, 2000.
Generally, the company seeking to terminate cannot itself be in breach of
the merger agreement so as to allow the other party to terminate.
The merger agreement provides that Prime may terminate the merger
agreement if the average price of Summit common stock over a ten-day trading
period ending on the date the last bank regulatory approval is received is below
$32.68125 and the stock prices of 16 selected bank holding companies have not
experienced relative declines greater than 17% compared to the decline of the
Summit stock price since the time the companies agreed to merge. The last bank
regulatory approval was received on June 16, 1999 and the Prime board of
directors was not entitled to exercise this termination right.
Summit may terminate the merger agreement if Prime's board of directors
modifies its recommendation or withdraws its approval of the merger agreement,
or if the cost of environmental matters exceeds the threshold set forth in the
merger agreement.
Other Interests of Prime Officers and Directors in the Merger. (see page
27) Some directors and executive officers of Prime have interests in the merger
that are different from, or in addition to, your interest as a shareholder of
Prime. These interests arise from provisions in the merger agreement, the rights
of Prime officers and directors under Prime's Bylaws, and the rights of some
Prime officers under benefit plans maintained by Prime and separate agreements
with Prime and Summit, and include the following:
o the merger agreement contains indemnification arrangements for officers
and directors of Prime, and Summit has agreed to purchase directors'
and officers' liability insurance for a six year period following the
merger;
o Summit has agreed to appoint James J. Lynch, Chairman, President and
Chief Executive Officer of Prime, as Chairman and Chief Executive
Officer of Summit Bank (Pennsylvania) at an annual salary and bonus not
less than he received from Prime during 1998, and Mr. Lynch will be
included as a participant in Summit's Executive Severance Plan and will
enter into a Termination Agreement with Summit, under which he will
receive severance payments if his employment with Summit is terminated
under circumstances set forth in those documents;
o options to purchase 346,736 shares of Prime common stock held by Prime
executive officers and directors will automatically become options to
acquire shares of Summit common stock, adjusted for the exchange ratio
in the merger agreement;
o James J. Lynch, William H. Bromley and James E. Kelly, executive
officers of Prime, have agreements with Prime which provide for
severance payments (based upon their compensation through December 31,
1998) of $1,283,458 to Mr. Lynch, $520,000 to Mr. Bromley, and $344,875
to Mr. Kelly, if their employment is terminated under specified
circumstances after the merger; and
o some members of Prime's board will likely become members of the Summit
Bank (Pennsylvania) board of directors and will be entitled to receive
directors' fees.
Prime's board of directors considered these interests when it approved
the merger agreement.
Difference in Shareholders' Rights. (see page 39) The rights of Prime
shareholders, which are determined by Pennsylvania corporation law and Prime's
Articles of Incorporation and Bylaws differ from the rights of Summit
shareholders, which are determined by New Jersey corporation law and Summit's
Restated Certificate of Incorporation and By-Laws. Some of the differences in
shareholders' rights are due to differences between the corporation laws of
Pennsylvania, the state of Prime's incorporation, and the corporation law of New
Jersey, the state of Summit's incorporation. The remaining differences in
shareholders' rights are due to differences between Prime's Articles of
Incorporation and Bylaws and Summit's Restated Certificate of Incorporation and
By-Laws. Upon completion of the merger your rights as a
4
<PAGE>
shareholder of Summit will be governed by New Jersey corporation law and
Summit's Restated Certificate of Incorporation and By-laws.
Option Agreement. (see page 25) As a condition to its offer to acquire
Prime, Summit required that Prime grant Summit a stock option that allows Summit
to buy up to 1,087,498 shares of Prime's common stock at an exercise price of
$18.00 per share, the last sale price on February 17, 1999, which was the last
full trading day prior to the announcement of the signing of the merger
agreement. In addition, if the stock option becomes exercisable and Summit
exercises the option in full, Prime must pay Summit $5,000,000. Summit may
exercise this option if and when events relating to the potential acquisition of
Prime by someone other than Summit occur. As of the date of this document, we do
not believe that any event of this nature has occurred. The option agreement is
intended to increase the likelihood the merger will be completed and may be
expected to discourage persons who, now or prior to completion of the merger,
may be interested in acquiring Prime from considering or proposing such an
acquisition. A copy of the stock option agreement is attached as Appendix C to
this Proxy Statement--Prospectus.
5
<PAGE>
Market Prices and Dividends (see page 14)
Summit common stock is listed and traded on the New York Stock Exchange
under the symbol "SUB". Prime common stock is included on the Nasdaq National
Market under the symbol "PBNK". The following table presents for the periods
indicated, rounded to the nearest full cent, the high and low sale prices of a
share of Summit common stock and Prime common stock and quarterly dividends
declared per share on Summit common stock and Prime common stock.
All sale prices and dividends shown below for Summit common stock have been
adjusted for the 3-for-2 stock split paid on September 24, 1997. All sale prices
and dividends shown for Prime common stock have been adjusted for the 2-for-1
stock split paid on June 19, 1998.
<TABLE>
<CAPTION>
Summit Common Stock Prime Common Stock
--------------------------------------- -------------------------------------
Sale Price Sale Price
--------------------------------------- -------------------------------------
Dividends Dividends
Calendar Year High Low Per Share High Low Per Share
- ------------- ----------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1997 ................................. $ 53.38 $ 28.50 $ 1.02 $ 18.63 $ 9.88 $ 0.35
1998 ................................. 53.88 30.75 1.17 26.25 15.50 0.40
1999 (through June 18, 1999) ......... 44.50 37.06 0.63 28.75 16.88 0.22
</TABLE>
The table below presents, rounded to the nearest full cent, the following
prices for Summit common stock and Prime common stock:
o the closing price on February 17, 1999, which was the last full trading
day prior to the public announcement of the execution of the merger
agreement, and
o the closing price on June 18, 1999 (the most recent practicable date
prior to the date of this Proxy Statement -- Prospectus).
Also set forth below for each of these dates is the pro forma equivalent in
Summit common stock of a share of Prime common stock computed by multiplying the
applicable price of Summit common stock by the exchange ratio of 0.675. The pro
forma equivalents are provided for illustration purposes only.
Pro Forma Prime
Summit Prime Equivalent
------------ ----------- ----------------
February 17, 1999 ......... $ 39.38 $ 18.00 $ 26.58
June 18, 1999 ............. 42.69 28.38 28.82
On the date that the merger is completed and on the date you receive Summit
common stock certificates in exchange for your Prime certificates, the price of
a share of Summit common stock, and the pro forma Prime equivalent may be
different from those set forth above. You should obtain current price
quotations. In addition, the timing and amount of future dividends declared on
Summit common stock will be set at the discretion of Summit's board of directors
and will be determined after consideration of various factors, including,
without limitation, the earnings and financial condition of Summit and its
subsidiaries.
The following table presents, as of June 18, 1999, the current annualized
dividend rate for a share of Summit common stock, for a share of Prime common
stock, and rounded to the nearest full cent, for the pro forma equivalent in
Summit common stock of a share of Prime common stock computed by multiplying the
annualized dividend rate of a share of Summit common stock by the exchange ratio
of 0.675.
Pro Forma Prime
Summit Prime Equivalent
---------- ---------- ----------------
June 18, 1999 ......... $ 1.32 $ 0.44 $ 0.89
6
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Each of us makes forward-looking statements in this Proxy
Statement-Prospectus, and in our public documents to which we refer, that are
subject to risks and uncertainties. These forward-looking statements include
information about possible or assumed future results of our operations or the
performance of the combined company after the merger and the impact of "Year
2000" compliance issues. Also, when we use any of the words "believes,"
"expects," "anticipates," "estimates" or similar expressions we are making
forward-looking statements.
These forward-looking statements are intended to qualify for the safe
harbor provided by the Private Securities Litigation Reform Act of 1995. While
each of us believes that its forward-looking statements are reasonable, you
should not place undue reliance on any forward-looking statements, which speak
only as of the date made. You should understand that the following important
factors, in addition to those discussed elsewhere in this Proxy
Statement-Prospectus and in our public documents to which we refer, could affect
the future results and performance of each of us and the combined company. This
could cause those results to differ materially from those expressed in our
forward-looking statements. Factors that might cause such a difference include
the following
o deposit attrition, customer loss or revenue loss following the merger may
be greater than expected;
o expected cost savings from the merger may not be fully realized or
realized within the expected time frame;
o difficulties in integrating our businesses may be greater than expected;
o competition among depository and other financial institutions may
increase significantly;
o inflation and changes in the interest rate environment may reduce our
margins;
o general economic or business conditions, either nationally or in the
combined company's market areas, may be less favorable than expected;
o adverse changes may occur in the securities markets;
o legislative or regulatory changes may adversely affect our business;
o our ability to enter new markets successfully and capitalize on growth
opportunities may be more difficult than expected; and
o technological changes, including "Year 2000" data systems compliance
issues, may be more difficult, time consuming or expensive than we
expect.
7
<PAGE>
INTRODUCTION
We are providing this Proxy Statement-Prospectus to shareholders of Prime
in connection with the solicitation of proxies by the board of directors of
Prime for the special meeting of shareholders of Prime to be held on Wednesday,
July 28, 1999 at the DoubleTree Guest Suites, 640 West Germantown Pike, Plymouth
Meeting, Pennsylvania at 10:00 a.m., local time, or any adjournments thereof. At
the special meeting, the shareholders of Prime will vote upon (i) a proposal to
approve the Agreement and Plan of Merger dated February 17, 1999 between Summit,
First Valley Corporation, a wholly-owned subsidiary of Summit, and Prime, and
(ii) a proposal to approve in advance of voting on the merger agreement an
adjournment of the special meeting in order to permit further solicitation of
proxies by Prime if insufficient shares are present at the special meeting to
constitute a quorum or to approve the merger agreement. Shareholders of Prime
are entitled to exercise dissenters rights with respect to the merger agreement.
See "THE MERGER -- Dissenters Rights."
Prime's board of directors has unanimously approved the merger agreement
and unanimously recommends that Prime shareholders vote FOR its approval.
Prime's board also recommends that Prime shareholders vote FOR approval of the
adjournment proposal.
SPECIAL MEETING
Record Date
The record date for determining the Prime shareholders entitled to vote on
the merger at the special meeting is June 21, 1999. Only the holders of record
of Prime common stock as of the close of business on that date are entitled to
vote at the special meeting. Each share of Prime common stock entitles the
holder to one vote on each proposal and on all other matters properly brought
before the special meeting. Prime had no other class of outstanding voting
securities entitled to vote on the merger agreement or the adjournment proposal
at the close of business on the record date. As of the record date, there were
approximately 800 holders of record of Prime common stock and 11,074,373 shares
of Prime common stock outstanding and eligible to be voted at the special
meeting.
Quorum and Vote Required
Generally, in order to conduct business at a shareholders meeting a quorum
must be present. One-third of the outstanding shares of Prime common stock
entitled to vote, whether present in person or represented by proxy, will
constitute a quorum for the transaction of business at the special meeting. By
checking the appropriate box on the proxy card provided by Prime's board of
directors, you may vote "FOR" approval of the merger agreement, vote "AGAINST"
approval of the merger agreement or "ABSTAIN" from voting. You have similar
choices with regard to the adjournment proposal. Under the Pennsylvania Business
Corporation Law (the "PBCL"), the law under which Prime was formed, and Prime's
Articles of Incorporation, the affirmative vote of the majority of the votes
cast at the special meeting is required to approve both the merger agreement and
the adjournment proposal. Under Prime's Articles of Incorporation, the approval
of the merger agreement requires only the affirmative vote of a majority of the
votes cast because the merger agreement has been approved by a majority of the
members of Prime's board of directors. Therefore, the higher shareholder
approval requirements for certain business combinations which have not been
approved by Prime's board of directors, or which do not satisfy other conditions
set forth in Prime's Articles of Incorporation, are not applicable to the
merger.
Voting of Proxies
Shares represented by a proxy will be voted at the special meeting as
specified in the proxy.
Proxies Without Voting Instructions Proxies that are properly signed and
dated but which do not contain voting instructions will be voted for approval of
the merger and the adjournment proposal. Proxies voted against the merger which
do not contain voting instructions on the adjournment proposal will abstain from
voting on the adjournment proposal.
8
<PAGE>
Abstentions Prime will count a properly executed proxy marked "ABSTAIN" for
purposes of determining whether there is a quorum, but the shares represented by
that proxy will not be voted at the special meeting. Because the affirmative
vote of a majority of the votes cast by Prime shareholders is required for
approval of the merger and the adjournment proposal, if you mark your proxy
"ABSTAIN" it will have no effect on approval of the merger agreement or
adjournment proposal.
Broker Non-Votes If your shares are held by your broker, your broker will
vote your shares for you only if you provide instructions to your broker on how
to vote your shares. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares. In accordance with
the rules of the New York Stock Exchange, your broker cannot vote your shares of
Prime common stock without specific instructions from you. Because the
affirmative vote of a majority of the votes cast is required to approve the
merger and the adjournment proposal, if you do not instruct your broker how to
vote it will have no effect on approval of the merger agreement or the
adjournment proposal.
Other Matters If you sign the proxy card, you grant authority to the
holders of the proxy to vote in their discretion on any other matters that may
properly come before the special meeting or any adjournment or postponements
thereof. Prime's management does not presently know of any other matters to be
brought before the special meeting. As to other matters that may properly come
before the special meeting, unless otherwise provided in Prime's Articles of
Incorporation or Bylaws or by statute, the matter will be approved if a majority
of the votes cast are in favor of the matter.
If a quorum is not present, or if fewer shares of Prime common stock are
voted in favor of approval of the merger agreement than the number required for
approval, Prime currently expects that, if a majority of the shares voted, in
person or by proxy, with respect to the adjournment proposal have been voted in
favor of that proposal, the special meeting will be postponed or adjourned for
the purpose of allowing additional time for obtaining additional proxies or
votes. At any subsequent reconvening of the special meeting all proxies will be
voted in the same manner as such proxies would have been voted at the original
convening of the special meeting (except for any proxies which have effectively
been revoked or withdrawn).
How to Vote Shares Held Through Prime Plans and Brokers If you participate
in Prime's Dividend Reinvestment Plan you will receive a single proxy covering
both the shares of Prime common stock held by you in certificate form and the
shares of Prime common stock held on your behalf by the Prime Dividend
Reinvestment Plan Administrator in your Prime Dividend Reinvestment Plan
account. If you do not return a proxy, your shares of Prime common stock
epresented by the proxy, including any held under the Prime Dividend
Reinvestment Plan, will not be voted.
Prime employees who hold Prime common stock through participation in
Prime's Retirement Savings Plan will receive a separate card for use in
providing voting instructions to the Trustee of the Prime Retirement Savings
Plan. Full shares held by the Prime Retirement Savings Plan will be voted by the
Trustee in accordance with the instructions received from the participants.
If you hold Prime common stock in the name of a broker or other custodian
and wish to vote those shares in person at the special meeting, you must obtain
from the nominee holding the Prime common stock in the nominees' name a properly
executed "legal proxy" identifying you as a Prime shareholder, authorizing you
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.
How to Revoke a Proxy
Granting a proxy on the enclosed proxy card will not prevent you from
voting in person at the Prime special meeting or otherwise revoking your proxy.
You may revoke a proxy at any time prior to the special meeting by delivering a
properly signed revocation or a proxy bearing a later date, to Joseph A. Fleuhr
III, Secretary of Prime, 7111 Valley Green Road, Fort Washington, Pennsylvania
19034, or by giving written notice of revocation in person at Prime's special
meeting prior to any vote being taken. Revocation of a proxy at the special
meeting will not affect any vote taken at the meeting before revocation of the
proxy. To vote in person at the special meeting after having granted a proxy,
you must first revoke your proxy.
9
<PAGE>
Solicitation of Proxies
Prime will bear the cost of soliciting proxies. In addition to solicitation
by mail, Prime's directors, officers or employees may solicit proxies from
shareholders by telephone, in person or by other means. These persons will not
receive additional compensation, although they will be reimbursed for the
reasonable, out-of-pocket expenses they incur in connection with this
solicitation. Prime will also make arrangements with brokerage firms,
fiduciaries, and other custodians who hold shares of record to forward
solicitation materials to the beneficial owners of those shares. Prime will
reimburse those brokerage firms, fiduciaries, and other custodians for their
reasonable out-of-pocket expenses in connection with this solicitation.
Georgeson & Co., a proxy soliciting firm, will assist in the solicitation of
proxies for a fee of $7,500 plus fees for direct telephone solicitations, if
authorized, and reimbursement of reasonable out-of-pocket costs. Summit will pay
the expenses incurred for the printing and mailing of this Proxy Statement --
Prospectus and related filing fees.
Stock Held by Prime Directors and Others
The directors and executive officers of Prime and certain persons who may
be deemed to be affiliates of Prime beneficially owned, as of June 21, 1999,
1,993,098 shares of Prime common stock, assuming they exercised all options to
purchase Prime common stock that were then currently exercisable. This figure
represents 17.5% of the outstanding shares of Prime common stock after exercise
of those options. Each of the directors and executive officers of Prime has
entered into an agreement with Summit to vote all of their shares of Prime
common stock in favor of the proposal to approve the merger. If the directors
and executive officers exercised all presently exercisable options to purchase
Prime common stock, they would own approximately 8.66% of the outstanding shares
of Prime common stock. A trust established by a director of Prime owns
approximately 9.1% of the shares of Prime common stock outstanding on June 21,
1999.
Summit beneficially owns 106,700 shares of Prime common stock, which
represents less than 1% of the outstanding shares of Prime common stock, and
intends to vote these shares in favor of the proposal to approve the merger and
the proposal to adjourn the special meeting, if necessary. In addition, Prime
has granted Summit a stock option that allows Summit to acquire up to 1,087,498
shares of Prime common stock. This option is not currently exercisable and the
Prime common stock represented by the option has not been issued and cannot
currently be voted.
10
<PAGE>
SELECTED FINANCIAL DATA
The following tables present selected historical financial information for
Summit and Prime for each of the five years in the period ended December 31,
1998 and the three-month periods ended March 31, 1999 and 1998. This information
is provided to aid your financial analysis of the merger. We derived this
information from the consolidated financial statements of Summit and Prime,
including the respective notes to those financial statements contained in the
Form 10-Ks and Form 10-Qs of Summit and Prime filed with the Securities and
Exchange Commission, which are incorporated by reference in this Proxy
Statement-Prospectus. See "WHERE YOU CAN FIND MORE INFORMATION." The unaudited
selected historical financial information for Summit and Prime for the
three-month periods ended March 31, 1999 and 1998 reflects, in the opinion of
the managements of Summit and Prime, respectively, all adjustments, comprising
only normal recurring accruals, necessary for a fair presentation of the
consolidated operating results and financial position of Summit and Prime for
these 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>
Three Months Ended
March 31,
--------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Summary of Operations:
Interest income .................. $ 560,445 $ 529,329
Interest expense ................. 255,101 240,171
Net interest income .............. 305,344 289,158
Provision for loan losses ........ 16,500 15,000
Securities gains ................. 217 1,426
Net income ....................... 118,741 112,417
Net income per diluted share. 0.68 0.63
Cash dividends declared per
share ........................... 0.30 0.27
Average diluted common
shares outstanding .............. 175,458 179,251
Balance Sheet Data (at period end):
Total assets ..................... $33,477,377 $30,554,690
Securities ....................... 10,453,562 9,301,360
Loans ............................ 21,153,707 19,271,927
Deposits ......................... 23,220,148 22,215,625
Long-term debt ................... 3,734,392 1,588,592
Shareholders' equity ............. 2,712,041 2,701,367
Book value per common
share ........................... 15.70 15.22
Year Ended December 31,
--------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------------- --------------- ---------------- ---------------- ---------------
Summary of Operations:
Interest income .................. $ 2,175,212 $ 2,064,706 $ 1,906,996 $ 1,831,934 $ 1,572,370
Interest expense ................. 1,001,406 919,617 853,707 822,232 599,732
Net interest income .............. 1,173,806 1,145,089 1,053,289 1,009,702 972,638
Provision for loan losses ........ 66,000 59,100 64,034 72,090 94,347
Securities gains ................. 6,646 5,637 3,862 8,595 4,954
Net income ....................... 465,819 370,965 283,675 300,412 213,917
Net income per diluted share. 2.63 2.09 1.67 1.87 1.36
Cash dividends declared per
share ........................... 1.17 1.02 0.90 0.79 0.63
Average diluted common
shares outstanding .............. 177,043 177,459 168,788 159,249 155,520
Balance Sheet Data (at period end):
Total assets ..................... $ 33,101,314 $29,964,172 $ 27,767,271 $ 26,647,452 $25,484,073
Securities ....................... 9,999,304 9,267,655 8,320,520 8,026,968 8,445,936
Loans ............................ 21,126,577 18,888,366 17,386,059 16,413,222 15,048,579
Deposits ......................... 23,145,128 22,329,436 21,629,531 21,232,926 19,981,071
Long-term debt ................... 3,572,710 1,246,750 695,793 431,754 552,736
Shareholders' equity ............. 2,722,427 2,612,420 2,290,838 2,130,108 1,813,445
Book value per common
share ........................... 15.67 14.79 13.61 13.04 11.40
</TABLE>
11
<PAGE>
PRIME BANCORP, INC.
Summary of Selected Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Summary of Operations:
Interest income .................. $ 18,374 $ 18,358
Interest expense ................. 8,189 8,561
Net interest income .............. 10,185 9,797
Provision for loan losses ........ 501 570
Securities gains (losses) ........ -- --
Net income ....................... 3,036 2,664
Net income per diluted share. 0.27 0.24
Cash dividends declared per
share ........................... 0.110 0.095
Average diluted common
shares outstanding .............. 11,312 11,206
Balance Sheet Data (at period end):
Total assets ..................... $1,040,863 $1,026,672
Securities ....................... 270,493 287,668
Loans ............................ 664,311 630,511
Deposits ......................... 713,738 717,486
Long-term debt ................... 124,000 139,527
Shareholders' equity ............. 90,617 81,981
Book value per common
share ........................... 8.24 7.50
Year Ended December 31,
-----------------------------------------------------------------------------
1998 1997 1996 1995 1994
----------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Interest income .................. $ 76,263 $ 71,364 $ 65,664 $ 58,979 47,068
Interest expense ................. 35,910 34,232 33,140 30,557 21,280
Net interest income .............. 40,353 37,132 32,524 28,422 25,788
Provision for loan losses ........ 2,027 3,438 3,837 1,129 1,594
Securities gains (losses) ........ (6) 741 288 448 (285)
Net income ....................... 12,143 10,519 4,017 7,469 6,712
Net income per diluted share. 1.08 0.96 0.37 0.70 0.64
Cash dividends declared per
share ........................... 0.395 0.35 0.34 0.31 0.27
Average diluted common
shares outstanding .............. 11,255 10,988 10,823 10,777 10,564
Balance Sheet Data (at period end):
Total assets ..................... $ 1,039,340 $ 953,425 $ 926,071 $ 819,961 $ 739,231
Securities ....................... 307,371 233,716 236,194 244,065 225,273
Loans ............................ 656,914 630,848 616,893 497,034 441,401
Deposits ......................... 702,893 694,444 736,642 644,306 585,066
Long-term debt ................... 124,000 79,550 37,598 37,646 24,694
Shareholders' equity ............. 89,803 79,864 70,516 69,279 57,369
Book value per common
share ........................... 8.18 7.33 6.66 6.58 5.60
</TABLE>
12
<PAGE>
COMPARATIVE AND PRO FORMA PER SHARE FINANCIAL INFORMATION
The per share data below shows the net income, dividends and book value per
share for Summit and Prime on an historical basis and on a pro forma basis. We
derived the pro forma combined data by combining historical consolidated
financial information of Summit and Prime using the purchase method of
accounting for business combinations. We derived the pro forma Prime equivalent
data by multiplying the Summit pro forma data by the exchange ratio of 0.675.
The pro forma information does not reflect cost savings anticipated to be
realized from the merger. 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 evaluations of fair value, at the
effective time of the merger. 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 is not necessarily indicative of
the combined financial position or results of operations of future periods.
Three Months Ended Year Ended
March 31, 1999 December 31, 1998
-------------------- ------------------
Net Income Per Diluted Share
Historical:
Summit .......................... $ 0.68 $ 2.63
Prime ........................... 0.27 1.08
Pro Forma Combined ................. 0.66 2.59
Pro Forma Prime Equivalent ......... 0.45 1.74
Dividends per Share
Historical:
Summit .......................... $ 0.30 $ 1.17
Prime ........................... 0.11 0.40
Pro Forma Combined ................. 0.30 1.17
Pro Forma Prime Equivalent ......... 0.20 0.79
Book Value per Share
Historical:
Summit .......................... $ 15.70 $ 15.67
Prime ........................... 8.24 8.18
Pro Forma Combined ................. 15.85 15.55
Pro Forma Prime Equivalent ......... 10.70 10.50
13
<PAGE>
MARKET PRICE AND DIVIDEND MATTERS
Market Price and Dividend History
Summit common stock, including associated preferred stock purchase rights,
is listed and traded on the New York Stock Exchange and is quoted under the
symbol "SUB". Prime common stock is listed and traded on the Nasdaq National
Market and is quoted under the symbol "PBNK". The following table sets forth,
for the periods indicated, the high and low sale prices as reported in published
financial sources, and quarterly dividends declared per share, of Summit common
stock and Prime common stock.
Where necessary, sale prices shown in the table below have been rounded to
the nearest full cent. All sale prices and dividends shown below for Summit
common stock have been adjusted for the 3-for-2 stock split paid on September
24, 1997. All sale prices and dividends shown below for Prime common stock have
been adjusted for the 2-for-1 stock split paid on June 19, 1998.
<TABLE>
<CAPTION>
Summit Common Prime Common
--------------------------- --------------------------
Sales Prices Sales Prices
--------------------------- --------------------------
High Low Dividends High Low Dividends
------------ ------------ ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter $ 33.33 $ 28.50 $ 0.24 $ 11.88 $ 9.88 $ 0.085
Second Quarter 35.08 28.58 0.24 12.63 10.25 0.085
Third Quarter 45.31 33.58 0.27 13.75 11.94 0.085
Fourth Quarter 53.38 38.38 0.27 18.63 13.75 0.095
1998
First Quarter 53.88 45.88 0.27 19.56 17.38 0.095
Second Quarter 53.50 44.75 0.30 24.75 19.38 0.095
Third Quarter 49.44 32.75 0.30 26.25 15.50 0.095
Fourth Quarter 45.00 30.75 0.30 20.00 15.50 0.110
1999
First Quarter 44.50 37.06 0.30 26.50 16.88 0.110
Second Quarter 44.00 37.38 0.33 28.75 24.56 0.110
(through June 18,
1999)
</TABLE>
On April 14, 1999 Summit's board of directors approved an increase in the
quarterly cash dividend paid on Summit common stock to $0.33 per share. The
increased dividend will be first paid on August 2, 1999 to shareholders of
record as of July 8, 1999.
On February 17, 1999, which was the last full trading day prior to the
public announcement of the signing of the merger agreement, the last sale price
of a share of Summit common stock was $39.38 and the last sale price of a share
of Prime common stock was $18.00. On June 18, 1999, the last sale price of
Summit common stock was $42.69 and the last sale price of Prime common stock was
$28.38.
On the date the merger is completed and on the date you receive a Summit
stock certificate in exchange for your Prime certificate(s), the price of a
share of Summit common stock may differ from those set forth above. Prime
shareholders should obtain current price quotations. In addition, past dividends
paid on Summit common stock and Prime common stock are not necessarily
indicative of future dividends which may be paid. No assurance can be given
concerning dividends to be declared and paid on Summit common stock and Prime
common stock before or after the merger. The timing and amount of future
dividends declared on Summit common stock will be set at the discretion of
Summit's board of directors and will depend on various factors, including,
without limitation, the earnings and financial condition of Summit and its
subsidiaries.
Coordination and Determination of Dividends Under Merger Agreement
In order to ensure that Prime shareholders are paid no more, and no less,
than one regular dividend in the calendar quarter in which the merger is
consummated, Prime has agreed to coordinate with Summit the declaration of any
dividends and the setting of any dividend record or payment dates. Under the
merger
14
<PAGE>
agreement, Prime may declare a quarterly dividend of up to $.11 per share of
Prime common stock in each quarter in which Prime's shareholders are not
otherwise entitled to a Summit dividend on the shares of Summit common stock
received in the merger. If the merger has not been completed by November 30,
1999, Prime may increase the amount of its quarterly dividend to $.13 per share.
Dividend Limitations
Summit's primary source of funds to pay dividends to its shareholders is
provided by dividends from its subsidiary banks. Summit's bank subsidiaries are
restricted by law in the amount of dividends they may pay to Summit. In
addition, some debt agreements restrict the amount of dividends Summit may pay
to its shareholders. At March 31, 1999, Summit's subsidiary banks had
approximately $81.9 million available, under the most restrictive limitations,
for the payment of dividends to Summit.
Similarly, Prime's primary source of funds to pay dividends to its
shareholders is provided by dividends from Prime Bank. Prime Bank is also
restricted by law in the amount of dividends that it may declare and pay to
Prime.
PROPOSAL I -- APPROVAL OF THE MERGER AGREEMENT
THE MERGER
The discussion in this Proxy Statement-Prospectus of the merger and the
description of the principal terms and conditions of the merger agreement and
the merger are subject to and qualified in their entirety by reference to the
merger agreement. A copy of the merger agreement is attached hereto as Appendix
A and is incorporated herein by reference.
General
The merger agreement provides for the acquisition of Prime by Summit,
pursuant to the merger of Prime with and into Summit or a wholly owned
subsidiary of Summit or the merger of a wholly owned subsidiary of Summit with
and into Prime, as determined by Summit. Summit has decided to merge Prime with
and into First Valley Corporation, a Pennsylvania corporation and wholly owned
subsidiary of Summit, with First Valley as the surviving corporation in the
merger.
Upon consummation of the merger, each outstanding share of Prime common
stock other than (1) shares of Prime common stock beneficially owned by Summit
or a subsidiary of Summit, other than shares held in a fiduciary capacity or as
a result of foreclosures or debts previously contracted, if any, (2) shares of
Prime common stock beneficially owned by Prime or a subsidiary of Prime, other
than shares of Prime common stock held in a fiduciary capacity or as a result of
forfeitures or debts previously contracted, if any, and (3) shares of Prime
common stock held in the treasury of Prime, if any, will be converted into and
represent the right to receive whole shares of Summit common stock and cash
instead of fractional shares resulting from the conversion based upon an
exchange ratio of 0.675 of a share of Summit common stock for each share of
Prime common stock, adjusted if necessary in accordance with certain
anti-dilution provisions described below. The cash paid for each fractional
share resulting from the conversion will be an amount equal to the fractional
share multiplied by the closing price of a share of Summit common stock on the
New York Stock Exchange Composite Transactions List on the last trading day
ending prior to the effective time of the merger. The exchange ratio is subject
to appropriate adjustments if, from the date of the merger agreement to the
effective time of the merger, the outstanding shares of Summit common stock are
increased or decreased, changed into or exchanged for a different number or kind
of shares or securities through merger, recapitalization, reclassification,
stock dividend, stock split or reverse stock split or other similar changes.
Summit expects to repurchase in the open market the number of shares of Summit
common stock equal to the approximate number of shares to be issued in the
merger or reissue previously acquired shares held in treasury, depending on
market conditions or other factors.
Closing and Effective Time
The merger agreement provides that, unless Summit designates an earlier
date and gives Prime at least five business days notice of the new date, we will
hold the closing of the merger 45 business days after the last to occur of the
following (the "Scheduled Date"):
15
<PAGE>
o if the transactions contemplated by the merger agreement are being
contested in any legal proceedings, the date that all such proceedings have
been brought to a conclusion favorable, in the judgement of Summit and
Prime, to the consummation of the transactions contemplated by the merger
agreement or any prior date as Summit and Prime shall elect, whether or not
those proceedings have been brought to a conclusion; or
o the date on which the approvals of Prime's shareholders, the Board of
Governors of the Federal Reserve System and the Banking Department of the
Commonwealth of Pennsylvania have been received and any required waiting
periods have expired.
If Prime shareholders approve the merger agreement by the required vote,
all other conditions of the merger are satisfied or waived and the closing is
held on the date set for closing, the merger will become effective at the date
and time specified in the articles of merger required to be filed with the
Secretary of State of the Commonwealth of Pennsylvania following the closing
date. If Prime shareholders approve the merger agreement on the scheduled date
of the special meeting, subject to the satisfaction or waiver of certain other
conditions described herein, we presently expect that the merger will become
effective during the third calendar quarter of 1999. Either party may terminate
the merger agreement if, among other things, the closing fails to occur on or
before January 3, 2000, 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 merger agreement to be performed or observed by it on or before
the closing date. Summit's board of directors and Prime's board of directors
each also has the right to terminate the merger agreement under certain
circumstances. See "THE MERGER -- The Merger Agreement -- Conditions to the
Merger; Termination."
Exchange of Prime Certificates
Prior to the effective time of the merger, Summit will appoint First
Chicago Trust Company of New York, a division of Equiserve or another entity
reasonably satisfactory to Prime as the exchange agent for the merger. 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 Prime common stock as of the effective time of
the merger, Summit will cause the exchange agent to send to each Prime
shareholder a letter of transmittal and instructions for exchanging his or her
Prime common stock certificate(s) for a certificate representing the number of
whole shares of Summit common stock and, if applicable, a check for the
fractional share amount, to which he or she is entitled.
To effect a proper surrender and exchange of Prime stock certificates, you
must surrender to the exchange agent all of your Prime stock certificates along
with properly executed and completed letters of transmittal. Until you have
properly surrendered your Prime stock certificate(s), Summit may, at its option,
refuse to pay to you dividends or other distributions, if any, payable to
holders of Summit common stock. However, upon proper surrender and exchange of
your Prime stock certificate(s), Summit will pay to you the amount, without
interest, of dividends and other distributions, if any, to which you were
entitled but were not paid. No transfer of Prime common stock will be made on
the stock transfer books of Prime at and after the effective time of the merger.
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
any matters as may be referred to it by the exchange agent shall be binding and
conclusive.
Summit will not issue stock certificates or scrip certificates for
fractions of shares of Summit common stock and Prime shareholders who would
otherwise be entitled to receive fractions of shares of Summit common stock will
have none of the rights with respect to any fractions of shares, including,
without limitation, the right to receive dividends, that a holder of a full
share of Summit common stock would possess in respect of a full share. Instead,
these Prime shareholders will receive cash for their fractions of shares.
If a Prime shareholder surrenders more than one Prime stock certificate,
Summit will issue to that Prime shareholder a single Summit stock certificate
representing the total number of whole shares of Summit common stock to which
that owner is entitled pursuant to the merger agreement based on the total
number of shares of Prime common stock represented by all Prime stock
certificates surrendered by that Prime shareholder.
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You should not surrender your Prime stock certificates for exchange until
you receive a letter of transmittal, instructions and other exchange materials
from the exchange agent. However, you are urged to notify American Stock
Transfer and Trust Company, Prime's transfer agent, now at (800) 937-5440 if
your Prime stock certificates are lost, stolen, destroyed or not properly
registered, in order to begin the process of obtaining replacement Prime stock
certificates.
Conversion of Prime Stock Options
Each stock option relating to Prime common stock granted pursuant to the
Prime Bancorp, Inc. 1988 Stock Option Plan and the Prime Bancorp, Inc. Incentive
Stock Option Plan which is outstanding and unexercised at the effective time of
the merger, will be converted automatically at the effective time of the merger
into an option to purchase Summit common stock. Subject to the adjustment in
exercise price per share and number of shares, described below, each converted
option will continue to be governed by the terms of the applicable Prime stock
option plan and the stock option agreement by which it was evidenced, including
terms and provisions governing exercises. In each case:
o the number of shares of Summit common stock subject to the converted option
will be equal to the number of shares of Summit common stock which would
have been issued in the merger if the shares of Prime common stock subject
to that option were issued and outstanding immediately prior to the
effective time, rounded down to the next lower full share; and
o the exercise price per share of Summit common stock subject to the
converted option will be equal to the aggregate exercise price that would
have been payable upon exercise in full of the Prime stock option divided
by the number of shares of Summit common stock which may be acquired upon
exercise of the converted option.
After the effective time of the merger and within 45 days after Summit
receives an accurate and complete list of all holders of Prime stock options,
Summit will issue to each holder of converted options, upon surrender of all
agreements under which Prime stock options were issued to the holder,
appropriate instruments confirming the conversion described above. However,
Summit will have no obligation to issue confirming instruments or any shares of
Summit common stock issuable upon exercise of a converted option until the
shares of Summit common stock issuable upon exercise of the converted options
have been registered with the Securities and Exchange Commission, authorized for
listing on the New York Stock Exchange and authorized for sale by any
appropriate state securities regulators. Summit will use its best efforts to
effect these registrations, listings and authorizations within 45 days after
Prime delivers to Summit the above mentioned option-holder list.
Recommendation of Prime Board
The merger agreement has been unanimously approved by Prime's board of
directors. Prime's board of directors believes that the merger is in the best
interests of Prime shareholders. Prime's board of directors unanimously
recommends that Prime shareholders vote "FOR" the proposal to approve the merger
agreement.
Background
Prime's management and board of directors, over the past several years,
have periodically evaluated the strategic alternatives and long-term goals of
Prime and Prime Bank as the pace of change within the banking industry and
financial services sector has accelerated. The strategic alternatives reviewed
from time-to-time included (1) remaining independent and continuing its strategy
of internal growth and expansion through acquisition, (2) engaging in a
merger-of-equals type transaction, or (3) a strategic combination with a larger
bank holding company.
As was noted in Prime's 1997 Annual Report to shareholders, Prime intended
to continue to expand through internal growth and "through the acquisition of
first-rate community banks." This strategy led to analyses of, and discussions
with, several possible acquisition candidates that were reviewed with Prime's
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board of directors in 1998. Prime's board of directors and management agreed at
a meeting in April 1998 that the scope of review should be expanded to include a
complete review of all strategic alternatives -- acquisitions, merger-of-equals
and merger into larger bank holding companies.
During the summer and early fall of 1998, Prime management actively
evaluated Prime's strategic options in regard to mergers with similarly-sized
and larger institutions, and made contact with certain executives of other bank
holding companies in order to establish or renew relationships as well as to
discuss common goals and operating objectives. These contacts, in one case,
included specific discussions over a period of several months, of the merits of
combining the respective companies. However, the parties were never able to
agree on the general structure of a combination that was acceptable to both
companies. During this period, Prime management also met with a number of
investment banking firms familiar with the banking industry for the purpose of
identifying possible candidates for strategic combinations.
On December 14, 1998, Prime's Chairman, President and Chief Executive
Officer, James J. Lynch, met with John Howell, Chairman of Summit Bank
(Pennsylvania) and John Feeney, Executive Vice President of Summit and exchanged
ideas about market conditions in the Philadelphia region. At this meeting the
parties discussed the possible acquisition of Prime by Summit and the common
goals the two organizations had in regard to the eastern Pennsylvania banking
market.
On January 6, 1999 Mr. Lynch met with Mr. John Collins, Vice Chairman of
Summit and Mr. Feeney. Mr. Joseph Semrod, Summit's Chief Executive Officer and
Robert Cox, President of Summit, also joined the meeting for a period of time.
At this meeting, Summit management expressed continued interest in the
acquisition of Prime and the benefit of adding Prime's management team to
Summit's Pennsylvania organization.
During the period from January 6, 1999 through January 26, Prime had
limited discussions with representatives of two other large bank holding
companies regarding a possible business combination. Prime management had
previously discussed the possibility of a combination with both of these
companies. At the request of each company, Prime provided certain information
after confidentiality agreements were signed. However, these contacts did not
develop into active negotiations.
At the regularly scheduled meeting of Prime's board of directors on January
20, 1999, the Prime board authorized Mr. Lynch to open formal negotiations with
Summit concerning the possible combination of the two companies. On January 21,
Mr. Collins and Mr. Feeney again met with Mr. Lynch in order to continue a
dialogue concerning the benefits of a possible combination and the organization
needed to serve the eastern Pennsylvania market.
In a phone conversation in late January 1999, Mr. Collins suggested that
the companies exchange certain information to determine the feasibility of a
combination of the two companies. On January 26, 1999 Summit signed a
confidentiality agreement and Prime began to provide Summit with certain
detailed business and financial information.
During late January, members of senior management of Summit and Prime
continued to review and evaluate the information provided in order to determine
whether or not to commence negotiations. During this period, Fox-Pitt, Kelton
Inc. ("Fox-Pitt, Kelton") consulted with Prime regarding the potential value of
Prime and of Summit.
On February 3, 1999, representatives of Prime and Fox-Pitt, Kelton met with
representatives of Summit to discuss the potential synergies and benefits to be
realized if Summit were to acquire Prime and combine Summit's Pennsylvania
banking operations with Prime Bank. On this date, Mr. Arthur J. Kania, a member
of Prime's board of directors, also met with Mr. Collins to discuss strategies
for the eastern Pennsylvania banking market and Summit's commitment to the Prime
management team, philosophy and culture. On February 5, Summit made its initial
proposal to acquire Prime. During the period from February 5 through February
10, the parties conducted negotiations regarding the principal terms of the
proposed transaction, including the exchange ratio and an option for Summit to
purchase a significant block of Prime common stock upon the occurrence of
certain events.
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On February 10, Mr. Lynch held a number of telephone conversations
individually with the members of the Executive Committee of Prime's board of
directors. The members of the Executive Committee are Mr. Lynch, Mr. Kania, Mr.
Fox, Mr. Straw, Mr. Betz, Mr. Larenz and Mr. Peraino. The purpose of the
conversations was to review the terms of the proposed transaction with Summit.
Mr. Lynch discussed with the members the financial aspects of the proposal, the
potential benefits of a transaction to Prime and each of its subsidiaries, the
expected conditions to the consummation of a transaction with Summit and the
expected tax and accounting treatment of a merger.
On February 11, Mr. Lynch met with Mr. Cox and Mr. Collins. During this
meeting the exchange ratio was discussed and tentatively set at 0.675 of a share
of Summit common stock for each share of Prime common stock in a tax-free
exchange. During the period from February 13 through February 17, Summit's and
Prime's senior management, along with their respective legal and financial
advisors, continued due diligence and negotiations regarding the proposed
transaction, including negotiating the terms of the definitive merger agreement,
the stock option agreement and related documents. On February 16,
representatives of Fox-Pitt, Kelton met with Summit senior executives in
Princeton, New Jersey to conduct further due diligence regarding Summit. A
senior member of Prime's staff and Prime's legal counsel were also present and
conducted additional due diligence.
On February 17, Prime's management and its legal and financial advisors
presented the terms of the proposed merger, including the exchange ratio, to
Prime's board of directors at a special meeting. Under the terms of the
negotiated transaction, Summit would issue 0.675 of a share of Summit common
stock for each share of Prime common stock outstanding in a tax-free exchange.
Prime's financial advisor, Fox-Pitt, Kelton, rendered its opinion that, as of
such date, the exchange ratio was fair, from a financial point of view, to the
holders of Prime common stock. Prime's board of directors also considered the
advice of Fox-Pitt, Kelton regarding certain other financial terms of the
transaction. Legal counsel made presentations regarding the principal terms of
the proposed transaction, the legal documents and the fiduciary duties of
Prime's board of directors. After these presentations and discussions, including
full consideration of the above-referenced matters, Prime's board of directors
determined that the merger agreement and the transactions contemplated thereby,
including the stock option agreement, were in the best interests of Prime, its
shareholders and other constituencies. Accordingly, Prime's board of directors
approved and adopted the merger agreement and the transactions contemplated
thereby.
Summit's board of directors also approved the merger agreement at a meeting
on February 17, 1999. On the evening of February 17, the parties executed the
merger agreement and the stock option agreement was executed as of February 18,
1999.
Reasons for the Merger
Prime. At its meeting on February 17, 1999, Prime's board of directors
determined that the merger and the terms of the merger agreement are fair, from
a financial point of view, to Prime and Prime's shareholders and are in the best
interests of Prime, Prime's shareholders, employees and customers and the
communities which Prime Bank serves. Accordingly, Prime's board of directors
unanimously approved and adopted the merger agreement and recommends approval of
the merger agreement by Prime's shareholders. In reaching its decision, Prime's
board of directors consulted with Prime's management, legal counsel and
Fox-Pitt, Kelton, Prime's financial advisor for this transaction. Prime's board
of directors considered a number of factors, including the following:
o The investment in capital and people that would be needed to make Prime's
operating capabilities fully competitive with the much larger banks in the
eastern Pennsylvania markets it serves;
o Technology costs, lending limits and the investment necessary to increase
branch penetration that were deemed impediments to improving Prime's
operating returns to attractive levels;
o The cost of acquiring banking franchises in order to expand Prime's market
and improve economies of scale would likely be expensive and dilutive to
existing shareholders;
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o The business operations of both Prime and Summit on an historical and
prospective basis and the prospective results of the combined companies on
a pro forma basis, considering the potential cost savings and revenue
enhancements which might result from the merger;
o Historical trading ranges for both Summit common stock and Prime common
stock;
o The value of the consideration offered by Summit and the increase in
dividend payments to Prime shareholders after the merger;
o The need for each organization to improve its service to the eastern
Pennsylvania markets and Summit's commitment to these markets;
o The current and prospective economic and competitive environment for banks
in the eastern Pennsylvania markets;
o The commitment by Summit to appoint Mr. Lynch as the chief executive
officer of Summit's Pennsylvania operations;
o Summit's desire to utilize Prime's management, experienced commercial and
real estate lending teams and branch network, presenting additional career
opportunities for most of Prime's employees;
o Prime's need to expand product offerings which can be achieved with the
addition of Summit's trust powers, asset management services and other
banking products;
o The premium offered by Summit for Prime in terms of (1) the ratio of price
to last twelve (12) months earnings per share, (2) the ratio of price to
book value, (3) the ratio of price to tangible book value, and (4) market
price;
o Summit's asset base and financial strengths;
o The due diligence conducted by management, legal advisors and Fox-Pitt,
Kelton and the analyses and opinions expressed by Fox-Pitt, Kelton;
o The expectation that the merger will qualify as a tax-free reorganization
for federal income tax purposes;
o The financial and other terms and conditions of the merger agreement and
related documents, including but not limited to the provisions relating to
severance benefits for those employees whose employment may be terminated
in connection with the merger;
o The opportunity for Prime to continue its corporate culture as part of
Summit, enhanced by Summit's commitment to serving middle market companies
and its strong product offerings;
o The terms of the stock option agreement, which might discourage third
parties from seeking to acquire Prime;
o The likelihood of obtaining necessary regulatory approvals;
o Other strategic options which had been investigated and explored by Prime
management and Prime's board of directors since January 1, 1998; and
o The effect of the merger generally on the shareholders, employees and
customers of Prime and the communities which it serves.
The above discussion of the information and factors considered by Prime's
board of directors is not intended to be all-inclusive, but includes all
material factors considered by Prime's board of directors. In reaching its
determination to approve the merger agreement, Prime's board of directors did
not assign any relative or specific weights to the various factors considered
nor did Prime's board of directors specifically characterize any factor as
positive or negative, except as specifically stated above. Individual directors
may have given different weights to the various factors and may have viewed
certain factors more positively or negatively than other directors.
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Summit. Summit's board of directors believes the merger will enhance Summit's
retail franchise and competitive position in key market areas.
Opinion of Prime's Financial Advisor
Fox-Pitt, Kelton has acted as financial advisor to Prime in connection with
the merger. As part of its engagement, Fox-Pitt, Kelton delivered its oral
opinion (subsequently confirmed in writing) to Prime's board of directors at the
February 17, 1999 Prime board of directors meeting that, as of February 16, 1999
and based upon and subject to various considerations set forth in the opinion,
the exchange ratio was fair from a financial point of view to the holders of the
Prime common stock. Fox-Pitt, Kelton has again confirmed its opinion in writing
as of the date of this Proxy Statement-Prospectus. Except as discussed herein,
no limitations were imposed by Prime's board of directors upon Fox-Pitt, Kelton
with respect to investigations made or the procedures followed by Fox-Pitt,
Kelton in rendering its opinion.
The full text of the written opinion by Fox-Pitt, Kelton, dated the date of
this Proxy Statement-Prospectus, which sets forth the assumptions made, matters
considered and qualifications and limitations on the review undertaken, is
attached as Appendix B to this Proxy Statement-Prospectus. Prime shareholders
are urged to read this opinion carefully and in its entirety. Fox-Pitt, Kelton's
opinion is directed only to the fairness of the exchange ratio to the holders of
the Prime common stock from a financial point of view, has been provided to
Prime's board of directors in connection with its evaluation of the merger, does
not address the merits of the underlying decision by Prime to engage in the
merger, and does not constitute a recommendation to any Prime shareholder as to
how the shareholder should vote. The summary of the opinion of Fox-Pitt, Kelton
set forth in this Proxy Statement-Prospectus is qualified in its entirety by
reference to the full text of the opinion.
In arriving at its opinion, Fox-Pitt, Kelton, among other things:
o Reviewed and analyzed certain publicly available financial statements for
Prime and Summit and financial information made available to Fox-Pitt,
Kelton by the management of Prime and Summit;
o Analyzed certain internal financial statements, including financial
projections and other financial and operating data prepared by the
management of Prime;
o Discussed the past, present and future operations, financial condition and
prospects of Prime and Summit with the management of Prime and Summit,
respectively;
o Reviewed the stock price performance and trading activity of Prime common
stock and Summit common stock;
o Compared the financial performance and condition of Prime and Summit with
that of certain other comparable publicly traded companies;
o Reviewed and discussed with the management of Prime and Summit the
strategic objectives of the merger and certain other benefits of the
merger;
o Reviewed the financial terms, to the extent publicly available, of certain
merger and acquisition transactions comparable, in whole or in part, to the
merger;
o Reviewed the merger agreement and the stock option agreement; and
o Performed such other analyses and investigations as Fox-Pitt, Kelton deemed
appropriate.
In rendering its opinion, Fox-Pitt, Kelton assumed and relied upon, without
independent verification, the accuracy and completeness of all of the financial
and other information reviewed by it for the purposes of providing its opinion,
and did not assume any responsibility for independent verification of the
information. Fox-Pitt, Kelton did not assume any responsibility for independent
valuation and appraisal of the assets and liabilities of Prime nor did it assume
any responsibility for reviewing loan files or visiting branch locations. With
respect to financial projections, Fox-Pitt, Kelton assumed that they were
reasonably prepared by the management of Prime on bases reflecting the best
currently available estimates and judgments of the future financial performance
of Prime. Fox-Pitt, Kelton expresses no view as to the reasonableness of the
projections
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provided or the assumptions on which they were based. Fox-Pitt, Kelton also
assumed that the merger would be consummated in accordance with the terms of the
merger agreement without material waiver or modification. Fox-Pitt, Kelton's
opinion dated February 17, 1999, and its opinion dated the date of this Proxy
Statement-Prospectus are based upon economic, market and other conditions as
they existed and could be evaluated on February 16, 1999, and June 22, 1999,
respectively.
The forecasts or projections furnished to Fox-Pitt, Kelton for Prime were
prepared by the management of Prime. As a matter of policy, Prime does not
publicly disclose internal management forecasts, projections or estimates of the
type furnished to Fox-Pitt, Kelton in connection with its analysis of the
merger, and such forecasts, projections and estimates were not prepared with a
view towards public disclosure. These forecasts, projections and estimates were
based on numerous variables and assumptions which are inherently uncertain and
which may not be within the control of management, including, without
limitation, general economic, regulatory and competitive conditions.
Accordingly, actual results could vary materially from those set forth in the
forecasts, projections and estimates provided by the management of Prime.
The following is a summary of the material analyses presented by Fox-Pitt,
Kelton to Prime's board of directors at its meeting held on February 17, 1999.
Comparable Public Company Analyses. Fox-Pitt, Kelton reviewed certain
financial, operating and stock market performance data of 27 publicly traded
banks and bank holding companies headquartered in the Mid-Atlantic region of the
United States, each with assets between $500 million and $1.5 billion as of the
most recent period publicly available (the "Prime Peer Companies"). Fox-Pitt,
Kelton analyzed the relative performance and value of Prime by comparing certain
publicly available financial data of Prime with that of the Prime Peer
Companies, including ratios of loans to deposits and equity to assets, and
multiples of market price to earnings per share as of the last twelve months,
market price to estimated earnings per share in 1998, and market price to book
value. The operating data for Prime was as of or for the twelve month period
ended December 31, 1998 and the operating data for the Prime Peer Companies was
as of or for the last twelve month reporting period for each company. All stock
prices were as of the market close on February 16, 1999. The analyses yielded
the following comparison of the medians for the Prime Peer Companies with Prime,
respectively:
o Loans to deposits ratios of 77.2% and 93.5%;
o Equity to assets ratios of 8.9% and 8.6%;
o Market price to earnings per share multiples for the last twelve months
of 16.1x and 16.7x;
o Market price to estimated (or actual if available) earnings per share in
1998 of 13.3x and 14.8x; and
o Market price to book value multiples of 200% and 220%.
Fox-Pitt, Kelton performed similar analyses with respect to Summit.
Fox-Pitt, Kelton reviewed and compared certain financial, operating and stock
market performance data of Summit with 13 publicly traded banks and bank holding
companies in the United States, each with assets between $20 billion and $40
billion as of the most recent period publicly available (the "Summit Peer
Companies"). Fox-Pitt, Kelton analyzed the relative performance and value of
Summit by comparing certain publicly available financial data of Summit with
that of the Summit Peer Companies, including ratios of loans to deposits and
equity to assets, and multiples of market price to earnings per share as of the
last twelve months, market price to estimated earnings per share in 1998, and
market price to book value. The operating data for Summit was as of or for the
twelve month period ended December 31, 1998 and the operating data for the
Summit Peer Companies was as of or for the last twelve month reporting period
for each company. All stock prices were as of the market close on February 16,
1999. These analyses yielded the following comparison of the medians for the
Summit Peer Companies with Summit, respectively.
o Loans to deposits ratios of 94.7% and 91.3%;
o Equity to assets ratios of 8.2% and 8.2%;
o Market price to earnings per share multiple for the last twelve months of
21.2x and 14.9x;
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o Market price to estimated (or actual if available) earnings per share in
1998 of 14.9x and 13.8x; and
o Market price to book value multiple of 273% and 250%.
Comparable Transactions Analyses. Fox-Pitt, Kelton reviewed the
consideration paid or proposed to be paid in other transactions in 1998 and 1999
involving banks and bank holding companies. Specifically, Fox-Pitt, Kelton
analyzed 17 transactions in which the seller had assets between $500 million and
$1.5 billion and returns on average assets of 1.0% or greater as of the most
recent period publicly available (the "Comparable Transactions"). The ratios
provided below assume a Summit common stock price of $39.19 (the reported price
per share of Summit common stock on February 16, 1999). In reviewing the
Comparable Transactions, Fox-Pitt, Kelton examined the multiples of price paid
relative to previous twelve-month earnings, price-to-book value, the premium
over tangible book value to core deposits and the five trading day market
premium. These analyses yielded the following comparison of the medians for the
Comparable Transactions with the merger, respectively:
o Price to earnings multiple for the last twelve months of 24.4 x and
24.5x;
o Price to book value ratios of 311.8% and 323.4%;
o Price to tangible book value ratios of 326.3% and 337.7%;
o Tangible book value premium to core deposits ratios of 27.6% and 32.3%;
and
o Premium to seller common stock price of 123.8% and 147.0%.
Stock Trading History. Fox-Pitt, Kelton reviewed the performance of the
weekly stock prices and trading volume of the Prime common stock and Summit
common stock during the period from January 2, 1998 through February 16, 1999.
Fox-Pitt, Kelton compared the per share stock price and trading volume of Prime
common stock to the Prime Peer Companies and compared the per share market price
and trading volume of Summit common stock to the Summit Peer Companies.
Pro Forma Merger Analyses. Fox-Pitt, Kelton estimated the impact of the
proposed merger on Summit's projected fully diluted estimated earnings per share
for 2000. Fox-Pitt, Kelton based its analysis on equity analysts' consensus
estimates with respect to projected future earnings of Prime and Summit and
conversations it conducted with the management of Summit and Prime regarding
those estimates. Based on this information, and the terms of the proposed
merger, Fox-Pitt, Kelton concluded that, for Summit, the merger could have an
immaterial dilutive effect (before taking into account various cost savings and
revenue enhancements which could be accomplished upon consolidation of Prime's
and Summit's operations) on estimated fully diluted earnings per share in 2000.
Fox-Pitt, Kelton also calculated that the merger could have an immaterial
accretive effect on Summit's earnings per share in 2000 if pre-tax costs savings
and revenue enhancements estimated by Prime could be achieved. Separately,
Fox-Pitt, Kelton also determined that the merger would have an accretive effect
on Prime's dividend per share of approximately 84%, based on Summit's and
Prime's then current dividend payments.
Dividend Discount Analysis. Fox-Pitt, Kelton performed an analysis to
calculate a range of present values per share of Prime common stock assuming
Prime continued to operate as a stand-alone entity. The range was determined by
adding (i) the present value of the estimated future dividend stream that Prime
could generate over the period beginning December 31, 1998, and ending on
December 31, 2003, and (ii) the present value of the terminal value of Prime
common stock on December 31, 2003. To determine a projected dividend stream,
Fox-Pitt, Kelton assumed (i) an increase in assets of 8% each year from 1999
through 2003; (ii) an increase in net income of 12% each year from 1999 through
2003; and (iii) a dividend payout ratio of 36.50% each year from 1999 through
2003.
The terminal values are based upon a range of price-to-earnings and
price-to-book value multiples consistent with the range of price-to-earnings and
price-to-book value multiples at which similarly-sized banking institutions
located in the United States have been sold in 1998-99 (13x to 15x previous
twelve month earnings per share and 2.0x to 2.2x book value per share) and a
range of discount rates (12% to 16%).
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Applying the foregoing multiples, discount rates and assumptions, Fox-Pitt,
Kelton determined that the fully diluted value per share of Prime common stock
ranged from approximately $13.55 to $18.16 based on the price-to-earnings
multiple assumptions and $14.32 to $18.41 based on the price-to-book value
multiple assumptions.
In arriving at its opinion, Fox-Pitt, Kelton performed a variety of
financial analyses, the material portions of which are summarized above. The
summary set forth above does not purport to be a complete description of the
analyses performed by Fox-Pitt, Kelton or of Fox-Pitt, Kelton's presentation to
Prime's board of directors. The preparation of a fairness opinion is a complex
analytical process involving various determinations as to the most appropriate
and relevant methods of financial analyses and the application of those methods
to the particular circumstances and, therefore, such an opinion is not
necessarily susceptible to partial analysis or summary description. In arriving
at its opinion, Fox-Pitt, Kelton did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly,
Fox-Pitt, Kelton believes that its analyses must be considered as a whole and
that selecting portions of such analyses and the factors considered by it,
without considering all such analyses and factors, could create an incomplete
view of the process underlying its analyses set forth in its opinion. With
regard to the Comparable Public Company Analyses and the Comparable Transactions
Analyses summarized above, Fox-Pitt, Kelton selected comparable public companies
on the basis of various factors; however no public company or transaction
utilized as a comparison is identical to Prime, Summit or the merger.
Accordingly, an analysis of the foregoing is not mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the comparable companies and other
factors that could affect the acquisition or public trading value of the
comparable companies and transactions to which Prime, Summit and the merger are
being compared.
Fox-Pitt, Kelton's opinion does not imply any conclusion as to the likely
trading range for Summit common stock following consummation of the merger, and
do not address Prime's underlying business decision to effect the merger. In
performing its analyses, Fox-Pitt, Kelton made numerous assumptions with respect
to industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Prime and
Summit. Any estimates contained in such analyses are not necessarily indicative
of actual past or future results or values, which may be significantly more or
less than such estimates. Actual values will depend upon several factors,
including changes in interest rates, dividend rates, market conditions, general
economic conditions and other factors that generally influence the price of
securities.
Fox-Pitt, Kelton is an internationally recognized investment banking firm
and was selected by Prime based on Fox-Pitt, Kelton's experience and expertise.
Fox-Pitt, Kelton regularly engages in evaluation of bank and bank holding
company securities in connection with acquisitions, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for various other purposes. In the ordinary course of its
business, Fox-Pitt, Kelton may effect transactions, for its own account or for
the account of customers, and hold at any time a long or short position in
securities of Prime or Summit.
In connection with the preparation of its opinion, Fox-Pitt, Kelton was not
authorized by Prime's board of directors to solicit, nor has Fox-Pitt, Kelton
solicited, third party indications of interest for the acquisition of all or
part of Prime.
Pursuant to a letter agreement dated February 5, 1999, between Prime and
Fox-Pitt, Kelton, Fox-Pitt, Kelton agreed to act as financial advisor to Prime
in connection with the merger. Prime paid Fox-Pitt, Kelton a $50,000 retainer
upon execution of the letter agreement and $450,000 upon the execution of the
merger agreement. Prime has also agreed to pay Fox-Pitt, Kelton, a transaction
fee of 0.75% of the aggregate consideration paid or payable by Summit upon
consummation of the merger which will be determined as of the closing date. The
$50,000 retainer and $450,000 paid upon execution of the merger agreement are to
be credited against the transaction fee of 0.75% of the aggregate consideration.
Prime has agreed to reimburse Fox-Pitt, Kelton for its reasonable out-of-pocket
expenses, including travel, outside legal fees and related charges, and to
indemnify Fox-Pitt, Kelton and related persons against certain liabilities,
including certain liabilities under the federal securities laws, from and
arising out of or based upon Fox-Pitt, Kelton's engagement on its behalf.
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Stock Option Agreement
As an inducement and condition to Summit's willingness to enter into the
merger agreement, Prime entered into the Prime Bancorp, Inc. Stock Option
Agreement dated as of February 18, 1999 with Summit. The following discussion
highlights selected information from the stock option agreement but may not
contain all the information which is important to you. To understand the stock
option agreement fully you should read carefully the entire document which is
included as Appendix C hereto.
Pursuant to the stock option agreement, Prime granted to Summit an
irrevocable option, exercisable under some limited and specifically defined
circumstances, none of which, to the best of Summit's and Prime's knowledge, has
occurred as of the date hereof, to purchase up to 1,087,498 shares of Prime
common stock at a price of $18.00 per share, the last sale price on February 17,
1999, the last full trading day prior to the announcement of the signing of the
merger agreement. In addition, Prime agreed to pay Summit a "break up" fee of $5
million in the event the option becomes exercisable and is exercised in full by
Summit. Summit must comply with applicable law in purchasing any shares of Prime
common stock pursuant to the option.
If Summit is in breach of any material covenant or obligation contained in
the merger agreement and, if the merger agreement has not been terminated prior
thereto, that breach would entitle Prime to terminate the merger agreement,
Summit will not be permitted to exercise the option. Otherwise, Summit, as long
as the option has not yet terminated, may exercise the option, in whole or in
part, at any time and from time to time following the occurrence of a Purchase
Event, as defined below. The option will terminate upon the earliest to occur of
certain events, including:
o the time immediately prior to the effective time of the merger;
o termination of the merger agreement prior to the occurrence of an
Extension Event, as defined below, other than a termination by Summit
resulting from (1) a material breach of the merger agreement by Prime
which has not been cured or is not capable of being cured within the time
allotted, (2) nonsatisfaction of a condition to Summit's obligation to
close the merger, other than failure to obtain shareholder approval of
the merger agreement or failure to obtain the fairness opinion of
Fox-Pitt, Kelton, or (3) the Prime board of directors' failure to
recommend, or withdrawal of or adverse change to its recommendation, to
Prime shareholders to approve the merger agreement; or
o 15 months after the termination of the merger agreement following the
occurrence of an Extension Event, as defined below, or the termination of
the merger agreement by Summit upon (1) a material breach by Prime which
has not been cured or is not capable of being cured within the time
allotted, (2) nonsatisfaction of a condition to Summit's obligation to
close the merger, other than failure to obtain Prime shareholder approval
of the merger agreement or failure to obtain the fairness opinion of
Fox-Pitt, Kelton, or (3) the Prime board of directors' failure to
recommend, or withdrawal of or adverse change to its recommendation, to
Prime shareholders to approve the merger agreement.
The term "Extension Event" shall mean the occurrence of some events without
Summit's prior written consent, including:
o Prime, Prime's board of directors or any of Prime's subsidiaries taking
some actions (each an "Acquisition Transaction"), including recommending
to shareholders the approval of, or entering into an agreement with any
third party to effect, (1) a merger, consolidation or similar transaction
involving Prime or any of its banking subsidiaries, (2) the purchase,
lease, or other acquisition of ten percent or more of the aggregate value
of the assets or deposits of Prime or any of its banking subsidiaries,
(3) the purchase or other acquisition of securities representing ten
percent or more of the voting power of Prime or any of its banking
subsidiaries or (4) any substantially similar transaction, in each case
except as otherwise permitted by the merger agreement;
o any third party's acquiring beneficial ownership, or the right to acquire
beneficial ownership, of ten percent or more of the aggregate voting
power of Prime or any of its banking subsidiaries;
o any third party's making a bona fide proposal to Prime 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 ten percent or more of the aggregate voting power of Prime or
any of its banking subsidiaries;
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o after a proposal by a third party to Prime or its shareholders to engage
in an Acquisition Transaction, Prime breaches, without curing within the
time allotted, any representation or covenant in the merger agreement
which would entitle Summit to terminate the merger agreement;
o any third party's filing an application with any federal or state bank
regulatory authority for approval to engage in an Acquisition
Transaction; or
o any Purchase Event, as defined below.
The term "Purchase Event" shall mean any of the following events or
transactions:
o any person's, other than Summit or a subsidiary of Summit, acquiring
beneficial ownership of 25 percent or more of the aggregate voting power
of Prime or any of its banking subsidiaries, except as otherwise
permitted by the merger agreement;
o failure of Prime's board of directors to call a meeting for consideration
of the merger or cancellation of such a meeting, or if Prime's board of
directors shall have withdrawn or modified in a manner adverse to the
consummation of the merger its recommendation with respect to the merger
agreement, in each case after an Extension Event; or
o the occurrence of an Extension Event described in the first bullet of the
definition of "Extension Event" above, except that the percentage
referred to in clauses (2) and (3) thereof shall be 25 percent.
Upon the occurrence of certain events set forth in the stock option
agreement, at the election of Summit, the option, or shares issued pursuant to
the exercise thereof, must be repurchased by Prime or converted into, or
exchanged for, an option of another corporation or Prime. In addition, the stock
option agreement grants certain registration rights to Summit with respect to
the shares represented by the option. The terms of these repurchase, substitute
option and registration rights are set forth in the stock option agreement.
In the event that the option becomes exercisable and Summit exercises the
option in full, Prime is required to pay Summit $5 million which may be applied
as an offset to Summit's obligation to pay the aggregate purchase price for the
shares of Prime common stock underlying the option. The stock option agreement
and option are intended to increase the likelihood that the merger will be
consummated according to the terms set forth in the merger agreement and may be
expected to discourage offers by third parties to acquire Prime prior to the
merger. To the knowledge of Summit and Prime, no event giving rise to the right
to exercise the option has occurred as of the date of this Proxy
Statement-Prospectus.
Regulatory Approvals
The merger 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 Prime's voting stock is subject to the same
requirement for approval. Summit filed an application with respect to the merger
with the Federal Reserve Board on April 9, 1999 and the merger was approved on
May 17, 1999.
The BHC Act provides that a transaction approved by the Federal Reserve
Board may not be consummated for 30 days after the approval is received or, if
certain conditions are met, a shorter period, but,
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<PAGE>
in the absence of an emergency, not less than 15 calendar days after the date of
approval. During this period, the U.S. Department of Justice may commence legal
action challenging the transaction under the antitrust laws. If, however, the
U.S. Department of Justice 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" under the Community
Reinvestment Act.
The acquisition of Prime by Summit is also subject to the approval by the
Pennsylvania Department of Banking ("PDOB"). The factors that the PDOB considers
in determining whether to grant its approval include the competitive effects of
the merger, principles of safe and sound banking, the public interest and the
needs of the communities served by Prime and Summit. Summit filed an application
for approval of the acquisition of Prime by Summit with the PDOB on April 9,
1999. The merger of Prime Bank into Summit Bank (Pennsylvania) is also subject
to receipt of approval by the PDOB, which Summit requested in an application
filed on April 9, 1999. The approvals of the Pennsylvania Department of Banking
were given on June 15, 1999.
Prime shareholders should be aware that regulatory approvals of the merger
may be based upon different considerations than those that would be important to
shareholders in determining whether or not to approve the merger. Any regulatory
approvals should in no event be construed by a Prime shareholder as a
recommendation by any regulatory agency with respect to the merger.
Interests of Certain Persons in the Merger
Directors and executive officers of Prime have certain interests in the
merger that are different from and in addition to their interests as Prime
shareholders. These interests are described in more detail below.
Indemnification
In the merger 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 Prime or any subsidiary of Prime on or before the
effective time of the merger with respect to liabilities and claims, and related
expenses including fees and disbursements of counsel, made against them
resulting from their service as directors or officers prior to the effective
time of the merger. Summit further agreed that this indemnification and
advancement of expenses would be made in accordance with and subject to the
requirements and other provisions of Summit's Restated Certificate of
Incorporation and By-Laws and Prime's Articles of Incorporation and Bylaws or
the applicable subsidiary of Prime, as in effect on the date the parties signed
the merger agreement and to the extent permitted by law.
In the merger agreement, Summit also agreed that, subject to Prime's
covenant to take all action necessary to preserve its rights under its
directors' and officers' liability insurance policies with respect to matters
occurring prior to the effective time of the merger, for a period of six years
after the effective time of the merger, Summit would use its best efforts to
provide to the persons who served as directors or officers of Prime or any
subsidiary of Prime on or before the effective time of the merger insurance
against liabilities and claims, and related expenses, made against them
resulting from their service prior to the effective time of the merger. This
insurance would be comparable in coverage to that provided by Summit to its own
directors and officers, but, if not available on commercially reasonable terms,
the coverage would be substantially similar in all material respects to the
insurance coverage provided to these individuals in these capacities on the date
of the merger agreement. However, in no event is Summit required to expend more
than 200% of the amount expended by Prime prior to the execution of the merger
agreement for one year of coverage. 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. Prime must renew any
existing insurance or purchase any "discovery period" insurance provided for
under existing insurance at Summit's request.
Board of Directors and Officers of Summit and Summit Bank (Pennsylvania)
The members of the Summit board of directors and the executive officers of
Summit immediately prior to the effective time of the merger will continue to be
the members of the Summit board of directors and executive officers of Summit at
the effective time of the merger.
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<PAGE>
Upon the completion of the merger, James J. Lynch will be appointed
Chairman of the Board and Chief Executive Officer of Summit Bank (Pennsylvania)
and Senior Executive Vice President of Summit.
Summit expects that certain members of Prime's board of directors will
become members of Summit Bank (Pennsylvania)'s board of directors, although no
decisions in this regard have been made.
Employment Agreements
Prime and Prime Bank have entered into employment agreements with James J.
Lynch and William H. Bromley which provide for payments to each executive if he
terminates his employment for "good reason", as defined in the agreements, in
connection with a "change in control", as defined in the agreements. Mr. Lynch's
agreement provides that if he terminates his employment for "good reason" in
connection with a "change in control", he is entitled to receive a severance
payment equal to 2.99 times his average aggregate annual compensation during the
preceding five calendar years. Under Mr. Bromley's agreement, if he terminates
his employment for "good reason" in connection with a "change in control", he is
entitled to a severance payment equal to two times his average aggregate annual
compensation during the preceding three years. In both cases, the severance
payments will be reduced to the extent necessary to ensure that no portion of
the severance payments are subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended.
Prime and Prime Bank have also entered into a Change in Control Agreement
with James E. Kelly which provides for payments to Mr. Kelly after a "change in
control" of Prime if his employment is terminated or he terminates his
employment with Prime for "good reason". Upon such termination of employment,
Mr. Kelly is entitled to receive severance payments equal to the sum of (1) two
times his highest annual base salary during the preceding five years and (2) a
prorated portion of the cash bonus received by Mr. Kelly for the prior fiscal
year.
The merger will constitute a "change in control" under each of the
foregoing agreements. If Messrs. Lynch, Bromley or Kelly were to become
entitled to receive payments under their agreements with Prime, the estimated
amounts of payments, based upon their compensation through December 31, 1998,
would be $1,283,458 to Mr. Lynch, $520,000 to Mr. Bromley, and $344,875 to Mr.
Kelly. If Mr. Bromley or Mr. Kelly were to leave for "good reason" after the
merger, they would be entitled to receive continued medical insurance benefits
for up to two years subject to the co-pay requirements which Summit applies to
its executives at a similar level.
Upon the effectiveness of the merger, James J. Lynch will become Chairman
of the Board and Chief Executive Officer of Summit Bank (Pennsylvania) and
Senior Executive Vice President of Summit, and will receive an annual base
salary of not less than $345,000 and an annual cash bonus of not less than
$120,750. Summit has also agreed to include Mr. Lynch as a participant in the
Summit Bancorp. Executive Severance Plan (the "Severance Plan") and enter into a
termination agreement (the "Termination Agreement") with Mr. Lynch.
Mr. Lynch's participation in the Severance Plan and the Termination
Agreement will supersede and extinguish his employment agreement and severance
arrangements with Prime, with the exception of the provisions relating to stock
options and, therefore, he will not be entitled to receive the payments
described under his employment agreement with Prime described above as a result
of the merger. Upon receiving a payment under the Severance Plan or his
Termination Agreement, Mr. Lynch would be required to agree not to accept
employment with another bank, savings and loan association or credit union, or
holding company thereof, at a principal place of employment within 25 miles of
Summit or a Summit subsidiary bank office then in existence.
The Severance Plan provides that, if a participant's employment is
terminated by Summit or one of its subsidiaries, other than for "Cause", as
defined in the Severance Plan, death, disability or retirement, or by the
participant for "Good Reason", as defined in the Severance Plan, within 6 months
of any event alleged to constitute Good Reason, the participant, upon signing a
release, covenant not to sue and non-disclosure and non-solicitation agreement
in the form set forth in the Severance Plan, is entitled to receive:
o a lump sum cash payment equal to two times the highest annual rate of
base salary in effect for the participant during the twelve-month period
preceding the notice of termination;
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o a lump sum cash payment equal to two times the highest annual cash
incentive bonus earned by the participant during the three fiscal years
preceding the date of termination; and
o two years of employee benefit plans participation and outplacement
services and one year of perquisites or the cash equivalent.
All payments and benefits, other than outplacement services and continued
perquisites, are reduced pro rata within two years of normal retirement;
The Severance Plan generally defines "Good Reason" to include:
o the assignment of duties which are inconsistent with the participant's
then title and salary grade or a significant reduction in the
participant's authority and responsibility as a senior executive;
o the removal of the participant from, or any failure to reappoint or
reelect a participant to, the title of Executive Vice President or above;
o a reduction in the participant's salary or the failure to grant increases
in the participant's salary comparable to those granted executives of
Summit or its subsidiaries of comparable title, salary grade and
performance ratings;
o locating the participant's office anywhere other than an executive office
of Summit or a subsidiary located in New Jersey or Pennsylvania within
sixty miles of corporate headquarters;
o the failure to provide the participant with welfare benefits, perquisites
and participation in all cash and stock bonus and incentive plans of
Summit on substantially the same terms as provided to executives of
comparable title and salary grade; or
o notice from Summit or a subsidiary that the participant's participation
in the Severance Plan or the participant's Termination Agreement,
described below, would not be renewed.
Mr. Lynch's participation letter under the Severance Plan will provide that
"Good Reason" includes a termination of employment by Mr. Lynch for any reason
other than disability or retirement during the nineteenth full calendar month
following the effective time of the merger. In addition, Mr. Lynch's
participation letter will further provide that if he is entitled to receive
benefits under the Severance Plan during the period from the effective time of
the merger through the end of the nineteenth full calendar month thereafter, Mr.
Lynch shall be entitled to receive a lump sum cash amount equal to 2.99 times
his base salary and bonus, subject to reduction if necessary to avoid payment of
excise taxes, rather than the two times base salary and bonus provided for under
the Severance Plan. After the nineteenth full calendar month following the
effective time of the merger, the foregoing special provisions provided for Mr.
Lynch's participation letter shall expire and he will be entitled to the rights
and benefits provided generally under the Severance Plan.
The Termination Agreement between Summit and Mr. Lynch will provide that if
any person or entity takes certain steps designed to effect a "Change in
Control", as defined in the Termination Agreement, of Summit, Mr. Lynch will not
voluntarily leave the employ of Summit, except during the nineteenth month
window period described in the paragraph above or upon his normal retirement
date, and will continue to perform his regular duties and services for Summit
until the person or entity has abandoned or terminated efforts to effect a
Change in Control or until a Change in Control has occurred. The Termination
Agreement will provide that if, within three years after a Change in Control of
Summit, Mr. Lynch's employment with Summit or Summit Bank is terminated by
Summit, other than for Cause, as defined in the Termination Agreement, his death
occurring more than 13 months after the Change in Control, disability or
retirement, or by Mr. Lynch for "Good Reason", as defined in the Termination
Agreement, Mr. Lynch will be entitled to receive:
o a lump sum cash payment equal to the difference between (1) the sum of
three times his base salary at the highest rate in effect during the
twelve-month period preceding the notice of termination, plus three times
the highest annual cash bonus earned by him during the three preceding
fiscal years, and (2) the aggregate lump sum cash amounts relating to
base salary and bonus payable to him under the Severance Plan in the
event of the termination of his employment; and
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<PAGE>
o upon retirement an amount of total retirement benefits equal to that
which he would have received from defined benefit retirement plans of
Summit, if his employment had continued for ten years beyond the
termination date or until his normal retirement date, if earlier.
Mr. Lynch will also be entitled to remain an active participant in most
employee benefit plans of Summit for a period of 36 months after the date of
termination. The Termination Agreement will further provide that if any payment
or benefit received or to be received by Mr. Lynch pursuant to the Termination
Agreement or any other plan, arrangement or agreement of Summit or Summit Bank
would, in the opinion of independent tax counsel, be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code, Summit shall pay to him an
amount that would restore him to the same after tax position as if the excise
tax had not been imposed.
To come within the terms of the Termination Agreement, the Change in
Control of Summit must occur, or efforts designed to lead to a Change in Control
of Summit must commence, before the earlier of (1) Mr. Lynch's death, disability
or retirement or (2) October 15, 2002. The Termination Agreement will provide
for automatic renewal on October 15, 2002 and each annual anniversary thereafter
unless Mr. Lynch is no longer employed by Summit or a subsidiary of Summit on
such date, Mr. Lynch has reached his normal retirement date or Summit has given
twelve months notice that it will not extend the Termination Agreement.
A "Change in Control" of Summit will be defined under the Termination
Agreement to include, generally:
o A change in control required to be reported under the federal securities
laws;
o The acquisition by any person of beneficial ownership of 25% or more of
the combined voting power of Summit's outstanding securities then
entitled to vote for the election of directors;
o A change in the composition of majority membership of the Summit board of
directors over any two-year period;
o A change in ownership of Summit such that the Summit common stock becomes
subject to delisting from the New York Stock Exchange;
o The approval of the Summit board of directors of the sale of all or
substantially all of the assets of Summit; or
o The approval by the Summit board of directors of any merger,
consolidation, issuance of securities or purchase of assets, the result
of which would be the occurrence of any event described in the first four
bullets above or that the shareholders of Summit own less than 65% of the
combined voting power of the resulting entity.
The definition of "Good Reason", under the Termination Agreement, will be
substantially similar to the definition of Good Reason in the Severance Plan,
but will also include a termination of employment by Mr. Lynch for any reason
other than disability or normal retirement within 30 days of the first
anniversary of an event constituting a Change in Control.
Prime Stock Option Plans
As described under "THE MERGER -- Conversion of Prime Stock Options," Prime
stock options outstanding at the effective time of the merger, whether or not
then currently exercisable, will be automatically converted into Summit stock
options, subject to the terms of the Prime option plan and grant agreement
governing the Prime stock options, including terms and provisions governing
exercises. The number of shares covered by a converted option will be set by
multiplying the number of shares covered by the Prime option by the exchange
ratio. The exercise price per share of converted option will be equal to the
aggregate exercise price that would have been payable upon exercise in full of
the Prime option divided by the number of shares of Summit that may be acquired
upon exercise of the converted option.
The following table sets forth certain information relating to Prime
options held by James J. Lynch, William H. Bromley and James E. Kelly, and all
directors and executive officers of Prime as a group as follows:
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o the number of Prime options held by such persons;
o the number of Prime options held by such persons that are currently
exercisable;
o the number of unexercisable Prime options held by such persons that will
be converted into Summit options at the effective time of the merger;
o the weighted average exercise price for currently exercisable Prime
options;
o the weighted average exercise price for unexercisable Prime options that
will be converted into Summit options at the effective time of the
merger; and
o the aggregate net unrealized value of all Prime options based on the
number of shares of Summit common stock covered by, and the exercise
price of, the Summit options into which the Prime options are convertible
and using the last sale price of a share of Summit common stock on May
21, 1999 of $42.25 as the market price for purposes of the calculation.
<TABLE>
<CAPTION>
Weighted Weighted
Average Average Exercise Aggregate
Options Exercise Price Price of Options Net
Options Not of Options Not Unrealized
Options Currently Currently Currently Currently Value of
Held Exercisable Exercisable Exercisable Exercisable Options
--------- ------------- ------------- ---------------- ------------------ -------------
<S> <C> <C> <C> <C> <C> <C>
James J. Lynch(1) ................. 220,000 176,000 44,000 $ 8.64 $ 8.64 $4,374,425
William H. Bromley ................ 66,000 66,000 -- 10.25 -- 1,205,738
James E. Kelly .................... 35,000 35,000 -- 16.48 -- 421,281
Executive Officers and Directors as
a Group (5 persons total) ......... 346,736 302,736 44,000 9.90 8.64 $6,510,362
</TABLE>
- ------------
(1) Mr. Lynch's employment agreement provided that any options which were not
currently exercisable would become so upon a "change in control" of Prime.
His employment agreement has been amended to provide that the merger with
Summit will not cause his remaining options to become exercisable
immediately. However, the remaining options will become exercisable upon a
subsequent "change in control" of Summit or upon Mr. Lynch's termination of
employment for any reason.
Stay Bonuses
The merger agreement permits Prime, after the closing date of the merger,
to pay "stay bonuses" of up to $325,000 in the aggregate to employees of Prime
designated by Prime's board of directors, after consultation with Summit, who
continue to be employees of Prime on such payment date and who execute a release
of claims against Summit and its affiliates.
Incentive Plan Payments
The merger agreement authorizes Prime to pay Prime employees up to $720,000
in incentive compensation and bonuses under the Prime Key Executive Incentive
Plan for services rendered in 1999, provided that required performance goals are
satisfied.
Severance Pay Provision
The merger agreement provides that, under some circumstances, an employee
of Prime or a subsidiary of Prime at the effective time of the merger who is not
a party to an employment, change of control, termination, severance or similar
agreement and whose employment is terminated by Summit, other than for cause,
within twelve months of the effective time of the merger may be entitled to
receive a severance payment upon signing a release. This severance payment would
be equal to the greater of (1) eight times the employee's gross weekly salary or
(2) the product of such employee's gross weekly salary multiplied by two times
the number of full years of service completed by such employee prior to the
termination of employment.
Other Interests
Mr. Fred Blume, a director of Prime, is a partner in the law firm of Blank
Rome Comisky & McCauley LLP which has performed legal services for Prime in
connection with the merger. Blank Rome Comisky & McCauley LLP also performs
legal services for subsidiaries of Summit, from time to time.
Mr. Arthur J. Kania, a director of Prime, owns 5,000 shares of Summit
common stock and Mr. William J. Cunningham, also a director of Prime, owns
1,000 shares of Summit common stock. Mr. James E. Kelley, Executive Vice
President and Chief Financial Officer of Prime, owns 451 shares of Summit
common stock.
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The Merger Agreement
The following discussion highlights selected information from the merger
agreement but may not contain all of the information that is important to you.
To understand the merger agreement fully you should read carefully the entire
document which is included as Appendix A hereto.
Amendment
Prime and Summit may jointly amend the merger agreement at any time.
However, after the special meeting, no amendment may reduce the amount, or
change the form, of consideration to be received by Prime shareholders unless
the modification is submitted to a vote of Prime shareholders.
Prime Covenants
Pursuant to the merger agreement, Prime has agreed, among other things,
that, until the effective time of the merger or termination of the merger
agreement, Prime will advise Summit of any material adverse change in Prime's
business and of certain other circumstances, and the business of Prime and its
subsidiaries will be carried on substantially in the same manner as prior to the
execution of the merger agreement. Furthermore, until the effective time of the
merger or termination of the merger agreement, without the prior written consent
of Summit, Prime will not declare or pay any dividend other than a quarterly
cash dividend at a rate up to $.11 per share, which amount may be increased to
$.13 per quarter if the effective time of the merger has not occurred by
November 30, 1999, and will refrain from taking some other actions, including
certain actions relating to changes in its capital stock, the incurrence of
liabilities, the making of certain expenditures, the relinquishment of certain
rights, the amendment of its Articles of Incorporation and Bylaws and the
issuance of capital stock.
In order to ensure that Prime shareholders would be paid no more than one
dividend in each calendar quarter between the date of the merger agreement and
the effective time of the merger, Prime agreed in the merger agreement to
coordinate with Summit the declaration of any dividends and the setting of any
dividend record or payment dates.
Prime also has agreed that, until termination of the merger agreement or
the effective time of the merger, neither Prime nor any of its subsidiaries nor
any of the officers or directors of Prime or its subsidiaries shall, and Prime
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 Prime 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. The merger agreement defines "Acquisition
Proposal" as any offer, including an exchange offer or tender offer, or proposal
concerning a merger, consolidation, business combination or takeover transaction
involving Prime or any of its subsidiaries, or the acquisition of any assets
(other than those permitted under the merger agreement) or any securities of
Prime or any of its subsidiaries. Further, Prime agreed to immediately cease any
activities, discussions, or negotiations with respect to the foregoing. In
addition, Prime has agreed to notify Summit, by telephone call to its chief
executive officer or general counsel, promptly upon receipt of any inquiry with
respect to an 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 Prime or any of its subsidiaries or assets by another
party and to deliver as soon as possible by facsimile transmission to that
Summit officer a copy of any document relating thereto promptly after any such
document is received by Prime.
The merger agreement obligates Prime to disclose to Summit information
regarding environmental conditions affecting (1) any property now or previously
owned, occupied, leased or held or managed in a representative or fiduciary
capacity, (2) any property or facility of which Prime has at any time
participated in the management or may be deemed to be or to have been an owner
or operator, and (3) any real property in which Prime holds a security interest
in an amount greater than $50,000. The merger agreement provides Summit with
certain environmental investigative rights prior to the effective time of the
merger with respect to real property owned, leased or operated by Prime on or
after the date of the merger agreement.
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Summit Covenants
Pursuant to the merger agreement, Summit has agreed, among other things,
that, until the effective time of the merger or termination of the merger
agreement, Summit will advise Prime of any material adverse change in Summit's
business and certain other circumstances.
Conditions to the Merger; Termination
The obligations of both parties to consummate the merger are subject to the
satisfaction of certain conditions including:
o Approval of the merger agreement by the requisite vote of the
shareholders of Prime;
o Receipt of all required regulatory approvals by Summit and Prime 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 merger, and the expiration of any
waiting periods required by such approvals;
o Continued effectiveness of the registration statement on Form S-4 filed
by Summit with the Securities and Exchange Commission for the purpose of
registering the shares of Summit common stock that Summit will issue in
the merger;
o The receipt by Summit and Prime of an opinion from Thompson Coburn as to
certain federal income tax consequences of the merger;
o The New York Stock Exchange's indication that the shares of Summit common
stock to be issued in the merger will be listed on the New York Stock
Exchange, subject to official notice of issuance;
o The absence of material litigation;
o The absence of regulatory agreements relating to the parties;
o The delivery of officers' certificates by Prime and Summit; and
o Other customary conditions described in the merger agreement.
Any of these conditions may be waived by the party for whose benefit the
condition was included. However, the merger will not be consummated without the
receipt of the requisite shareholder and regulatory approvals.
Either party may terminate the merger agreement if:
o Prime shareholders, in a vote on the merger agreement at the special
meeting, fail to approve the merger agreement by the requisite vote;
o 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;
o On the designated closing date of the merger all the conditions precedent
to one party's obligations to close are not met due to the other party's
material breach; or
o The merger closing is not consummated on or before the later of (1)
January 3, 2000; provided, however, that a party does not have the
termination right described by this clause if the failure to close by
January 3, 2000 is due to its material breach or its failure to fulfill a
condition to the completion of the merger, or, (2) the Scheduled Date, if
the last required event for setting the Scheduled Date has occurred on or
before January 3, 2000.
In addition, the parties may terminate the merger agreement at any time by
mutual agreement. Summit's board of directors may terminate the merger agreement
if Prime's board of directors modifies its
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recommendation of the merger agreement or withdraws its recommendation, or if
the cost of taking necessary remedial and other corrective actions and measures
associated with certain environmental matters exceeds $3,000,000 in the
aggregate, or that cost is unascertainable but cannot be reasonably estimated to
be less than $3,000,000.
The merger agreement provides that Prime's board of directors may terminate
the merger agreement if both of the following circumstances exist:
o The average of the closing prices of Summit common stock on the New York
Stock Exchange Composite Transactions List for the ten consecutive full
trading days ending on the Determination Date, as defined below, (the
"Summit Price") is less than $32.68125, and
o The amount obtained by dividing the Summit Price by $39.375 is more than
17% less than the amount obtained by dividing the Determination Date
Index Price by the Starting Date Index Price, as such terms are defined
below.
In order to terminate the merger agreement pursuant to this provision,
Prime must give notice to Summit by 11:59 P.M. on the third business day
following the Determination Date. For purposes of this Prime right of
termination, the terms referenced above are defined as follows:
"Determination Date" means the later of the dates that the merger is approved
by the Federal Reserve Board or the PDOB.
"Index Group" means 16 bank holding companies designated in the merger
agreement, the common stocks of all of which must be publicly traded and as
to which there has not been made, since February 17, 1999 and prior to the
Determination Date, a public announcement of a proposal for such company to
be acquired or for such company to acquire another company or companies in
transactions with a value exceeding 25% of the acquiror's market
capitalization. Any such company or companies which does not satisfy any of
the foregoing requirements shall be removed from the Index Group. Appropriate
adjustments shall be made for stock splits, stock dividends or similar
transactions occurring between February 17, 1999 and the Determination Date.
"Determination Date Index Price" means the average of the closing prices of
the common stock of the companies comprising the Index Group on the New York
Stock Exchange Composite Transactions List for the 10 consecutive full
trading days ending on the Determination Date.
"Starting Date Index Price" means the average of the closing prices of the
common stock of the companies comprising the Index Group on the New York
Stock Exchange Composite Transactions List on February 17, 1999.
The "Determination Date" was June 16, 1999 and the Prime board of directors
did not become entitled to exercise this termination right.
Expenses
If (1) either party terminates the merger 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 (2) Summit terminates
because Prime's board of directors modifies its recommendation of the merger
agreement or withdraws its recommendation, or because of the environmental
contingency referred to above, then the terminating party shall be reimbursed by
the defaulting party for the terminating party's out-of-pocket expenses
reasonably incurred in connection with the merger agreement, including counsel
fees, printing fees and filing fees, but excluding any brokers', finders' or
investment bankers' fees. If the merger 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 merger 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 Securities and Exchange
Commission, the Federal Reserve Board, the Pennsylvania Department of Banking
and the New York Stock Exchange. Each party has agreed to indemnify the other
for claims for brokerage commissions and finders' fees.
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Dissenters Rights
Any Prime shareholder who objects to the merger has the right to be paid
the fair value of all shares of Prime common stock owned by the shareholder in
accordance with the provisions of Section 1930(a) and Subchapter 15D -- Sections
1571 through 1580 -- of the PBCL. A copy of these sections of the PBCL is set
forth in Appendix D to this Proxy Statement-Prospectus and you are encouraged to
read them carefully. Prime will not give any other notice of the specific
requirements of Subchapter 15D other than the notices described in this Proxy
Statement-Prospectus and as required by the PBCL. The discussion in this section
is not a complete statement of Pennsylvania law relating to dissenters rights.
This discussion and Appendix D should be reviewed carefully by any Prime
shareholder who wishes to exercise dissenters rights, or who wishes to reserve
the right to do so. Failure to comply with the procedures set forth in the
appropriate provisions of Subchapter 15D will result in the loss of dissenters
rights.
If you own shares in "street name" or in a brokerage account and you want
to exercise dissenters rights, you must have the record holder of your shares
take action to exercise dissenters rights on your behalf or consent in writing
to your exercise of dissenters rights. A holder of record of Prime common stock
may assert dissenters rights as to fewer than all of the shares of Prime common
stock registered in its name only if it dissents with respect to all the Prime
common stock beneficially owned by any one person and discloses the name and
address of the person or persons on whose behalf the record holder dissents. In
that event, the record holder's rights shall be determined as if the shares as
to which it has dissented and its other shares were registered in different
names. A beneficial owner of Prime common stock, who is not also the record
holder of shares, may assert dissenters rights with respect to shares held on
the beneficial owner's behalf, and shall be treated as a dissenting shareholder
under the terms of Subchapter 15D, if the beneficial owner submits to Prime not
later than the time of filing the beneficial owner's Notice of Intention to
Dissent, as described below, a written consent of the record holder.
If you intend to exercise dissenters rights, you must dissent with respect
to all of the shares of Prime common stock that you beneficially own, whether or
not any shares are registered in your name. You may not dissent with respect to
some but not all shares that you own.
Holders of Prime common stock who follow the procedures of Subchapter 15D
will be entitled to receive from Prime the fair value of their Prime common
stock calculated as of the time immediately before the effective time of the
merger. This valuation will take into account all relevant factors, excluding
any appreciation or depreciation in anticipation of the completion of the merger
agreement. If you want to exercise dissenters rights you must comply strictly
with the procedures described in this section and in Appendix D to preserve your
rights.
If you wish to exercise dissenters rights, you must file a written notice
of intention to dissent and demand the fair value of your Prime common stock if
the merger is completed.
o You must file the Notice of Intention to Dissent with the Corporate
Secretary of Prime prior to the vote by shareholders on the merger
agreement;
o You may not make any change in your beneficial ownership of Prime common
stock from the date you file the Notice of Intention to Dissent until the
effective time of the merger; and
o You must refrain from voting your Prime common stock FOR the adoption of
the merger agreement.
Neither a proxy nor a vote AGAINST the merger agreement will constitute the
giving of the Notice of Intention to Dissent. A proxy or a vote FOR the merger
agreement will cause you to lose your dissenters rights under Subchapter 15D.
If the merger agreement is approved by the required vote of Prime's
shareholders, Prime will mail a Notice of Approval to all dissenters who filed a
Notice of Intention to Dissent prior to the vote on the merger agreement and who
refrained from voting for the approval of the merger agreement. Prime expects to
mail the Notice of Approval promptly after the effective time of the merger. The
Notice of Approval will state where and the deadline by which a dissenting
shareholder must send a demand for payment and certificates for
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Prime common stock in order to obtain payment. Prime will supply a copy of
Subchapter 15D and a form for demanding payment which will include a request for
certification of the date on which the record holder, or the person on whose
behalf the record holder dissents, acquired beneficial ownership of Prime common
stock. Dissenters must ensure that the demand form and their certificates for
Prime common stock are received by Prime on or before the deadline. All mailings
to Prime are at the risk of the dissenting shareholder. Accordingly, if you
desire to dissent, Prime recommends that the Notice of Intention to Dissent, the
demand form and your stock certificates be sent by certified mail.
Any shareholder who fails to file a Notice of Intention to Dissent, fails
to complete and return the demand form, or fails to deposit stock certificates
where directed, each within the time periods prescribed, will lose his or her
dissenters rights under Subchapter 15D. A dissenter will retain all rights of a
shareholder, or beneficial owner, as the case may be, of Prime until those
rights are modified by completion of the merger.
Once Prime receives a completed demand form in a timely fashion, it must
either
o send to dissenters who have returned the Notice of Intention to Dissent
and the completed demand form and have deposited their certificates, each
in a timely fashion, payment in the amount Prime estimates to be the fair
value for their shares, or
o give written notice that no such payment will be made.
Prime will determine whether to make payment or to defer payment for the
shares until completion of the necessary appraisal proceedings, after giving due
consideration to the number of shares, if any, with respect to which
shareholders have dissented and any objections that may be raised as to the
standing of the dissenting shareholders. The payment or notice will be
accompanied by:
o The closing balance sheet and statement of income of Prime for the fiscal
year ended December 31, 1998, together with the latest available interim
financial statements;
o A statement of Prime's estimate of the fair value of the Prime common
stock; and
o A notice of the right of the dissenter to demand payment or supplemental
payment, as the case may be, accompanied by a copy of Subchapter 15D.
If Prime does not pay the amount of its estimate of the fair value of the
Prime common stock, it will return any certificates that have been deposited,
and may make a notation on the certificates that a demand for payment in
accordance with Subchapter 15D has been made. If shares carrying this notation
are subsequently transferred, each new certificate will bear a similar notation,
together with the name of the original dissenting shareholder. A transferee of
these shares will not acquire any rights in Prime other than those which the
original dissenter had after making demand for payment of their fair value.
If the dissenter believes that the amount paid or stated is less than the
fair value of the shares he or she owns, the dissenter may send to the Corporate
Secretary of Prime the dissenting shareholder's own estimate of the fair value
of the shares. This notice will be deemed a demand for payment of the amount of
the deficiency. If a dissenter does not file his own estimate within 30 days
after the mailing by Prime of its payment or notice, the dissenter will not be
entitled to any more than the amount stated in the notice or paid to the
dissenter by Prime.
If within 60 days after the effective time of the merger or after the
timely receipt by Prime of any demand form or shareholders estimate, whichever
is latest, any demands for payment remain unsettled, Prime may file in the Court
of Common Pleas of Philadelphia County, Pennsylvania an application for relief
requesting that the fair value of the shares be determined by the court in an
appraisal proceeding. There is no assurance that Prime will file this
application. All dissenters, wherever residing, whose demands have not been
settled will be made parties to any appraisal proceeding commenced by Prime. The
court may appoint an appraiser to receive evidence and recommend a decision on
the issue of fair value. Each dissenter who is made a party will be entitled to
recover the amount by which the fair value of his or her shares is found to
exceed the amount, if any, previously paid, plus interest. If Prime fails to
file an application for relief, any dissenter who has made a demand and who has
not already settled his or her claim against Prime may do so
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in the name of Prime at any time within 30 days after the expiration of the
60-day period. If a dissenter does not file an application within the 30-day
period, each dissenter entitled to file an application shall be paid Prime's
estimate of the fair value of the shares and no more, and may bring an action to
recover any amount not previously paid.
The cost and expenses of the court proceedings, including the reasonable
compensation and expenses of the appraiser appointed by the court, will be
determined by the court and assessed against Prime, except that any part of the
costs and expenses may be apportioned and assessed as the court deems
appropriate against all or some of the dissenters who are parties and whose
action in demanding supplemental payment the court finds to be dilatory,
arbitrary or in bad faith. Fees and expenses of counsel and of experts of the
respective parties may be assessed as the court deems appropriate against Prime,
and in favor of any or all dissenters, if Prime fails to comply substantially
with the requirements of Subchapter 15D. These fees and expenses may be assessed
against either Prime or a dissenter, if the court finds that the party against
whom the fees and expenses are assessed acted in bad faith or in a dilatory or
arbitrary manner. If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated and
should not be assessed against Prime, it may award that counsel reasonable fees
to be paid out of the amounts awarded to the dissenters who were benefited.
Under the PBCL, as a shareholder of Prime, you have no right to obtain, in
the absence of fraud or fundamental unfairness, an injunction against the
merger, nor any right to valuation and payment of the fair value of your shares
because of the merger, except to the extent provided by the dissenters rights
provisions of Subchapter 15D. The PBCL also provides that absent fraud or
fundamental unfairness, the rights and remedies provided by Subchapter 15D are
exclusive. This Proxy Statement-Prospectus constitutes the notice of a proposed
corporate action which would give rise to dissenters rights as required under
PBCL Section 1571(d).
Any Prime shareholder who properly exercises dissenters rights will
recognize taxable gain or loss for federal income tax purposes upon receipt of
the cash payment in an amount equal to the difference between the amount of cash
received and his or her adjusted tax basis in the Prime common stock.
New York Stock Exchange Listing
Summit has agreed in the merger agreement to use its best efforts to cause
the shares of Summit common stock to be issued to Prime shareholders in the
merger to be listed on the New York Stock Exchange. The New York Stock
Exchange's indication that the necessary shares of Summit common stock are to be
listed on the New York Stock Exchange, subject to official notice of issuance,
is a condition to the completion of the merger.
Accounting Treatment
Summit expects to account for the merger under the purchase method of
accounting. 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. Intangible assets, including goodwill, recorded in
the transaction will be amortized over a period not to exceed 20 years.
Certain Federal Income Tax Consequences of the Merger
The following discussion is based upon an opinion of Thompson Coburn,
special counsel to Summit, and except as otherwise indicated, reflects Thompson
Coburn's opinion. The discussion is a summary of the material United States
federal income tax consequences of the merger to Prime shareholders and is not a
complete analysis or listing of all potential tax considerations or consequences
relevant to a decision whether to vote for the approval of the merger agreement.
The discussion does not address all aspects of federal income taxation that may
be applicable to Prime shareholders in light of their status or personal
investment circumstances, nor does it address the federal income tax
consequences of the merger that are applicable to Prime 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 Prime common stock pursuant to the
exercise of employee stock options or otherwise as compensation, and persons who
hold their Prime common stock 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.
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As a result, you are urged to consult with your own tax advisor to determine the
specific tax consequences of the merger to you. The discussion assumes that
shares of Prime common stock are held as capital assets (within the meaning of
Section 1221 of the Internal Revenue Code) at the effective time of the merger.
Prime and Summit have received an opinion from Thompson Coburn, to the
effect that, assuming the merger occurs in accordance with the merger agreement,
the merger will constitute a "reorganization" for federal income tax purposes
under Section 368(a)(1) of the Internal Revenue Code, with the following federal
income tax consequences:
o You will recognize no gain or loss as a result of the exchange of your
Prime common stock solely for shares of Summit common stock pursuant to
the merger, except with respect to cash received in lieu of fractional
shares, if any, as discussed below.
o The aggregate adjusted tax basis of the shares of Summit common stock you
receive in the merger, including any fractional share of Summit common
stock deemed to be received, as described in bullet 4 below, will be
equal to the aggregate adjusted tax basis of the shares of Prime common
stock surrendered.
o The holding period of the shares of Summit common stock you receive in
the merger, including any fractional share of Summit common stock deemed
to be received, as described in bullet 4 below, will include the holding
period of the shares of Prime common stock surrendered.
o If you receive cash in lieu of a fractional share of Summit common stock,
you will be treated as if the fractional share had been received and then
redeemed by Summit in return for the amount of cash that your received.
You will recognize capital gain or loss equal to the difference between
the amount of cash received and the portion of your adjusted tax basis in
the shares of Summit common stock allocable to the fractional share.
o No gain or loss will be recognized by Prime upon the transfer of its
assets to First Valley solely in exchange for Summit common stock and the
assumption by First Valley of the liabilities of Prime.
o No gain or loss will be recognized by Summit or First Valley on the
receipt by First Valley of the assets of Prime solely in exchange for
Summit common stock and the assumption by First Valley of the liabilities
of Prime.
In addition, Prime has received an opinion from Stradley, Ronon, Stevens &
Young, LLP for the benefit of the shareholders of Prime, subject to the
limitations set forth in the first paragraph of this section, to the effect
that, assuming the merger occurs in accordance with the merger agreement, the
merger will have the federal income tax consequences described in the first four
bullet points above in the discussion of the summary of the Thompson Coburn
opinion.
The opinions of Thompson Coburn and Stradley, Ronon, Stevens & Young, LLP
are subject to the conditions and customary assumptions that are stated in the
opinions, and rely upon various representations made by Summit and Prime. If any
of these representations or assumptions is inaccurate, the tax consequences of
the merger could differ from those described in this section. The opinions of
Thompson Coburn and Stradley, Ronon, Stevens & Young, LLP are also based upon
the Internal Revenue Code, regulations proposed or promulgated thereunder,
judicial precedent, 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 in this section. The
receipt of the opinions of Thompson Coburn and Stradley, Ronon, Stevens & Young,
LLP again as of the closing date of the merger are a condition to the
completion of the merger. An opinion of counsel, unlike a private letter ruling
from the Internal Revenue Service, has no binding effect. The Internal Revenue
Service could take a position contrary to the opinions of Thompson Coburn and
Stradley, Ronon, Stevens & Young, LLP and, if the matter were litigated, a
court may reach a decision contrary to the opinions. Neither Summit nor Prime
has requested an advance ruling as to the federal income tax consequences of the
merger, and the Internal Revenue Service is not expected to issue such a ruling.
The foregoing is a summary of the material federal income tax consequences
of the merger to certain Prime shareholders and does not take into account the
particular facts and circumstances of
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each Prime shareholder's tax status and attributes. As a result, the federal
income tax consequences addressed in this discussion may not apply to you.
Accordingly, you should consult with your 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 stock into which your shares of Prime common
stock are converted at the effective time of the merger will be freely
transferable under the Securities Act of 1933 as amended, unless you are deemed
to be an "affiliate" of Prime for purposes of Rule 145 under the Securities Act
as of the date of the special meeting. Affiliates of Prime may not sell their
shares of Summit common stock acquired in connection with the merger except
pursuant to an effective registration statement under the Securities Act
covering the resale of those 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 Prime generally include individuals or entities that control, are controlled
by or are under common control with Prime and may include executive officers and
directors of Prime as well as principal shareholders of Prime.
Prime agreed in the merger agreement to use its best efforts to cause each
director, executive officer and other person deemed in the opinion of Prime's
counsel to be affiliates of Prime 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 Prime shareholders, which are determined by the PBCL and
Prime's Articles of Incorporation and Bylaws, differ from the rights of Summit
shareholders, which are determined by New Jersey corporation law and Summit's
Restated Certificate of Incorporation and By-Laws. Some of the differences in
shareholders' rights are attributable to differences between the corporation law
of Pennsylvania, the state of Prime'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 Prime's Articles of
Incorporation and Bylaws and Summit's Restated Certificate of Incorporation and
By-Laws.
Some of the rights of Prime shareholders described below which are provided
by Pennsylvania corporation law or contained in Prime's Articles of
Incorporation or Bylaws and which are not provided by New Jersey corporation law
or contained in Summit's Restated Certificate of Incorporation or By-Laws may be
deemed to have an anti-takeover effect and will not be available to Prime
shareholders when they become Summit shareholders after the effective time of
the merger. However, some rights provided for by New Jersey corporation law or
Summit's Restated Certificate of Incorporation or By-Laws also may be deemed to
have an anti-takeover effect and will be applicable to Prime shareholders only
after becoming Summit shareholders after the effective time of the merger. 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 Pennsylvania and New Jersey and the governing documents
of Prime and Summit referred to above.
Comparison of Certificate or Articles of Incorporation and By-Laws
Classified Board and Related Provisions
Prime. Prime's Articles of Incorporation and Bylaws provide that Prime's
board of directors shall consist of not less than seven nor more than fifteen
directors and divides Prime's board of directors into three classes, with each
class serving a term of three years. Directors are elected by receiving the
highest number of votes cast, even if not a majority. Presently there are twelve
directors of Prime. Holders of Prime common stock may not cumulate their votes
in elections of directors.
Summit. Summit's Restated Certificate of Incorporation provides that
Summit's board of directors shall consist of not less than five and not more
than forty persons and divides Summit's board of directors into three classes,
with each class of directors serving a staggered term of three years. Each class
of directors must consist, as nearly as possible, of one third of the number of
directors constituting the entire Summit board of
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directors. Directors are elected by receiving the highest number of votes cast
by shares entitled to vote, even if not a majority. Presently there are seven
directors in Class I, six directors in Class II and five directors in Class III.
Holders of Summit common stock may not cumulate their votes in elections of
directors.
Summit's Restated Certificate of Incorporation further requires that
resolutions increasing the number of directors be approved by 80% of either
directors holding office or shares of capital stock of Summit entitled to vote
generally in the election of directors, voting as a single class.
Summit's Restated Certificate of Incorporation 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 the classified board and related provisions is to make it
difficult for persons other than those negotiating directly with Summit's board
of directors to acquire seats on Summit's board of directors and obtain control
of Summit.
Meetings and Consents
Prime. Prime's Articles of Incorporation provide that a special meeting of
shareholders may be called only by the President, the Chairman of the Board, or
a majority of Prime's board of directors. Prime's Articles of Incorporation and
Bylaws do not authorize shareholder action by partial written consent and the
PBCL prohibits shareholder action by partial written consent without express
authorization in the Bylaws. Prime's Articles of Incorporation and Bylaws do not
prohibit action by unanimous consent and therefore such actions are permitted
under Pennsylvania law.
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 Summit board of directors. Summit's Restated Certificate
of Incorporation requires that, subject to the rights of holders of any series
of Summit's preferred stock or other class or series of stock having preference
over the Summit common stock as to dividends or upon liquidation, all actions by
the shareholders of Summit must 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
Summit's Restated Certificate of Incorporation 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 Summit's 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 of directors
determines that such action shall be taken by written consent.
Summit Shareholder Rights Plans
Summit. Summit has in effect a shareholder rights plan which provides that
holders of shares of Summit common stock possess one preferred stock purchase
right for each share of Summit common stock 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, 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. Each full
share of the Series R preferred stock has rights per share equal to 150 times
the rights of Summit common stock with respect to voting, dividends and
distributions upon liquidation or merger, and entitles the holder to an
additional preferential dividend.
Upon the occurrence of certain 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" equal in market value to twice the exercise price of the
preferred stock purchase right. Summit's board of directors 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.
The provisions contained in Summit's Restated Certificate of Incorporation
relating to the Series R preferred stock may not be amended in a manner which
adversely affects the holders of Series R preferred stock without the
affirmative vote of the holders of two-thirds of the outstanding shares of
Series R preferred stock.
The existing shareholder rights plan will expire on August 16, 1999, and
will be replaced at that time with a new shareholder rights plan. The new
shareholder rights plan provides that the holders of shares of Summit common
stock will possess one new preferred stock purchase right for each share of
Summit common
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stock held by them. Each new preferred stock purchase right entitles the holder
to buy, as of the close of business on the tenth day following the occurrence of
specified takeover-related events, one one-hundredth of a share of a new series
of preferred stock, designated the Series S preferred stock, at $164 per one
one-hundredth share. Each full share of the Series S preferred stock has rights
per share equal to 100 times the rights of Summit common stock with respect to
voting, dividends and distributions upon liquidation or merger, and entitles the
holder to an additional preferential dividend.
Upon the occurrence of certain events, holders of the new preferred stock
purchase rights become entitled to purchase either shares of the Series S
preferred stock or, if the right was not previously exercised, a number of
shares of the "Acquiring Person" equal in market value to approximately twice
the exercise price of the new preferred stock purchase right. Summit's board of
directors has the power to redeem the new preferred stock purchase rights at any
time prior to the close of business on the tenth day after a public announcement
that a person or group has acquired "beneficial ownership" of 15% or more of
Summit's voting stock, upon the majority vote of the board of directors.
The combination of prohibitive dilution of the acquiring person's share
value and the power of Summit's board of directors to redeem the preferred stock
purchase rights is intended to encourage potential acquiring persons to
negotiate with Summit's board of directors 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. For a further description of
Summit's shareholder rights plans, see "DESCRIPTION OF SUMMIT CAPITAL
STOCK--Shareholder Rights Plans."
Prime. Prime has not adopted a shareholders rights plan.
Nominations to the Board, Shareholder Proposals and Conduct of Meeting
Prime. Prime's Bylaws provide that any shareholder wishing to nominate a
candidate for election to Prime's board of directors or to bring any other
business before a meeting of shareholders must give written notice of the
nomination or item of business delivered to Prime at its executive offices not
less than 30 days nor more than 90 days prior to the meeting. However, if less
than 40 days notice or prior public disclosure of the meeting is given or made
to shareholders, the notice from the shareholder, to be timely, must be received
no later than the 10th day following Prime's notice or public disclosure.
Summit. Summit's By-Laws contain provisions that empower Summit's board of
directors 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 Summit's board of
directors, to adopt rules, regulations and procedures and to take actions that
the chairman deems necessary, appropriate or convenient for the proper conduct
of a shareholder meeting. Summit's By-Laws also contain provisions that
o establish rules governing nominations for director and shareholder
proposals made at meetings of shareholders and, in general, authorize the
chairman of an annual meeting to determine whether nominations and
shareholder proposals have been made at least 80 days in advance of the
anniversary of the preceding year's annual meeting or otherwise comply
with the requirements of the By-Laws, and
o establish rules governing nominations for directors made at special
meetings of shareholders and authorize the chairman of a special meeting
to determine whether nominations have been made at least 70 days prior to
the special meeting or the 10th day following the day on which public
announcement of the special meeting is first made or otherwise comply
with the requirements of the By-Laws.
Vote Required for Charter and By-Law Amendments
Prime. Prime's Articles of Incorporation may be amended only as proposed by
the board of directors, upon the affirmative vote of a majority of the votes
cast by the shareholders entitled to vote at a duly called meeting. However,
certain amendments require more than a majority vote. These include the
following:
o amendments to Article 7 of Prime's Articles of Incorporation, relating to
approval of acquisitions of control and offers to acquire control, may
only be made by the affirmative vote of at least two-thirds of the
outstanding shares that are entitled to vote generally in the election of
directors;
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o amendments to Article 8 of Prime's Articles of Incorporation, relating to
supermajority voting requirements applicable to certain business
combinations, may only be made by the affirmative vote of shareholders
holding at least 75% of outstanding shares at a duly called meeting;
o amendments to Article 9, anti-greenmail provision, may only be made by
the affirmative vote of the holders of at least a majority of the total
number of outstanding shares that are entitled to vote generally in the
election of directors; and
o amendments to Article 11, relating to amending the Bylaws, may only be
made by the affirmative vote of at least two-thirds of the votes cast by
all shareholders at a duly called meeting.
Prime's Bylaws may be amended at a meeting called for that purpose upon the
affirmative vote of two-thirds of the directors then in office or two-thirds of
the outstanding voting shares at a duly called meeting. Bylaws made by Prime's
board of directors may be changed by vote of Prime's shareholders.
Summit. As discussed above, Summit's Restated Certificate of Incorporation
requires that certain provisions relating to increases in the number of
directors, which number may also be increased by the board of directors, changes
to the classified board provision and changes to the provision requiring that
actions by shareholders be 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. Otherwise, pursuant
to the New Jersey Business Corporation Act ("NJBCA"), Summit's Restated
Certificate of Incorporation may be amended, in general, after board approval by
the affirmative vote of a majority of the votes cast. Summit's By-Laws provide
for amendments upon two-thirds vote of the board of directors. Under the NJBCA,
by-laws made by a corporation's board may be altered or repealed and new by-laws
made by the shareholders.
Supermajority Vote on Certain Transactions
Prime. Prime's Articles of Incorporation prohibit the acquisition of
control of Prime, which means the sole or shared acquisition of 10% or more of
the voting power of Prime, unless the acquisition of control was approved by at
least two-thirds of the then current directors or at least two-thirds of the
outstanding voting securities of Prime. Furthermore, as long as Prime common
stock continues to be traded on the Nasdaq or a national securities exchange, no
offer to acquire sole or shared control of 10% or more of the voting power of
Prime common stock may be made, unless it has received either the prior approval
of at least two-thirds of the directors then in office or the prior approval of
certain regulatory authorities.
Prime's Articles of Incorporation also require that certain mergers,
consolidations, asset transfers, transfers of voting securities of Prime or of
any of its subsidiaries, proposals for liquidation or dissolution, or certain
other transactions involving interested shareholders or their affiliates, i.e. a
shareholder holding directly or indirectly more than 10% of the voting power of
the outstanding Prime voting securities, will require both the affirmative vote
of 75% of all eligible voting power and over half of the voting power excluding
the interested shareholders of Prime, unless the transaction has received the
affirmative vote of a majority of certain disinterested directors or the value
of the consideration to be received by shareholders of Prime meets certain
specified valuation tests. Prime's Articles of Incorporation also contain a
prohibition against the payment of greenmail to shareholders.
Summit. With the exception of a sale of all of Summit's property in the
entirety, as described on page 45, Summit's Restated Certificate of
Incorporation does not contain any supermajority voting provisions with respect
to mergers or similar change of control transactions.
Removal of Directors
Prime. Under Prime's Bylaws, except in the event of a court order or legal
incompetency or imprisonment for a term of more than one year, any individual
director may be removed only for cause by the affirmative vote of the holders
of a majority of shares entitled to vote at a duly constituted meeting called
for that purpose.
Summit. Summit's Restated Certificate of Incorporation contains no specific
provisions with respect to removal of directors, other than for directors
elected by preferred shareholders. Under the NJBCA, 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
on the removal question.
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Authorized Shares
Prime. Prime's Articles of Incorporation authorize the issuance of
13,000,000 shares of common stock and 2,000,000 shares of preferred stock, par
value $1.00 per share. Prime's board of directors has the power to set the
rights, preferences, privileges and designations with respect to each class or
series of preferred stock and to issue preferred stock without shareholder
approval. As of March 31, 1999, there were 11,001,806 shares of Prime common
stock outstanding and no shares of Prime preferred stock outstanding. Prime's
shareholders do not have preemptive rights.
Summit. Summit's Restated Certificate of Incorporation authorizes the
issuance of 390,000,000 shares of common stock and 6,000,000 shares of preferred
stock, no par value. As of March 31, 1999, there were approximately 172,692,000
shares of Summit common stock outstanding and 4,901,000 shares of Summit common
stock held in treasury and 1,500,000 shares of Summit Series R preferred stock
reserved for issuance under Summit's shareholder rights plan. Summit's Restated
Certificate of Incorporation and the NJBCA authorize Summit's board of directors
to amend Summit's 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 series, and to
determine the relative voting, dividend, conversion, redemption, liquidation and
other rights, preferences and limitations of the authorized shares of preferred
stock. Holders of Summit common stock do not have preemptive rights.
Indemnification; Limitation of Liability
Prime. Article IX of Prime's Bylaws provides that Prime shall indemnify any
person involved or threatened to be involved in any action, suit or proceeding
by reason of being an officer, director, employee or agent of Prime against
expenses, judgments, fines, penalties and amounts paid in settlement in
connection with the action, suit or proceeding, if the person acted in good
faith and in a manner he or she reasonably believed to be in the best interests
of Prime. Article IX of Prime's Bylaws also provides that the directors of Prime
shall not be personally liable for monetary damages for any action taken or
failure to take any action unless the director breached or failed to perform his
or her fiduciary duties under Pennsylvania law and the breach or failure
constituted self-dealing, willful misconduct or recklessness. The limitation of
liability does not apply to liabilities for taxes or violation of any criminal
statute.
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. Summit's By-Laws permit it
to 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 owed to Summit or its
shareholders, except for liability for, breach of duty based upon an act or
omission: (1) in breach of the person's duty of loyalty to Summit or its
shareholders, (2) not in good faith or involving a knowing violation of the law,
or (3) resulting in the receipt of an improper personal benefit.
Comparison of Corporation Laws
Dissenters Rights in Merger or Consolidation. Under the NJBCA, 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.
The PBCL provides dissenters rights of appraisal to shareholders of a
Pennsylvania corporation, such as Prime, in the event of a merger or
consolidation or similar transaction, except where the shares of the corporation
being acquired are listed on a national securities exchange or held of record by
more than 2,000 shareholders. This exception does not apply in situations where
shares are not converted solely into shares of the acquiring or surviving
corporation or solely into shares and cash in lieu of fractional shares. See
"THE MERGER -- Dissenters Rights."
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Dissenters Rights Relating to Disposition of Assets. Under the NJBCA,
unless the certificate of incorporation provides otherwise, 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 except with respect to (1) shares listed on a
national securities exchange or held of record by not less than 1,000 holders,
(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 the 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. This rule does not apply to certain transfers of
assets of a wholly owned subsidiary caused by its parent corporation. The
Pennsylvania dissenters rights statute discussed in the preceding paragraph also
applies in the event of the sale of substantially all of the assets of a
corporation, other than sales in the usual course of business, certain
liquidations or sales pursuant to a court order.
Class Voting on Merger or Consolidation. Under the NJBCA, 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. The PBCL contains a similar provision on class voting on a plan of
merger.
Source of Dividends. Under the NJBCA, 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. The PBCL
permits the payment of dividends unless (1) the corporation would be unable to
pay its debts as they become due in the ordinary course of business or (2) the
total assets of the corporation would be less than the sum of its liabilities
plus the amount that would be needed upon dissolution to pay the holders of
shares having a liquidation preference.
Shareholder Approval of Mergers and Consolidations. While shareholder
approval of a merger or consolidation is generally required under both the NJBCA
and the PBCL, the NJBCA 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 (1) the plan of merger does
not make an amendment of the certificate of incorporation of the surviving
corporation that would otherwise require shareholder approval, (2) the shares
outstanding immediately before the effectiveness of the merger are not changed
by the merger, and (3) the number of voting or participating shares outstanding
after the merger, after giving effect to the merger, including shares issuable
upon conversion of other securities or upon exercise of rights or warrants
issued pursuant 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.
Under both the NJBCA and PBCL, unless otherwise provided in the
corporation's certificate or articles of incorporation, a merger requiring
shareholder approval must be approved by the majority of the votes cast by
shareholders entitled to vote on the merger.
Under the PBCL, some transactions require the approval of the shareholders
entitled to cast at least a majority of the votes which all shareholders other
than an interested shareholder are entitled to cast with respect to the
transaction without counting the votes of the interested shareholder, and
certain affiliated and associated persons. This special voting rule applies to
transactions where a shareholder:
o of a registered corporation, such as Prime, is a party to a sale of
assets transaction, share exchange, merger or consolidation involving the
corporation or a subsidiary, or
o is to receive a disproportionate amount of the shares or other securities
of any corporation surviving or resulting from a plan of division, or
o is to be treated differently in a corporate dissolution from other
shareholders of the same class, or
o is to have a materially increased percentage of voting or economic share
interest in the corporation relative to substantially all other
shareholders as a result of a reclassification.
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This additional shareholder approval is not required if the consideration to be
received by the other shareholders in the transaction for shares of any class is
not less than the highest amount paid by the interested shareholder in acquiring
shares of the same class, or if the proposed transaction is approved by a
majority of the board of directors other than certain directors affiliated or
associated with, or nominated by, the interested shareholder.
The NJBCA requires the approval of two-thirds of the voting stock of a
corporation not beneficially owned by an "interested shareholder" for some
business combinations between the corporation and the interested shareholder.
Under the PBCL, an amendment to the articles of incorporation or plan of
reclassification, merger, consolidation, exchange, asset transfer, division or
conversion that provides mandatory special treatment for the shares of a class
held by particular shareholders or groups of shareholders that differs
materially from the treatment accorded other shareholders or groups of
shareholders holding shares of the same class must be approved by each group of
holders of any outstanding shares of a class who are to receive the same special
treatment under the amendment or plan, voting as a special class in respect of
the plan, regardless of any limitations stated in the articles or bylaws on the
voting rights of any class or series. At the option of the corporation's board
of directors, the approval of the special treatment by any affected group may be
omitted, but in that event the holder of any outstanding shares of the special
class denied those voting rights will be entitled to dissenters rights.
Shareholder Approval of Asset Sales. Under both the NJBCA and the PBCL, 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 on the question. Summit's Restated Certificate of Incorporation provides
that Summit's board of directors may sell all the rights, franchises and
property of Summit as an entirety with the approval of two-thirds of the
outstanding shares.
Power to Adopt, Amend or Repeal By-Laws. Under the NJBCA, 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. However, any 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 the by-laws that the board may not amend or repeal
by-laws approved by shareholders. Under the PBCL, unless otherwise provided in
the corporation's articles or bylaws, the bylaws may be amended by a majority of
votes cast by shareholders or by the majority of the board of directors, unless
the matter is required by statute to be submitted to the shareholders.
Amendments to the bylaws of a Pennsylvania corporation adopted by the board of
directors are subject to the power of shareholders to change those amendments.
Action by Shareholders by Written Consent in Lieu of a Meeting. Under the
NJBCA, except as otherwise provided in a certificate of incorporation, any
action, other than the election of directors or approval of a merger, required
or permitted to be taken at a meeting of 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 the
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 the NJBCA, 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: (1) unanimous written consent of all
shareholders entitled to vote on the matter with advance notice to any other
shareholders who have no right to vote, or (2) 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 the 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. Under the PBCL shareholders may take action by unanimous written
consent, unless otherwise restricted by the corporation's bylaws, but may not
take action by less than unanimous written consent unless specifically permitted
by the corporation's articles or bylaws.
Removal of Directors. Under the NJBCA, unless otherwise provided in the
certificate of incorporation, shareholders of a corporation whose board of
directors, is classified may not remove a director except for
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cause. Summit has a classified board of directors. Under the PBCL, any director
or the entire board of directors may be removed, with or without cause, by the
vote of the shareholders entitled to elect directors, provided that, unless
otherwise provided in the corporation's articles, if the board is divided into
classes, as is Prime's board of directors, directors may only be removed for
cause.
Special Meetings of Shareholders. Under the NJBCA, special meetings of
shareholders may be called by the president or board of directors of the
corporation, or by 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 the PBCL, shareholders may not
call special meetings of shareholders unless the shareholder is an "interested
shareholder" and the meeting relates to certain business combinations.
DeFacto Merger. Under the NJBCA, shareholders have the same voting and
dissenters rights as if they were shareholders of a surviving corporation in a
merger, if (1) voting shares outstanding or issuable after the transaction
exceed by more than 40% of the 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% the shares
outstanding before the transaction. The PBCL does not contain a comparable
provision.
Shareholders' Derivative Actions. The NJBCA contains certain provisions
that have the effect of discouraging derivative actions. Specifically, the NJBCA
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 for any series or class, unless the
shares or trust certificates so held have a market value in excess of $25,000.
The PBCL contains a provision entitling a corporation involved in a derivative
action instituted by holders of less than 5% of the corporation's outstanding
shares (unless those shares have value of greater than $200,000) to require the
plaintiffs to give security for reasonable expenses, including attorney's fees,
that the corporation may incur or become liable for in the case of mandatory
indemnification. The court will determine the extent to which the corporation
may have recourse against the security.
Inspection of Books and Records. Under the NJBCA, a shareholder of record
for at least 6 months immediately preceding his demand, or any holder, or a
person authorized on behalf of a 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 the PBCL, every shareholder
has a right, upon written verified demand stating the purpose of the
examination, to examine, in person or by agent or attorney, the share register,
books and records of account, and records of the proceedings of the
incorporators, shareholders and directors, and to make copies of extracts from
them. The shareholder's purpose for requesting access must be reasonably related
to the interest of the person as a shareholder. Shareholders do not have the
right to inspect corporate documents for an improper purpose; nor do they have
the right to inspect documents which do not fall within the narrow categories
listed in the PBCL or the corporation's bylaws. The scope of records to which a
shareholder might otherwise have access may be further limited by considerations
of privacy, privilege and confidentiality.
In addition, the officer or agent having charge of the transfer books for
shares of the corporation is required to prepare a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and the number of shares held by each.
The list is required to be produced and kept open at the time and place of the
meeting and any shareholder may inspect the list during the meeting.
The NJBCA provides for similar shareholder rights to inspect a shareholder
list at a shareholders' meeting.
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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 after the person becomes an interested stockholder unless
specified conditions are satisfied. The conditions are that the corporation's
board shall have approved the transaction prior to the stockholder becoming an
interested stockholder, and after the five-year period a business combination
may only be effected if the transaction was approved by the corporation's board
of directors 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 interested stockholder 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, among other
transactions, (1) the merger or consolidation of the corporation with the
interested stockholder or any corporation that after the 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 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.
Chapter 25 of the PBCL contains shareholder protection provisions which
apply to registered corporations, such as Prime, unless the corporation elects
not to be governed by the provisions. Prime elected in its Articles of
Incorporation only to have Chapter 25F and Section 2538, described below, apply
to it.
Chapter 25E provides that in the event a shareholder becomes a controlling
shareholder of a registered corporation by, individually or as part of a group,
directly or indirectly, acquiring 20% or more of the share voting power of the
corporation, then any remaining shareholders who object to the transaction may
compel the acquiring shareholder to purchase all remaining shares for their fair
market value in cash, including a pro-rata share of any control premium enjoyed
by the controlling shareholder. However, non-controlling shareholders are not
precluded from selling their shares to the controlling shareholder at any other
price. There are exceptions to the statutory determination of acquisition of
control relating, among other circumstances, to share acquisitions by bequest or
in the course of fulfilling duties as an agent, broker, nominee, trustee, or
similar third party. The controlling shareholder must give notice to every
voting shareholder of record of the corporation when a control transaction has
occurred. In the event that the controlling shareholder and any dissenting
shareholders cannot agree on the fair market value of the shares within the
proper statutory time period, or if the controlling shareholder fails to provide
proper statutory notice of a control transaction, then the statute also provides
for a court-supervised valuation procedure and appraisal, of which dissenting
shareholders may avail themselves.
Chapter 25F generally prohibits business combinations for a period of five
years with a 20% or more shareholder unless all disinterested directors approve.
Subject to exceptions, any shareholder who acquires 20% or more of the stock of
a Pennsylvania corporation may not engage in any "business combination" with the
corporation for a five-year period. In addition, shares which are issuable under
any agreement or upon exercise of conversion or option rights or with respect to
shares acquired in a stock split, stock dividend or recapitalization are not
included as owned by an interested shareholder for purposes of calculating the
20% threshold.
The PBCL defines a "business combination" to include a merger of the
corporation with the interested shareholder, a mortgage or sale of assets having
a market value of ten percent or more of the aggregate market value of the
assets or stock of the corporation to the interested shareholder, the
liquidation of the
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corporation as proposed by the interested shareholder, an issuance of shares
equal to five percent or more of the market value of all outstanding shares of
the corporation, and other transactions which may disproportionately benefit the
interested shareholder. The PBCL also includes some lease and mortgage
transactions in the definition of business combinations.
Under the PBCL, a "business combination" with an interested shareholder is
permitted if any of the following conditions are met: (1) prior to the
acquisition of 20% or more of the outstanding stock, the board of directors
approves the acquisition of stock or the "business combination," (2) following
the acquisition of 20% or more of the outstanding stock, all holders of common
stock consent, or (3) if the interested shareholder owns 80% of the
corporation's voting stock and a majority of disinterested shareholders consent
to the proposed "business combination" at a meeting called no earlier than three
months after the acquisition of 20% or more of the outstanding stock and all
shareholders receive a price for their shares in accordance with a "fair price"
valuation procedure set forth in the PBCL. After five years, any "business
combination" must be approved by holders of a majority of shares other than
those held by the interested shareholder, or all shareholders other than the
interested shareholder must receive a price for their shares in accordance with
the "fair price" valuation procedure.
Chapter 25G provides that a shareholder loses his voting rights in a
control share acquisition, i.e. the purchase of more than 20% of the
corporation's stock, unless and until the remaining shareholders of the
corporation vote to restore voting rights after a detailed information statement
is provided to all shareholders. The corporation also has a right to redeem the
stock for a period of two years.
Chapter 25H provides for the disgorgement of greenmail profits, i.e. any
profits earned over the original purchase price during a certain period of time.
Greenmail is the practice of a company's repurchasing of shares at a premium
over market from a potential acquiror in order to stop or eliminate the threat
of an acquisition by the potential acquiror.
Section 2538 concerns transactions involving interested shareholders, which
are defined for purposes of Section 2538 to be shareholders that are a party to
a transaction, or that are treated differently from other shareholders in a
transaction, or persons acting in concert with, under common control with, or
controlling, directly or indirectly, the interested shareholder, with the
exception of some agents and other similar third parties. Section 2538 requires
the affirmative vote of a majority of all shareholders, excluding shares held by
an interested shareholder, to approve certain fundamental transactions including
a merger, consolidation, share exchange, sale of a substantial portion of the
corporation's assets, division, voluntary dissolution, winding-up, or
reclassification of the corporation. However, these shareholder approval
provisions do not apply
o when the transaction has been approved by a majority of the board of
directors, excluding directors who have a material equity interest in the
interested shareholder or who were nominated for election by the
interested shareholder and were first elected to the board within 24
months of the transaction;
o if the consideration to be received by shareholders of any class in the
transaction is at least equal to the highest amount paid by the
interested shareholder in acquiring shares of the same class; or
o if the plan of merger or consolidation relating to the transaction does
not require the approval of the corporation's shareholders under PBCL
Section 1924(b)(1)(ii) because immediately prior to the adoption of the
plan and continously until the effective date of the transaction another
party to the merger or consolidation directly or indirectly owns at least
80% of the outstanding shares of each class of the corporation.
These provisions are cumulative and apply in addition to any other approvals and
procedures required by state law or the articles of incorporation and bylaws of
the corporation.
Under the NJBCA, 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:
o the effects of the action on the corporation's employees, suppliers,
creditors and customers;
o the effects of the action on the community in which the corporation
operates; and
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o 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 specifically covered by this provision of the NJBCA.
The PBCL contains a similar provision with regard to mergers, sales of
assets and other business combinations, which
o gives Prime's board of directors the authority to consider employees,
suppliers, customers and creditors of the corporation, the communities in
which the corporation is located and other pertinent factors, and to
weigh the short- and long-term interests of the corporation and the
possibility that they may be best served by the independence of the
corporation, and the resources, intent and past and potential conduct of
the prospective acquiror,
o relieves Prime's board of directors from any duty to regard the
shareholder interest as dominant or controlling,
o explicitly gives the board of directors the discretion to refuse to
redeem a shareholder rights plan or to refuse to take specified actions
with respect to potential acquisitions of control of the corporation,
o declares actions by directors with respect to a takeover bid to be
subject to the same standard of conduct for directors that is applicable
to all other conduct, and
o establishes a presumption that actions with respect to a takeover bid by
the "disinterested directors", are lawful unless it is proved under a
clear and convincing evidence standard that the director did not act in
good faith after reasonable investigation. The term disinterested
director includes essentially all directors except some officers and
persons associated with the prospective acquiror.
Indemnification. Under the NJBCA, 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 or her 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 the person by
reason of his or her 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, a corporation may not indemnify a
person who has 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 the
proceeding was brought determines that, despite the adjudication of liability
but in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for those expenses that the court shall deem
proper. In connection with any other proceeding, a corporation may indemnify the
person against his or her 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. The NJBCA requires
that a corporation indemnify these persons against expenses to the extent the
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, and provides that
any of these persons 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.
New Jersey corporation law also permits a corporation to purchase and
maintain insurance on behalf of any person against any expenses incurred in any
proceeding and any liabilities asserted against the person by reason of his or
her corporate agent status, whether or not the corporation would have the power
indemnify the person under the statute.
The PBCL permits a corporation to indemnify any person involved in a
third-party action by reason of his or her being an officer or director of the
corporation, against expenses, judgments, fines and settlement amounts paid in
the third-party action and against expenses incurred in any derivative action,
if the person
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acted in good faith and reasonably believed that his or her actions were in or
not opposed to the best interests of the corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe that his or her conduct
was unlawful. In general, no indemnification for expenses in derivative actions
is permitted under the PBCL in situations in which the person has been adjudged
liable to the corporation, unless a court decides the person is entitled to
indemnification. If, however, the person has been successful in defending a
third-party or derivative action, indemnification for expenses incurred is
mandatory.
The PBCL provisions for indemnification are non-exclusive with respect to
any other rights, including contractural rights, or rights under a bylaw or
pursuant to a vote of shareholders or disinterested directors, to which a person
seeking indemnification may be entitled. The PBCL expressly permits these
contractual or other rights to provide for indemnification against judgments and
settlements paid in a derivative or other action unless a court determines that
the act or omission giving rise to the claim for indemnification constituted
willful misconduct or recklessness.
Both the NJBCA and the PBCL permit advancement of expenses.
Limitation of Director and Officer Liability. The NJBCA 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:
o the opinion of counsel for the corporation,
o 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,
o 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
o written reports of committees of the board.
The PBCL 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 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 the other person's professional or expert
competence.
The NJBCA further provides that the certificate or incorporation 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:
o in breach of the director's or officer's duty of loyalty to the
corporation or its shareholders,
o not in good faith or involving a knowing violation of law, or
o resulting in receipt by the person of an improper personal benefit.
Summit's Restated Certificate of Incorporation contains a provision of this
nature.
With respect to the foregoing provisions, the NJBCA 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 PBCL, the articles of incorporation or bylaws of a Pennsylvania
corporation may provide that a director or officer shall not be personally
liable, in that capacity, for monetary damages for any action taken, or any
failure to take any action, unless the director or officer has breached or
failed to perform the duties of his or her office as set forth under the PBCL
and the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness. This limitation does not apply to the responsibility
or liability of a director or officer pursuant to any criminal statute or the
liability of a director of officer for the payment of taxes. Prime's Bylaws
contain a provision of this nature.
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SUMMIT BANCORP.
Description of Business
Summit commenced operations on October 1, 1970 as a bank holding company
registered under the BHC Act. Summit owns three bank subsidiaries and several
active non-bank subsidiaries. At March 31, 1999, Summit had total consolidated
assets of $33.5 billion on the basis of which it ranked as the largest New
Jersey-based bank holding company.
Summit's bank subsidiaries engage in a general banking business. Summit
Bank (New Jersey) is Summit's largest bank subsidiary, accounting for
approximately 89% of Summit's total consolidated assets at March 31, 1999.
Summit's non-bank subsidiaries engage primarily in securities products and
services, life, health, property and casualty insurance products and services,
venture capital investment, commercial finance lending, lease financing,
asset-based lending, letter of credit issuance, data processing and reinsuring
credit life and disability insurance policies related to consumer loans made by
the bank subsidiaries.
As of March 31, 1999 Summit's bank subsidiaries operated 455 banking
offices located in major trade centers and suburban areas in New Jersey,
Pennsylvania and southwestern Connecticut. The following table lists, as of
March 31, 1999, each bank subsidiary, the number of its banking offices and, in
thousands of dollars, its total assets and deposits. All of Summit's bank
subsidiaries are state banks and both the New Jersey and Pennsylvania
subsidiaries are members of the Federal Reserve System.
<TABLE>
<CAPTION>
Location of Principal No. of Banking
Offices Offices Total Assets (1) Total Deposits (1)
------- ------- ---------------- -----------------
(in thousands) (in thousands)
<S> <C> <C> <C>
Summit Bank, (New Jersey) ........... 365 $29,631,637 $20,574,625
Summit Bank, (Pennsylvania) ......... 78 2,906,747 2,033,100
Summit Bank, (Connecticut) .......... 12 938,080 609,700
</TABLE>
- ------------
(1) 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 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, 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 Summit Bank (New Jersey) and Summit Bank
(Pennsylvania), 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. Summit Bank (Connecticut), as a Connecticut chartered bank,
is subject to a similar restriction. Further, Summit Bank (New Jersey), as a New
Jersey state-chartered bank, may declare a dividend only if, after payment, its
capital stock would be unimpaired and its surplus would equal at least 50
percent of its capital stock or its surplus would not be reduced. Summit Bank
(Pennsylvania), as a Pennsylvania-chartered bank, may declare and pay a dividend
only out of accumulated net earnings and only if it has surplus at least equal
to its capital and its surplus would not be reduced by payment of the proposed
dividend. In addition, under the Federal Deposit Insurance Corporation
Improvement Act all institutions are prohibited from paying dividends if after
doing so an institution would be undercapitalized. Summit may not pay dividends
to its shareholders if after paying any dividends it would be unable to pay its
debts as they become due in the usual course of business or its total assets
would be less than its total liabilities. At March 31, 1999, the total
undistributed net assets of Summit's subsidiary banks were $2.6 billion of which
$81.9 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 common stock
and 6,000,000 shares of preferred stock, without par value. As of March 31, 1999
there were approximately 172,692,000 shares of Summit common stock outstanding,
4,901,000 shares of Summit common stock held in treasury, 1,500,000 shares of
Summit Series R preferred stock designated in Summit's Restated Certificate of
Incorporation and reserved for issuance under the Summit shareholder rights plan
described below, and no shares of Summit preferred stock outstanding. Pursuant
to the New Jersey Business Corporation Act, Summit's board of directors has
authority to set the terms and conditions of the authorized but unissued Summit
preferred stock. Summit may issue any authorized Summit common stock and Summit
preferred stock without further shareholder vote, unless a shareholder vote is
required for a particular transaction by applicable law or New York Stock
Exchange rules. The Summit common stock is presently listed on the New York
Stock Exchange. The issuance of additional Summit common stock or Summit
preferred stock, including Summit preferred stock that might be convertible into
Summit common stock, may, among other things, affect the earnings per share
applicable to existing Summit common stock and the equity and voting rights of
existing holders of Summit common stock.
The following summary is not a complete description of all provisions
relating to Summit capital stock 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 shareholder rights plan.
Common Stock
The rights of holders of Summit common stock 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 stock that may be issued. The holders of
Summit common stock 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 Summit's board of
directors out of funds of Summit legally available for the payment of dividends.
Shares of Summit common stock do not have cumulative voting rights. Accordingly,
at any annual 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 Summit's board of directors that are up for
election at that meeting if they so choose. In that event, the holders of the
remaining shares will not be able to fill any positions on the board up for
election at that meeting. 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 stock
are entitled to share pro rata in the distribution of Summit's assets available
for common shareholders. All shares of Summit common stock are fully paid and
nonassessable. No preemptive rights attach to the ownership of Summit common
stock and no personal liability is imposed on the holders of common stock by
reason of the ownership of those shares. First Chicago Trust Company of New
York, a division of Equiserve is the transfer agent, dividend disbursing agent
and registrar for the Summit common stock. Summit Bank (New Jersey) is the
co-transfer agent.
Shareholder Rights Plans
In August 1989, Summit adopted a shareholder rights plan under which
preferred stock purchase rights ("Rights") attached to Summit common stock
outstanding as of the close of business on August 28, 1989. Holders of shares of
Summit common stock 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 stock and become exercisable only
under certain circumstances as described below.
The Rights are not currently exercisable. In general, the Rights will
become exercisable upon the earlier to occur of the following: (1) ten days
following a public announcement that a person or group has
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acquired beneficial ownership of 15% or more of the Summit common stock
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 Summit's board of directors 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 stock or voting
securities representing 30% or more of the total voting power of Summit.
Generally, in the event the Rights become exercisable by virtue of a person
or group becoming an Acquiring Person, other than pursuant to an offer for all
outstanding shares of Summit common stock and other voting securities that
Summit's board of directors 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 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 the Rights become exercisable and Summit is acquired in a
merger or other business combination, or more than 50% of Summit's assets or
earning power is sold or transferred, each Right will entitle the holder 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 Summit's board of directors to redeem the Rights is
intended to encourage potential acquiring persons to negotiate with Summit's
board of directors 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 is not complete and is
qualified in its entirety by reference to the terms of the rights plan, which
are more fully described in Summit's Registration Statement on Form 8-A filed
with the Securities and Exchange Commission on August 28, 1989.
At the Summit board meeting on June 16, 1999, the Summit board adopted a
new shareholder rights plan, effective on the expiration of the existing Rights
on August 16, 1999. This plan was adopted for the same reasons and with the same
anticipated effects as the existing plan, and is similar in most respects. Each
new right ("New Right") will expire on August 31, 2009 and, on the occurrence of
the specified takeover-related events, entitles the holder to purchase one
one-hundredth of a share of a new series of Summit preferred stock, designated
the Series S preferred stock ("Series S Preferred"). Under the new plan the
rights will become exercisable after the commencement of a tender offer or
exchange offer that would result in a person or group beneficially owning 15%
(rather than 30% as under the current plan) or more of the outstanding Summit
common stock or voting securities representing 15% (rather than 30% as under the
current plan) or more of the total voting power of Summit. Alternatively, in the
event that a person or group becomes an Acquiring Person, each holder of a New
Right, other than an Acquiring Person, will be entitled to purchase, on payment
of the exercise price of $164 an amount of Series S Preferred having a fair
value equal to approximately two times the exercise price, or, if the Acquiring
Person has acquired less than 50% of the outstanding voting stock of Summit, the
board may exchange each New Right, other than a New Right owned by an Acquiring
Person, for Summit common stock at an exchange ratio of one share of Summit
common stock for each New Right. In the event that (1) Summit is acquired in a
merger or other business combination, or (2) 50% or more of Summit's assets or
earning power are transferred in one or a series of transactions, each holder of
a New Right will have the right to receive, upon payment of the exercise price,
common stock of the acquiring person having a fair value equal to approximately
two times the exercise price.
PRIME BANCORP, INC.
Description of Business
Prime was incorporated under the laws of the Commonwealth of Pennsylvania
in 1996 for the purpose of converting its predecessor from a Delaware
corporation to a Pennsylvania corporation, while at the same time completing the
merger with First Sterling Bancorp, Inc., then a privately held bank holding
company. Prime is regulated as a bank holding company. Prior to October 1, 1997,
Prime's principal subsidiaries were Prime Bank, a savings bank and First
Sterling Bank, a commercial bank. On October 1, 1997, the merger of the two
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banks was completed with the surviving entity taking the name Prime Bank. Prime
Bank is a Pennsylvania chartered commercial bank and a member of the Federal
Reserve System. Prime's corporate headquarters is in Fort Washington,
Pennsylvania at 7111 Valley Green Road, Fort Washington, PA 19034-2209
(215-836-2400).
The principal business of Prime Bank consists of attracting deposits and
obtaining borrowings, and converting those deposits and borrowings into various
types of loans and investments. Prime Bank's loan products include commercial
loans, real estate loans, consumer loans and consumer and residential mortgages.
Deposits are generated along five (5) major lines: checking, savings, retail
certificates of deposit, jumbo certificates of deposit and commercial cash
management.
As of March 31, 1999, Prime Bank operated through twenty-four (24) branches
in the Philadelphia metropolitan area. Prime Bank also has signed leases for
three new branches. It is anticipated that these new branches will be opened in
the third quarter of 1999 as Summit Bank (Pennsylvania) branches. Under an
agreement between Summit Bank (Pennsylvania) and Prime Bank, if the merger is
not completed the branches will be turned over to Prime Bank.
The statutory headquarters of Prime Bank is located in northeast
Philadelphia, Pennsylvania. Prime Bank has eight (8) full service branches in
Philadelphia, five (5) in Bucks County, Pennsylvania, eight (8) in Montgomery
County, Pennsylvania, two (2) in Delaware County, Pennsylvania and one (1) in
Chester County, Pennsylvania.
Recent Developments
On April 8, 1999, Prime Bank announced the signing of a lease for a new
branch bank location at 1430 Walnut Street, Philadelphia, Pennsylvania. This
center city Philadelphia branch is expected to be opened in the fourth quarter
of 1999 as a Summit Bank (Pennsylvania) branch, and represents a key commitment
to the center city business community with its significant demand for commercial
lending expertise. Under an agreement between Summit Bank (Pennsylvania) and
Prime Bank, if the merger is not completed the branch will be turned over to
Prime Bank.
Prime Bank has entered into an agreement to sell its credit card portfolio
to MBNA. The transaction is expected to be completed in the third quarter of
1999. Prime Bank's credit card portfolio amounts to approximately $10 million.
DESCRIPTION OF PRIME CAPITAL STOCK
General
Prime has the authority to issue 13,000,000 shares of common stock, and
2,000,000 shares of preferred stock. As of March 31, 1999, 11,001,806 shares of
Prime common stock were issued and outstanding. No shares of Prime preferred
stock are currently issued or outstanding.
The following summary does not purport to be complete and is subject in all
respects to the applicable provisions of the Pennsylvania Business Corporation
Law, and Prime's Articles of Incorporation and Bylaws.
Common Stock
Voting Rights. Each holder of Prime common stock has one vote on matters
presented for consideration by the shareholders for each share held. There are
no cumulative voting rights in the election of directors. The Prime board of
directors has the power to designate or issue one or more series of preferred
stock with rights, preferences, privileges and designations, including voting
rights, which could adversely affect the voting rights of the holders of the
Prime common stock. Super-majority voting provisions apply in certain
situations. See "THE MERGER -- Differences in Shareholders' Rights."
Dividends. Each holder of Prime common stock is entitled to share ratably
in dividends out of funds legally available for the payment of dividends, when
and as declared by Prime's board of directors, after full cumulative dividends
on any class or series of Prime preferred stock ranking superior as to dividends
to the
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Prime common stock have been paid or declared and funds sufficient for the
payment of those dividends set apart, and after the payment of the full amount
of sinking fund, retirement fund, or other retirement payments, if any, to which
holders of shares of the Prime preferred stock may be entitled in preference to
the Prime common stock.
Prime's current policy is to pay quarterly cash dividends. Future cash
dividends will be subject to determination and declaration by Prime's board of
directors, which will take into account Prime's financial condition, results of
operations, industry standards, economic conditions, and other factors including
regulatory and tax considerations. Currently, Prime relies on the payment of
dividends by Prime Bank in order to generate cash and income sufficient to pay
dividends to its shareholders. The amount of dividends that may be declared or
paid by Prime Bank is subject to certain regulatory restrictions. For example,
Pennsylvania chartered commercial banks may not declare or pay cash dividends on
their stock if the effect of paying the dividend would be to cause the bank's
net worth to be reduced below (1) the amount, if any, required for the
liquidation account, or (2) the net worth requirements imposed by applicable
bank regulatory authorities.
Preemptive Rights. The holders of Prime common stock have no preemptive
rights to acquire any new or additional unissued shares or treasury shares of
the capital stock of Prime.
Liquidation. In the event of a liquidation, dissolution or winding up of
Prime, whether voluntary or involuntary, the holders of the Prime common stock
are entitled to share ratably in any assets or funds of Prime that are available
for distribution to its shareholders after satisfying its liabilities, or after
adequate provision is made for the payment of those liabilities, and after any
preferences on any outstanding Prime preferred stock.
Preferred Stock
Prime's board of directors has the authority, without further action by the
holders of the outstanding shares of common stock, to issue shares of preferred
stock from time to time in one or more classes or series and to fix the number
of shares constituting any class or series. Prime's board of directors has the
power to fix the terms of any such series or class, including designations,
limitations or restrictions relating to the class or series, including voting
rights, dividends, rights on liquidation, dissolution or winding up, conversion
or exchange rights and redemption provisions, including sinking fund provisions,
if any. The designations, rights and preferences of any class or series of Prime
preferred stock which may be issued would be set forth in a statement which
would be filed with the Secretary of State of the Commonwealth of Pennsylvania.
The issuance in the future of shares of Prime preferred stock, or the
designation of authorized but unissued shares of Prime preferred stock, with
voting and other rights which may be established by Prime's board of directors
in its discretion without shareholder approval, may create voting impediments or
otherwise delay or prevent a change in control of Prime. By issuance of
preferred stock, Prime's board of directors could modify the rights of holders
of the Prime common stock. There is no current intention to issue any Prime
preferred stock.
PROPOSAL II -- ADJOURNMENT OF SPECIAL MEETING
In the event there are not sufficient votes to constitute a quorum for the
special meeting or to approve the merger agreement at the time of the special
meeting, the merger agreement could not be approved unless the special meeting
was adjourned in order to permit further solicitation of proxies. In order to
allow proxies that have been received by Prime at the time of the special
meeting to be voted for adjournment under these circumstances, Prime has
submitted the question of adjournment to its shareholders as a separate matter
for their consideration. In order to approve any adjournment a majority of votes
must be cast in favor of Proposal II.
Prime's board of directors recommends that shareholders vote their proxies
FOR the adjournment proposal so that their proxies may be used for purposes of
adjourning the special meeting under the circumstances described in the
preceding paragraph.
Properly executed proxies will be voted in favor of adjournment unless
otherwise indicated thereon. However, proxies voting AGAINST the merger
agreement will not be voted in favor of the adjournment
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proposal unless the shareholder has voted FOR approval of the adjournment
proposal on the proxy card. If Prime's board of directors elects 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 the time and
place at the special meeting unless the adjournment exceeds 90 days.
SHAREHOLDER PROPOSALS
Prime shareholders will not be entitled to submit proposals for
consideration at the special meeting except to the extent the proposals relate
directly to the matters to come before the special meeting as set forth in this
Proxy Statement-Prospectus. If the merger is not approved at the special meeting
and Prime subsequently holds its annual meeting for 1999, Prime shareholders
will be entitled to submit proposals on matters appropriate for shareholder
action consistent with regulations of the Securities and Exchange Commission and
Prime's Bylaws. No date has been set for Prime's 1999 annual meeting of
shareholders.
For business to be properly brought before Prime's 1999 annual meeting by a
shareholder, any shareholder proposal to take action at the meeting will be
required to be received at Prime's main office at 7111 Valley Green Road, Fort
Washington, Pennsylvania 19034-2209, not later than 30 nor more than 90 days
prior to the meeting. However, if Prime gives less than 40 days' notice or prior
public disclosure of the date of the meeting to shareholders, in order to be
timely the shareholder's notice must be received no later than the 10th day
following Prime's notice or public disclosure. The shareholder notice must
include certain information concerning the shareholder making the proposal and
concerning the business proposed to be conducted. All shareholder proposals
shall be subject to the requirements of the proxy rules adopted under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The proxy
rules provide that if the shareholder's notice is not received by Prime within a
reasonable period of time before the date Prime mails its proxy materials for
the annual meeting, Prime, through management proxy holders, may exercise
discretionary voting authority when the proposal is raised at the annual meeting
without reference to any matter in the proxy statement for the 1999 annual
meeting.
Summit's By-Laws 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. However, if the date of the annual meeting is more than
30 days before or more than 60 days after that 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 the annual
meeting or the tenth day following the day on which public announcement of the
meeting date is first made. Any notice of a shareholder proposal by a
shareholder to the Secretary of Summit must be accompanied by:
o the name and address of the shareholder who intends to present the
proposal for a vote;
o a representation that the shareholder is a holder of record of shares
entitled to vote at the meeting;
o a description of all agreements, arrangements or understandings between
the shareholder and any other shareholder relating to the proposal to be
voted on and any financial contractual interest of either shareholder in
the outcome of the vote; and
o all 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 the proposal pursuant to the proxy rules of
the Securities and Exchange Commission.
Summit's board of directors will consider and include in Summit's proxy
statement for the 2000 annual meeting of Summit shareholders proposals which
meet the regulations of the Securities and Exchange Commission and New Jersey
law and which comply with Summit's By-laws. In order to be eligible for
inclusion, proposals should be addressed to Summit's Secretary and must be
received on or before November 9, 1999.
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<PAGE>
OTHER MATTERS
Prime's board of directors is not aware of any business to come before the
special meeting other than those matters described in this Proxy
Statement-Prospectus. However, if any other matters should properly come before
the special meeting, the proxy holders intend to vote on those matters in
accordance with their reasonable business judgment.
LEGAL MATTERS
The legality of the Summit common stock offered by this Proxy
Statement-Prospectus will be passed upon for Summit by Richard F. Ober, Jr.,
Esq., Executive Vice President, General Counsel and Secretary of Summit. Mr.
Ober owns 48,843 shares of Summit common stock and options to purchase 132,034
shares of Summit common stock at a weighted average exercise price of $22.11.
Certain federal tax matters will be passed upon for Summit and Prime by Thompson
Coburn, St. Louis, Missouri. Certain legal matters and certain federal income
tax matters will be passed upon for Prime by Stradley, Ronon, Stevens & Young,
LLP, Philadelphia, Pennsylvania.
EXPERTS
The consolidated financial statements of Summit Bancorp. and subsidiaries
as of December 31, 1998 and 1997 and for each of the years in the three-year
period ended December 31, 1998, included in Summit's Annual Report on Form 10-K,
incorporated by reference herein and in the Registration Statement on Form S-4
("Registration Statement"), have been incorporated by reference herein and in
the Registration Statement in reliance upon the report of KPMG LLP, independent
certified public accountants, incorporated by referenced herein, and upon the
authority of KPMG LLP as experts in accounting and auditing.
The consolidated financial statements of Prime Bancorp, Inc. as of December
31, 1998 and for the year then ended, appearing in Prime Bancorp, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1998, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of Ernst & Young LLP as experts in accounting and
auditing.
The consolidated financial statements of Prime Bancorp, Inc. and
subsidiaries as of December 31, 1997 and for each of the years in the two-year
period ended December 31, 1997, included in Prime's Annual Report on Form 10-K,
incorporated by reference herein and in the Registration Statement, have been
included herein and in the Registration Statement in reliance upon the report of
KPMG LLP, independent certified public accountants, incorporated by reference
herein, and upon authority of KPMG LLP as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Summit has filed with the Securities and Exchange Commission under the
Securities Act the Registration Statement which registers the distribution to
Prime shareholders of the shares of Summit common stock to be issued in
connection with the merger. The Registration Statement, including the attached
exhibits and schedules, contains additional relevant information about Summit
and Summit common stock. The rules and regulations of the Securities and
Exchange Commission allow us to omit certain information included in the
Registration Statement from this Proxy Statement-Prospectus.
In addition, both Summit and Prime file reports, proxy statements and other
information with the Securities and Exchange Commission under the Exchange Act.
You may read and copy this information at the following locations of the
Securities and Exchange Commission:
<TABLE>
<CAPTION>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
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You may also obtain copies of this information by mail from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
The Securities and Exchange Commission also maintains an Internet world
wide web site that contains reports, proxy statements and other information
about issuers, like Summit and Prime, who file electronically with the
Securities and Exchange Commission. The address of that site is
http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
Summit at the offices of the New York Stock Exchange, 20 Broad Street, New York,
New York 10005 and reports, proxy statements and other information about Prime
at the offices of the Nasdaq, 1735 K Street, N.W., Washington, D.C. 20006.
The Securities and Exchange Commission allows Summit and Prime to
"incorporate by reference" information into this Proxy Statement-Prospectus.
This means that we can disclose important information to you by referring you to
another document filed separately with the Securities and Exchange Commission.
The information incorporated by reference is considered to be a part of this
Proxy Statement-Prospectus, except for any information that is superseded by
information that is included directly in this document.
This Proxy Statement-Prospectus incorporates by reference the documents
listed below that Summit and Prime have previously filed with the Securities and
Exchange Commission. They contain important information about our companies and
their financial condition.
Summit SEC Filings Period
- ------------------------------------------------------------------------------
Annual Report on Form 10-K Year ended December 31, 1998
Report on Form 8-K Report dated April 27, 1999
Quarterly Report on Form 10-Q and Quarter ended March 31, 1999
Amendment No. 1 to Quarterly Report on
Form 10-Q (Form 10-Q/A)
The description of Summit common stock set forth in the Summit Registration
Statement on Form 10 filed pursuant to Section 12(b) of the Exchange Act dated
August 31, 1970, including any amendment or report filed with the Securities
and Exchange Commission for the purpose of updating such description.
The description of Summit Preferred Stock Purchase Rights set forth in the
Summit registration statement filed under Section 12 of the Exchange Act on
Form 8-A on August 28, 1989, including any amendment or report filed with the
Securities and Exchange Commission for the purpose of updating such description
58
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Prime SEC Filings Period
- ------------------------------------------------------------------------------
Annual Report on Form 10-K (enclosed) Year ended December 31, 1998
Report on Form 8-K Report dated February 18, 1999
Quarterly Report on Form 10-Q Quarter ended March 31, 1999
The description of Prime common stock set forth in the Prime Registration
Statement on Form 8-A filed pursuant to Section 12 of the Exchange Act on
November 7, 1988, as superceded by the description of the Prime common stock
contained in Prime's Registration Statement on Form S-4 (No. 333-13741)
Amendment no. 1, filed with the Securities and Exchange Commission on October
31, 1996, including any amendment or report filed with the Securities and
Exchange Commission for the purpose of updating such description.
Summit and Prime incorporate by reference additional documents that either
company may file with the Securities and Exchange Commission between the date of
this Proxy Statement-Prospectus and the date of the special meeting. The
documents include periodic reports, such as Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and current reports on Form 8-K, as well as proxy
statements.
You can obtain any of the documents incorporated by reference in this
document through Summit or Prime, as the case may be, or from the Securities and
Exchange Commission through the Securities and Exchange Commission's web site at
the address described above. Documents incorporated by reference are available
from the companies without charge, excluding any exhibits to those documents
unless the exhibit is specifically incorporated by reference as an exhibit in
this Proxy Statement-Prospectus. You can obtain documents incorporated by
reference in this Proxy Statement-Prospectus by requesting them in writing or by
telephone from the appropriate company at the following addresses:
Summit Bancorp. Prime Bancorp, Inc.
Attention: Corporate Secretary Attention: Corporate Secretary
301 Carnegie Center 7111 Valley Green Road
Princeton, NJ 08543 Fort Washington, PA 19034
Telephone: (609) 987-3442 Telephone: (215) 836-2400
If you would like to request documents, please do so by July 21, 1999 to
receive them before the special meeting. If you request any incorporated
documents from us, we will mail them to you by first class mail, or another
equally prompt means, within one business day after we receive your request.
We have not authorized anyone to give any information or make any
representation about the merger or our companies that is different from, or in
addition to, that contained in this Proxy Statement-Prospectus or in any of the
materials that we have incorporated into this document. Therefore, if anyone
does give you information of this sort, you should not rely on it. If you are in
a jurisdiction where offers to exchange or sell, or solicitations of offers to
exchange or purchase, the securities offered by this document or the
solicitation of proxies is unlawful, or if you are a person to whom it is
unlawful to direct these types of activities, then the offer presented in this
document does not extend to you. The information contained in this document
speaks only as of the date of this document unless the information specifically
indicates that another date applies.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated February 17, 1999 between Summit
Bancorp., a New Jersey business corporation ("Summit"), Prime Bancorp, Inc., a
Pennsylvania business corporation ("Prime") and First Valley Corporation, a
Pennsylvania business corporation and wholly owned bank holding company
subsidiary of Summit.
Section 0.01. Integration of Terms. Summit and Prime at Section 1.01(b) agreed
that, subsequent to the date of execution of the Agreement and Plan of Merger by
Summit and Prime, Summit would add terms to the Agreement and Plan of Merger
which satisfied the conditions set forth at said Section 1.01(b) and which have
the same force and effect as if present in the Agreement and Plan of Merger on
the date executed by Summit and Prime. The heading preceding this Section 0.01
and Sections 0.01 through 0.10 constitute such additional terms to the Agreement
and Plan of Merger and "Exhibit A" thereto as contemplated by the Agreement and
Plan of Merger.
Section 0.02. Designation Election. Pursuant to Section 1.01(b), Summit hereby
elects the method set forth in Section 1.01(a)(2) as the method for carrying out
the Reorganization, and hereby designates First Valley Corporation, a
Pennsylvania business corporation and wholly owned bank holding company
subsidiary of Summit ("Designated Summit Subsidiary") as the constituent
corporation in the Reorganization.
Section 0.03. Surviving Corporation. Prime shall be merged with and into
Designated Summit Subsidiary ("Merger") and Designated Summit Subsidiary shall
continue its corporate existence after the Merger as the surviving corporation
in the Merger ("Surviving Corporation"). (Prime and Designated Summit Subsidiary
are sometimes referred to individually as a "Constituent Corporation" and
collectively as the "Constituent Corporations").
Section 0.04. Effective Time. The Effective Time of the Merger shall be the
later of the date and time set forth in the Articles of Merger respecting the
Merger to be filed with the Department of State of the Commonwealth of
Pennsylvania and the date the Articles of Merger are actually so filed.
Section 0.05. Board of Directors and Officers of Surviving Corporation. The
Board of Directors and officers of the Surviving Corporation at the Effective
Time shall consist of the persons who are, respectively, the directors and
officers of Designated Summit Subsidiary immediately prior to the Effective
Time.
Section 0.06. Articles of Incorporation and By-Laws of Surviving Corporation. At
the Effective Time and until thereafter amended in accordance with law, the
Articles of Incorporation and By-Laws of the Surviving Corporation shall consist
of, respectively, the Articles of Incorporation and By-Laws of Designated Summit
Subsidiary as in effect immediately prior to the Effective Time.
(i)
<PAGE>
Section 0.07. Other Terms and Conditions of the Merger. In addition to the terms
and conditions of the Merger set forth in Sections 0.01 through 0.10 hereof, all
other terms and conditions of the Merger shall be as set forth at Articles I
through X hereof.
Section 0.08. Manner and Basis of Converting Shares. The manner and basis of
converting shares of Prime Stock into shares of Summit Stock shall be as set
forth in Article I hereof. All shares of the capital stock of Designated Summit
Subsidiary issued or issued and outstanding immediately prior to the
Effective Time shall be unaffected by the Merger and shall remain issued or
issued and outstanding and held by Summit, as the case may be, at the Effective
Time.
Section 0.09. Notices to Designated Summit Subsidiary. Information with respect
to Designated Summit Subsidiary for all purposes of Section 10.05 of the
Agreement and Plan of Merger shall be the same as the information set forth for
Summit at said Section 10.05.
Section 0.10. Representations and Warranties. Summit and Designated Summit
Subsidiary hereby jointly and severally represent and warrant to Prime as
follows:
(i) Designated Summit Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of Commonwealth of
Pennsylvania;
(ii) Designated Summit Subsidiary is qualified to transact business in
and is in good standing under the laws of all jurisdictions where the failure to
be so qualified could reasonably be expected to have a Summit Material Adverse
Effect;
(iii) All of the issued and outstanding shares of capital stock of
Designated Summit Subsidiary are owned by Summit;
(iv) Designated Summit Subsidiary has the corporate power and is duly
authorized by all necessary corporate action to execute, deliver and perform the
Agreement and Plan of Merger;
(v) The Board of Directors and sole shareholder of Designated Summit
Subsidiary have taken all action required by law, its articles of incorporation,
and its bylaws, to authorize the execution and delivery of the Agreement and
Plan of Merger; and
(vi) Assuming due execution and delivery by and enforceability against
Prime, this Agreement and Plan of Merger is a valid and binding agreement of
Designated Summit Subsidiary enforceable in accordance with its terms except as
such enforcement may be limited by applicable principals 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 that deposits of which
are insured by Federal Deposit Insurance Corporation, or the affiliates of such
institutions.
(ii)
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated February 17, 1999 between Summit
Bancorp., a New Jersey business corporation ("Summit"), and Prime Bancorp, Inc.,
a Pennsylvania business corporation ("Prime").
W I T N E S S E T H :
WHEREAS, the respective boards of directors of Summit and Prime 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 Prime by Summit on the terms and conditions provided for in this
Agreement and Plan of Merger ("Agreement");
WHEREAS, the Board of Directors of Summit and Prime 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 Prime 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) Prime 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
Pennsylvania Business Corporation Law, as amended ("Pennsylvania Law"); or
(2) Prime shall be merged into a wholly owned subsidiary of Summit
or a wholly owned subsidiary of Summit shall be merged into Prime, in either
case pursuant to and in accordance with the provisions of, and with the effect
provided in, the corporate laws of the jurisdiction of incorporation of each of
the constituent corporations in such merger ("Applicable Corporation Laws").
<PAGE>
(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) ("Reorganization Election") and following an election of the
Reorganization method provided for at Section 1.01(a)(2) Summit shall (i) cause
the wholly owned subsidiary of Summit designated as the constituent corporation
in the Reorganization ("Designated Summit Subsidiary") to approve, execute and
deliver this Agreement in accordance with all Applicable Corporation Laws, (ii)
cause this Agreement to be approved by the sole shareholder of the Designated
Summit Subsidiary, (iii) attach as Exhibit A to this Agreement (A) any
additional terms and conditions to this Agreement required by Applicable
Corporation Laws to effect the Reorganization and other transactions
contemplated by this Agreement, (B) the terms and conditions of any agreement or
plan of merger required by Applicable Corporation Laws, (C) the date and time
that the merger shall be effective or the mechanism for determining the date and
time that the merger shall be effective and (D) such other terms and conditions
as Summit shall determine in its discretion to be desirable and not contrary to
this Agreement or Applicable Corporation Laws regarding the corporate governance
of the corporation surviving the merger contemplated by Section 1.01(a),
including without limitation terms and conditions governing certificates or
articles of incorporation and amendments thereto or restatements thereof,
by-laws of the corporation surviving the merger and amendments thereto, and
directors and officers of the corporation surviving the merger; provided,
however, that no provision of Exhibit A shall (x) alter or change the amount or
kind of consideration to be received by Prime Shareholders (as defined at
Section 1.07(c) below) 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 Prime Shareholders or (z) materially impede
or delay consummation of the transactions contemplated by this Agreement and
(iv) cause the Designated Summit Subsidiary to take all actions appropriate to
accomplish the Reorganization and the other transactions contemplated by this
Agreement. Exhibit A as so constituted shall constitute a part of this Agreement
as fully as if attached hereto on the date hereof without separate execution by
Summit or Prime.
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 Prime Capital Stock.
(a) At the Effective Time, by virtue of the Reorganization and without
any action on the part of any shareholder of Prime:
(1) All shares of the Common Stock, par value $1.00 per share, of
Prime ("Prime Stock") 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 Prime or a subsidiary of
Prime (other than Prime Stock held as a result of foreclosures or debts
previously contracted and Prime Stock held in trust, managed, custodial or other
nominee accounts or held by mutual funds for which Prime or any subsidiary of
Prime acts as investment advisor), if any, or held in the treasury of Prime, 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 Prime Stock; and
2
<PAGE>
(2) Subject to Section 1.03(a)(1), outstanding shares of Prime
Stock held as of the Effective Time by each Prime Shareholder shall be converted
in accordance with the New Jersey Act and the Pennsylvania Law 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 Prime Stock held by
each Prime Shareholder shall be multiplied by the Exchange Ratio (as defined at
Section 1.03(c) below) and (i) a Prime Shareholder shall become entitled to
receive whole shares of Summit Stock pursuant to this Section 1.03(a)(2) equal
in number to the whole number which results from the foregoing multiplication,
and (ii) a Prime Shareholder shall become entitled to receive cash pursuant to
this Section 1.03(a)(2) in lieu of a fractional share of Summit Stock, if any,
equal in amount to 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
Prime and Summit) on the last trading day ending prior to the Effective Time
("Cash In Lieu Amount"). (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), 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 Prime Stock shall be appropriately adjusted to give effect to the
Capital Change.
(c) The "Exchange Ratio" is hereby defined to be six hundred seventy-five
thousandths (.675).
(d) Summit agrees that any Summit Rights issued pursuant to the Summit
Rights Agreement shall be issued with respect to each share of Summit Stock
issued pursuant to the terms hereof under the terms of such Summit Rights
Agreement prior to the Effective Time, as well as to take all action necessary
or advisable to enable the holder of each such share of Summit Stock to obtain
the benefit of such Summit Rights Agreement notwithstanding their prior
distribution, including, without limitation, amendment of the Summit Rights
Agreement.
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 Prime 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
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
after the Effective Time to Prime Shareholders.
Section 1.05.Exchange Agent Arrangements. Prior to the Effective Time,
Summit shall appoint Equiserve First Chicago Trust Division, or another entity
reasonably satisfactory to Prime, as the exchange agent ("Exchange Agent")
responsible for exchanging, in connection with and upon consummation of the
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<PAGE>
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 Prime Stock ("Prime Certificates") and
Summit shall deliver to the Exchange Agent sufficient Summit Certificates and
cash as shall be required to satisfy Summit's obligations to Prime Shareholders
under Section 1.07(c), prior to the time such obligations arise.
Section 1.06.Effective Time. In the event that pursuant to the
Reorganization Election Summit elects the Reorganization method provided for at
Section 1.01(a)(1), the "Effective Time" of the Reorganization shall be the hour
and the date specified in the certificate of merger of Summit and Prime filed
with the Secretary of State of the State of New Jersey in accordance with
Section 14A:10-4.1 of the New Jersey Act ("NJ Certificate") and the articles of
merger filed with the Department of State of the Commonwealth of Pennsylvania
("Pennsylvania Articles") in accordance with Section 1927 of the Pennsylvania
Law, which such hour and date shall be identical in both the NJ Certificate and
the Pennsylvania Articles. In the event that pursuant to the Reorganization
Election Summit elects the Reorganization method provided for at Section
1.01(a)(2), the "Effective Time" of the Reorganization shall be the date and
time specified in Exhibit A or determined in accordance with Exhibit A.
Section 1.07.Exchange of Prime Certificates.
(a) After the Effective Time and subject to Section 1.07(c) below, each
Prime Shareholder (except as provided otherwise in Section 1.03(a)(1) above),
upon surrender to the Exchange Agent of all Prime Certificates registered to the
Prime Shareholder, shall be entitled to receive in exchange therefor a Summit
Certificate representing the number of whole shares of Summit Stock such Prime
Shareholder becomes entitled to receive pursuant to Section 1.03(a)(2) and the
Cash In Lieu Amount, payable by check, such Prime Shareholder may become
entitled to receive pursuant to Section 1.03(a)(2). Until so surrendered,
outstanding Prime Certificates held by each Prime Shareholder, other than Prime
Certificates governed by Section 1.03(a)(1), shall be deemed for all purposes
(other than as provided below with respect to unsurrendered Prime 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,
without interest, 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 Prime Certificates dividends or other distributions, if any, on
Summit Stock declared after the Effective Time; provided, however, that upon the
surrender and exchange of Prime Certificates following a dividend or other
distribution on Summit Stock there shall be paid to such Prime Shareholders the
amount, without interest, of dividends and other distributions, if any, which
became payable prior to such surrender and exchange but which were not paid.
(b) Holders of Prime Certificates as of the Effective Time shall cease to
be, and shall have no further rights as, shareholders of Prime.
(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 Prime Stock as of the Effective Time ("Prime
Shareholders") (including the address and social security number of and the
number of shares of Prime Stock held by each Prime Shareholder) from Prime
("Final Shareholder List"), Summit shall cause the Exchange Agent to send to
each Prime Shareholder instructions and transmittal materials for use in
surrendering and exchanging Prime Certificates for the Reorganization
Consideration. Summit shall consult with Prime with respect to the form and
4
<PAGE>
content of the transmittal instructions and materials and incorporate reasonable
suggestions. If Prime 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
Prime cause the Exchange Agent to cancel and exchange Prime 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 Prime,
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 Prime of the shares of Prime Stock which were
outstanding immediately prior to the Effective Time.
Section 1.08.Restated Certificate of Incorporation and By-Laws. In the
event that pursuant to the Reorganization Election Summit elects the
Reorganization method provided for at Section 1.01(a)(1): the Restated
Certificate of Incorporation of Summit in effect immediately prior to the
Effective Time shall be the Restated Certificate of Incorporation of the
corporation surviving the Reorganization ("Surviving Corporation"), except as
duly amended thereafter and except to the extent such is deemed by law to be
affected by the NJ Certificate; and 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. In the event that pursuant to the
Reorganization Election Summit elects the Reorganization method provided for at
Section 1.01(a)(2), the certificate or articles of incorporation and by-laws of
the Surviving Corporation shall be as set forth in Exhibit A.
Section 1.09.Board of Directors and Officers. In the event that pursuant
to the Reorganization Election Summit elects the Reorganization method provided
for at Section 1.01(a)(1): the Board of Directors of the Surviving Corporation
shall consist of the members of the Board of Directors of Summit at the
Effective Time; the officers of the Surviving Corporation shall consist of the
officers of Summit at the Effective Time; and 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. In the event that pursuant to the
Reorganization Election Summit elects the Reorganization method provided for at
Section 1.01(a)(2), the members of the Board of Directors and the officers of
the Surviving Corporation shall be as set forth in Exhibit A.
Section 1.10.Prime Stock Options.
(a) At the Effective Time, each Prime Option (as defined in Section
1.10(b) below) shall be deemed to constitute, and shall automatically be
converted on the terms set forth in this Section 1.10 into, options to purchase
Summit Stock and a corresponding number of Summit Rights in the event of the
prior distribution contemplated by Section 1.03(d) ("Converted Options") and
each Converted Option (i) shall immediately vest to the extent the related Prime
Option was vested or as provided in the Prime Stock Compensation Plan (as
defined at Section 2.01(d)(3) below) under which the related Prime Option was
granted and in the stock option agreement by which it was evidenced, and (ii)
shall be administered in all material respects in accordance with the terms and
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conditions provided for in the Prime Stock Compensation Plan under which the
related Prime Option was granted and in 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 Prime
Stock which would have been issuable upon exercise in full of the related Prime
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 Prime Option divided by the Converted Number and rounded up to the
nearest ten-thousandth of a dollar. In the event a Capital Change shall occur
prior to the Effective Time, an appropriate adjustment shall be made to the
terms of the Prime 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 Prime
Options, all information about the Prime Options and the holders thereof
(including the address and social security number of each such holder and a
description of the Prime 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 Prime Stock subject
thereto) and copies of each form of option agreement, warrant agreement or
letter agreement entered into between Prime and a holder of a Prime Option (all
of the foregoing being collectively referred to as the "Final Option List and
Materials"), Summit shall issue to the holders of such Prime 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 Prime 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 45 days after Prime shall have delivered
to Summit the Final Option List and Materials, and Summit knows of no reason why
it will not be able to do so. 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 any 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, Prime 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, "Prime Option" is hereby defined
to mean an option relating to the purchase of Prime Stock, and any rights
appurtenant thereto including Equity Based Rights (as defined at Section
2.01(d)(2) below), granted under a Prime 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 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 the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Prime acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Reorganization
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
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and on behalf of Prime or otherwise, all such deeds, bills of sale, assignments
and assurances and to take, in the name and on behalf of Prime, 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 Prime
Shareholders to surrender and exchange Prime Certificates for Reorganization
Consideration, Summit may, at its election, continue to retain the Exchange
Agent for purposes of the surrender and exchange of Prime Certificates or take
possession of such unclaimed Reorganization Consideration, in which such latter
case, Prime Shareholders who have theretofore failed to surrender and exchange
Prime Certificates shall thereafter look only to Summit for payment of the
Reorganization Consideration and the unpaid dividends and distributions on
Summit Stock declared after the Effective Time, without any interest thereon.
Notwithstanding the foregoing, none of Summit, Prime, the Exchange Agent or any
other person shall be liable to any former holder of shares of Prime Stock for
any property properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
Section 1.13.Lost Prime Certificates. In the event any Prime Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Prime Certificate to be lost, stolen or
destroyed and the posting by such person of a personal, nonsurety 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 Prime Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed Prime
Certificate the Reorganization Consideration deliverable in respect thereof
pursuant to this Agreement.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF PRIME
Prime represents and warrants to Summit as follows (where an item
required to be disclosed on a Prime Schedule is required to be disclosed on one
or more additional Prime Schedules, or where a copy of an item required to be
attached to a Prime Schedule is required to be attached to one or more
additional Prime Schedules, such disclosure or copy need not be provided on more
than one Prime Schedule provided the Prime 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 Prime Schedules which is
clear and unambiguous):
Section 2.01.Organization, Capital Stock.
(a) Each of Prime and its nonbank subsidiaries, including the nonbank
subsidiaries of Bank (as defined in Section 2.01(e) (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 by Prime or a "subsidiary" of
Prime; 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
Prime Schedule 2.01(a), is a corporation duly organized, validly subsisting and
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in good standing under the laws of the state of its incorporation, qualified to
transact business under the laws of all jurisdictions where it does business
except where the failure to be so qualified could not reasonably be expected to
have a material adverse effect on (i) the business, results of operations,
assets or financial condition of Prime and its subsidiaries on a consolidated
basis, or (ii) the ability of Prime to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement ("Prime Material
Adverse Effect"). However, a Prime Material Adverse Effect or Prime 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 Prime 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 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) Prime is registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended ("BHCA").
(c) Prime or one of its subsidiaries is the holder and beneficial owner
of all of the outstanding capital stock of all of Prime's direct and indirect
nonbank subsidiaries.
(d) (1) The authorized capital stock of Prime consists of 13,000,000
shares of Common Stock, par value $1.00 per share, of which 10,984,833 shares
are issued and outstanding as of the date hereof, and 2,000,000 shares of
Preferred Stock, par value $1.00 per share, of which no shares are issued or
outstanding. All issued and outstanding shares of the capital stock of Prime 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 to the best of Prime's knowledge 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 (as defined at Section 2.01(d)(4) below) of Prime 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 Prime outstanding, in existence, the subject of an
agreement or reserved for issuance ("Equity Based Rights") are listed on Prime
Schedule 2.01(d)(2) and all significant information relating to such Current
Equity Securities (other than Common Stock) and Equity Based Rights is listed on
Prime Schedule 2.01(d)(2) including without limitation, where applicable, name
of holder, address and relationship to Prime if not an employee of Prime or a
subsidiary, date of grant, award or issuance, expiration dates, vesting dates,
the Prime 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 to the best of Prime's knowledge an
appropriate exemption from registration under the Securities Act and were not
issued in violation of the preemptive rights of any shareholder.
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(3) All agreements, 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 ("Prime Stock Plan") are listed in Prime Schedule
2.01(d)(3). All Prime Stock Plans constituting a compensatory contract, plan or
arrangement ("Prime Stock Compensation Plan"), including all amendments thereto,
are separately identified on Prime Schedule 2.01(d)(3) and except as disclosed
thereon have been duly approved by the shareholders of Prime and such approvals
have been obtained in compliance with all applicable laws and with 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) Prime owns no bank subsidiary other than the Prime Bank ("Bank").
("bank" is hereby defined to include commercial banks, savings banks, private
banks, trust companies, savings and loan associations, building and loan
associations and similar institutions receiving deposits and making loans). Bank
is a bank duly organized, validly subsisting, and in good standing under the
laws of 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 Prime Material Adverse Effect. Bank is duly
authorized to conduct all activities and exercise all powers of a commercial
bank contemplated by the laws of its jurisdiction of organization. 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 Prime Schedule 2.01(f). Prime 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 Prime Schedule 2.01(f).
(g) All Equity Securities of its direct and indirect subsidiaries
beneficially owned by Prime or a subsidiary of Prime 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
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Prime's (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) quarterly reports on Form 10-Q filed pursuant to the Exchange Act
for the fiscal quarters ended March 31, 1998, June 30, 1998 and September 30,
1998 and the financial statements (and related notes and schedules thereto)
contained in Prime's draft annual report to shareholders for the fiscal year
ended December 31, 1998 attached hereto as Prime Schedule 2.02 (all of the
foregoing financial statements being collectively referred to as the "Prime
Financial Statements") are true and correct in all material respects as of their
respective dates and each fairly presents in all material respects (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 Prime 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 Prime 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 Prime 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 Prime Schedule 2.03,
Prime 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 Prime, or the
consummation of the transactions contemplated hereby including the
Reorganization by Prime 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 Prime or any
of its subsidiaries or upon any of the Equity Securities of Prime or any of its
subsidiaries, or constitute an event which could, with the lapse of time, action
or inaction by Prime 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 or articles of incorporation or articles of
association, as appropriate, or by-laws of Prime 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
(iv) any material note, bond, mortgage, indenture, lease, policy of
insurance or indemnity, license, contract, agreement or other
instrument;
to which Prime or any of its subsidiaries is a party or by which Prime 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 result in a
material adverse change in the business, results of operations, assets or
financial condition of Prime and its subsidiaries, on a consolidated basis, from
that reflected in the Prime Financial Statements as of and for the year ended
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December 31, 1998 ("Prime Material Adverse Change"), or enable any person to
enjoin the transactions contemplated hereby.
Section 2.04.Absence of Undisclosed Liabilities. Except as set forth on
Schedule 2.04, Prime 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 Prime 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 Prime Financial Statements or
disclosed in the notes thereto, (b) commitments made by Prime or any of its
subsidiaries in the ordinary course of its business, and (c) liabilities arising
in the ordinary course of its business since December 31, 1998, which are not in
the aggregate material to Prime and its subsidiaries, on a consolidated basis.
Other than as may be set forth on Prime Schedule 2.04, neither Prime nor any of
its subsidiaries has, since December 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 Pittsburgh 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 Prime or any of its subsidiaries
which materially and adversely affects Prime and its subsidiaries, on a
consolidated basis, and there are no actions, arbitrations, claims, charges,
suits, investigations or proceedings (formal or informal) material to Prime and
its subsidiaries, on a consolidated basis, pending or, to the best of Prime's
knowledge, threatened, against or involving Prime 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 Prime referred to in Section 2.02 or set forth in
Prime Schedule 2.05. Except as set forth on Prime Schedule 2.05, neither Prime
nor any subsidiary of Prime 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. Except as set forth
on Prime Schedule 2.05, neither Prime nor any subsidiary of Prime 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 Prime nor any subsidiary of Prime 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 Prime's or a Prime subsidiary's business nor has
Prime or any subsidiary of Prime been advised of any significant deficiencies by
any such agency in connection with any current examination of either Prime or a
subsidiary of Prime by any such agency.
Section 2.06.Brokers' Fees. Prime 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 Fox-Pitt,
Kelton Inc. ("Fox-Pitt"). Prime Schedule 2.06 consists of true and complete
copies of all agreements between Prime and Fox-Pitt with respect to the
transactions contemplated by this Agreement or similar transactions.
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Section 2.07.Regulatory Filings. All filings made by Prime and its
subsidiaries after December 31, 1995 with the SEC and the appropriate bank
regulatory authorities did not at the time of filing 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 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 or the Federal bank regulatory agency having securities
regulatory jurisdiction, as appropriate. 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 Prime and its subsidiaries at its respective date or 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. Except as set forth on Prime
Schedule 2.07, Prime and its subsidiaries have since December 31, 1995, 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 Prime of
this Agreement, the Reorganization and the other transactions contemplated
hereby in accordance with Prime's Articles of Incorporation and the Pennsylvania
Law at a meeting of such holders to be duly called and held, Prime 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 Prime has
taken all action required by law, its Articles of Incorporation, its By-Laws or
otherwise (i) to authorize the execution and delivery of this Agreement and (ii)
for shareholders of Prime to approve this Agreement and the transactions
contemplated hereby including the Reorganization by a simple majority of the
shares entitled to vote at the meeting held in accordance with Section 4.03.
Assuming due execution and delivery by and the enforceability against Summit of
this Agreement, this Agreement is a valid and binding agreement of Prime
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 Prime in authorizing the execution of
this Agreement has determined to recommend to the shareholders of Prime the
approval of this Agreement, the Reorganization and the other transactions
contemplated hereby.
Section 2.09.Absence of Changes. There has not been, since December 31,
1998, any Prime Material Adverse Change except as may be set forth in Prime
Schedule 2.09. Except as may be set forth in Prime Schedule 2.09, neither Prime
nor any of its subsidiaries has since December 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 Prime or other
subsidiaries of Prime, and an ordinary cash dividend to Prime shareholders of
$0.11 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
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course of business; (c) sold, exchanged or otherwise disposed of any of their
assets except in the ordinary course of business; (d) 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 $75,000, whether or not covered by insurance, adversely affecting its
business, property or assets, or waived any rights of value in excess of
$75,000; (f) entered into transactions other than in the ordinary course of
business which in the aggregate exceeded $150,000; 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.
Section 2.10.Allowance for Credit Losses. At December 31, 1998 and
thereafter the allowances for credit losses of Prime 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 Prime's knowledge, the loan and lease
portfolios of Prime in excess of such allowances are collectible in the ordinary
course of business. Prime Schedule 2.10 constitutes a list of all loans and
leases made by Prime 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. Subject to the exceptions set forth
on Prime Schedule 2.11:
Neither Prime 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 Prime 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
Prime 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. All federal, state and local returns
(as defined below) required to be filed have been timely filed by Prime 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), are accurate, 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 Prime or any of its subsidiaries, have been paid in full or adequate
provision therefor has been included on the books of Prime or its appropriate
subsidiary. Neither Prime nor any of its subsidiaries is required to file tax
returns with any state other than the Commonwealth of Pennsylvania. Provision
has been made on the books of Prime or its appropriate subsidiary for all unpaid
taxes, whether or not disputed, that may become due and payable by Prime 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 never audited the consolidated federal
income tax returns of Prime and the Commonwealth of Pennsylvania has never
audited the Pennsylvania income tax returns of Prime and its subsidiaries.
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Neither Prime nor any of its subsidiaries is subject to an audit or review of
its tax returns by any state other than the Commonwealth of Pennsylvania or the
State of Delaware. Neither Prime 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 the best of Prime's knowledge, threatened against
Prime or any of its subsidiaries, including a claim or assessment by any
authority in a jurisdiction where Prime or any of its subsidiaries do not file
tax returns and Prime 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 Prime 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 Prime or any of its subsidiaries, and neither
Prime nor any of its subsidiaries has any knowledge that the IRS has proposed
any such adjustment or change in accounting method. Prime 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, 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. Except as set forth in Prime Schedule 2.12,
Prime 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 Prime Financial Statements (except individual properties and
assets disposed of since December 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 Prime Financial Statements
or which in the aggregate do not materially adversely affect or impair the
operation of Prime and its subsidiaries on a consolidated basis. Prime and each
of its subsidiaries enjoys peaceful and undisturbed possession under all
material leases under which it is the lessee, where the failure to enjoy such
peaceful and undisturbed possession would be likely to have a Prime 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 Prime and its subsidiaries, on a consolidated basis.
Section 2.13.Condition of Properties; Insurance. All real and tangible
personal properties owned or leased by Prime or any of its subsidiaries are in a
good state of maintenance and repair, are in good operating condition, subject
to normal wear and tear, conform (as to owned properties only) in all material
respects to all applicable ordinances, regulations and zoning laws, and are
adequate for the business conducted by Prime or such subsidiary subject to
exceptions which are not, in the aggregate, material to Prime and its
subsidiaries, on a consolidated basis. Prime and each of its subsidiaries
maintains insurance (with companies which, to the best of Prime's knowledge, are
approved by all appropriate state insurance regulators to sell such insurance
where purchased by Prime) against loss relating to such properties and to the
best of Prime's knowledge such other risks as companies engaged in similar
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business located in Pennsylvania, 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 Prime and each of its subsidiaries from any
adverse loss resulting from risks and liabilities reasonably foreseeable at the
date hereof, and are disclosed on Prime Schedule 2.13. All material claims
thereunder have been filed in a due and timely fashion. Since December 31, 1994,
neither Prime 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 has Prime or any subsidiary 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, other than premium increases in the ordinary course
of business applicable on their terms to all insureds.
Section 2.14.Contracts.
(a) Except as set forth in Prime Schedule 2.14(a), neither Prime 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 $75,000.
(b) Except as set forth in, and, in Prime Schedule 2.03 or Prime Schedule
2.14(b), neither Prime 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 Prime bargaining contract
or union agreement) or other agreement with any director or any officer or other
employee of Prime or any subsidiary, the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a transaction
involving Prime or any of its subsidiaries of the nature contemplated by this
Agreement which is not terminable without penalty by Prime or a subsidiary, as
appropriate, on 60 days or less notice; (ii) contract or commitment for capital
expenditures in excess of $75,000 for any one project or in excess of $150,000
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 $75,000 (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 $75,000; (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, 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 Prime
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 Prime (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 Prime or any of its subsidiaries, (viii) contract (other than this
Agreement) limiting the freedom of Prime 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
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material to the business of Prime and its subsidiaries, on a consolidated basis,
and not made in the ordinary course of business.
(c) Neither Prime 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 Prime, is
materially adverse, onerous, or harmful to any aspect of the business of Prime
and its subsidiaries, on a consolidated basis.
Section 2.15.Pension and Benefit Plans.
(a) Neither Prime 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 maintained after
December 31, 1995, except employee pension benefit plans listed in Prime
Schedule 2.15(a) (individually a "Prime Pension Plan" and collectively the
"Prime Pension Plans"). In its present form each Prime Pension Plan complies in
all material respects with all applicable requirements under ERISA and the Code.
Each Prime Pension Plan and the trust created thereunder which is intended to be
qualified and exempt under Sections 401(a) and 501(a) of the Code is so
qualified and exempt, and Prime or the subsidiary whose employees are covered by
such Prime 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 Prime 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 Prime or any subsidiary whose employees are covered by a Prime 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 Prime Pension Plan's
qualification and the associated trust's 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 Prime Pension Plan or has been misled as to his or her rights under
such Prime Pension Plan. No Prime Pension Plan is subject to Section 412 of the
Code or Title IV of ERISA. Except as set forth on Prime Schedule 2.15(c), no
person has engaged in any prohibited transaction involving any Prime 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 Prime Pension Plans or any fiduciary thereof
which would subject Prime 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 Prime is a member and which is under
common control within the meaning of Section 414 of the Code. Neither Prime 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. Except as set forth in Prime Schedule 2.15(a), there are no
unfunded benefit or pension plans or arrangements, or any individual agreements
whether qualified or not, to which Prime or any of its subsidiaries or ERISA
Affiliates has any obligation to contribute and the present value of all
benefits vested and all benefits accrued under each Prime Pension Plan which is
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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 Prime Pension Plan
allocable to such vested or accrued benefits. No Prime Pension Plan or any trust
created thereunder has been terminated, nor has there been any "reportable
events" with respect to any Prime Pension Plan, as that term is defined in
Section 4043 of ERISA since December 31, 1992. No Prime 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 Prime
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 Prime 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 Prime Stock Compensation Plans and medical,
major medical, disability, life insurance or dental plans covering employees
generally, other than the Prime Pension Plans, maintained by Prime or any of its
subsidiaries with an annual cost in excess of $75,000 (collectively "Prime
Benefit Plans") are listed in Prime Schedule 2.15(b) (unless already listed in
Prime Schedule 2.15(a) or Prime 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 Prime 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 Prime 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 Prime Benefit Plan's qualification
and any associated trust's 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 Prime Benefit
Plans or has been misled as to their rights under the Prime Benefit Plans. There
are no pending or threatened claims (other than routine claims for benefits)
against the Prime Benefit Plans which would subject Prime 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 Prime 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 the best of Prime's knowledge, threatened
litigation, administrative action or proceeding relating to any Prime Benefit
Plan or Prime Pension Plan. There has been no announcement or commitment by
Prime or any subsidiary of Prime to create an additional Prime Benefit Plan or
Prime Pension Plan, or to amend a Prime Benefit Plan or Prime Pension Plan,
except for amendments required by applicable law, which may materially increase
the cost of such Prime Benefit Plan or Prime Pension Plan and, except for any
plans or amendments expressly described on Prime Schedule 2.01(d)(3), Prime
Schedule 2.15(a) or Prime Schedule 2.15(b), Prime and its subsidiaries do not
have any obligations for post-retirement or post-employment benefits under any
Prime Benefit Plan (exclusive of any coverage mandated by the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA") that cannot be amended or
terminated upon more than sixty (60) days' notice without incurring any
liability thereunder. Disclosed on Prime Schedule 2.15(c) with respect to each
Prime Benefit Plan and Prime Pension Plan, to the extent applicable, is (A) the
most recent annual report on the applicable form of the Form 5500 series filed
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with the IRS with all the attachments filed, (B) such Prime Benefit Plan or
Prime 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, 1995, Prime and each of
its subsidiaries has continuously maintained fidelity bonds insuring them
against acts of dishonesty in such amounts as are customary, usual and prudent
for organizations of its size and business. All material claims thereunder have
been filed in a timely fashion. Since December 31, 1992, there has been no
individual claim under such bonds in excess of $1 million and since December 31,
1995 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 $100,000), neither Prime 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, the cost of which has not been reserved or expensed in
the Prime Financial Statements, and aggregate deductible amounts both incurred
and reserved or expensed since December 31, 1995 have not exceeded $1 million.
Neither Prime 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 Prime's and its subsidiaries' past claim experience.
Section 2.17.Labor Matters. Hours worked by and payment made to employees
of Prime 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 Prime 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 Prime or its appropriate subsidiary. Prime 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 Prime 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 its knowledge threatened with respect to Prime or any of its
subsidiaries. Since December 31, 1994, no employee of Prime 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 Prime 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 Prime pending with, or, to
the knowledge of Prime, threatened by, any labor organization or group of
employees of Prime.
Section 2.18.Books and Records. The minute books of Prime and each of its
subsidiaries contain complete and accurate records of and fairly reflect all
actions taken at all meetings of the shareholders and of the boards of directors
and committees thereof and accurately reflect all other corporate action of the
shareholders and the boards of directors and each committee thereof. The books
and records of Prime and each of its subsidiaries fairly and accurately reflect
the transactions to which Prime 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.
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Section 2.19.Concentrations of Credit. No customer or affiliated group
(as defined by applicable banking laws and regulations) of customers (a) is owed
by Prime or any subsidiary of Prime an aggregate amount equal to more than 10%
of the shareholders' equity of Prime or such subsidiary (including deposits,
other debts and contingent liabilities) or (b) owes to Prime or any of its
subsidiaries an aggregate amount equal to more than 10% of the shareholders'
equity of Prime or such subsidiary (including loans and other debts, guarantees
of debts of third parties, and other contingent liabilities) other than as set
forth in Prime Schedule 2.19.
Section 2.20.Trademarks and Copyrights. Neither Prime nor any of its
subsidiaries has received written notice that the manner in which Prime 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 Prime nor any of its subsidiaries
owns, directly or indirectly, except for the equity interests of Prime in Bank
and the equity interests disclosed on Prime Schedule 2.01(a) and Prime 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 $35,000 acquired in connection with a foreclosure or debt previously
contracted. None of the investments reflected in the consolidated balance sheet
of Prime as of December 31, 1998, and none of such investments made by it or any
of its subsidiaries since December 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
Prime or any of its subsidiaries.
Section 2.22.Environmental Matters.
(a) Except as disclosed on Prime Schedule 2.22 or as may be disclosed in
the Forms 10-K and 10-Q of Prime referred to in Section 2.02 hereof:
(1) To Prime's actual knowledge, 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 Prime 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 Prime 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 Prime 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 Prime 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 Prime 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;
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(3) To Prime's actual knowledge (with Summit waiving any duty of
inquiry, if applicable), other than loans to known gasoline service stations and
loans to industrial enterprises where the storage of Hazardous Substances occurs
in the normal course of business or is generally permitted by applicable laws,
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 Prime or any of
its subsidiaries from recovering the full value of its loan in the event of a
foreclosure on such Loan Property.
(b) Except as disclosed on Prime Schedule 2.22, neither Prime 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) has
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 Prime 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 (A) for pooling-of-interest accounting
treatment, or (B) as a reorganization within the meaning of Section 368(a) 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 Prime or any of its subsidiaries
to present or former directors or executive officers of Prime or any subsidiary
of Prime, or their associates, or any members of their immediate 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 Prime Schedule 2.24(b), no
present or former officer or director of Prime or any of its subsidiaries or any
Associated Person (as defined in Section 2.24(d) below):
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(1) has any interest in any property, real or personal, tangible
or intangible, used in or pertaining to the business of Prime 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 Prime or any of its subsidiaries ("Insider
Agreements");
(3) has received from Prime 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 Prime 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 person's employer and reimbursable according to a policy of
Prime or such subsidiary, as appropriate, as in effect immediately prior to the
date hereof ("Insider Indebtedness").
(c) Except as set forth in Prime 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 Prime or any of its subsidiaries or any successor or
assign thereof to any director, officer or employee of Prime or any of its
subsidiaries or any successor or assign of such subsidiary, other than payments
and benefits due under the contracts and agreements set forth in Prime Schedule
2.14(b).
(d) "Associated Person" means (i) any holder of 10% of more of the
outstanding shares of Prime Stock, (ii) any associate (as "associate" is defined
at Rule 14a-1(a) of the SEC) or relative ("relative" for purposes of this
Section 2.24 is defined as any person having a family relationship with the
subject person, as family relationship is defined in the Instruction to
Paragraph 401(d) of Regulation S-K of the SEC) of a present or former director
or executive officer of Prime or any of its subsidiaries, (iii) any entity
controlled, directly or indirectly, individually or in the aggregate, by any
present or former director or executive officer of Prime 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 Prime or
any of its subsidiaries or any relative or associate of any of such persons.
Section 2.25 Registration Obligations. Neither the Prime nor any of its
subsidiaries is under any contractual obligation, contingent or otherwise, to
register any of its securities under the Securities Act.
Section 2.26 Corporate Documents. Prime has previously provided Summit
with 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 Prime and of each of its subsidiaries.
Section 2.27 Community Reinvestment Act Compliance. Prime and its
subsidiaries 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 their last completed
examination. As of the date of this Agreement, Prime has not been advised of the
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existence of any fact or circumstance or set of facts or circumstances which, if
true, would cause Prime or any subsidiary to fail to be in substantial
compliance with such provisions.
Section 2.28 Business of Prime. Since December 31, 1998, Prime has
conducted its business only in the ordinary course. For purposes of the
foregoing, Prime has not, since December 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 Prime, (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.
Section 2.29 Interest Rate Risk Management Instruments.
(a) Set forth on Prime 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 Prime 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 Prime 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 Prime or a subsidiary and are in full
force and effect. Prime 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.Takeover Laws; Dissenters' Rights. Prime has taken all
action required to be taken by it in order to exempt this Agreement, the Option
Agreement and the transactions contemplated by each from, and this Agreement,
the Option Agreement and the transactions contemplated by each are exempt from,
the requirements of any "moratorium", "control share", "fair price", "affiliate
transaction", "control transaction", business combination" or other antitakeover
laws and regulations of the Commonwealth of Pennsylvania, including, without
limitation, Chapter 25 of the Pennsylvania Law except Subchapter F, which is
applicable.
Section 2.31.Year 2000 Compliant. To the best knowledge of Prime, all
computer software and hardware owned or licensed by Prime or any of its
subsidiaries is, or Prime has taken or is taking 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 owned or
licensed by Prime is, or Prime has taken steps or is taking 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 operate 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.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SUMMIT
Summit represents and warrants to Prime 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 (i) 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 173,756,531 shares were issued and outstanding as of December 31, 1998 and
(ii) 6,000,000 shares of Preferred Stock, each without par value, of which no
shares are issued and outstanding and 1,500,000 shares of Series R Preferred
Stock are 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 could
reasonably be expected to 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 and each has complied with all applicable laws, regulations
and orders except where the failure to comply would not constitute a Summit
Material Adverse Effect. 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 registration
statement under the Securities Act or to the best of Summit's knowledge 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 Summit Rights Agreement.
(d) All Equity Securities of its direct and indirect subsidiaries
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beneficially owned by Summit or a subsidiary of Summit are held free and clear
of any claims, liens, encumbrances or security interests.
(e) Each bank subsidiary of Summit is duly authorized to conduct all
activities and exercise all powers of a commercial bank or savings bank
contemplated by the laws of its jurisdiction of organization. Each such bank
subsidiary is an insured bank as defined in the Federal Deposit Insurance Act.
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) quarterly reports on Form 10-Q filed
pursuant to the Exchange Act for the fiscal quarters ended March 31, 1998, June
30, 1998 and September 30, 1998 (the "Summit Financial Statements") are true and
correct in all material respects as of their respective dates and each fairly
presents in all material respects (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
or 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;
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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 nine months ended September 30,
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
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
[as to which Summit has not been advised of any significant deficiencies].
Section 3.05.Regulatory Filings. At the time of filing, all filings made
by Summit and its subsidiaries after December 31, 1995 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, 1995 timely made all
filings required by the Securities Act and the Exchange Act, as appropriate, and
all applicable rules and regulations thereunder of the SEC or the Federal bank
regulatory agency having securities regulatory jurisdiction, as appropriate.
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 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 is included.
Section 3.06.Corporate Action.
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(a) Assuming due execution and delivery by Prime, 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
is not required by applicable law. Assuming due execution and delivery by and
the enforceability against Prime of this Agreement, 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 that pursuant to the Reorganization Election Summit
elects the Reorganization method provided for at Section 1.01(a)(2), the
Designated Summit Subsidiary will prior to Closing (i) have the corporate power
and be duly authorized by all necessary corporation action to execute, deliver
and perform this Agreement and (ii) the Board of Directors and sole shareholder
of the Designated Summit Subsidiary will have taken all action required by law,
its certificate or articles of incorporation and by-laws and otherwise to
authorize the execution and delivery of this Agreement and to approve this
Agreement and the transactions contemplated hereby including the Reorganization.
Assuming due execution and delivery by and the enforceability against each of
the other parties hereto, this Agreement will be a valid and binding agreement
of the Designated Summit Subsidiary 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 September 30,
1998, any Summit Material Adverse Change and there is no matter or fact known to
Summit which may result in any such Summit Material Adverse Change in the
future.
Section 3.08 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 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 September 30, 1998 which
are not in the aggregate material to Summit and its subsidiaries, on a
consolidated basis.
Section 3.09.Allowance for Credit Losses. At September 30, 1998 and
thereafter, the allowances for credit 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.
Section 3.10. Accounting, Tax and Regulatory Matters. Neither Summit nor
any of its subsidiaries has taken or agreed to take any action or has any
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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(a) 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 3.11. Community Reinvestment Act Compliance. Summit and its
subsidiaries 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 their last completed
examination. As of the date of this Agreement, Summit and its subsidiaries have
not been advised of the existence of any fact or circumstance or set of facts or
circumstances which, if true, would cause Summit or any bank subsidiary to fail
to be in substantial compliance with such provisions.
Section 3.12.Year 2000 Compliant. To the best knowledge of Summit, all
computer software and hardware owned or licensed by Summit or any of its
subsidiaries is, or Summit has taken or is taking 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, except where the failure to be so
compliant would not have a Summit Material Adverse Effect. All computer software
owned or licensed by Summit is, or Summit has taken steps or is taking 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 that such software will
operate 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, except
where the failure to be so designed or to so operate would not have a Summit
Material Adverse Effect.
Section 3.13.Beneficial Ownership of Prime Stock. Summit is the
beneficial owner of 106,700 shares of Prime Stock on the date hereof.
ARTICLE IV.
COVENANTS OF PRIME
Prime hereby covenants and agrees with Summit that:
Section 4.01.Preparation of Registration Statement and Applications for
Required Consents. Prime 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 Prime to solicit shareholders of Prime
for approval of the Reorganization. In connection therewith, Prime will furnish
all financial or other information, including using reasonable best efforts to
obtain customary consents, certificates, opinions of counsel and other items
concerning Prime, deemed reasonably 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). Prime will
cooperate with Summit and provide such information as may be advisable and
reasonably available to Prime 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
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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 Prime and its counsel a reasonable opportunity
to comment on such filings and regulatory applications and will give due
consideration to any comments of Prime and its counsel before making any such
filing or application, and Summit will provide Prime 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. Prime covenants and
agrees that all information furnished in writing by Prime expressly for
inclusion in the Registration Statement, the Proxy-Prospectus, and all
applications to appropriate regulatory agencies for approval of the
Reorganization 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 together with all information
furnished in writing by Prime to Summit in connection with obtaining Required
Consents 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. Prime will furnish to Fox-Pitt such information
about Prime reasonably available to it as Fox-Pitt may reasonably request for
purposes of the opinion referred to in Section 8.07.
Section 4.02.Notice of Adverse Changes. Prime 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 Prime contained in this
Agreement or the Prime 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 Prime Material Adverse Change, (c) any inability or perceived
inability of Prime 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 Prime or any of its subsidiaries or assets,
which, if determined adversely to Prime or any of its subsidiaries, would have a
Prime Material Adverse Effect or an 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 Prime or a subsidiary subsequent to the date hereof and
prior to the Effective Time, under any agreement, indenture or instrument to
which Prime or a subsidiary is a party or is subject and which is material to
the business, operation or condition (financial or otherwise) of Prime 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. Prime 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. Prime will call a meeting of its
shareholders for the purpose of voting upon this Agreement, the Reorganization
and the transactions contemplated hereby. The meeting of Prime shareholders
contemplated by this Section 4.03 will be held as promptly as practicable and,
in connection therewith, will comply with the Pennsylvania Law and the Exchange
Act and all regulations promulgated thereunder governing shareholder meetings
and proxy solicitations. In connection with such meeting, Prime shall mail the
Proxy-Prospectus to Prime shareholders and use its reasonable best efforts to
obtain shareholder approval of this Agreement, the Reorganization and the
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transactions contemplated hereby; provided, however, that no director of Prime
shall be obligated to take any action under this Section 4.03 in such person's
capacity as a director which such person reasonably believes on the advice of
counsel to be contrary to his fiduciary duty as a director.
Section 4.04.Copies of Filings. Without limiting the provisions of
Section 4.01, Prime will deliver to Summit, at least 48 hours prior to an
anticipated date of filing or distribution or as soon thereafter as practicable,
all documents to be filed with the SEC or any bank regulatory authority or to be
distributed in any manner to the shareholders of Prime 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, Prime
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 Prime to Prime or
other subsidiaries of Prime except that Prime may declare, set aside and pay a
dividend of $0.11 per share of Prime Stock per quarter; provided, however, if
the Effective Time has not occurred by November 30, 1999, Prime shall be
permitted to increase the amount of its quarterly dividend to $.13 per share of
Prime Stock per quarter;
(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 Prime into
other subsidiaries of Prime) or enter into any other transaction not in the
ordinary course of the banking business;
(d) except as set forth on Prime Schedule 4.05(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 (i) transactions in the ordinary course of business or other transactions
involving not more than $75,000, and (ii) costs and expenses incurred in
connection with the Reorganization and other transactions contemplated by this
Agreement;
(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 Prime and its subsidiaries, on a consolidated
basis;
(f) except as set forth in Prime Schedule 4.05(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) except as set forth in Prime Schedule 4.05(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 Prime Pension Plans and the Prime Benefit Plans (collectively,
"Prime Plans"), or change the level of benefits, reduce eligibility, performance
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or participation standards, increase any payment or benefit under any Prime
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, the Prime Bancorp, Inc.
Directors Deferred Compensation Plan or the exercise of director and employee
stock options and warrants granted prior to the date hereof under the Prime
Stock Compensation Plans and exercisable and outstanding under the terms of a
Prime 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 or articles of
association, as appropriate, charter or by-laws;
(k) modify, amend or cancel any of its existing borrowings other than in
the ordinary course of business and other than intra-corporate borrowings and
borrowings of federal funds from correspondent banks and the Federal Home Loan
Bank of Pittsburgh 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 Prime or any of its
subsidiaries, on a consolidated basis;
(l) create, amend, increase, enhance, accelerate the exercisability of,
or release or waive any forfeitures, terminations or expirations of or
restrictions on any rights, awards, benefits, entitlements, options or warrants
under the Prime Plans including Equity Securities and Equity Based Rights
outstanding ;
(m) make any employer contribution to a Prime Plan which under the terms
of the particular plan is voluntary and within the discretion of Prime to make,
other than regular contributions to Prime's 401(k) Plan and except as provided
for in Prime Schedule 4.05(m);
(n) make any determination or take any action, discretionary or
otherwise, under or with respect to any Prime Plan other than routine
administration in accordance with past precedent;
(o) notwithstanding any other provision of this Agreement, enter into 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 Insider Agreement or any agreement, understanding,
contract, commitment or transaction relating to any Insider Indebtedness, except
to the extent permitted by Section 4.12 or disclosed in Prime Schedule 2.24(b);
(p) other than in the ordinary course of business and in compliance with
applicable laws and regulations, enter into, increase or renew any loan or
credit commitment (including standby letters of credit) to any executive officer
or director of Prime or any of its subsidiaries, any holder of 10% of more of
the outstanding shares of Prime 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.
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ss.371c and 12 U.S.C. ss.371c-1. For purposes of this Section 4.05(p), "control"
shall have the meaning associated with that term under 12 U.S.C. ss.371c; or
(q) take or fail to take any discretionary action provided for under the
terms of 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.
Section 4.06.Operation of Business in Ordinary Course. Prime, 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 Prime or any of its subsidiaries may terminate any employee for
unsatisfactory performance or other reasonable business purpose, and provided
further, however, that Prime will notify and consult with Summit prior to
terminating any of the five highest paid employees of Prime; (d) will use their
best efforts to continue to maintain fidelity bonds insuring Prime 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; and (e) will not
change their methods of accounting in effect at December 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 ended December 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
Prime's independent certified public accountants.
Section 4.07.Further Actions. Prime 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 its reasonable best 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 reasonable 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, Prime 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 reasonable 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 Prime or any of its subsidiaries.
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Section 4.09.Copies of Documents. As promptly as practicable, but not
later than 30 days after the date hereof, Prime will furnish to or make
available to Summit all the documents, contracts, agreements, papers, and
writings referred to in the Prime Schedules or called for by the list attached
hereto as Exhibit C (the "Post-Signing Document List"), except where prohibited
by law.
Section 4.10.Applicable Laws. Prime and its subsidiaries will use their
reasonable best efforts to comply promptly with all requirements which federal
or state law may impose on Prime 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. Prime 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 Prime Stock by
such persons and also identifies the manner in which all such beneficially owned
shares of Prime Stock are registered on the stock record books of Prime) who in
the written opinion of counsel to Prime (which opinion need not be furnished to
Summit), constitute all the affiliates of Prime for the purposes of Rule 145
under the Securities Act (an "Prime Affiliate"). Prime agrees to use its
reasonable best efforts (i) to cause each Prime Affiliate to enter into an
agreement effective upon the execution thereof, satisfactory in form and
substance to Summit and (y) substantially in the form of Exhibit D-1 with
respect to Affiliates who are directors or officers of Prime or a subsidiary of
Prime, or (z) substantially in the form of Exhibit D-2 with respect to
Affiliates who are not directors or officers of Prime or a subsidiary of Prime
(an "Affiliate Agreement"), and (ii) to furnish such Affiliate Agreements to
Summit no later than 5 business days prior to the date of mailing of the
Proxy-Prospectus.
Section 4.12.Loans and Leases to Affiliates. All loans and leases
hereafter made by Prime 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
Prime or its representatives pursuant hereto shall be treated as the sole
property of Summit and, if the Reorganization shall not occur, Prime 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 Prime or any committee thereof for the purpose of considering
this Agreement, the Reorganization and the related transactions may be kept and
maintained by Prime with other records of Board, and Board committee, meetings
subject to a continuing obligation of confidentiality. Prime shall, and shall
use its reasonable 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 Prime's possession prior to the
disclosure thereof by Summit, (y) was then generally known to the public, or (z)
was disclosed to Prime 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, Prime is nonetheless, in the written opinion of its outside counsel,
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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, Prime may disclose such information to such tribunal or
governmental body or agency without liability hereunder and shall so notify
Summit in advance to the extent practicable. This Section 4.13 shall survive any
termination of this Agreement.
Section 4.14.Dividends. Prime will coordinate with Summit the declaration
of any dividends and the record and payment dates thereof so that the holders of
Prime Stock will not be paid two dividends for a single calendar quarter with
respect to their shares of Prime 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. Prime
will notify Summit at least five business days prior to any proposed dividend
declaration date.
Section 4.15.Acquisition Proposals. Prime agrees that neither Prime nor
any of its subsidiaries nor any of the respective officers and directors of
Prime or its subsidiaries shall, and Prime 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 Prime 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 Prime or any of its subsidiaries or the
acquisition of any assets (otherwise than as permitted by Section 4.05) or
securities of Prime or any of its subsidiaries. Prime 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. Prime
will take the necessary steps to inform the individuals or entities referred to
in the first sentence hereof of the obligations undertaken in this Section. In
addition, Prime 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 Prime 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 Prime.
Section 4.16 Tax Opinion Certificates. Prime 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 Prime shall use its reasonable best
efforts to cause each of its executive officers, directors and holders of five
percent (5%) or more of outstanding Prime 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. Prime and each of its
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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 Prime. Prime shall renew any existing D&O Insurance or purchase any
"discovery period" D&O Insurance provided for thereunder at Summit's request.
Section 4.18.Conforming Entries.
(a) Notwithstanding that Prime believes that Prime 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, Prime 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, Prime and Summit shall consult and cooperate with each other with
respect to conforming the loan, accrual and reserve policies of Prime and its
subsidiaries to those policies of Summit, as specified in each case in writing
to Prime, based upon such consultation and as hereinafter provided.
(b) In addition, from and after the date of this Agreement, Prime and
Summit shall consult and cooperate with each other with respect to determining
appropriate accruals, reserves and charges for Prime 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 Prime, based upon such consultation and as hereinafter provided.
(c) Prime and Summit shall consult and cooperate with each other with
respect to determining the amount and the timing for recognizing for financial
accounting purposes Prime'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 4.18, (i) it
is the objective of Prime and Summit that such reserves, accruals, charges and
divestitures, if any, to be taken shall be consistent with generally accepted
accounting principles, and (ii) Prime shall not be obligated to make a
particular conforming entry if the particular entry is not capable of being
reversed upon a termination of this Agreement or if the entry would have a
material adverse effect on Prime.
Section 4.19 Cooperation with Policies and Procedures. Prime, 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
4.18 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 Prime's existing policies and procedures in respect thereof,
provided that Prime shall not be required to conform a policy or procedure (y)
if such would cause Prime or any of its subsidiaries to be in violation of any
law, rule, regulation or requirement of any governmental regulatory authority
having jurisdiction over Prime or any of its subsidiaries affected thereby, or
(z) if such conforming change is not capable of being reversed upon a
termination of this Agreement or if the change would have a material adverse
effect on Prime.
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Section 4.20 Environmental Reports. Prime shall disclose to Summit all
matters of the types described in Section 2.22 hereof which Prime would have
been required to disclose to Summit on the date hereof if known to Prime on the
date hereof, as such become known to Prime between the date hereof and the
Effective Time. In addition, Summit may at its expense 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 Prime or any of its subsidiaries
as of the date of this Agreement (but excluding space in retail or similar
establishments leased by Prime for automatic teller machines or leased bank
branch facilities where the space leased by Prime comprises less than 20% of the
total space leased to all tenants of such property), and (ii) within 15 days
after being notified by Prime 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 Prime for automatic teller machines or leased bank branch facilities
where the space leased by Prime comprises less than 20% of the total space
leased to all tenants of such property). If the results of a phase one
investigation (whether requested by Prime or Summit) 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 Prime 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
(without regard to who requested such reports) or as may be prudent in light of
serious life, health or safety concerns), if any, is in the aggregate in excess
of $3,000,000, 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.
Section 4.21 Best Efforts to Ensure Pooling. Prime agrees to use, and
agrees to cause each of its subsidiaries to use, its and their best efforts to
cause the Reorganization to qualify for pooling-of-interests accounting
treatment.
ARTICLE V.
COVENANTS OF SUMMIT
Summit hereby covenants and agrees with Prime that:
Section 5.01.Approvals and Registrations. Based on such assistance and
cooperation of Prime as Summit shall reasonably request, Summit will use its
reasonable 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, and (c) with the NYSE, an application for the listing of the
shares of Summit Stock issuable upon the Reorganization, subject to official
notice of issuance, and (d) with any state regulatory authority having
jurisdiction over the Reorganization, applications for such consents or
approvals as may be required for consummation of the transactions contemplated
by this Agreement, 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 Prime Affiliates. Summit
covenants and agrees that all information furnished by Summit for inclusion in
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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 use its reasonable best efforts to seek
the effectiveness of the Registration Statement. Summit will furnish to Fox-Pitt
such information about Summit reasonably available to it as Fox-Pitt 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 Prime
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) 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
parties' ability to consummate 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 Prime of any of the provisions of
Articles VI or VIII.
Section 5.03.Copies of Filings. Summit shall promptly provide to Prime
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 Prime may reasonably require to carry
out the intent of this Agreement; (b) use its reasonable best 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 reasonable best
efforts so that the other conditions precedent to the obligations of Prime set
forth in Articles VI and VIII hereof are satisfied.
Section 5.05.Applicable Laws. Summit will use its reasonable 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 Prime in connection with any such requirements
imposed upon Prime or on any of its subsidiaries in connection with the
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Reorganization.
Section 5.06.Unpaid Prime Dividends. By virtue of the Reorganization and
without further action on anyone's part, Summit shall assume the obligation of
Prime to pay dividends, if any, on Prime 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 Prime
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 Prime's representatives covering
the business and affairs of Summit or any of its subsidiaries.
Section 5.08.Confidentiality. All information furnished by Prime to
Summit or its representatives pursuant hereto shall be treated as the sole
property of Prime and, if the Reorganization shall not occur, Summit and its
representatives shall return to Prime 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 reasonable 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 Summit's possession prior to the
disclosure thereof by Prime, (y) was then generally known to the public, or (z)
was disclosed to Summit 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, Summit is nonetheless, in the written opinion of its counsel,
compelled to disclose information concerning Prime 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
Prime 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(a) 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.
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(a) Summit shall indemnify persons who served as directors and officers
of Prime or any subsidiary of Prime 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 and the certificate or articles of incorporation and by-laws of Prime or
the applicable subsidiary of Prime, all as in effect on the date of this
Agreement and to the extent permitted by law, and Summit shall advance expenses
in matters that may be subject to indemnification in accordance with its
Restated Certificate of Incorporation and By-Laws in effect on the date of this
Agreement and any applicable provisions of law.
(b) Subject to Prime's obligation set forth at Section 4.17: For a period
of six (6) years after the Effective Time, Summit will use its reasonable best
efforts to provide to the persons who served as directors or officers of Prime
or any subsidiary of Prime 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 Prime 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
reasonable 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 Prime and its subsidiaries referred to herein are
intended to be third party beneficiaries and shall be enforceable by the such
persons and their heirs and representatives. Summit's obligations under this
Section 5.10 shall survive the Effective Time.
Section 5.11.Employee Matters. After the Effective Time, Summit may in
its discretion maintain, terminate, merge or dispose of the Prime 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 to a Prime Plan which
is, respectively, a defined contribution plan, defined benefit plan or health
and welfare plan available to all Prime employees generally, then, if such Prime
Plan is terminated by Summit or is otherwise rendered inactive by Summit, Summit
shall offer to the former employees of Prime affected by such plan termination
or cessation of activity the opportunity to participate in the similar plan of
Summit.
Section 5.12.Tax Opinion Certificates. Summit 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, 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).
ARTICLE VI.
CONDITIONS PRECEDENT TO THE RESPECTIVE OBLIGATIONS OF
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SUMMIT AND PRIME
The respective obligations of Summit and Prime 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 Prime in
accordance with Section 10.09:
Section 6.01.Receipt of Required Consents. Summit and Prime 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 Prime, 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 Prime shall have received
from Thompson Coburn an opinion addressed to Prime, Summit and all shareholders
of Prime (the "Tax Opinion"), reasonably satisfactory in form and substance to
Prime and Summit, to the effect that (a) the Reorganization will constitute a
tax-free reorganization within the meaning of Section 368(a) of the Code, (b)
except with respect to fractional share interests, holders of Prime 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 Prime 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 Prime Stock for which it is exchanged,
assuming that such Prime 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 (y) 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 (z) 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 authority,
shall have been instituted or threatened against Summit or any of its
subsidiaries, or Prime 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 Prime 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
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Prime 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 December 31, 1998 any Prime Material Adverse Change or any material
loss or damage to the properties of Prime or any of its subsidiaries, whether or
not insured, which materially affects the ability of Prime 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,
changes 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, all representations and warranties made by Prime in this
Agreement and the Prime 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. Prime shall have complied in all material respects with all covenants
and agreements contained herein to be performed by Prime.
Section 7.03.Secretary's/Assistant Secretary's Certificate. Prime 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 Prime relating to this Agreement, the Option Agreement and the Reorganization
and related transactions, which such certificate shall be signed by the
Secretary or an Assistant Secretary of Prime and certify to the satisfaction of
the condition set forth in Section 7.09 and the truth, correctness, completeness
and continuing effectiveness of all resolutions and actions contained or
referenced in the aforementioned attachments.
Section 7.04.Officer's Certificate. Prime shall have furnished to Summit
a certificate signed by the Chief Executive Officer of Prime, 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 Prime, and at Sections 7.01, 7.02, 7.07 and 7.10.
Section 7.05.Opinion of Prime's Counsel. Summit shall have received an
opinion of Stradley, Ronon, Stevens & Young, LLP or Blank, Rome, Comisky &
McCauley, LLP, counsel to Prime, 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.
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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 Prime 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 parties to each
mortgage, note, lease, permit, franchise, loan or other agreement or contract to
which Prime 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 Prime and its subsidiaries on a consolidated basis, shall have
been obtained.
Section 7.08.FIRPTA Affidavit. Prime shall have delivered to Summit an
affidavit of an executive officer of Prime dated the date the Closing occurs
stating, under penalties of perjury, that Prime 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 Prime, 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 Prime's Articles of Incorporation and By-Laws.
Section 7.10.Absence of Regulatory Agreements. Neither Prime nor Bank
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 Prime and its subsidiaries on a consolidated
basis, and neither Prime 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. In the event Summit shall elect to
account for the Reorganization on a pooling-of-interest basis, Prime shall use
its best efforts to have a sufficient number of Prime Affiliates execute and
deliver Affiliate Agreements to Summit such that, in the reasonable opinion of
Summit based on consultation with its independent accounting firm, the
Reorganization may be accounted for on a pooling-of-interests basis.
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 PRIME
The obligation of Prime to consummate the Reorganization is subject to
the simultaneous satisfaction of all of the following conditions, compliance
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with which or the occurrence of which may be waived in whole or in part by Prime
in writing in accordance with Section 10.09:
Section 8.01.No Adverse Changes. There shall not have occurred at any
time after September 30, 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 and
Summit shall have complied in all material respects with all covenants and
agreements contained herein or therein to be performed by Summit; provided,
however, that no representation, warranty or covenant of Summit shall be
construed to limit or prohibit any business or financing activities of Summit
including by way of illustration and not limitation, the entry by Summit after
the date hereof into any agreement to acquire any assets or any company or other
entity, the issuance of any debt or equity securities in public or private
offerings, the issuance of Series R Preferred Stock pursuant to the Summit
Rights Agreement, the redemption or repurchase by Summit of its capital stock,
the Summit Rights or the Series R Preferred Stock issuable pursuant to the
Summit Rights Agreement, and any transactions reasonably necessary or
appropriate in connection therewith, and no such business or financing activity
shall constitute a breach of any representation, warranty or covenant of Summit;
provided further, however, that Summit agrees that it will not permit any such
transaction to cause any delay in the consummation of the Reorganization in
excess of 60 days.
Section 8.03.Secretary's Certificate.
(a) Summit shall have furnished to Prime 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 truth, correctness, completeness
and continuing effectiveness of all resolutions and actions contained or
referenced in the aforementioned attachments.
(b) In the event that pursuant to the Reorganization Election Summit
elects the Reorganization method provided for at Section 1.01(a)(2), the
Designated Summit Subsidiary shall have furnished to Prime 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 and shareholders
(including committees thereof) of the Designated Summit Subsidiary relating to
this Agreement, the Reorganization and related transactions, which such
certificate shall be signed by the Secretary of the Designated Summit Subsidiary
and certify to satisfaction of the condition set forth at Section 8.09
applicable to the Designated Summit Subsidiary and to the truth, 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 Prime
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, 8.08 and 8.11.
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Section 8.05.Opinion of Summit Counsel. Prime 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 Prime,
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 Prime, 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 Fox-Pitt, 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
Prime 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 on a consolidated
basis, 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.Prime Shareholder Approval. The shareholders of Prime, 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 Prime's Articles of Incorporation and By-laws and in the
event that pursuant to the Reorganization Election Summit elects the
Reorganization method provided for at Section 1.01(a)(2) the sole shareholder of
the Designated Summit Subsidiary 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 the Designated Summit Subsidiary's certificate or articles
of incorporation and by-laws.
Section 8.10.Severance/Termination Agreements. Summit and James J. Lynch
shall each have executed a participation letter for the Summit Bancorp.
Executive Severance Plan in the form attached hereto as Exhibit G-1 and a
termination agreement in the form attached hereto as Exhibit G-2, provided that
at the Effective Time Mr.
Lynch is able to serve as an executive officer of Bank.
Section 8.11.Consents to Summit Contracts. All consents, approvals or
waivers required to be obtained in connection with the Reorganization from other
parties to each mortgage, note, lease, permit, franchise, loan or other
agreement or contract to which Summit is a party or by which its assets or
properties may be bound or committed, which contract is material to the
business, franchises, operations, assets or condition (financial or otherwise)
of Summit and its subsidiaries on a consolidated basis, shall have been
obtained.
The receipt of the documents required by this Article VIII by Prime shall in no
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way constitute a waiver by Prime 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 45 business days after the last to occur
of the following ("Scheduled Date"), unless Summit shall designate a date for
the Closing which is prior to the Scheduled Date in a writing ("Closing Notice")
designating a Determination Date in accordance with Section 9.02(e)(i) below
delivered to Prime 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 Prime 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 Prime, to the consummation of the transactions
contemplated herein or such prior date as Summit and Prime 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 or the
date that all waiting periods required by statute or incorporated
into such Required Consents have expired;
and the date of Closing determined in accordance with the foregoing provisions
is referred to herein as the "Closing 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. In the event that pursuant to the
Reorganization Election Summit elected the Reorganization method provided for at
Section 1.01(a)(1), Summit shall, after all such conditions to Closing have been
satisfied or waived, cause the NJ Certificate to be filed with the Secretary of
State of the State of New Jersey and the Pennsylvania Articles to be filed with
the Department of State of the Commonwealth of Pennsylvania. In the event that
pursuant to the Reorganization Election Summit elected the Reorganization method
provided for at Section 1.01(a)(2), Summit shall, after all such conditions to
Closing have been satisfied or waived, cause the appropriate certificate of
merger, articles of merger, or both to be filed with the proper state
jurisdictional authorities to effect the Reorganization intended by this
Agreement. 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 Prime or Summit may terminate this
Agreement in the event that:
(1) the shareholders of Prime at the meeting of shareholders
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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, representation, covenant or
agreement made by the other party in this Agreement 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 (a "Material Breach") (provided that the terminating party is not then in
Material Breach of this Agreement);
(3) Prime's investment banker is unable to deliver the opinion
required by Section 8.07 to Prime by the day which is three business days prior
to the date the Registration Statement is declared effective by the SEC; or
(4) the Closing is not consummated on or before the later of (i)
January 3, 2000, unless the failure of such occurrence shall be due solely to a
Material Breach by the party seeking to terminate this Agreement or the failure
of such party to fulfill a condition to Closing provided for herein, or (ii) the
Scheduled Date, if the last event required to occur pursuant to the first
sentence of Section 9.01 for the setting of the Scheduled Date shall have
occurred on or before January 3, 2000.
(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, the Board of Directors of a
party not in Material Breach may, during the period any such Material 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 or
a failure of the condition set forth at Section 8.07 due to the circumstances
set forth at Section 9.02(a)(3) hereof): (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 party's Closing obligation or is in
Material Breach.
(d) The Board of Directors of Summit may terminate this Agreement:
(1) at any time if Prime 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 Prime shareholders
contemplated by Section 4.03, if the Board of Directors of Prime 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; and
(3) as provided at Section 4.20.
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(e) In the event the Summit Price is less than $32.68125 and the quotient
obtained by dividing the Summit Price by $39.375 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), the
Board of Directors of Prime shall have the right, exercisable only until 11:59
p.m. on the third business day following the Determination Date to terminate
this Agreement by giving Summit notice of such termination, referring to this
Section 9.02(e), and this Agreement shall be terminated provided Summit receives
such notice prior to the time and day set forth above in this Section 9.02(e).
For purposes of this Section 9.02(e):
(i) "Determination Date" means the date that the last approval of the
Reorganization and the transactions contemplated hereby required
of a bank regulatory agency is received from the applicable bank
regulatory agency.
(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
Prime 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
Prime and Summit) for the 10 consecutive full trading days ending
on the Determination Date.
(iv) "Starting Date Index Price" means the average of the closing
prices on the Starting Date (as defined at (vi) below) of the
common stock of the companies in the Index Group on the NYSE
Composite Transactions List (as reported in The Wall Street
Journal) 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 acquiror's 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
Fifth Third Bancorp
First Security Corp.
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Huntington Bancshares, Inc.
Keystone Financial, Inc.
Marshall & Ilsley Corporation
Mercantile Bancorp
Mellon Bank Corporation
Old Kent Financial Corporation
Regions Financial Corporation
SouthTrust Corporation
Star Banc Corporation
Union Planters Corp.
Wilmington Trust Corporation
(vi) "Starting Date" means the date of the last trading day ending before
the public announcement of the execution of this Agreement.
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 Prime;
provided, however, that: (A) if Prime terminates this Agreement pursuant to
Section 9.02(a)(2) or Section 9.02(c), Summit shall reimburse Prime 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), Prime shall reimburse Summit 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.
(b) Notwithstanding any termination of this Agreement, (i) Prime 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 Prime
and (ii) Summit shall indemnify and hold Prime 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, Prime 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.
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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 Prime
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 Prime contemplated
by this Agreement, unless such modification is submitted to a vote of the
shareholders of Prime.
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:
Summit: Summit Bancorp.
Attn: John G. Collins
301 Carnegie Center, P.O. Box 2066
Princeton, NJ 08543-2066
Telephone No.: 609-987-3422
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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
Prime: Prime Bancorp, Inc.
7111 Valley Green Road
Fort Washington, Pennsylvania 19034
Attention: James J. Lynch
Telephone No.: 215-836-4060
Facsimile No.: 215-836-0957
With a copy to: David F. Scranton, Esq.
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, Pennsylvania 19103
Telephone No.: 215-564-8000
Facsimile No.: 215-564-8120
and Fred Blume, Esq.
Blank, Rome, Comisky & McCauley, LLP
One Logan Square
Philadelphia, Pennsylvania 19103
Telephone No.: 215-569-5500
Facsimile No.: 215-988-6910
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, (ii) if hand
delivered, when received by the person to whom directed, (iii) if delivered by
overnight courier, on the next business day following shipment, or (iv) if
delivered via facsimile, on the business day transmitted.
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.
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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 Prime, 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 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 Agreement to be executed
in counterparts by their duly authorized officers as of the date first above
written.
SUMMIT BANCORP.
By: /s/ John G. Collins
------------------------
John G. Collins
Vice Chairman
PRIME BANCORP, INC.
By: /s/ James J. Lynch
-------------------------------------
James J. Lynch
President and Chief Executive Officer
In the event that pursuant to the Reorganization Election Summit elects the
Reorganization method provided for at Section 1.01(a)(2), the Designated Summit
Subsidiary indicated below agrees to be legally bound by all terms of this
Agreement and Plan of Merger as if an original party hereto.
Designated Summit Subsidiary: First Valley Corporation
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By: /s/ John R. Feeney
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Name: John R. Feeney
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Title: Executive Vice President
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Date: April 20, 1999
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Appendix B
June 23, 1999
The Board of Directors
Prime Bancorp, Inc.
7111 Valley Green Road
Fort Washington, Pennsylvania 19034
Gentlemen:
Fox-Pitt, Kelton Inc. ("Fox-Pitt, Kelton") understands that Prime Bancorp, Inc.
("Prime") and Summit Bancorp ("Summit") have entered into an agreement and plan
of merger dated February 17, 1999 (the "Merger Agreement"), which provides for,
among other things, the acquisition of Prime by Summit through either the
merger of Prime with and into Summit or into a wholly owned subsidiary of
Summit, or the merger of a wholly owned subsidiary of Summit into Prime (the
"Merger"). As set forth in the Merger Agreement, and subject to certain
exceptions set forth therein, at the effective time of the Merger, each issued
and outstanding share of common stock of Prime, par value $1.00 per share (the
"Prime Common Stock"), shall be converted into the right to receive 0.675
shares (the "Exchange Ratio") of common stock of Summit, par value $0.80 per
share (the "Summit Common Stock"). In connection with the Merger, the parties
have entered into a stock option agreement ("Option Agreement"), pursuant to
which Prime granted Summit an option to acquire a number of shares (subject to
adjustment), which if issued would represent no more than 9.9% of the total
number of outstanding shares of Prime, which option is exercisable upon the
occurrence of certain specified events set forth therein. In addition, as
provided in the Option Agreement, in the event the option is exercised by
Summit, Prime will also pay additional cash consideration of $5 million to
Summit. The terms and conditions of the Merger are more fully set forth in the
Merger Agreement.
You have asked for Fox-Pitt, Kelton's opinion as to whether the Exchange Ratio
is fair, from a financial point of view, to the holders of Prime Common Stock.
In arriving at the opinion set forth below, Fox-Pitt, Kelton has, among other
things:
a) reviewed and analyzed certain publicly available financial statements for
Prime and Summit and financial information made available to us by the
management of Prime and Summit;
b) analyzed certain internal financial statements, including financial
projections, and other financial and operating data prepared by the
management of Prime;
c) discussed the past, present and future operations, financial condition and
prospects of Prime and Summit with the management of Prime and Summit,
respectively;
d) reviewed the stock price performance and trading activity of Prime Common
Stock and Summit Common Stock;
e) compared the financial performance and condition of Prime and Summit with
that of certain other comparable publicly traded companies;
f) reviewed the financial terms, to the extent publicly available, of certain
merger and acquisition transactions comparable, in whole or in part, to the
Merger;
g) reviewed and discussed with the management of Prime and Summit the strategic
objectives of the Merger and certain other benefits of the Merger;
h) reviewed the Merger Agreement and the Option Agreement; and
i) performed such other analyses as we have deemed appropriate.
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Fox-Pitt, Kelton has assumed and relied upon, without independent verification,
the accuracy and completeness of all of the financial and other information it
has reviewed for the purposes of providing this opinion, and we have not
assumed any responsibility for independent verification of such information.
Fox-Pitt, Kelton has not assumed any responsibility for any independent
valuation or appraisal of the assets and liabilities of Prime nor have we been
furnished with any such valuation or appraisal. Fox-Pitt, Kelton has not
assumed any responsibility for reviewing loan files or visiting branch
locations. With respect to the financial projections, Fox-Pitt, Kelton has
assumed that they have been reasonably prepared by the management of Prime on
bases reflecting the best currently available estimates and judgments of the
future financial performance of Prime. We express no view as to such
projections or the assumptions on which they are based. We have assumed that
the Merger described in the Merger Agreement will be consummated on the terms
set forth therein without material waiver or modification. Fox-Pitt, Kelton's
opinion is necessarily based upon economic, market and other conditions as they
exist and can be evaluated on June 22, 1999.
In connection with the preparation of this opinion, we were not authorized by
the Board of Directors to solicit, nor have we solicited, third party
indications of interest for the acquisition of all or part of Prime.
In the normal course of its investment banking business, Fox-Pitt, Kelton is
regularly engaged in the valuation of bank and bank holding company securities
in connection with acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for various other purposes. As specialists in the securities of
banking companies, Fox-Pitt, Kelton has experience in, and knowledge of, the
valuation of such enterprises.
In the normal course of its business, Fox-Pitt, Kelton may trade equity
securities of Prime and Summit 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. We have acted as financial advisor to Prime in connection with
the Merger, have received a fee in connection with our engagement and an
additional fee upon the execution of the Merger Agreement, and will receive a
final fee upon the closing of the Merger.
It is understood that this letter is solely for the information of the Board of
Directors of Prime and is not intended to confer any rights or remedies upon
any other entity or persons, and may not be used for any other purpose without
our prior written consent, except for inclusion in a proxy or information
statement related to the Merger that we have had an opportunity to review. This
opinion does not constitute a recommendation to any holder of Prime Common
Stock as to how such shareholder should vote on the Merger.
Based upon and subject to the foregoing, Fox-Pitt, Kelton is of the opinion
that, on the date hereof, the Exchange Ratio is fair, from a financial point of
view, to the holders of Prime Common Stock.
Very truly yours,
FOX-PITT, KELTON INC.
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APPENDIX C
PRIME 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 February, 1999
(this "Agreement"), between Summit Bancorp., a New Jersey corporation
("Grantee"), and Prime Bancorp, Inc., a Pennsylvania corporation ("Issuer").
WITNESSETH:
WHEREAS, Grantee and Issuer have on a date prior to the date hereof,
entered into an Agreement and Plan of Merger, dated as of the 17th day of
February, 1999 (the "Merger Agreement"). (Capitalized terms used in this
Agreement and not defined herein but defined in the Merger Agreement shall have
the meanings assigned thereto in the Merger Agreement); and
WHEREAS, as a condition and inducement to Grantee's entering into the
Merger Agreement and in consideration therefor, Grantee has required that Issuer
agree, and Issuer has agreed, to grant Grantee an option and to pay a breakup
fee on the terms set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
SECTION 1. Grant of Option; Breakup Fee.
(a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 1,087,498
fully paid and nonassessable shares of the common stock, par value $1.00 per
share, of Issuer ("Common Stock") at a price equal to $18.00 per share (such
price, as adjusted as hereinafter provided, the "Option Price"). 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 9.9% 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).
(b) In the event the Option becomes exercisable and Summit exercises
the Option in full, Prime shall pay to Summit $5,000,000 (the "Breakup Fee") in
accordance with Section 2.
SECTION 2. Exercise of Option; Payment of Breakup Fee.
(a) Grantee may exercise the Option in whole at any 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 to the Effective Time, (ii) the termination of
the Merger Agreement in accordance with the terms thereof prior to the
occurrence of an Extension Event, other than a termination of the Merger
Agreement by the Grantee pursuant to Section 9.02(a)(2) or Sections 9.02 (c) or
(d)(2) thereof (with the understanding that Section 9.02(d)(2) does not
encompass the situation where the Board of Directors of Prime recommends the
Reorganization but the shareholders of Prime at the meeting held pursuant to
Section 4.03 of the Merger Agreement fail to approve the Reorganization), or
(iii) 15 months after the termination of the Merger Agreement following the
occurrence of an Extension Event (as defined below), or the termination of the
Merger Agreement by Grantee pursuant to Section 9.02(a)(2) or Sections 9.02 (c)
or (d)(2) thereof (with the same understanding with respect to Section
9.02(d)(2) as set forth in clause (ii) above), and provided further, that any
purchase of Common Stock upon exercise of the Option
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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 Merger Agreement and, if the Merger Agreement has not terminated prior
thereto, such breach would entitle Issuer to terminate the Merger 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
Merger Agreement;
(ii) Any person (other than Grantee or any Grantee Subsidiary)
shall have acquired after the date hereof 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); except that notwithstanding the foregoing shareholders of Prime
described in the proxy statement of Prime dated March 18, 1998 as beneficially
owning 5% or more of the outstanding common stock of Prime and directors of
Prime shall each be permitted to acquire beneficial ownership of up to an
additional 2% of the outstanding Common Stock in addition to their respective
current holdings;
(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 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);
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(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 Merger Agreement and such
breach (x) would entitle Grantee to terminate the Merger 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 Prime shareholders required by Section
4.03 of the Merger 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 Merger 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 Merger
Agreement as set forth therein, 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) 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 (ii) 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 (b) is the
Breakup Fee and (a) is the amount obtained by multiplying the number of shares
with respect to which the Option is being exercised by the Option Price. The
terms of this Section 2(f) are specifically intended not to provide a discount
from the fair market value of Issuer's Common Stock on the date the Option is
granted and this Agreement signed, but instead to provide for a procedure which
(i) aligns Grantee's right to receive the Breakup Fee with its right to exercise
the Option and (ii) offsets the obligation of Grantee to pay the aggregate
purchase price provided for in connection with an exercise of the Option with
the obligation of Issuer to pay the Breakup Fee and thereby facilitates and
assures Grantee's receipt of the benefits of this Agreement 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.
(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 Prime Bancorp, Inc. ("Issuer") dated as of the 18th day of
February, 1999. 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 the transfer qualifies for an
exemption from the Securities Act and applicable state securities laws and such
legend is not required for purposes of the Securities Act and applicable state
securities laws; (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
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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 issuable hereunder, all of
which shares will, upon issuance pursuant hereto, be duly authorized, validly
issued, 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 articles 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. ss.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. In conjunction with or following an
assignment permitted by Section 11 hereunder, 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 any option or right under a Prime Stock
Compensation Plan or an exercise of the Option), the number of shares of Common
Stock subject to the Option shall be increased so it equals 9.9% 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 or
subject to or issued pursuant to options outstanding on the date hereof under a
Prime Stock Compensation Plan).
(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.
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(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 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 on such form as is available and the Issuer is eligible
to use under the Securities Act relating to a delayed or continuous offering (as
contemplated by Rule 415 of the SEC under the Securities Act or any successor
rule or regulation) (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
135 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 one such registration
(notwithstanding the number of Grantees). 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 one registration pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as a
result of an assignment permitted by Section 11 hereof.
(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 of the Company (but not any
Grantee), printing expenses and the costs of special audits or "cold comfort"
letters, expenses of underwriters, excluding discounts and commissions, and the
reasonable fees and expenses of any necessary special experts) in connection
with the 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
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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 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
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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) 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 at a price (the "Option
Repurchase Price") equal to the amount by which (A) the market/offer price (as
defined below) exceeds (B) the Option Price, multiplied by the number of shares
for which this Option may then be exercised and shall pay to Grantee the Breakup
Fee; 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. 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 average of the last
sale prices for a share of Common Stock during 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 and the Breakup Fee or to the Owner the Option Share Repurchase Price or
with respect to the Option Repurchase Price or the Option Share Repurchase Price
the portion thereof that Issuer is not then prohibited from so delivering under
applicable law and regulation.
(c) Each of Issuer and Grantee hereby undertake 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 shall deliver to the Grantee the Breakup Fee as provided in
Section 7(b) above, and thereafter shall 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,
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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 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.
(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 provide for payment of the Breakup Fee
on terms as identical as possible to those provided for herein unless the
Breakup Fee has been paid under the circumstances described in Section 7(c).
Furthermore, 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
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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 (including terms governing the Breakup Fee as provided in the first
sentence of Section 8(b) above), 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.
(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 9.9% 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 9.9% 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 12
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
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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 12
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 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 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 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 articles 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 material 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 in whole or in part to one
or more subsidiaries directly or indirectly wholly-owned by Grantee (as
"indirect" ownership is defined at Section 2.01(a) of the Merger Agreement)
(other than director qualifying shares, if any) . 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
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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 Prime Bancorp, Inc.
("Issuer") dated as of the 18th day of February, 1999. 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 the transfer
qualifies for an exemption from the Securities Act and applicable state
securities laws and such legend is not required for purposes of the Securities
Act and applicable state securities laws; (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 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 Merger Agreement.
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SECTION 16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
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 Merger 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. Merger Agreement. Nothing contained in this Agreement shall
be deemed to authorize Issuer or Grantee to breach any provision of the Merger
Agreement.
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 Section 6
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.
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IN WITNESS WHEREOF, each of the parties has caused this Prime Stock
Option Agreement between Prime 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 February, 1999.
SUMMIT BANCORP.
By _________________________________
John G. Collins
Vice Chairman
PRIME BANCORP, INC.
By _________________________________
James J. Lynch
President and Chief Executive Officer
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Appendix D
PENNSYLVANIA STATUTORY PROVISIONS RELATING TO DISSENTERS RIGHTS
EXCERPT FROM SUBCHAPTER 19C
Section1930. Dissenters rights
(a) General rule. If any shareholder of a domestic business corporation
that is to be a party to a merger or consolidation pursuant to a plan of merger
or consolidation objects to the plan of merger or consolidation and complies
with the provisions of Subchapter D of Chapter 15 (relating to dissenters
rights), the shareholder shall be entitled to the rights and remedies of
dissenting shareholders therein provided, if any. See also section 1906(c)
(relating to dissenters rights upon special treatment).
SUBCHAPTER 15D
Dissenters rights
Section:
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1571. Application and effect of subchapter.
1572. Definitions.
1573. Record and beneficial holders and owners.
1574. Notice of intention to dissent.
1575. Notice to demand payment.
1576. Failure to comply with notice to demand payment, etc.
1577. Release of restrictions or payment for shares.
1578. Estimate by dissenter of fair value of shares.
1579. Valuation proceedings generally.
1580. Costs and expenses of valuation proceedings.
Section1571. Application and effect of Subchapter.
(a) General rule. Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any
corporate action, or to otherwise obtain fair value for his shares, where this
part expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of
election).
Section 2907(a) (relating to proceedings to terminate breach of
qualifying conditions).
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Section 7104(b)(3) (relating to procedure).
(b) Exceptions.
(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of and to vote at the meeting at
which a plan specified in any of section 1930, 1931(d), 1932(c) or 1952(d) is
to be voted on, are either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000 shareholders;
shall not have the right to obtain payment of the fair value of any such shares
under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in
the case of:
(i) Shares converted by a plan if the shares are not converted solely
into shares of the acquiring, surviving, new or other corporation
or solely into such shares and money in lieu of fractional shares.
(ii) Shares of any preferred or special class unless the articles, the
plan or the terms of the transaction entitle all shareholders of
the class to vote thereon and require for the adoption of the plan
or the effectuation of the transaction the affirmative vote of a
majority of the votes cast by all shareholders of the class.
(iii) Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase, lease,
exchange or other disposition all or substantially all of the shares,
property or assets of another corporation by the issuance of shares,
obligations or otherwise, with or without assuming the liabilities of
the other corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the rights and
remedies of dissenting shareholders provided in this subchapter
regardless of the fact, if it be the case, that the acquisition was
accomplished by the issuance of voting shares of the corporation to be
outstanding immediately after the acquisition sufficient to elect a
majority or more of the directors of the corporation.
(c) Grant of optional dissenters rights. The bylaws or a resolution of the
board of directors may direct that all or a part of the shareholders shall have
dissenters rights in connection with any corporate action or other transaction
that would otherwise not entitle such shareholders to dissenters rights.
(d) Notice of dissenters rights. Unless otherwise provided by statute, if a
proposed corporate action that would give rise to dissenters rights under this
subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) a statement of the proposed action and a statement that the shareholders
have a right to dissent and obtain payment of the fair value of their
shares by complying with the terms of this subchapter; and
(2) a copy of this subchapter.
(e) Other statutes. The procedures of this subchapter shall also be applicable
to any transaction described in any statute other than this part that makes
reference to this subchapter for the purpose of granting dissenters rights.
(f) Certain provisions of articles ineffective. This subchapter may not be
relaxed by any provision of the articles.
(g) Cross references. See sections 1105 (relating to restriction on equitable
relief), 1904 (relating to de facto transaction doctrine abolished) and
2512 (relating to dissenters rights procedure).
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Section 1572. Definitions.
The following words and phrases when used in this subchapter shall have
the meanings given to them in this section unless the context clearly indicates
otherwise:
"Corporation." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation,
division, conversion or otherwise of that issuer. A plan of division may
designate which of the resulting corporations is the successor corporation for
the purposes of this subchapter. The successor corporation in a division shall
have sole responsibility for payments to dissenters and other liabilities under
this subchapter except as otherwise provided in the plan of division.
"Dissenter." A shareholder or beneficial owner who is entitled to and does
assert dissenters rights under this subchapter and who has performed every act
required up to the time involved for the assertion of those rights.
"Fair value." The fair value of shares immediately before the effectuation
of the corporate action to which the dissenter objects, taking into account all
relevant factors, but excluding any appreciation or depreciation in
anticipation of the corporate action.
"Interest." Interest from the effective date of the corporate action until
the date of payment at such rate as is fair and equitable under all of the
circumstances, taking into account all relevant factors, including the average
rate currently paid by the corporation on its principal bank loans.
Section 1573. Record and beneficial holders and owners.
(a) Record holders of shares. A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of
the same class or series beneficially owned by any one person and discloses the
name and address of the person or persons on whose behalf he dissents. In that
event, his rights shall be determined as if the shares as to which he has
dissented and his other shares were registered in the names of different
shareholders.
(b) Beneficial owners of shares. A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters rights
with respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner,
whether or not the shares so owned by him are registered in his name.
Section 1574. Notice of intention to dissent.
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed
corporate action shall constitute the written notice required by this section.
Section 1575. Notice to demand payment.
(a) General rule. If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice
of intention to demand payment of the fair value of their shares and who
refrained from voting in favor of the proposed action. If the proposed
corporate action is to be taken without a vote of shareholders, the corporation
shall send to all shareholders who are entitled to dissent and demand payment
of the fair value of their shares, a notice of the adoption of the plan or
other corporate action. In either case, the notice shall:
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(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to
obtain payment.
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is
received.
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on
whose behalf the shareholder dissents, acquired beneficial ownership
of the shares.
(4) Be accompanied by a copy of this subchapter.
(b) Time for receipt of demand for payment. The time set for receipt of
the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.
Section 1576. Failure to comply with notice to demand payment, etc.
(a) Effect of failure of shareholder to act. A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575
(relating to notice to demand payment) shall not have any right under this
subchapter to receive payment of the fair value of his shares.
(b) Restriction on uncertificated shares. If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms of
section 1577(a) (relating to failure to effectuate corporate action).
(c) Rights retained by shareholder. The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.
Section 1577. Release of restrictions or payment for shares.
(a) Failure to effectuate corporate action. Within 60 days after the
date set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares
from any transfer restrictions imposed by reason of the demand for payment.
(b) Renewal of notice to demand payment. When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming to
the requirements of section 1575 (relating to notice to demand payment), with
like effect.
(c) Payment of fair value of shares. Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance
under this section will be made. The remittance or notice shall be accompanied
by:
(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending
not more than 16 months before the date of remittance or notice
together with the latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair value of the
shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of
this subchapter.
(d) Failure to make payment. If the corporation does not remit the
amount of its estimate of the fair value of the shares as provided by
subsection (c), it shall return any certificates that have been deposited and
release uncertificated shares from any transfer restrictions imposed by reason
of the demand for payment. The
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corporation may make a notation on any such certificate or on the records of
the corporation relating to any such uncertificated shares that such demand has
been made. If shares with respect to which notation has been so made shall be
transferred, each new certificate issued therefor or the records relating to
any transferred uncertificated shares shall bear a similar notation, together
with the name of the original dissenting holder or owner of such shares. A
transferee of such shares shall not acquire by such transfer any rights in the
corporation other than those that the original dissenter had after making
demand for payment of their fair value.
Section 1578. Estimate by dissenter of fair value of shares.
(a) General rule. If the business corporation gives notice of its
estimate of the fair value of the shares, without remitting such amount, or
remits payment of its estimate of the fair value of a dissenter's shares as
permitted by section 1577(c) (relating to payment of fair value of shares) and
the dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the
fair value of the shares, which shall be deemed a demand for payment of the
amount or the deficiency.
(b) Effect of failure to file estimate. Where the dissenter does not
file his own estimate under subsection (a) within 30 days after the mailing by
the corporation of its remittance or notice, the dissenter shall be entitled to
no more than the amount stated in the notice or remitted to him by the
corporation.
Section 1579. Valuation proceedings generally.
(a) General rule. Within 60 days after the latest of:
(1) Effectuation of the proposed corporate action;
(2) Timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or
(3) Timely receipt of any estimates pursuant to section 1578 (relating
to estimate by dissenter of fair value of shares);
if any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the shares
be determined by the court.
(b) Mandatory joinder of dissenters. All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).
(c) Jurisdiction of the court. The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(d) Measure of recovery. Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found
to exceed the amount, if any, previously remitted, plus interest.
(e) Effect of corporation's failure to file application. If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time within 30
days after the expiration of the 60-day period. If a dissenter does not file an
application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not
previously remitted.
Section 1580. Costs and expenses of valuation proceedings.
(a) General rule. The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the
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court, shall be determined by the court and assessed against the business
corporation except that any part of the costs and expenses may be apportioned
and assessed as the court deems appropriate against all or some of the
dissenters who are parties and whose action in demanding supplemental payment
under section 1578 (relating to estimate by dissenter of fair value of shares)
the court finds to be dilatory, obdurate, arbitrary, vexatious or in bad faith.
(b) Assessment of counsel fees and expert fees where lack of good faith
appears. Fees and expenses of counsel and of experts for the respective parties
may be assessed as the court deems appropriate against the corporation and in
favor of any or all dissenters if the corporation failed to comply
substantially with the requirements of this subchapter and may be assessed
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 in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner in
respect to the rights provided by this subchapter.
(c) Award of fees for benefits to other dissenters. If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of
the amounts awarded to the dissenters who were benefitted.
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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 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.
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(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 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.
(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;
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(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, 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.
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.
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Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
This Registration Statement includes the following exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------- -----------
<S> <C>
2 Agreement and Plan of Merger dated February 17, 1999 between Prime and Summit.
(Included without exhibits as Appendix A to the Proxy Statement-Prospectus included in
this Registration Statement; with Exhibit B thereto included as Appendix C to the Proxy
Statement-Prospectus included in this Registration Statement and Exhibits C-F thereto
incorporated by reference to Exhibit 10(a) to the Schedule 13D filed by Summit with
respect to Prime Bancorp, Inc. Common Stock (File No. 0-17286) dated February 18,
1999).).
3(a) Restated Certificate of Incorporation of Summit, as restated August 19, 1998
(incorporated by reference to Exhibit (3)A on Form 10-Q for the quarter ended September
30, 1998).
(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(a) Opinion of Thompson Coburn regarding tax matters.
8(b) Opinion of Stradley, Ronon, Stevens & Young, LLP regarding tax matters.
23(a) Consent of KPMG LLP (Summit).
(b) Consent of KPMG LLP (Prime).
(c) Consent of Ernst & Young LLP
*(d) Consent of Richard F. Ober, Jr., Esq. -- included in his opinion filed as Exhibit 5 to this
Registration Statement.
(e) Consent of Thompson Coburn -- included in its opinion filed as Exhibit 8(a) to this
Registration Statement.
(f) Consent of Stradley, Ronon, Stevens & Young, LLP -- included in its opinion filed as
Exhibit 8(b) to the Registration Statement.
*24 Power of Attorney -- included on the signature page of the original filing.
*99(a) Form of Prime proxy.
(b) Opinion of Fox-Pitt, Kelton -- Included as Appendix B to the Proxy Statement-Prospectus
included in this Registration Statement.
(c) Consent of Fox-Pitt, Kelton.
</TABLE>
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* Previously filed
(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.
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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 Amendment No. 2 to Registration Statement No. 333-77155 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 22nd day of June,
1999.
SUMMIT BANCORP.
By: *
------------------------------------
T. Joseph Semrod
Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment No.
2 to Registration Statement No. 333-77155 has been signed below on the 22nd day
of June, 1999 by the following persons in the capacities indicated.
Signatures Titles
---------- ------
* Chairman of the Board
- ----------------------------- of Directors (Chief Executive Officer)
T. Joseph Semrod
* President and Director
- -----------------------------
Robert G. Cox
* Executive Vice President -- Finance
- ----------------------------- (Principal Financial Officer)
William J. Healy
* Senior Vice President and Comptroller
- ----------------------------- (Principal Accounting Officer)
Paul V. Stahlin
* Director
- -----------------------------
Robert L. Boyle
* Director
- -----------------------------
James C. Brady
* Director
- -----------------------------
John G. Collins
* Director
- -----------------------------
T.J. Dermot Dunphy
* Director
- -----------------------------
Anne Evans Estabrook
II-6
<PAGE>
Signatures Titles
---------- ------
* Director
- -----------------------------
Elinor J. Ferdon
* Director
- -----------------------------
William M. Freeman
* Director
- -----------------------------
Thomas H. Hamilton
* Director
- -----------------------------
Fred G. Harvey
* Director
- -----------------------------
Francis J. Mertz
* Director
- -----------------------------
George L. Miles, Jr.
* Director
- -----------------------------
William R. Miller
* Director
- -----------------------------
Raymond Silverstein
* Director
- -----------------------------
Orin R. Smith
* Director
- -----------------------------
Joseph M. Tabak
* Director
- -----------------------------
Douglas G. Watson
* Richard F. Ober, Jr., by signing his name hereto, does sign the document on
behalf of each of the persons indicated above pursuant to the powers of
attorney executed by such person, filed with the Securites and Exchange
Commission.
/s/ Richard F. Ober, Jr.
- -------------------------
Richard F. Ober Jr.
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ------------- ------------------------------------------------------------------------------------- -----
<S> <C> <C>
2 Agreement and Plan of Merger dated February 17, 1999 between Prime and Summit.
(Included without exhibits as Appendix A to the Proxy Statement-Prospectus included
in this Registration Statement; with Exhibit B thereto included as Appendix C to the
Proxy Statement-Prospectus included in this Registration Statement and Exhibits C-F
thereto incorporated by reference to Exhibit 10(a) to the Schedule 13D filed by
Summit with respect to Prime Bancorp, Inc. Common Stock (File No. 0-17286) dated
February 18, 1999).).
3(a) Restated Certificate of Incorporation of Summit, as restated August 19, 1998
(incorporated by reference to Exhibit (3)A on Form 10-Q for the quarter ended
September 30, 1998).
(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(a) Opinion of Thompson Coburn regarding tax matters.
8(b) Opinion of Stradley, Ronon, Stevens & Young, LLP regarding tax matters.
23(a) Consent of KPMG LLP (Summit).
(b) Consent of KPMG LLP (Prime).
(c) Consent of Ernst & Young LLP
*(d) Consent of Richard F. Ober, Jr., Esq. -- included in his opinion filed as Exhibit 5
to this Registration Statement.
(e) Consent of Thompson Coburn -- included in its opinion filed as Exhibit 8 to this
Registration Statement.
(f) Consent of Stradley, Ronon, Stevens & Young, LLP -- included in its opinion filed as
Exhibit 8(b) to the Registration Statement.
*24 Power of Attorney -- included on the signature page of the original filing.
*99(a) Form of Prime proxy.
(b) Opinion of Fox-Pitt, Kelton -- Included as Appendix B to the Proxy Statement-
Prospectus included in this Registration Statement.
(c) Consent of Fox-Pitt, Kelton.
</TABLE>
- ------------
* Previously filed
<PAGE>
[Thompson Coburn Letterhead]
June 22, 1999
Board of Directors Board of Directors
Prime Bancorp, Inc. Summit Bancorp.
7111 Valley Green Road 301 Carnegie Center
Fort Washington, Pennsylvania Princeton, New Jersey
Ladies and Gentlemen:
You have requested our opinion with regard to certain federal income
tax consequences of the proposed merger (the "Merger") of Prime Bancorp, Inc.
("Prime") with and into First Valley Corporation ("First Valley"), a wholly
owned subsidiary of Summit Bancorp. ("Summit").
In connection with the preparation of our opinion, we have examined and
have relied upon the following:
(i) The Agreement and Plan of Merger by and among Summit, First Valley,
and Prime dated February 17, 1999, including the schedules and exhibits
thereto (the "Agreement"), and the "Reorganization Election" (as the
quoted term is defined in the Agreement);
(ii) Summit's Registration Statement on Form S-4, including the Proxy
Statement/Prospectus contained therein, filed with the Securities and
Exchange Commission on April 27, 1999 as supplemented and amended to
the date hereof (the "Registration Statement");
(iii) The representations and undertaking of Summit substantially in
the form of Exhibit A hereto;
(iv) The representations and undertakings of Prime substantially in the
forms of Exhibit B hereto; and
(v) The Shareholder Rights Plan between Summit (formerly UJB Financial
Corp.) and First Chicago Trust Company of New York, as rights agent,
dated as of August 16, 1989, and the Rights Agreement between
Summit and First Chicago Trust Company of New York, as rights agent,
dated as of June 16, 1999 (collectively, the "Rights Agreements").
Our opinion is based solely upon applicable law and the factual
information and undertakings contained in the above-mentioned documents. In
rendering our opinion, we have assumed the accuracy of all information and the
performance of all undertakings contained in each of such documents, and we have
assumed that all representations made to the knowledge of any person or entity
or with similar qualification will be true and correct as if made without such
qualification. We also have assumed the authenticity of all original documents,
the conformity of all copies to the original documents, and the genuineness of
all signatures. We have not attempted to verify independently the accuracy of
any information in any such document, and we have assumed that such documents
accurately and completely set forth all material facts relevant to this opinion.
All of our assumptions were made with your consent. If any fact or assumption
described herein or below is incorrect, any or all of the federal income tax
consequences described herein may be inapplicable.
<PAGE>
Prime Bancorp, Inc.
Summit Bancorp.
June 22, 1999
Page 2
OPINION
Subject to the foregoing, to the conditions and limitations expressed
elsewhere herein, and assuming that the Merger is consummated in accordance with
the Agreement, we are of the opinion that for federal income tax purposes:
1. The Merger will constitute a reorganization within the meaning of
sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986, as
amended to the date hereof (the "Code"). Each of Summit, First Valley and Prime
will be a "party to a reorganization" within the meaning of Section 368(b) of
the Code.
2. Each shareholder of Prime who exchanges, in the Merger, shares of
Prime common stock, par value $1.00 per share ("Prime Common Stock") solely for
shares of Summit common stock, par value $0.80 per share, including the rights
associated therewith under the Rights Agreements ("Summit Common Stock"):
a) will recognize no gain or loss as a result of the exchange,
except with regard to cash received in lieu of a fractional share, as
discussed below (Code section 354(a)(1));
b) will have an aggregate basis for the shares of Summit
Common Stock received (including any fractional share of Summit Common
Stock deemed to be received, as described in paragraph , below) equal
to the aggregate adjusted tax basis of the shares of Prime Common Stock
surrendered (Code section 358(a)(1)); and
c) will have a holding period for the shares of Summit Common
Stock received (including any fractional share of Summit Common Stock
deemed to be received, as described in paragraph , below) which
includes the holding period of the shares of Prime Common Stock
surrendered, provided that the shares of Prime Common Stock surrendered
are held as capital assets at the time of the Merger (Code section
1223(1)).
3. Each shareholder of Prime who receives, in the Merger, cash in lieu
of a fractional share of Summit Common Stock will be treated as if the
fractional share had been received in the Merger and then redeemed by Summit.
Provided that the shares of Prime Common Stock surrendered are held as capital
assets at the time of the Merger, 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 basis in the shares of
Summit Common Stock allocable to the fractional share (Code sections 1001 and
1222; Rev. Rul. 66-365, 1966-2 C.B. 116; Rev. Proc. 77- 41, 1977-2 C.B. 574).
4. No gain or loss will be recognized to Prime upon the transfer of
its assets in the Merger to First Valley solely in exchange for Summit Common
Stock and the assumption by First Valley of the liabilities of Prime
(Code section 361(a) and 357(a)).
5. No gain or loss will be recognized to Summit or First Valley on the
receipt by First Valley of the assets of Prime in the Merger solely in exchange
for Summit Common Stock and the assumption by First Valley of the liabilities
of Prime (Code section 1032(a); Rev. Rul. 57-278, 1957-1 C.B. 124).
**********
<PAGE>
Prime Bancorp, Inc.
Summit Bancorp.
June 22, 1999
Page 3
We express no opinion with regard to: (1) the federal income tax
consequences of the Merger not addressed expressly by this opinion, including
without limitation, (i) the tax consequences, if any, to those shareholders of
Prime who acquired shares of Prime Common Stock pursuant to the exercise of
employee stock options or otherwise as compensation, and (ii) the tax
consequences to special classes of shareholders, if any, including without
limitation, foreign persons, insurance companies, tax-exempt entities,
retirement plans, and dealers in securities; and (2) federal, state, local, or
foreign taxes (or any other federal, state, local, or foreign laws) not
specifically referred to and discussed herein. Further, our opinion is based
upon the Code, Treasury Regulations proposed or promulgated thereunder, and
administrative interpretations and judicial precedents relating thereto, all of
which are subject to change at any time, possibly with retroactive effect, and
we assume no obligation to advise you of any subsequent change thereto. If there
is any change in the applicable law or regulations, or if there is any new
administrative or judicial interpretation of the applicable law or regulations,
any or all of the federal income tax consequences described herein may become
inapplicable.
The foregoing opinion reflects our legal judgment solely on the issues
presented and discussed herein. This opinion has no official status or binding
effect of any kind. Accordingly, we cannot assure you that the Internal Revenue
Service or any court of competent jurisdiction will agree with this opinion.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to all references made to this letter and to this
firm in the Registration Statement.
Very truly yours,
/s/ Thompson Coburn
<PAGE>
June 22, 1999
Board of Directors
Prime Bancorp. Inc.
7111 Valley Green Road
Fort Washington, PA 19034
Ladies and Gentlemen:
You have requested our opinion with regard to certain federal
income tax consequences of the proposed merger (the "Merger") of Prime Bancorp,
Inc. ("Prime") with and into First Valley Corporation ("First Valley"), a wholly
owned subsidiary of Summit Bancorp. ("Summit").
In connection with the preparation of our opinion, we have
examined and have relied upon the following:
(i) The Agreement and Plan of Merger by and among Summit,
First Valley, and Prime dated February 17, 1999, including the
schedules and exhibits thereto (the "Agreement"), and the
"Reorganization Election" (as the quoted term is defined in the
Agreement);
(ii) Summit's Registration Statement on form S-4, including
the Proxy Statement/Prospectus contained therein, filed with the
Securities and Exchange Commission on April 27, 1999, as supplemented
and amended to the date hereof (the "Registration Statement");
(iii) The representations and undertaking of Summit
substantially in the form of Exhibit A hereto:
(iv) The representations and undertakings of Prime
substantially in the form of Exhibit B hereto; and
(v) The Shareholder Rights Plan between Summit (formerly UJB
Financial Corp.) and First Chicago Trust Company of New York, as rights
agent, dated as of August 16, 1989 and the Rights Agreement between
Summit and First Chicago Trust Company of New York, as rights agent,
dated as of June 16, 1999 (collectively, the "Rights Agreements").
Our opinion is based solely upon applicable law and the
factual information and undertakings contained in the above-mention documents.
In rendering our opinion, we have assumed the accuracy of all information and
the performance of all undertakings contained in each of such documents, and we
have assumed that all representations made to the knowledge of any person or
entity or with similar qualification will be true and correct as if made without
such qualification. We also have assumed the authenticity of all original
documents, the conformity of all copies to the original documents, and the
genuineness of all signatures. We have not attempted to verify independently the
accuracy of any information in any such document, and we have assumed that such
documents accurately and completely set forth all material facts relevant to
this opinion. All of our assumptions were made with your consent. If any fact or
assumption described herein or below is incorrect, any or all of the federal
income tax consequences described herein may be inapplicable. References herein
to the "Code" shall be to the Internal Revenue Code of 1986, as amended to the
date hereof.
OPINION
Subject to the foregoing, to the conditions and limitations
expressed elsewhere herein, and assuming that the Merger is consummated in
accordance with the Agreement, we are of the opinion that for federal income tax
purposes:
1. Each shareholder of Prime who exchanges, in the Merger,
shares of Prime common stock, par value $1.00 per share ("Prime Common Stock")
solely for shares of Summit common stock, par value $0.80 per share, including
the rights associated therewith under the Rights Agreements ("Summit Common
Stock"):
(a) will recognize no gain or loss as a result of the
exchange, except with regard to cash received in lieu of a fractional
share, as discussed below (Code section 354(a)(1));
<PAGE>
(b) will have an aggregate basis for the shares of Summit
Common Stock received (including any fractional share of Summit Common
Stock deemed to be received, as described in paragraph 2, below) equal
to the aggregate adjusted tax basis of the shares of Prime Common Stock
surrendered (Code section 358(a)(1));
(c) will have a holding period for the shares of Summit Common
Stock received (including any fractional share of Summit Common Stock
deemed to be received, as described in paragraph 2, below) which
includes the holding period of the shares of Prime Common Stock
surrendered, provided that the shares of Prime Common Stock surrendered
are held as capital assets at the time of the Merger (Code section
1223(1)).
2. Except with respect to shareholders of Prime who exercise
dissenters rights, each shareholder of Prime who receives, in the Merger, cash
in lieu of a fractional share of Summit Common Stock will be treated as if the
fractional share had been received in the Merger and then redeemed by Summit.
Provided that the shares of Prime Common Stock surrendered are held as capital
assets at the time of the Merger, 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 basis in the shares of
Summit Common Stock allocable to the fractional share (Code sections 1001, 1222;
Rev. Rul 66-365, 1966-2 C.B. 116; Rev. Proc. 77-41, 1977-2 C.B. 574)
We express no opinion with regard to: (1) the federal income
tax consequences of the Merger not addressed expressly by this opinion,
including without limitation, (i) the tax consequences, if any, to those
shareholders of Prime who acquired shares of Prime Common Stock pursuant to the
exercise of employee stock options or otherwise as compensation, (ii) the tax
consequences, if any, to those shareholders of Prime who exercise dissenters
rights, and (iii) the tax consequences to special classes of shareholders, if
any, including without limitation, foreign persons, insurance companies,
tax-exempt entities, retirement plans, and dealers in securities; and (2)
federal, state, local and foreign taxes (or any other federal, state, local, or
foreign laws) not specifically referred to and discussed herein. Further, our
opinion is based upon the Code, Treasury Regulations proposed or promulgated
thereunder, and administrative interpretations and judicial precedents relating
thereto, all of which are subject to change at any time, possibly with
retroactive effect, and we assume no obligation to advise you of any subsequent
change thereto. If there is any change in the applicable law or regulations, or
if there is any new administrative or judicial interpretation of the applicable
law or regulations, any or all of the federal income tax consequences described
herein may become applicable.
The foregoing opinion reflects our legal judgement solely on
the issues presented and discussed herein. This opinion has no official status
or binding effect of any kind. Accordingly, we cannot assure you that the
Internal Revenue Service or any court of competent jurisdiction will agree with
this opinion.
This opinion is provided for the benefit of the shareholders
of Prime, excluding, however, Summit and its affiliates. We hereby consent to
the filing of this letter as an exhibit to the Registration Statement and to all
references made to this letter and to this firm in the Registration Statement.
Very truly yours,
/s/ Stradley, Ronon, Stevens & Young, LLP
<PAGE>
Exhibit 23(a)
Independent Auditors' Consent
The Board of Directors
Summit Bancorp:
We consent to the use of our report dated January 19, 1999 relating to the
consolidated balance sheets of Summit Bancorp and subsidiaries as of December
31, 1998 and 1997 and the related consolidated statements of income,
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1998, which report appears in the December 31, 1998
Annual Report on Form 10-K of Summit Bancorp, incorporated by reference in
Amendment No. 2 to 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 LLP
Short Hills, New Jersey
June 18, 1999
<PAGE>
Exhibit 23(b)
The Board of Directors
Prime Bancorp, Inc.:
We consent to the incorporation by reference and to the reference to our firm
under the heading "Experts" in the Registration Statement (Form S-4 Amendment
No. 2) of Summit Bancorp of our report dated January 16, 1998, relating to the
consolidated statement of financial condition of Prime Bancorp, Inc. and
subsidiaries as of December 31, 1997 and the related consolidated statements of
income, changes in stockholders' equity and cash flows for each year in the
two-year period ended December 31, 1997, which report appears in the 1998 annual
report of Prime Bancorp, Inc. filed on Form 10-K.
/s/ KPMG LLP
Philadelphia, PA
June 18, 1999
<PAGE>
Exhibit 23(c)
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Amendment No. 2 to the Registration Statement (Form S-4) and related Prospectus
of Summit Bancorp, for the registration of 7,870,316 shares of its common stock
and to the incorporation by reference of our report dated January 19, 1999,
except for Note 17, which is dated February 17, 1999, with respect to the 1998
financial statements of Prime Bancorp, Inc. included in its Annual Report (Form
10-K) for the year ended December 31, 1998, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
June 18, 1999
<PAGE>
FOX-PITT, KELTON
CORPORATE FINANCE
380 Madison Avenue, 24th Floor Tel: 212 857 6200
New York, NY 10017-2513 Fax: 212 682 0779
June 23, 1999
The Board of Directors
Prime Bancorp, Inc.
7111 Valley Green Road
Fort Washington, Pennsylvania 19034
Gentlemen:
Pursuant to the letter agreement between Prime Bancorp, Inc. ("Prime" or the
"Company") and Fox-Pitt, Kelton Inc. ("Fox-Pitt, Kelton") dated February 5,
1999, Fox-Pitt, Kelton consents to the fact that a copy of and references to its
fairness opinion may be filed with the Securities and Exchange Commission and
included as part of the proxy statement-prospectus contained in the registration
statement on Form S-4 provided to the Company's stockholders.
Very truly yours,
/s/ Fox-Pitt, Kelton Inc.
- -------------------------
FOX-PITT, KELTON INC.
