FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
----------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to ___________________________
Commission File Number: 1-6451
--------------------------
SUMMIT BANCORP.
(Exact name of registrant as specified in its charter)
New Jersey 22-1903313
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
301 Carnegie Center, P.O. Box 2066, Princeton, New Jersey 08543-2066
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(Address of principal executive offices) (Zip Code)
(609) 987-3200
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[X] Yes [ ] No
As of August 1, 1999 there were 177,061,084 shares of common
stock, $.80 par value, outstanding.
===================================================================
Summit Bancorp
Form 10-Q
Index
Page No.
Part I Financial Information
Item 1. Financial Statements-Unaudited
Consolidated Balance Sheets-
June 30, 1999, December 31, 1998 and June 30,1998 2
Consolidated Statements of Income-
Three and Six Months Ended June 30, 1999 and 1998 3
Consolidated Statements of Cash Flows-
Six Months Ended June 30, 1999 and 1998 4
Consolidated Statements of Shareholders' Equity-
Six Months Ended June 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 24
Part II. Other Information
Item 1. Legal Proceedings 25
Item 2. Changes in Securities and Use of Proceeds 26
Item 3. Defaults Upon Senior Securities 26
Item 4. Submissions of Matters to a Vote of Security Holders 26
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 26
Signature 27
Exhibit Index 28
<TABLE>
Summit Bancorp and Subsidiaries
Consolidated Balance Sheets
Unaudited
(In thousands)
June 30, December 31, June 30,
1999 1998 1998
------------ ------------ ------------
<S> <C> <C> <C>
Assets
Cash and due from banks $ 1,009,863 $ 1,129,859 $ 1,153,023
Federal funds sold and securities purchased
under agreements to resell 16,463 28,829 176,000
Interest-bearing deposits with banks 15,297 26,360 34,476
Securities:
Trading account securities 18,990 12,553 23,797
Securities available for sale 4,375,966 3,970,941 4,295,945
Securities held to maturity 6,378,484 6,015,810 5,070,615
------------ ------------ ------------
Total securities 10,773,440 9,999,304 9,390,357
Loans (net of unearned discount):
Commercial 7,526,178 7,156,574 6,682,510
Commercial mortgage 2,897,752 2,888,597 2,863,378
Residential mortgage 5,488,340 5,719,305 5,635,144
Consumer 5,626,550 5,362,101 4,523,071
------------ ------------ ------------
Total loans 21,538,820 21,126,577 19,704,103
Less: Allowance for loan losses 321,700 322,814 308,753
------------ ------------ ------------
Net loans 21,217,120 20,803,763 19,395,350
------------ ------------ ------------
Premises and equipment 306,528 270,843 249,156
Goodwill and other intangibles 316,610 295,461 179,206
Accrued interest receivable 202,306 195,708 188,559
Due from customers on acceptances 20,901 18,089 16,608
Other assets 347,232 333,098 359,308
------------ ------------ ------------
Total Assets $ 34,225,760 $ 33,101,314 $ 31,142,043
============ ============ ============
Liabilities and Shareholders' Equity
Deposits:
Non-interest bearing demand deposits $ 4,863,591 $ 4,933,787 $ 4,785,430
Interest-bearing deposits:
Savings and time deposits 17,894,879 17,250,295 16,409,298
Commercial certificates of deposit $100,000 and over 684,430 961,046 911,722
------------ ------------ ------------
Total deposits 23,442,900 23,145,128 22,106,450
------------ ------------ ------------
Other borrowed funds 3,734,712 3,189,988 4,152,961
Accrued expenses and other liabilities 343,443 358,542 317,030
Accrued interest payable 80,413 94,430 85,123
Bank acceptances outstanding 20,901 18,089 16,608
Long-term debt 4,001,925 3,572,710 1,881,289
------------ ------------ ------------
Total liabilities 31,624,294 30,378,887 28,559,461
Shareholders' equity:
Common stock par value $ .80: Authorized 390,000 shares 142,018 142,106 142,123
Surplus 966,429 1,013,393 1,006,812
Retained earnings 1,859,908 1,728,135 1,596,600
Employee stock ownership plan obligation (2,250) (3,394) (3,663)
Accumulated other comprehensive income, net of tax (39,478) 12,087 22,669
Common stock held in treasury, at cost (325,161) (169,900) (181,959)
------------ ------------ ------------
Total shareholders' equity 2,601,466 2,722,427 2,582,582
------------ ------------ ------------
Total Liabilities and Shareholders' Equity $ 34,225,760 $ 33,101,314 $ 31,142,043
============ ============ ============
Common shares at period end:
Issued 177,523 177,632 177,654
Treasury 7,883 3,873 3,720
Outstanding 169,640 173,759 173,934
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
Summit Bancorp and Subsidiaries
Consolidated Statements of Income
Unaudited
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
----------- ----------- ----------- -----------
Interest Income
Loans $ 407,045 $ 392,005 $ 810,712 $ 772,314
Securities:
Trading account securities 135 331 217 885
Securities available for sale 60,069 76,324 119,630 161,346
Securities held to maturity 100,850 69,117 197,390 131,723
----------- ----------- ----------- -----------
Total securities 161,054 145,772 317,237 293,954
Other interest income 612 611 1,207 1,449
----------- ----------- ----------- -----------
Total interest income 568,711 538,388 1,129,156 1,067,717
----------- ----------- ----------- -----------
Interest Expense
Savings and time deposits 157,347 153,706 308,749 310,574
Commercial certificates of deposit $100,000 and over 9,460 12,302 21,035 24,559
Borrowed funds, including long-term debt 93,313 77,487 185,437 148,533
----------- ----------- ----------- -----------
Total interest expense 260,120 243,495 515,221 483,666
----------- ----------- ----------- -----------
Net interest income 308,591 294,893 613,935 584,051
Provision for loan losses 16,500 18,000 33,000 33,000
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 292,091 276,893 580,935 551,051
Non-Interest Income
Service charges on deposit accounts 29,567 31,653 59,643 61,937
Service and loan fee income 16,011 15,199 31,635 28,113
Trust income 12,844 10,851 24,770 21,078
Retail investment and insurance fees 18,982 13,155 37,010 24,819
Securities gains 2,094 3,072 2,311 4,498
Other 16,429 16,213 38,715 29,218
----------- ----------- ----------- -----------
Total non-interest income 95,927 90,143 194,084 169,663
----------- ----------- ----------- -----------
Non-Interest Expenses
Salaries 82,606 74,422 162,932 150,915
Pension and other employee benefits 29,132 27,202 59,149 53,820
Furniture and equipment 22,517 20,816 44,968 41,183
Occupancy, net 19,263 17,605 39,098 36,105
Communications 9,696 9,044 19,314 18,576
Advertising and public relations 5,927 6,352 11,455 12,275
Amoritization of goodwill and other intangibles 6,468 4,691 12,339 9,414
Other 31,607 31,787 63,398 61,284
----------- ----------- ----------- -----------
Total non-interest expenses 207,216 191,919 412,653 383,572
----------- ----------- ----------- -----------
Net Income before taxes 180,802 175,117 362,366 337,142
Federal and state income taxes 60,465 56,640 123,288 106,248
----------- ----------- ----------- -----------
Net Income $ 120,337 $ 118,477 $ 239,078 $ 230,894
=========== =========== =========== ===========
Net Income per Common Share:
Basic $ 0.71 $ 0.67 $ 1.39 $ 1.31
=========== =========== =========== ===========
Diluted 0.70 0.66 1.38 1.29
=========== =========== =========== ===========
Average Common Shares Outstanding:
Basic 170,656 176,127 172,216 176,528
=========== =========== =========== ===========
Diluted 172,282 178,232 173,861 178,739
=========== =========== =========== ===========
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
Summit Bancorp and Subsidiaries
Consolidated Statements of Cash Flows
Unaudited
(In thousands)
Six Months Ended
June 30,
--------------------------
Operating activities 1999 1998
----------- -----------
<S> <C> <C>
Net income $239,078 $230,894
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses and other real estate owned 33,000 33,120
Depreciation, amortization and accretion, net 35,108 22,161
Gains on sales of securities (2,311) (4,498)
Gains on sales of mortgages held for sale (10,756) (7,273)
Gains on the sales of other real estate owned (988) (2,314)
Proceeds from the sales of other real estate owned 6,338 9,784
Proceeds from the sales of mortgages held for sale 463,476 395,987
Originations of mortgages held for sale (480,013) (474,198)
Net (increase) decrease in trading account securities (6,437) 11,370
Net change in other accrued and deferred income and expense (48,612) (10,751)
----------- -----------
Net cash provided by operating activities 227,883 204,282
----------- -----------
Investing activities
Purchases of securities held to maturity (1,630,736) (2,031,896)
Purchases of investment securities available for sale (2,039,333) (1,294,197)
Proceeds from maturities of securities held to maturity 1,273,983 1,104,088
Proceeds from maturities of securities available for sale 1,068,731 1,363,435
Proceeds from the sales of securities available for sale 533,850 732,133
Net decrease (increase) in Federal funds sold, securities purchased under
agreements to resell and interest bearing deposits with banks 28,629 (191,944)
Net increase in loans (330,514) (753,147)
Purchases of premises and equipment, net (39,799) (44,506)
----------- -----------
Net cash used in investing activities (1,135,189) (1,116,034)
----------- -----------
Financing activities
Net increase (decrease) in deposits 143,882 (222,986)
Net increase in short-term borrowings 544,724 755,008
Principal payments on long-term debt (72,737) (170,941)
Proceeds from the issuance of long-term debt 501,860 805,895
Dividends paid (104,044) (95,667)
Purchase of common stock (239,970) (192,289)
Proceeds from issuance of common stock under stock option plans 7,099 12,637
----------- -----------
Net cash provided by financing activities 780,814 891,657
----------- -----------
Decrease in cash and due from banks (126,492) (20,095)
Beginning cash balance of acquired entities 6,496 -
Cash and due from banks at beginning of period 1,129,859 1,173,118
----------- -----------
Cash and due from banks at end of period $1,009,863 $1,153,023
=========== ===========
Supplemental disclosure of cash flow information Cash paid:
Interest payments $529,238 $470,145
Income tax payments 84,942 45,358
Noncash investing activities:
Net transfer of loans to other real estate owned 5,986 3,831
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
Summit Bancorp and Subsidiaries
Consolidated Statements of Shareholders' Equity
Unaudited
(In thousands)
Accum. Other Total
Common Retained ESOP Comprehensive Treasury Shareholders'
Stock Surplus Earnings Obligation Income Stock Equity
---------- ---------- --------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 $ 141,272 $ 987,281 $ 1,467,193 $ (4,201) $ 20,875 $ - $ 2,612,420
Comprehensive income:
Net income - - 230,894 - - - 230,894
Unrealized holding gain on securities
arising during the period, net of tax - - - - 1,794 - 1,794
--------
Total comprehensive income 232,688
Cash dividend declared on common stock - - (101,487) - - - (101,487)
Employee stock plans (1,262 shares) 851 19,531 - - - 10,330 30,712
Purchase of common stock (3,926 shares) - - - - - (192,289) (192,289)
ESOP debt repayment - - - 538 - - 538
----------- ---------- --------- -------- ------ ----------- ---------
Balance, June 30, 1998 $ 142,123 $1,006,812 $1,596,600 $ (3,663) $ 22,669 $ (181,959) $ 2,582,582
=========== ========== ========= ======== ====== =========== =========
Balance, December 31, 1998 $ 142,106 $1,013,393 $1,728,135 $ (3,394) $ 12,087 $ (169,900) $ 2,722,427
Comprehensive income:
Net income - - 239,078 - - - 239,078
Unrealized holding loss on securities
arising during the period, net of tax - - - - (51,565) - (51,565)
--------
Total comprehensive income 187,513
Cash dividend declared on common stock - - (107,305) - - - (107,305)
Employee stock plans (877 shares) (88) (48,531) - - - 37,630 (10,989)
Shares issued for acquisitions (1,131 shares) - 1,567 - - - 47,079 48,646
Purchase of common stock (6,018 shares) - - - - - (239,970) (239,970)
ESOP debt repayment - - - 1,144 - - 1,144
----------- --------- -------- ------- ------ ----------- ----------
Balance, June 30, 1999 $ 142,018 $ 966,429 $ 1,859,908 $ (2,250) $ (39,478) $ (325,161) $ 2,601,466
=========== ========= ========= ======= ====== =========== ==========
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
Summit Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1.) Basis of Presentation
The accompanying financial statements reflect, in the opinion of management, all
normal recurring adjustments necessary to present fairly the consolidated
financial position of Summit Bancorp and subsidiaries (Summit Bancorp), the
consolidated results of operations, changes in cash flows and changes in
shareholders' equity. All significant intercompany accounts and transactions
have been eliminated in consolidation. In all material respects, the financial
statements presented comply with the current reporting requirements of
supervisory authorities. Certain prior period amounts have been reclassified to
conform to the financial statement presentation of 1999. For additional
information and disclosures required under generally accepted accounting
principles, reference is made to Summit Bancorp's 1998 Annual Report on Form
10-K.
2.) Acquisitions
On March 31, 1999, Summit Bancorp completed the acquisition of New Canaan Bank
and Trust Company. New Canaan Bank and Trust Company was headquartered in New
Canaan, Connecticut and operated four branches with $182 million in assets. This
acquisition was accounted for as a purchase, with the issuance of 1.1 million
shares of treasury stock. The cost in excess of the fair value of net assets
acquired resulted in goodwill of $35.1 million.
On August 1, 1999, Summit Bancorp competed the acquistion of Prime Bancorp.
Prime Bancorp was headquartered in Fort Washington, Pennsylvania and operated 27
branches with $1.0 billion in assets. This acquisition was accounted for as a
purchase, with the issuance of approximately 7.4 million shares of treasury
stock.
3.) Net Income per Common Share
Basic net income per common share is calculated by dividing net income by the
weighted average common shares outstanding during the period. Diluted net income
per common share is computed similarly to that of basic net income per common
share, except that the denominator is increased to include the number of
additional common shares that would have been outstanding if all potentially
dilutive common shares, principally stock options, were issued during the
reporting period.
<TABLE>
- - -------------------------------------------------------------------------------------------
(in thousands, except per share data) Three months ended June 30, Six months
ended June 30,
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 1998 1999 1998
- - -------------------------------------------------------------------------------------------
Net Income $120,337 $118,477 $239,078 $230,894
===========================================================================================
Basic weighted-average
common shares outstanding 170,656 176,127 172,216 176,528
Plus:Common stock equivalents 1,626 2,105 1,645 2,211
- - -------------------------------------------------------------------------------------------
Diluted weighted-average
common shares outstanding 172,282 178,232 173,861 178,739
===========================================================================================
Net income per common share:
Basic $ 0.71 $ 0.67 $ 1.39 $ 1.31
Diluted 0.70 0.66 1.38 1.29
- - -------------------------------------------------------------------------------------------
</TABLE>
4.) Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
recognition of all derivative instruments as either assets or liabilities in the
statement of financial position and measurement of those instruments at fair
value. The adoption of SFAS No. 133 is not expected to have a material impact on
the financial position or results of operations of Summit Bancorp. With the
issuance of SFAS No. 137 "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the effective date of FASB Statement No.133" the
effective date of SFAS No. 133 has been deferred to all fiscal years beginning
after June 15, 2000.
In October 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage- Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
an Mortgage Banking Enterprise." This statement is an amendment of SFAS No. 65.
"Accounting for Certain Mortgage Banking Activities," and requires that after
the securitization of mortgage loans held for sale, an entity engaged in
mortgage banking activities classify the resulting mortgage-backed securities or
retained interests based on its ability and intent to sell or hold those
investments. This statement is effective for the first fiscal quarter beginning
after December 15, 1998. The adoption of the provisions of SFAS No. 134 did not
have a material impact on the financial position or results of operations of
Summit Bancorp.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Summit Bancorp is a bank holding company headquartered in Princeton, New Jersey.
Summit Bancorp owns bank subsidiaries in New Jersey, Pennsylvania and
Connecticut and several active non-bank subsidiaries. Summit Bancorp's bank
subsidiaries provide a broad range of retail, insurance, commercial and private
banking services as well as trust and investment services to individuals,
businesses, not-for-profit organizations, government entities and other
financial institutions. These services are provided through an extensive branch
network, including supermarket branches and private banking facilities, as well
as through automated teller machines, personal computers and the internet.
FINANCIAL CONDITION
Total assets at June 30, 1999, were $34.2 billion, an increase of $1.1 billion,
or 3.4 percent, from year-end 1998. The growth came most notably from the loan
and securities portfolios, and was generally funded with savings and time
deposits, and borrowed funds. The purchase of New Canaan Bank and Trust Company
added $208.5 million to total assets.
Total securities at June 30, 1999 were $10.8 billion, an increase of $774.1
million, or 7.7% from year-end 1998. Securities held to maturity at June 30,
1999, were $6.4 billion and mainly comprised of $4.2 billion of U.S. Government
and Federal agency securities, $2.1 billion of other securities, predominately
corporate collateralized mortgage obligations ("CMOs"), and $132.2 million of
state and political subdivision securities. These securities increased $362.7
million or 6.0 percent from year-end 1998, primarily as cash flows from
increased borrowings were invested in securities held to maturity. For the six
months of 1999, $1.6 billion of held to maturity securities were purchased,
offset by principal repayments and maturities of $1.3 billion. At June 30, 1999,
and December 31, 1998, net unrealized (losses) gains on securities held to
maturity amounted to ($140.2) million and $15.0 million, respectively. At June
30, 1999, securities available for sale amounted to $4.4 billion and were
predominately comprised of U.S. Government and Federal agency securities. These
securities increased $405.0 million, or 10.2 percent, from year-end 1998. The
increase resulted from $2.0 billion in purchases partially offset by sales and
maturities of $1.6 billion.
At June 30, 1999, total loans amounted to $21.5 billion, an increase of $412.2
million, or 2.0 percent, from year-end 1998. Increases in commercial loans of
$369.6 million, commercial mortgages of $9.2 million and consumer loans of
$264.4 million were offset by the $231.0 million decrease in residential
mortgages. The increase in commercial loans was primarily related to growth in
asset based lending and commercial media. The decline in residential mortgages
of $231.0 million or 4.0 percent from December 31, 1998 was due to mortgage
sales and prepayments exceeding the demand for new loans. Mortgage loans held
for sale amounted to $91.7 million, $183.3 million and $115.7 million for the
periods ended June 30, 1999, December 31, 1998, and June 30, 1998, respectively.
The increase in the consumer loan portfolio can generally be attributed to
purchases of home equity loans.
Total deposits were $23.4 billion at June 30, 1999, an increase of $297.8
million, or 1.3 percent, from December 31, 1998. Savings and time deposits at
$17.9 billion, increased $644.6 million, or 3.7 percent, from December 31, 1998.
The growth came most notably from Summit's new cash management product, the
Summit Navigator account, which increased $1.9 billion from year-end 1998.
Partially offsetting this increase was a decrease in commercial certificates of
deposit $100,000 and over, which were down $276.6 million, or 28.8 percent,
compared to December 31, 1998. Also decreasing were demand deposits, which
declined $70.2 million, or 1.4 percent, from year-end 1998 to $4.9 billion. The
decrease in demand deposits came mainly from business accounts.
Other borrowed funds at June 30, 1999, increased $544.7 million, or 14.6
percent, from December 31, 1998, to $3.7 billion. The increase in other borrowed
funds can be attributed to increases in short-term repurchase agreements,
partially offset by a decrease in federal funds purchased. Long-term debt at
June 30, 1999, increased $429.2 million, or 12.0 percent, from December 31,
1998, to $4.0 billion. The increase in long-term debt was principally the result
of the increase in repurchase agreements and Federal Home Loan Bank notes.
Included in long-term debt at each of the periods presented are $150.0 million
of 8.4 percent pass-through securities qualifying as Tier I Capital.
Total shareholders' equity at June 30, 1999 was $2.6 billion, a decrease of
$121.0 million or 4.4 percent from December 31, 1998. The decrease was primarily
attributed to the purchase of Treasury stock. Treasury stock at June 30, 1999
amounted to $325.2 million and was comprised of 7.9 million shares. On August 1,
1999, approximately 7.4 million shares were used with the acquisition of Prime
Bancorp. Included in shareholders' equity at June 30, 1999, was accumulated
other comprehensive income (loss), net of tax, amounting to ($39.5) million,
compared to $12.1 million at year-end 1998. Accumulated other comprehensive
income is comprised principally of unrealized gains and losses on securities
available for sale. The decline in accumulated other comprehensive income was
due to the increase in interest rates, having a negative effect on fixed income
securities.
Summit Bancorp's capital ratios for June 30, 1999, compared to select prior
periods and regulatory requirements, are shown in the following table. Summit
Bancorp's bank subsidiaries met the well-capitalized requirements for each of
the periods presented. The decreases in the ratios at June 30, 1999, were
principally attributable to treasury stock purchases and asset growth.
<TABLE>
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Minimum
June 30, Dec. 31, June 30, Required Well
Selected Capital Ratios 1999 1998 1999 Capital Capitalized
- - -----------------------------------------------------------------------------------------------
Equity to assets 7.60% 8.22% 8.29% -% -%
Leverage ratio 7.47 8.00 8.39 3.00 5.00
Tier I capital 9.97 10.86 11.68 4.00 6.00
Total risk-based capital 11.76 12.72 13.76 8.00 10.00
- - -----------------------------------------------------------------------------------------------
</TABLE>
Non-Performing Assets
Non-performing assets include non-performing loans and other real estate owned
(OREO) and are shown in the following table as of the dates indicated.
- - ------------------------------------------------------------------------------
Non-performing Assets June 30, Dec. 31, June 30,
(in thousands) 1999 1998 1998
- - ------------------------------------------------------------------------------
Non-performing loans:
Commercial and industrial $76,737 $55,245 $46,405
Commercial mortgage 11,764 26,446 22,484
Construction and development 6,324 5,046 2,566
- - ------------------------------------------------------------------------------
Non-performing loans 94,825 86,737 71,455
OREO, net 6,342 2,829 8,913
- - ------------------------------------------------------------------------------
Non-performing assets $101,167 $89,566 $80,368
- - ------------------------------------------------------------------------------
Non-performing loans to
total loans 0.44% 0.41% 0.36%
Non-performing assets to total
loans and OREO 0.47 0.42 0.41
- - ------------------------------------------------------------------------------
The average balances of non-performing loans amounted to $83.9 million, $87.5
million and $75.5 million, for the six months ended June 30, 1999, December 31,
1998 and June 30, 1998, respectively. Interest income received on non-performing
loans amounted to $1.2 million for the six months ended June 30, 1999, compared
to $1.0 million for the
six months ended June 30, 1998.
Loans, not included in the table above, which are past due 90 days or more
amounted to $37.7 million, $45.3 million and $57.0 million at June 30, 1999,
December 31, 1998, and June 30, 1998, respectively. These loans are primarily
residential mortgage and consumer loans which are well secured and in the
process of collection.
Potential problem loans, which are also excluded from the table above, are loans
where information about possible credit problems of borrowers causes management
to have doubts as to the ability of such borrowers to comply with loan repayment
terms. These loans amounted to $64.5 million, $8.0 million and $11.3 million at
June 30, 1999, December 31, 1998, and June 30, 1998, respectively. The increase
in potential problem loans at June 30,1999 was attributed to one borrower, with
a total relationship of approximately $60.0 million. Subsequent to June 30, 1999
there was a deterioration in this borrower's credit quality. As a result,
management expects to transfer this credit from potential problem loans to
nonaccrual loans in the third quarter. As of the date of this filing, the loss
exposure on this credit and its potential impact on the provision for loan
losses cannot be reasonably estimated.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level to absorb estimated
credit losses in the loan portfolio as of the date of the financial statements.
A standardized process has been established to assess the appropriateness of the
allowance for loan losses and to identify the risks inherent in the loan
portfolio. This process consists of (1) the identification of specific reserves
for identified problem loans, (2) the calculation of general reserves, which
includes a combination of formula-driven allocations and minimum reserve levels
by loan type and grade, and (3) the determination of the unallocated reserves.
Specific reserves, if any, are determined through a loan-by-loan analysis of
non-performing loans, with assessments made on the borrower's ability to repay
and the fair value of the underlying collateral for collateral-dependent loans.
If a loan's carrying value is in excess of the discounted expected cash flows or
the value of the underlying collateral, the excess is specifically reserved or
charged off. The level of specific reserves is generally the smallest component
of the allowance for loan losses.
There are three steps in the calculation of the general reserves. Reserves are
first determined by applying historical loss factors to each loan and unused
commitment by business segment and loan grade. The historical loss factors are
calculated using a trailing six quarter loss migration analysis. Adjustments are
then made to the historical loss factor based on six quantitative objective
elements ("Delinquency", "Non-performing Assets", "Watch Lists", "Charge-offs",
"Concentrations of Credit", and "Recoveries", and three subjective elements
("Economic Conditions", "Credit Audit's Rating", and "Other Factors"), which
have been developed to provide greater accuracy to the process. This methodology
is applied to both the commercial and retail portfolios. The reserves calculated
for the retail portfolios (residential mortgages and consumer loans) are
generally sufficient to absorb one year of expected losses. For the commercial
portfolios, the historical loss factor, inclusive of the adjustment, is then
compared to minimum reserve levels for each loan grade. The larger of the two
factors are used in the determination of the reserves. The minimum level of
reserves by loan classification is .25% for pass loans, .75% for close follow
loans, 1% for special mention loans, 10% for substandard loans, 50% for doubtful
loans, and 100% for loss loans. These minimum reserve levels have been
consistently applied for all reported periods.
The last component of the loan loss reserve is the unallocated reserve. The
unallocated reserve is based upon management's evaluation of the underlying
inherent risk in the loan portfolio. The appropriate level of reserves in the
aggregate is based on several factors: industry concentrations, delinquency
trends, economic trends, loan growth relative to the overall allowance, the
level of substandard assets and allocated reserves and the level of unallocated
reserves, to the total loan portfolio. The unallocated portion of the allowance
for loan losses, in excess of specific and general reserves, was $154.2 million
at June 30, 1999, compared to $164.5 million at December 31, 1998.
The 1999 provision for loan losses for the second quarter was $16.5 million, a
$1.5 million decrease from the prior year, and $33.0 million, for the six months
ended, unchanged from the same period a year ago. Provision for loan losses are
charged to expense to bring the allowance for loan losses at a level deemed
appropriate by management to cover the credit risk inherent in the loan
portfolio. The provision for loan losses may vary from quarter to quarter due to
loan growth or if there is a significant increase in the inherent risk in the
loan portfolios.
Transactions in the allowance for loan losses, by loan category, for the six
month periods ended June 30, 1999, and 1998 and selected loan quality ratios for
the dates indicated are shown in the following tables:
<TABLE>
Allowance for Loan Losses Three months ended Six months ended
June 30, June 30,
(in thousands) 1999 1998 1999 1998
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, Beginning of period $328,302 $301,264 $322,814 $296,494
Allowance of acquired institutions - - 2,140 -
Provision for loan losses 16,500 18,000 33,000 33,000
- - ------------------------------------------------------------------------------------------------
344,802 319,264 357,954 329,494
- - ------------------------------------------------------------------------------------------------
Loans charged off:
Commercial and industrial 20,268 2,824 28,399 11,490
Construction and development - 939 13 1,295
Commercial mortgage 1,070 1,847 2,272 2,107
Residential mortgage 322 3,330 2,948 3,649
Consumer 7,178 8,524 15,165 17,856
- - ------------------------------------------------------------------------------------------------
Total loans charged off 28,838 17,464 48,797 36,397
- - ------------------------------------------------------------------------------------------------
Recoveries:
Commercial and industrial 2,348 1,755 5,865 6,404
Construction and development 452 1,019 847 2,817
Commercial mortgage 193 1,431 741 1,718
Residential mortgage 116 555 435 829
Consumer 2,627 2,193 4,655 3,888
- - ------------------------------------------------------------------------------------------------
Total recoveries 5,736 6,953 12,543 15,656
- - ------------------------------------------------------------------------------------------------
Net charge offs 23,102 10,511 36,254 20,741
- - ------------------------------------------------------------------------------------------------
Balance, end of period $321,700 $308,753 $321,700 $308,753
================================================================================================
</TABLE>
<TABLE>
- - ------------------------------------------------------------------------------
Jun. 30, Dec. 31, Jun.30
1999 1998 1998
- - ------------------------------------------------------------------------------
Net charge offs to average loans:
<S> <C> <C> <C>
Quarter to date 0.44% 0.23% 0.22%
Year-to-date 0.34 0.23 0.22
Allowance for loan losses to:
Total loans 1.49 1.53 1.57
Non-performing loans 339.26 372.18 432.09
Non-performing assets 317.99 360.42 384.17
- - -----------------------------------------------------------------------------
</TABLE>
As a result of charge offs of several large credits, net charge offs for the
quarter amounted to $23.1 million, and increase of $12.6 million over the prior
year.
<TABLE>
Summit Bancorp and Subsidiaries
Consolidated Average Balance Sheets with Resultant Interest and Rates
Unaudited
(Tax-equivalent basis, dollars in thousands)
Three Months Ended
----------------------------------------------------------------------------------------
June 30, 1999 June 30, 1998
---------------------------------------- ----------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
--------- ----------- ----------- ----------- ----------- ---------
ASSETS
Interest-earning assets:
Federal funds sold and securities
purchased under agreements to resell $ 29,167 $ 350 4.81 % $ 15,035 $ 236 6.30 %
Interest-bearing deposits with banks 23,716 262 4.43 24,770 375 6.07
Securities:
Trading account securities 11,222 183 6.54 22,661 360 6.37
Securities available for sale 3,988,952 60,357 6.05 4,816,731 76,938 6.39
Securities held to maturity 6,551,577 101,871 6.22 4,402,545 70,391 6.40
----------- --------- ----------- ----------- ----------- -----------
Total securities 10,551,751 162,411 6.16 9,241,937 147,689 6.39
----------- --------- ----------- ----------- ----------- -----------
Loans, net of unearned discount:
Commercial 7,377,701 141,791 7.71 6,528,314 137,113 8.42
Commercial mortgage 2,895,640 58,054 8.02 2,833,291 59,696 8.43
Residential mortgage 5,536,378 98,631 7.13 5,721,791 104,842 7.33
Consumer 5,458,995 109,760 8.06 4,359,659 91,587 8.43
----------- --------- ----------- ----------- ----------- -----------
Total loans 21,268,714 408,236 7.70 19,443,055 393,238 8.11
----------- --------- ----------- ----------- ----------- -----------
Total interest-earning assets 31,873,348 571,259 7.19 28,724,797 541,538 7.56
----------- --------- ----------- ----------- ----------- -----------
Non-interest earning assets:
Cash and due from banks 958,692 1,005,805
Allowance for loan losses (330,913) (305,566)
Other assets 1,175,609 965,884
----------- -----------
Total non-interest earning assets 1,803,388 1,666,123
----------- -----------
Total Assets $ 33,676,736 $ 30,390,920
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Savings deposits $ 10,760,700 71,216 2.65 % $ 9,419,197 60,329 2.57 %
Time deposits 6,948,494 86,131 4.97 7,071,065 93,377 5.30
Commercial certificates of
deposit $100,000 and over 797,238 9,460 4.76 906,884 12,302 5.44
----------- --------- ----------- ----------- ----------- -----------
Total interest-bearing deposits 18,506,432 166,807 3.62 17,397,146 166,008 3.83
----------- --------- ----------- ----------- ----------- -----------
Other borrowed funds 3,259,556 38,642 4.76 3,690,155 50,105 5.45
Long-term debt 3,975,757 54,671 5.50 1,742,456 27,382 6.29
----------- --------- ----------- ----------- ----------- -----------
Total interest-bearing liabilities 25,741,745 260,120 4.05 22,829,757 243,495 4.28
----------- --------- ----------- ----------- ----------- -----------
Non-interest bearing liabilities:
Demand deposits 4,781,326 4,510,854
Other liabilities 518,481 389,433
----------- -----------
Total non-interest bearing liabilities 5,299,807 4,900,287
Shareholders' equity 2,635,184 2,660,876
----------- -----------
Total Liabilities and
Shareholders' Equity $ 33,676,736 $ 30,390,920
============ ============
Net interest spread 311,139 3.14 % 298,043 3.28 %
======== =======
Tax-equivalent basis adjustment (2,548) (3,150)
----------- -----------
Net interest income $ 308,591 $ 294,893
============ ============
Net interest margin 3.92 % 4.16 %
======== =======
</TABLE>
<TABLE>
Summit Bancorp and Subsidiaries
Consolidated Average Balance Sheets with Resultant Interest and Rates
Unaudited
(Tax-equivalent basis, dollars in thousands)
Year to Date
------------------------------------------------------------------------------------
June 30, 1999 June 30, 1998
----------------------------------------- --------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
---------- ----------- ----------- ----------- ----------- -----------
ASSETS
Interest-earning assets:
Federal funds sold and securities
purchased under agreements to resell $ 19,959 $ 495 5.00 % $ 22,072 $ 643 5.87%
Interest-bearing deposits with banks 28,699 712 5.00 25,911 806 6.27
Securities:
Trading account securities 10,599 286 5.44 27,863 942 6.82
Securities available for sale 3,973,019 120,308 6.06 5,089,824 162,581 6.39
Securities held to maturity 6,389,949 199,458 6.24 4,187,363 134,302 6.41
----------- ---------- ----------- ----------- ----------- -----------
Total securities 10,373,567 320,052 6.17 9,305,050 297,825 6.40
----------- ---------- ----------- ----------- ----------- -----------
Loans, net of unearned discount:
Commercial 7,268,132 277,402 7.70 6,363,227 265,659 8.42
Commercial mortgage 2,885,058 115,852 8.03 2,801,791 118,832 8.48
Residential mortgage 5,626,686 201,645 7.17 5,722,116 209,628 7.33
Consumer 5,438,268 218,432 8.10 4,314,428 180,654 8.44
----------- -------- ----------- ----------- ----------- -----------
Total loans 21,218,144 813,331 7.73 19,201,562 774,773 8.14
----------- -------- ----------- ----------- ----------- -----------
Total interest-earning assets 31,640,369 1,134,590 7.23 28,554,595 1,074,047 7.59
----------- --------- ----------- ----------- ----------- -----------
Non-interest earning assets:
Cash and due from banks 956,857 1,017,587
Allowance for loan losses (328,133) (303,828)
Other assets 1,149,459 956,368
----------- -----------
Total non-interest earning assets 1,778,183 1,670,127
----------- -----------
Total Assets $ 33,418,552 $ 30,224,722
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Savings deposits $ 10,416,033 $ 133,105 2.58 % $ 9,478,456 $ 121,881 2.59%
Time deposits 7,035,370 175,644 5.03 7,163,649 188,693 5.31
Commercial certificates of
deposit $100,000 and over 885,793 21,035 4.79 912,386 24,559 5.43
----------- --------- ----------- ----------- ----------- -----------
Total interest-bearing deposits 18,337,196 329,784 3.63 17,554,491 335,133 3.85
----------- --------- ----------- ----------- ----------- -----------
Other borrowed funds 3,335,296 80,129 4.84 3,588,557 96,893 5.44
Long-term debt 3,831,036 105,308 5.50 1,630,478 51,640 6.33
----------- --------- ----------- ----------- ----------- -----------
Total interest-bearing liabilities 25,503,528 515,221 4.07 22,773,526 483,666 4.28
----------- --------- ----------- ----------- ----------- -----------
Non-interest bearing liabilities:
Demand deposits 4,733,528 4,402,440
Other liabilities 498,354 381,470
----------- -----------
Total non-interest bearing liabilities 5,231,882 4,783,910
Shareholders' equity 2,683,142 2,667,286
----------- -----------
Total Liabilities and Shareholders' Equity $ 33,418,552 $ 30,224,722
============ ============
Net interest spread 619,369 3.16 % 590,381 3.31%
===== ======
Tax-equivalent basis adjustment (5,434) (6,330)
----------- -----------
Net interest income $ 613,935 $ 584,051
============ ============
Net interest margin 3.95 % 4.17%
====== =====
</TABLE>
RESULTS OF OPERATIONS
Net income for the quarter ended June 30, 1999, was $120.3 million, or $.71 per
basic share, compared to $118.5 million, or $.67 per basic share, for the second
quarter of 1998. On a diluted per share basis, net income for the three months
ended June 30, 1999, was $.70 per diluted share compared to $.66 for the same
period in 1998.
For the six months ended June 30, 1999, net income was $239.1 million or $1.39
per basic share compared to $230.9 million or $1.31 per basic share. On a
diluted basis, net income for the six months ended, was $1.38 per diluted share,
compared to $1.29 for the six months ended June 30, 1998.
The following are key performance indicators for the three and six month periods
ended June 30, 1999 and 1998. The cash-based financial data excludes the after
tax impact of amortization of goodwill and other intangibles.
- - -----------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
- - -----------------------------------------------------------------------------
FINANCIAL DATA:
Net income $120,337 $118,477 $239,078 $230,894
Per share diluted 0.70 0.66 1.38 1.29
Return on average assets 1.43% 1.56% 1.44% 1.54%
Return on average equity 18.32 17.86 17.97 17.46
Efficiency ratio 51.20 49.81 50.88 50.83
- - -----------------------------------------------------------------------------
CASH BASED FINANCIAL DATA*:
Net income $126,597 $122,709 $251,000 $239,390
Per share-diluted 0.73 0.69 1.44 1.34
Return on average
tangible assets 1.52 1.63 1.53 1.61
Return on average
tangible equity 21.87 19.78 21.24 19.37
Efficiency Ratio 49.61 48.59 49.36 49.59
- - -----------------------------------------------------------------------------
*
Cash-based financial data excludes the after tax impact of amortization of
goodwill and other intangibles.
Net Interest Income
Interest income on a tax-equivalent basis was $1.1 billion for the six months
ended June 30, 1999, an increase of $60.5 million, or 5.6 percent, compared to a
year ago. Interest-earning assets averaged $31.6 billion, an increase of $3.1
billion, or 10.8 percent, compared to the prior year period. The increase in
interest-earning assets contributed $116.1 million to the increase in
tax-equivalent interest income, partially offset by a decline of $55.6 million
due to the reduction in the yield. The rate earned on interest-earning assets
decreased 36 basis points to 7.23 percent in the 1999 period. The decrease was
generally the result of a lower interest rate environment as compared to last
year.
Interest expense increased $31.6 million, or 6.5 percent, for the six months
ended June 30, 1999, compared to the same period in 1998. The $2.7 billion
growth in the average balance of interest-bearing liabilities to $25.5 billion
in the 1999 period contributed $62.5 million to the increase in interest
expense. This increase was partially offset by a decrease of $31.0 million in
interest expense resulting from a decline in rates paid on interest-bearing
liabilities. The rate paid on interest-bearing liabilities decreased 21 basis
points to 4.07 percent in the 1999 period.
Net interest income on a tax-equivalent basis was $619.4 million for the six
months ended June 30, 1999, an increase of $29.0 million, or 4.9 percent,
compared to the same period in 1998. The net interest spread percentage on a
tax-equivalent basis (the difference between the rate earned on average
interest-earning assets and the rate paid on average interest-bearing
liabilities) was 3.16 percent for the six months ended June 30, 1999, compared
to 3.31 percent for the prior year period. Net interest income on a
tax-equivalent basis as a percentage of average interest-earning assets was 3.95
percent for the six months ended June 1999, compared to 4.17 percent during the
same period in 1998. The decline in net interest margin can be attributed
primarily to narrower spreads in a lower interest rate environment, the change
in deposit mix, and the purchase of treasury stock.
The rate/volume table below presents an analysis of the impact on interest
income and expense resulting from changes in average volumes and rates over the
periods. Changes that are not due to volume or rate variances have been
allocated proportionally to both, based on their relative absolute values.
<TABLE>
Rate/VolumeTable
Three Months ended June 30, Six months ended June 30,
1999 versus 1998 1999 versus 1998
--------------------------- -------------------------
Due to change in: Due to change in:
(In millions) ----------------- -----------------
(Tax-equivilent basis) Volume Rate Total Volume Rate Total
- - ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Loans
Commercial $ 16.9 $(12.2) $ 4.7 $ 35.7 $(24.0) $11.7
Commercial mortgage 1.3 (2.9) (1.6) 3.5 (6.5) (3.0)
Residential mortgage (3.4) (2.8) (6.2) (2.3) (5.6) (7.9)
Consumer 22.2 (4.1) 18.1 45.1 (7.3) 37.8
- - ------------------------------------------------------------------------------------
Total Loans 37.0 (22.0) 15.0 82.0 (43.4) 38.6
Securities HTM 33.5 (2.0) 31.5 68.8 (3.7) 65.1
Securities AFS (12.7) (3.9) (16.6) (34.2) (8.1) (42.3)
Other interest-earning assets - (0.2) (0.2) (0.5) (0.4) (0.9)
- - ------------------------------------------------------------------------------------
Total Interest Earning
Assets 57.8 (28.1) 29.7 116.1 (55.6) 60.5
- - ------------------------------------------------------------------------------------
Interest Expense
Deposits
Savings Deposits 8.9 2.0 10.9 11.7 (0.5) 11.2
Time deposits (1.6) (5.7) (7.3) (3.3) (9.7) (13.0)
Commercial CD's>$100M (1.4) (1.4) (2.8) (0.7) (2.8) (3.5)
- - ----------------------------------------------------------------------------------
Total Time Deposits 5.9 (5.1) 0.8 7.7 (13.0) (5.3)
Other borrowed funds (5.5) (6.0) (11.5) (6.5) (10.4) (16.9)
Long-term debt 31.1 (3.8) 27.3 61.3 (7.6) 53.7
- - ----------------------------------------------------------------------------------
Total Interest Expense 31.5 (14.9) 16.6 62.5 (31.0) 31.5
- - ----------------------------------------------------------------------------------
Net interest income-FTE $ 26.3 $(13.2) $13.1 $53.6 $(24.6) $29.0
- - ----------------------------------------------------------------------------------
Decrease in tax-equivalent adjustment 0.6 0.9
------ -----
Increase in Net Interest Income $ 13.7 $29.9
====== =====
</TABLE>
Non-Interest Income
Non-interest income categories for the three and six month periods ended June
30, 1999 and 1998 are shown in the following table:
<TABLE>
- - -----------------------------------------------------------------------------
(in millions) Three months ended June 30, Six months ended June 30,
Percent Percent
1999 1998 Change 1999 1998 Change
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service charges on
deposit accounts $29.6 $31.7 (6.6)% $59.6 $61.9 (3.7)%
Service and loan fee income 16.0 15.2 5.3 31.6 28.1 12.5
Trust income 12.8 10.9 18.4 24.8 21.1 17.5
Retail investment and
insurance fees 19.0 13.2 44.3 37.0 24.8 49.1
Other 16.4 16.1 1.3 38.8 29.3 32.5
- - -----------------------------------------------------------------------------
Total non-interest
operating income 93.8 87.1 7.8 191.8 165.2 16.1
Securities gains 2.1 3.0 (31.8) 2.3 4.5 (48.6)
- - -----------------------------------------------------------------------------
Total non-interest income $95.9 $90.1 6.4% $194.1 $169.7 14.4%
=============================================================================
</TABLE>
Service charges on deposit accounts decreased $2.1 million, or 6.6 percent for
the quarter ended June 30, 1999, compared with 1998, and decreased $2.3 million,
or 3.7 percent, for the six months ended, compared with the same period a year
ago. The decrease was primarily the result of lower minimum balance requirements
on retail deposits resulting in lower monthly maintenance fees.
Service and loan fee income increased $0.8 million, or 5.3 percent, for the
quarter ended June 30, 1999, compared with 1998, and $3.5 million, or 12.5
percent for the six months ended June 30, 1999, compared to the same period a
year ago. The increase in service and loan fee income for the three months ended
June 30, 1999, was primarily due to increased merchant credit card activity and
mortgage servicing income.
Trust income increased $1.9 million, or 18.4 percent, for the quarter ended June
30, 1999, compared with 1998, and $3.7 million, or 17.5 percent for the six
months ended June 30, 1999, compared to the same period a year ago. The increase
in trust income for the three months ended June 30, 1999, was generally due to
increases in asset management advisory fees, personal trust fees, and fees from
sales of proprietary and third party mutual funds.
Retail investment and insurance fees increased $5.8 million, or 44.3 percent,
for the quarter ended June 30, 1999, compared with 1998, and increased $12.2
million or 49.1 percent, for the six months ended, compared with the same period
a year ago. The increase in retail investment and insurance fees for the three
and six months ended June 30, 1999, was primarily due to increased annuity fee
and insurance service fees, resulting from the acquired insurance companies,
W.M. Ross and Company, August 31, 1998, and Madison Consulting Group, October
30, 1998.
Other income increased $0.3 million, or 1.3 percent, for the quarter ended June
30, 1999, compared with 1998, and $9.5 million, or 32.5 percent, for the six
month period ended June 30, 1999, compared to the same period a year ago. The
increase in other non-interest income for the six months ended June 30, 1999,
was generally attributable to a net gain of $5.9 million on the sale of the
$33.0 million credit card portfolio, which occurred in the first quarter.
<TABLE>
Non-Interest Expense
Non-interest expense categories for the three and six month periods ended June
30, 1999, and 1998, are shown in the following table:
- - -----------------------------------------------------------------------------
(in millions) Three months ended June 30, Six months ended June 30,
- - ------------------------------------------------------------------------------
Percent Percent
1999 1998 Change 1999 1998 Change
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Salaries $82.6 $74.4 11.0% $162.9 $150.9 8.0%
Pension and other
employee benefits 29.1 27.2 7.1 59.1 53.8 9.9
Furniture and equipment 22.5 20.8 8.2 45.0 41.2 9.2
Occupancy, net 19.3 17.6 9.4 39.1 36.1 8.3
Communications 9.7 9.0 7.2 19.3 18.6 4.0
Advertising and
public relations 5.9 6.4 (6.7) 11.5 12.3 (6.7)
Amortization of goodwill
and other intangibles 6.5 4.7 37.9 12.4 9.4 31.1
Other 31.6 31.8 (0.6) 63.4 61.3 3.4
- - ------------------------------------------------------------------------------
Total non-interest expense $207.2 $191.9 8.0% $412.7 $383.6 7.6%
==============================================================================
</TABLE>
Salaries increased $8.2 million, or 11.0 percent, for the quarter ended June 30,
1999, compared to the same quarter in 1998, and $12.0 million, or 8.0 percent,
for the six months ended June 30, 1999, compared to the same period a year ago.
In addition to annual merit increases, salaries rose approximately $3.2 million
and $5.7 million from acquisitions, for the three and six month periods ended,
respectively. There were 8,658 full-time equivalent employees at June 30, 1999,
compared to 8,350 the same period a year ago.
Pension and employee benefits increased $1.9 million, or 7.1 percent, for the
three months ended June 30, 1999 compared with the same quarter in 1998, and
$5.3 million, or 9.9 percent for the six months ended,June 30, 1999, compared to
the same period a year ago. The increases were attributable to increased taxes
and pension and incentive compensation expense related to higher levels of core
salaries.
Furniture and equipment expenses increased $1.7 million, or 8.2 percent, for the
quarter ended June 30, 1999, compared with the same quarter in 1998, and $3.8
million or 9.2 percent, for the six months ended June 30, 1999, compared to the
same period a year ago. This increase was due to the recent bank acquisitions,
equipment maintenance, bankcard service fees and increases in leasing expenses
associated with computer equipment installed at branches to support teller and
on-line operations.
Amortization of goodwill and other intangibles increased $1.8 million or 37.9
percent, for the three months ended June 30, 1999, and $2.9 million, or 31.1
percent, for the six months ended June 30, 1999, compared to the same period a
year ago. The increase was due to the purchase acquisitions of NSS Bancorp, New
Canaan Bank and Trust Company, W.M.
Ross and Company and Madison Consulting Group.
Included in other expenses, which did not vary significantly from period to
period, were legal and professional fees of $7.0 million and $14.9 million, for
the three and six month periods, respectively.
The effective income tax rate was 33.4 percent for the three months ended June
30, 1999, compared with 32.3 percent for the comparable 1998 period. The lower
effective income tax rate for 1998 was the result of benefits received from the
implementation of business strategies in the 1998 period that will not be
realized in 1999.
LINES OF BUSINESS
For management purposes, Summit Bancorp is segmented into the following lines of
business: Retail Banking, Commercial Banking, and Investment Services and
Private Banking. The investment portfolio and activities not included in these
lines are reflected in Corporate and Other. Summit Bancorp's profitability
measurement system uses internal management accounting policies that ensure
business line results reflect the underlying economics of each business unit,
and the results are not necessarily comparable with similar information for any
other financial institution.
Net income includes revenues and expenses directly associated with each line in
addition to allocations of revenue earned and expenses incurred by support units
such as operations and technology. Centrally provided corporate services and
general overhead are allocated on a per-unit cost basis or in proportion to the
balances of assets, liabilities and operating expenses associated with the
particular business line. A matched maturity funds transfer pricing methodology
is employed to assign a cost of funds to the assets of each business line, as
well as to assign a value of funds to the liabilities and equity of each
business line. The provision for loan losses is based on the historical credit
losses for each line of business. The anticipated consolidated effective income
tax rate is applied to each line of business, after consideration of earnings of
tax-advantaged assets within the lines of business.
In 1999, Summit Bancorp implemented a new business unit profitability system,
which prospectively provides enhanced management reporting, including an
enhanced methodology with respect to the allocation of the provisions for loan
losses. Certain prior period information has been restated to conform to the
1999 presentation with respect to the allocation of funds transfer charges or
credits for assigned assets, liabilities and equity.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Result of operations Investment Servs/
Quarter Ended June 30, Retail Banking Commercial Banking Private Banking Corporate and Other Consolidated
- - -----------------------------------------------------------------------------------------------------------------------------
(in millions) 1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
- - -----------------------------------------------------------------------------------------------------------------------------
Net interest income 202.9 189.6 68.2 66.2 14.3 13.5 23.2 25.6 308.6 294.9
Provision for loan loss 9.3 8.9 6.7 8.6 0.5 0.5 - - 16.5 18.0
Net interest income after
provision for loan losses 193.6 180.7 61.5 57.6 13.8 13.0 23.2 25.6 292.1 276.9
Non-interest income 49.5 50.3 11.6 10.3 32.3 26.2 2.5 3.3 95.9 90.1
Non-interest expense 135.0 130.7 31.1 27.2 33.2 27.4 7.9 6.6 207.2 191.9
- - -----------------------------------------------------------------------------------------------------------------------------
Income before taxes 108.1 100.3 42.0 40.7 12.9 11.8 17.8 22.3 180.8 175.1
Federal and state income tax 36.1 33.1 13.0 13.0 4.3 3.9 7.1 6.6 60.5 56.6
- - -----------------------------------------------------------------------------------------------------------------------------
Net income 72.0 67.2 29.0 27.7 8.6 7.9 10.7 15.7 120.3 118.5
=============================================================================================================================
</TABLE>
<TABLE>
Selectd Average Balances
- - ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities 55.0 41.0 - - 11.4 22.6 10,485.4 9,178.3 10,551.8 9,241.9
Loans 11,595.9 10,960.7 8,383.9 7,432.4 1,272.4 1,046.4 16.5 3.6 21,268.7 19,443.1
Assets 11,962.6 11,362.3 8,361.9 7,508.5 1,364.1 1,111.8 11,988.1 10,408.3 33,676.7 30,390.9
Deposits 20,667.9 19,075.4 1,006.6 961.1 770.4 733.5 842.9 1,138.0 23,287.8 21,908.0
</TABLE>
<TABLE>
Result of operations Investment Servs/
Six months Ended June 30 Retail Banking Commercial Banking Private Banking Corporate and Other Consolidated
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(in millions) 1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
- - --------------------------------------------------------------------------------------------------------------------------
Net interest income 402.0 377.9 135.1 129.1 28.0 26.3 48.8 50.8 613.9 584.1
Provision for loan loss 19.1 16.0 13.1 16.0 0.8 1.0 - - 33.0 33.0
- - --------------------------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 382.9 361.9 122.0 113.1 27.2 25.3 48.8 50.8 580.9 551.1
Non-interest income 104.5 95.9 24.0 20.3 62.4 47.0 3.2 6.5 194.1 169.7
Non-interest expense 267.1 262.9 62.1 54.8 64.6 50.0 18.9 16.0 412.7 383.7
- - --------------------------------------------------------------------------------------------------------------------------
Income before taxes 220.3 194.9 83.9 78.6 25.0 22.3 33.1 41.3 362.3 337.1
Federal and state income tax 75.2 62.7 26.6 24.4 8.5 7.2 12.9 11.9 123.2 106.2
- - --------------------------------------------------------------------------------------------------------------------------
Net income 145.1 132.2 57.3 54.2 16.5 15.1 20.2 29.4 239.1 230.9
==========================================================================================================================
Selectd Average Balances
- - ------------------------
Securities 55.0 40.9 - - 10.6 27.8 10,308.0 9,236.4 10,373.6 9,305.1
Loans 11,708.0 10,907.8 8,245.5 7,275.2 1,253.2 1,016.3 11.4 2.3 21,218.1 19,201.6
Assets 12,075.5 11,379.7 8,227.0 7,350.8 1,343.4 1,088.7 11,772.7 10,405.5 33,418.6 30,224.7
Deposits 20,330.9 19,152.6 1,005.1 936.1 753.1 700.2 981.6 1,168.0 23,070.7 21,956.9
</TABLE>
Retail Banking
Retail Banking meets the banking needs of individuals and small businesses
through traditional and supermarket branches in New Jersey, eastern
Pennsylvania, and southern Connecticut. Summit also offers its customers an
expanding array of 24-hour banking services through automated teller machines,
telephone banking centers, its Personal Computer Banking network, and the
internet. Mortgage loans, home equity loans and lines of credit, direct and
indirect consumer loans and small business commercial loans are offered through
Summit Bancorp's broad network of branches.
Average loans for the quarter ended June 30, 1999, increased $635.2 million or
5.8 percent to $11.6 billion from the same period in 1998, primarily in the
consumer lending area. Total average deposits for the second quarter of 1999
increased to $20.7 billion, up $1.6 billion from a year ago. This increase was
attributable to the growth in the Summit Navigator product introduced in the
fourth quarter of 1998. Net interest income for the quarter increased $13.3
million or 7.0 percent over last year. Interest income increased $5.4 million or
2.5 percent over the second quarter of 1998, resulting from the increase in loan
balances. Interest expense increased $4.7 million or 3.2 percent resulting from
the increased deposit balances. The increase in non-interest expense of $4.3
million is due to increases in salary and communication expenses.
Commercial Banking
Commercial Banking is focused on meeting the banking requirements of large and
middle-market businesses. Asset based lending, international trade services,
equipment leasing, real estate financing, private placement, mezzanine
financing, aircraft lending, correspondent banking, treasury services, limited
partnership investments, and structured finance services are actively solicited
through a network of relationship managers. Demand and interest-bearing deposit
accounts and services are provided through the branch network.
Total average loans for the quarter ended June 30, 1999, were $8.4 billion, an
increase of $951.5 million or 12.8 percent over the same period in 1998
primarily in asset-based lending and commercial media lending. Net interest
income for the second quarter of 1999 increased $2.0 million or 3.0 percent from
1998, driven by the increase in average loans. Higher loan fees, account
analysis service charges, advisory fees and limited partnership gains provided
for the increase over prior year in non-interest income of $1.3 million.
Non-interest expense increased $3.9 million over the prior year to $31.1 million
due to higher salaries and indirect expenses.
Investment Services and Private Banking
Investment Services provides a full range of trust, administrative, and
custodial services to individuals and institutions, in addition to investment
products and discount brokerage. The line also markets a wide variety of
insurance products for the personal and corporate marketplace. This segment also
includes Private Banking, which provides personal credit services for lawyers,
accountants and their firms, and business loans and lines of credit.
The increase in net interest income of $0.8 million or 5.9 percent is due to
higher loan volumes in 1999. The major portion of the increases in non-interest
income and expense over the prior period reflects the acquisitions of W.M. Ross
& Company and Madison Consulting Group, two insurance subsidiaries, in the
second half of 1998. Also contributing to the increase in non-interest income is
higher fee income in trust, mutual funds and annuities.
Corporate and Other
Corporate and Other is primarily comprised of the treasury function, which is
responsible for managing interest-rate risk and the investment portfolios. In
addition, certain revenues and expenses not considered allocable to a line of
business are reflected in this area.
Net interest income declined $2.4 million or 9.4 percent from 1998, primarily
due to higher equity allocations made to business lines in 1999, offset
partially by growth in the securities portfolio. Asset growth was primarily due
to an increase in the securities portfolios, which averaged $10.5 billion for
the second quarter of 1999, up $1.3 billion or 14.2 percent from the prior year.
The decrease in non-interest income in 1999 is primarily attributed to gains on
security transactions in the prior period.
Year 2000 Readiness Disclosure
Issues surrounding the Year 2000 arise out of the fact that many existing
computer programs use only two digits to identify a year in the date field. With
the approach of the Year 2000, computer hardware and software that are not made
Year 2000 ready might interpret "00" as year 1900 rather than year 2000. The
Year 2000 problem is not just a technology issue; it also involves Summit
Bancorp's assessment of building equipment, environmental systems, customers,
suppliers and third parties.
Risks of Year 2000 Issues:
Management believes that the Year 2000 project is on schedule and that its
efforts are adequate to address Year 2000 issues. However, failure to
successfully resolve critical issues could have a material impact on Summit
Bancorp's operations. The primary risks associated with the Year 2000 are as
follows:
The first is the risk that Summit Bancorp's systems are not ready for operation
by January 1, 2000. These systems must be remediated, tested, and made ready for
the Year 2000 in a timely manner.
The second is the risk of operational disruption due to operational failures of
third parties. Failure of one or more third parties to modify their systems in a
timely manner may have a material and adverse effect on Summit Bancorp's
operations. This risk is viewed as the one that is most reasonably likely to
occur, therefore appropriate contingency plans are being prepared.
The third is the risk of business interruption among customers such that funding
and repayment do not take place in a timely manner. As a result, there may be
increases in problem loans and credit losses in future years.
State of Readiness:
Summit Bancorp has been working since 1995 to remediate its information
technology ("IT") and non-IT systems for the Year 2000. All of the 330 software
systems being tracked by Summit Bancorp, and the computer equipment they run on,
have completed Summit Bancorp's seven-phase Year 2000 project program, which is
as follows: Developing a Strategic Approach, Creating Organizational Awareness,
Assessing Actions and Developing Detailed Plans, Renovating (remediating),
Validating (testing), Implementing (remediated code into production), and
Implementing (totally future-date certified). Additionally, Summit Bancorp has
completed the above project program for certain noncritical, stand-alone
personal computer (PC)-based software applications.
Testing of automated interfaces with third parties including principal
settlement methods associated with major payment systems involving systems of
other financial institutions and governmental agencies has been completed. In
addition, Summit Bancorp has set up a test capability for its customers to test
their automated interfaces with Summit Bancorp at the customer's convenience
between May and September of 1999.
Non-IT systems with embedded chip technology for all building, environmental,
and security systems have been remediated, tested, and confirmed as Year 2000
ready. Telecommunications software and equipment, both voice and data, have been
fully remediated, tested, and confirmed as Year 2000 ready. The banking and
telecommunications industries completed multiple joint end to end tests of major
carriers and bank networks in the second quarter of 1999 with no Y2K related
problems. Although Summit Bancorp was not one of the banks participating in
these tests, review of the methodology and results support Summit Bancorp's own
assessment of the Y2K readiness of the telecommunications services on which it
relies.
Communication with third parties that may have a material relationship with
Summit Bancorp has been initiated to determine whether they have appropriate
plans to be Year 2000 ready. An inventory of important vendors has been
completed and Summit Bancorp's vendor risk assessment and preparedness
evaluation activities are ongoing. Summit Bancorp's plans to minimize
third-party risk include contingency planning for important vendors. All of
Summit Bancorp's significant vendors have responded to the Year 2000 inquiries
made by Summit Bancorp, with approximately 87 percent claiming to be currently
Year 2000 compliant. Vendor responses were reviewed for completeness and
incomplete responses were followed up with additional correspondence, telephone
calls or both. In some cases, Year 2000 readiness information was obtained from
publicly available sources, including vendor or third party websites. Confidence
levels were developed based on the quality of the vendor's responses to Summit
Bancorp's written inquiries, use of publicly available information, and the
vendor's prior track record in meeting its commitments to Summit Bancorp. With
limited exception Summit Bancorp's suppliers have been found to be making
satisfactory progress toward achieving Y2K readiness. Summit Bancorp will have
appropriate contingency plans in place for those whose progress was not rated
satisfactory as of June 30, 1999. Summit Bancorp has not assessed the
enforceability of any representations by these vendors as to their Year 2000
compliance status, preferring to focus its Year 2000 resources on developing
appropriate contingency plans where it does not have sufficient confidence in a
vendor's Year 2000 status. These representations may or may not be enforceable,
depending on the facts and circumstances of particular vendor relationships, but
Summit Bancorp has not relied on the enforceability of such representations in
its Year 2000 readiness efforts.
To minimize the impact from those customers who may experience a disruption in
their operations because they have not adequately considered Year 2000 issues, a
program has been implemented for monitoring and measuring customer Year 2000
readiness. Customers with borrowing commitments of $1 million or more, and
customers monitored by the internal risk rating system with outstanding loan
balances of $500 thousand or more, have been reviewed for Year 2000 readiness,
and will continue to be reviewed on a quarterly basis during 1999. Certain
customers have been identified as having additional credit risk as a direct
result of the Year 2000. Those risks have been considered and incorporated in
the analysis of the adequacy of the loan loss allowance. All new loan customers
and renewals of existing loans are assessed as part of the underwriting process.
Costs to Address Year 2000 Issues:
The estimated cost of the Year 2000 project is $23 million. The project is
staffed with both external contract and internal personnel. This estimate
includes the cost of retention programs for key systems personnel, a portion of
which will be paid beyond January 1, 2000. To date, incremental internal costs
totaling $6.1 million have been incurred. These costs include compensation and
benefits for internal personnel assigned full-time to the project, the retention
program, and other ancillary costs. In addition, $12.0 million of external
costs, including external contract personnel and payments to third parties, have
been incurred to date. The total cost incurred to date is $18.1 million.
Contingency Plans:
Summit Bancorp has created certain remediation and business resumption
contingency plans specific to the Year 2000 project. Remediation contingency
plans address the actions to be taken if remediation of a mission-critical
system falls behind schedule. Remediation for all mission critical systems has
been completed. None of the three remediation contingency plans that were
prepared for mission-critical systems had to be triggered. Business resumption
contingency plans address the actions that will be taken if critical business
functions cannot be carried out in the normal manner due to system or
third-party failures. These plans supplement existing disaster recovery plans
and are being updated to include potential Year 2000 related failures. Business
resumption plans will be maintained current and will be tested during the
remainder of 1999.
LIQUIDITY
Liquidity is the ability to meet the borrowing needs and deposit withdrawal
requirements of customers and support asset growth. Principal sources of
liquidity are deposit generation, access to purchased funds, maturities and
repayments of loans and investment securities and interest and fee income.
The consolidated statements of cash flows present the change in cash and due
from banks from operating, investing and financing activities. During the first
six months of 1999, net cash provided by operating activities totaled $227.9
million. Contributing to net cash provided by operating activities were the
results of operations, plus noncash expenses, and proceeds from the sales of
mortgages held for sale. Partially offsetting the contributions to operating
cash were funds used to originate mortgage loans held for sale and noncash
revenues.
Net cash used in investing activities totaled $1.1 billion. For the six months
ended June 30, 1999, net cash used in transactions involving the investment
portfolios totaled $793.5 million, while the loan portfolio used $330.5 million.
Scheduled maturities and anticipated principal repayments of the held to
maturity portfolio will approximate $1.3 billion throughout the balance of 1999.
In addition, the securities available for sale portfolio provides another source
of liquidity. These sources can also be used to meet the funding needs during
periods of loan growth.
Net cash provided by financing activities totaled $780.8 million. During the
first six months of 1999, other borrowed funds and long-term debt increased
$973.8 million. This increase was partially offset by the purchase of common
stock of $239.8 million, and the payment of common stock dividends.
Liquidity is also available through additional lines of credit and the ability
to incur additional debt. The banking subsidiaries have established lines of
credit with the Federal Reserve Bank and the Federal Home Loan Bank of New York
and other correspondent banks, which further support and enhance liquidity. In
addition, in November 1998 two of Summit Bancorp's banking subsidiaries, Summit
Bank (New Jersey) and Summit Bank (Pennsylvania), executed a distribution
agreement providing for the possible issuance, from time to time, of senior and
subordinated notes to a maximum of $3.75 billion on an underwritten or agency
basis.
Liquidity is also important at the Parent Company in order to provide funds for
operations and to pay dividends to shareholders. Parent Company cash
requirements are met primarily through management fees and dividends from its
subsidiaries, the issuance of short and long-term debt and the exercise of stock
options. The amount of dividends that can be assessed to the bank subsidiaries
is subject to certain regulatory restrictions.
LOOKING AHEAD
This report contains certain forward-looking statements, either expressed or
implied, which are provided to assist the reader to understand anticipated
future financial performance. These forward- looking statements involve certain
risks, uncertainties, estimates and assumptions made by management.
Factors that may cause actual results to differ from those results expressed or
implied include, but are not limited to, the interest rate environment and the
overall economy, the ability of customers to repay their obligations, the
adequacy of the allowance for loan losses, including realizable collateral
valuations, charge offs and recoveries, the progress of integrating acquired
financial institutions, competition and technological changes, including the
Year 2000 issue. Although management has taken certain steps to mitigate the
negative effect of the above mentioned items, significant unfavorable changes
could severely impact the assumptions used and have an adverse affect on
profitability.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Due to the nature of Summit Bancorp's business, market risk is primarily its
exposure to interest rate risk. Interest rate risk is the impact that changes in
interest rates have on future earnings. The principal objective in managing
interest rate risk is to maximize net interest income within the acceptable
levels of risk that have been previously established by policy. This risk can be
reduced by various strategies, including the administration of liability costs,
the reinvestment of asset maturities and the use of off-balance sheet financial
instruments. Summit Bancorp has limited risks associated with foreign
currencies.
Interest rate risk is monitored through the use of simulation modeling
techniques which apply alternative interest rate scenarios to periodic forecasts
of future business activity, projecting the related impact to net interest
income. The use of simulation modeling assists management in its continuing
efforts to achieve earnings growth in varying interest rate environments.
Key assumptions in the model include anticipated prepayments on mortgage-related
instruments, contractual cash flows and maturities of all financial instruments
including derivatives, anticipated future business activity, deposit sensitivity
and changes in market conditions. Selected core deposit rates are held constant
based on the results of analysis of historical rate movements.
These assumptions are inherently uncertain, and as a result, these models cannot
precisely estimate the impact that higher or lower rate environments will have
on net interest income. Actual results will differ from simulated results due to
timing, magnitude and frequency of interest rate changes, changes in market
condition, as well as changes in management's strategies.
Based on the results of the interest simulation model as of June 30, 1999, if
interest rates increase or decrease 100 basis points from current rates in an
immediate and parallel shock over a twelve month period, Summit Bancorp would
expect a decrease of $23.0 million in net interest income and an increase of
$21.0 million in net interest income, respectively. The results of the interest
simulation model as of June 30, 1999, do not represent a material change from
the amounts previously reported as of December 31, 1998. The interest simulation
model does not include asset and liability strategies that could be deployed to
mitigate the impact of changes in the interest rate environment.
Interest rate risk management efforts also involve the use of certain derivative
financial instruments for the purpose of stabilizing net interest income in a
changing interest rate environment. The derivative financial instruments
portfolio consists principally of interest rate swaps. At June 30, 1999, the
notional values of these instruments were $272.0 million. These derivatives
resulted in a reduction in net interest income of $1.0 million for the first six
months of 1999. The cost to terminate these contracts at June 30, 1999, would
have been $103.5 thousand.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Based upon advice of Summit Bancorp's legal department, management does not
believe that the ultimate disposition of the litigation discussed below will
have a material adverse effect on the financial position and results of
operation of Summit Bancorp and its subsidiaries, taken as a whole.
1. Annette Loatman on behalf of herself and all others similarly situated v.
United Jersey Bank, U.S. District Court for the District of New Jersey, Civil
Action No. 95-5258 (JBS), filed on October 4, 1995, Robert M. Gundle, III, on
behalf of himself and all others similarly situated v. Summit Bank, successor in
interest to United Jersey Bank, U.S. District Court for the District of New
Jersey, Civil Action No. 96- 4477 (JBS), filed on October 14, 1996, and Annette
Loatman, on behalf of herself and all others similarly situated v. United Jersey
Bank, Superior Court of New Jersey, Camden County, Docket No. L-3527-96 ("the
State Action"), filed April 24, 1996, dismissed without prejudice pending the
outcome of the federal actions on December 9, 1996, and reinstated October 15,
1997 with Robert M. Gundle, III as an additional named plaintiff.
Reported on Form 10-K for the period ended December 31, 1998 and on Form 10-Q
for the period ended March 31, 1999. On March 30, 1999, plaintiffs filed a
motion for partial summary judgment as to liability on their New Jersey Consumer
Fraud Act claim. The Bank opposed this motion and filed a cross-motion for
dismissal of plaintiffs' Consumer Fraud Act claim. On July 23, 1999, the Court
entered an order denying the plaintiffs' motion for partial summary judgment and
granting the Bank's cross-motion for partial summary judgment dismissing the
plaintiffs' New Jersey Consumer Fraud Act claim.
2. In re Payroll Express Corporation et al - John S. Pereira as Chapter 11
Trustee of the Estate of Payroll Express Corporation et al v. United Jersey
Bank, United States District Court for the Southern District of New York, Civil
Action No. 94-1565 (LAP) ("the Preference Action"), filed December 29, 1993; In
re Payroll Express Corporation of New York and Payroll Express Corporation,
United States Bankruptcy Court for the Southern District of New York. Case Nos.
92-B-43 149 (CB) and 92-B-43 150 (CB), Adversary Proceeding No. 94-8297A, filed
April 22, 1994 ("the Fraudulent Conveyance Action"); Beth Israel Medical Center,
et al V. United Jersey Bank and National Westminster Bank New Jersey, United
States District Court for the Southern District of New York, Civil Action No.
94-8256 (LAP), filed September 28, 1993; Frederick Goldman, Inc. V. United
Jersey Bank and National Westminster Bank New Jersey, United States District
Court for the Southern District of New York, Civil Action No, 94-8256 (LAP),
filed March 21, 1994; Towers Financial Corporation v. United Jersey Bank, United
States District Court for the District of New Jersey, Civil Action No.92-3175
(WGB), filed June 2, 1992, removed to federal court September 2, 1992; New York
City Transit Authority V. United Jersey Bank and National Westminster Bank New
Jersey, United States District Court for the Southern District of New York,
Civil Action No.95-3685 (LAP), filed May 19, 1995; and Copytone, Inc. on behalf
of itself and others similarly situated v. United Jersey Bank, National
Westminster Bank New Jersey and John Does I through 20, United States District
Court for the Southern District of New York, Civil Action No. 95-8217 (LAP),
filed November 1995.
Reported on Form 10-K for the period ended December 31, 1998 and on Form 10-Q
for the period ended March 31, 1999. In the Preference Action, all fact and
expert discovery has been concluded. Summit Bank and NatWest Bank have filed
motions for summary judgment and the court has scheduled oral argument on the
motions for August 20, 1999. The court has also set September 13, 1999 as the
trial date for the Preference Action if the summary judgment motions are denied.
All other pending cases are inactive.
3. Daniel Iverson, Lawrence Cohen and Terri Cohen, on behalf of themselves and
all others similarly situated v. Collective Bank, a federally chartered savings
bank organized under the laws of the United States of America (improperly named
as Collective Bancorp, Inc., a Delaware corporation), on behalf of itself and
all others similarly situated. Superior Court of New Jersey, Atlantic County,
Docket No. ATL- L-2578-95, filed on July 26, 1995.
Reported on Form 10-K for the period ended December 31, 1998 and on Form 10-Q
for the period ended March 31, 1999. On January 27, 1999, the New Jersey Supreme
Court entered an order granting Collective's motion for leave to cross appeal
the Appellate Division's ruling concerning federal preemption. The Supreme Court
has not yet scheduled a date to hear the parties' appeals.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(3) A. #Restated Certificate of Incorporation of Summit
Bancorp., as restated August 16, 1999.
(4) A. #Rights Agreement, dated as of June 16, 1999, by and between
Summit Bancorp and First Chicago Trust Company of New York, as
Rights agent (incorporated by reference to Exhibit
4.1 on Form 8-K dated June 16, 1999).
(10) HH. (i) Summit Bancorp. Executive Severance Plan
Participation Letter, for James J. Lynch and (ii) Termination
Agreement between Summit Bancorp. and James J. Lynch
(27) Summit Bancorp. Financial Data Schedule - June 30, 1999.
(b) Reports on Form 8-K
In a current report on Form 8-K dated June 16, 1999, the Registrant
under Item 5, Other Events, reported the declaration of a dividend
distribution of one Preferred Stock Purchase Right for each outstanding
Common Share of the Corporation, payable as of August 16, 1999 to
shareholders of record on that date. Each Right entitles the registered
holder to purchase from the Corporation one one-hundredth (1/100) of a
preferred share of the Corporation, designated as Series S Preferred
Shares, upon the occurrence of certain events set forth in the Rights
Agreement dated as of June 16, 1999 between Summit Bancorp and First
Chicago Trust Company of New York, as Rights Agent.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUMMIT BANCORP
Registrant
DATE: August 16, 1999 BY: /s/Paul V. Stahlin
--------------------------
Paul V. Stahlin
Senior Vice President, Comptroller
and Principal Accounting Officer
(Duly Authorized Officer)
EXHIBIT INDEX
Exhibit No. Description
(3) A. #Restated Certificate of Incorporation of Summit
Bancorp., as restated August 16, 1999.
(4) A. #Rights Agreement, dated as of June 16, 1999, by and between
Summit Bancorp and First Chicago Trust Company of New York, as
Rights agent (incorporated by reference to Exhibit 4.1 on Form 8-K
dated June 16, 1999).
(10) HH. (i) Summit Bancorp. Executive Severance Plan Participation
Letter for James J. Lynch and (ii) Termination Agreement
between Summit Bancorp. and James J. Lynch
(27) Summit Bancorp. Financial Data Schedule - June 30, 1999.
Exhibit (3)A.
Restated 8/16/99
RESTATED
CERTIFICATE OF INCORPORATION
OF
SUMMIT BANCORP.
SUMMIT BANCORP., a corporation formed pursuant to the
provisions of the New Jersey Business Corporation Act (N.J.S.A.
14A: 1-1 et. seq.), hereby restates its Certificate of
Incorporation pursuant to the provisions of the New Jersey
Business Corporation Act (N.J.S.A. 14A:9-5).
1. The name of the Corporation is SUMMIT BANCORP.
2. The purposes for which the corporation is formed are:
A. To engage in and carry on the business of a
registered bank holding company.
B. To acquire, by purchase, subscription or otherwise, own, hold for
investment or otherwise, use, sell, exchange, mortgage, pledge,
hypothecate, create a security interest in, or otherwise deal with and
dispose of, any and all securities, as hereinafter defined, and to possess
and exercise any and all rights, powers and privileges of ownership of any
and all such securities, including the right to vote thereon and to
consent, assent or dissent with respect thereto for any and all purposes,
and to issue or deliver its own securities in payment or exchange, in whole
or in part, for any securities or to make payment therefor by any other
lawful means; to aid by loan, subsidy or in any other lawful manner any
corporation, firm, organization, association or other entity in which the
Corporation may be or become interested through the direct or indirect
holding of securities or in any other manner; to do any and all acts and
things for the enhancement, protection or preservation of any securities
which are in any manner, directly or indirectly, held or guaranteed by the
Corporation, and to do any and all acts and things designed to accomplish
any such purpose.
The term "securities", as used in this article, shall mean any
and all shares, stocks, bonds, debentures, notes, acceptances, voting trust
certificates, certificates of deposit, evidences of indebtedness, other
obligations, certificates of any interest in or of the deposit of any of
the foregoing, scrip, interim or other receipts, warrants or rights to
subscribe for or purchase, or guarantees of, any of the foregoing, or any
other interests or instruments commonly known as securities.
C. To the extent permitted by law, to cause to be formed, organized,
reorganized, consolidated, merged or liquidated and to take charge of, any
corporation, firm, organization, association or other entity, foreign or
domestic.
D. To the extent permitted by law, to furnish services to and perform
services for, and to act in any representative capacity for, any
corporation, firm, organization, association, or other entity in which the
Corporation may be or become interested through the direct or indirect
holding of securities or in any other manner, whether in the development,
exploitation, promotion, operation, management, liquidation, or otherwise,
of any of the business or property thereof or of any lawful enterprise
related thereto.
E. To make loans and give other forms of credit with or without
security.
F. To borrow money for its corporate purposes; to draw, make, accept,
endorse, execute, issue, deliver and negotiate bonds, debentures,
promissory notes, drafts, bills of exchange and other negotiable or
transferable instruments and to secure the payment thereof and the interest
thereon by a deed or deeds of trust or by mortgage or pledge of or upon, or
by the creation of a security interest in, all or any part of the property
of the Corporation, real or personal, or any interest therein, wherever
situated, whether at the time owned or thereafter acquired, and to sell,
pledge, create a security interest in or otherwise dispose of such bonds,
debentures, notes or other obligations.
G. To purchase, lease or otherwise acquire, take, hold, own, use,
improve, maintain, develop, complete, extend, manage, operate, mortgage or
otherwise impose a lien upon or create a security interest in, sell,
exchange, lease or otherwise dispose of or convey or transfer in any
manner, buildings, storage and other facilities, real and personal property
of all kinds, and any and all rights, interests or easements therein,
without limit as to amount and wherever situated.
H. To engage in any such activity directly or through a subsidiary or
subsidiaries, and to take all acts deemed appropriate to promote the
interest of such subsidiary or subsidiaries, including without limiting the
foregoing, making contracts and incurring liabilities for the benefit of
such subsidiary or subsidiaries; and transferring or causing to be
transferred to any such subsidiary or subsidiaries assets of the
Corporation.
I. To guarantee the bonds, debentures, notes or other evidences of
indebtedness issued, or obligations incurred by subsidiary companies in
which the Corporation holds, directly or indirectly, at least a majority of
the voting stock, or by any corporation, partnership, limited partnership,
joint venture or other association where the Corporation has or may acquire
a substantial interest in such corporation, partnership, limited
partnership, joint venture or other association or where such guarantee is
otherwise in furtherance of the interest of the Corporation.
J. To provide that the obligations of such subsidiary companies may be
convertible into, or exchangeable for, or carry rights or options to
purchase or subscribe to, or both, shares of the Corporation of any class.
K. In general, to do any and all of the acts and things herein set
forth to the same extent as natural persons could do, and in any part of
the world, as principal, factor, agent, contractor or otherwise, either
alone or in company with any person, entity, syndicate, partnership,
association, corporation or others; to establish and maintain offices and
agencies within and anywhere outside of the State of New Jersey; and to
exercise all or any of its corporate powers and rights in the State of New
Jersey and in any and all other states, territories, districts, possessions
or dependencies of the United States of America and in any other countries
or places.
L. To do everything necessary, proper, advisable or convenient for
the accomplishment of any of the purposes herein set forth and to do every
other act and thing incidental thereto or connected therewith, provided the
same be not forbidden by law.
3. The total number of shares of capital stock authorized and which may be
issued by this Corporation is Three Hundred Ninety-Six Million (396,000,000)
shares, of which Three Hundred Ninety Million (390,000,000) shares of Eighty
Cents ($0.80) par value each shall be designated as Common Shares (the "Common
Stock"), and of which Six Million (6,000,000) shares without par value shall be
designed as Preferred Shares (the "Preferred Stock"). All or any part of such
authorized Common Stock and Preferred Stock may be issued by the Corporation
from time to time and for such consideration as may be determined upon and fixed
by the Board of Directors as provided by law.
No holders of shares of Common Stock or Preferred Stock of the Corporation
shall be entitled, as such, as a matter of preemptive or preferential right, to
subscribe for or purchase any part of any new or additional issue of shares of
Common Stock or Preferred Stock, or any treasury shares of Common Stock or
Preferred Stock, or of securities of the Corporation or of any subsidiary of the
Corporation convertible into or exchangeable for, or carrying rights or options
to purchase or subscribe to, or both, shares of any class whatsoever, whether
now or hereafter authorized, and whether issued for cash, property, services or
otherwise.
The Board of Directors of the Corporation is, pursuant to the New Jersey
Business Corporation Law (N.J.S.A. 14A:7-2), authorized to amend this Restated
Certificate of Incorporation of the Corporation so as (a) to divide the
authorized shares of Preferred Stock of the Corporation into series within such
class, (b) to determine the designation and the number of shares of any such
series, and (c) to determine the relative voting, dividend, conversion,
redemption, liquidation and other rights, preferences and limitations of the
authorized shares of Preferred Stock of the Corporation.
A. Creation of Series S Preferred Shares. A series of Preferred Stock
of the Corporation, consisting of 2,000,000 shares, be, and hereby is,
created and designated as "Series S Preferred Shares" (the "Series S
Preferred Stock"), which shall have a stated value of $16,400 per share and
shall have the powers, preferences and relative participating, optional or
other special rights, and the qualifications, limitations or restrictions
thereof, as follows:
(1) Dividends and Distributions.
(a) Subject to the provisions for adjustment hereinafter set
forth, and subject to the rights of the holders of any shares of any
series of Preferred Shares ranking prior and superior to the Series S
Preferred Stock with respect to dividends, the holders of shares of
Series S Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for
the purpose, (i) cash dividends in an amount per share (rounded to the
nearest cent) equal to 100 times the aggregate per share amount of all
cash dividends declared or paid on the Common Stock and (ii) a
preferential cash dividend (the "Preferential Dividends"), if any, in
preference to the holders of Common Stock, on the first business day
of February, May, August and November of each year (each a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a
share of Series S Preferred Stock, payable in an amount (except in the
case of the first Quarterly Dividend Payment if the date of the first
issuance of Series S Preferred Stock is a date other than a Quarterly
Dividend Payment date, in which case such payment shall be a prorated
portion of such amount) equal to $25.00 per share of Series S
Preferred Stock less the per share amount of all cash dividends
declared on the Series S Preferred Stock pursuant to clause (i) of
this sentence since the immediately preceding Quarterly Dividend
Payment Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of
Series S Preferred Stock. In the event the Corporation shall, at any
time after the issuance of any share or fraction of a share of Series
S Preferred Stock, make any distribution on the shares of Common Stock
of the Corporation, whether by way of a dividend or a reclassification
of stock, a recapitalization, reorganization or partial liquidation of
the Corporation or otherwise, which is payable in cash or any debt
security, debt instrument, real or personal property or any other
property (other than cash dividends subject to the immediately
preceding sentence, a distribution of shares of Common Stock or other
capital stock of the Corporation or a distribution of options, rights
or warrants to acquire any such share, including any debt security
convertible into or exchangeable for any such share, at a price less
than the Fair Market Value (as hereinafter defined) of such share of
Common Stock), then, and in each such event, the Corporation shall
simultaneously pay on each then outstanding share of Series S
Preferred Stock of the Corporation a distribution, in like kind, of
100 times such distribution paid on a share of Common Stock (subject
to the provisions for adjustment hereinafter set forth). The dividends
and distributions on the Series S Preferred Stock to which holders
thereof are entitled pursuant to clause (i) of the first sentence of
this paragraph and pursuant to the second sentence of this paragraph
are hereinafter referred to as "Dividends" and the multiple of such
cash and non-cash dividends on the Common Stock applicable to the
determination of the Dividends, which shall be 100 initially but shall
be adjusted from time to time as hereinafter provided, is hereinafter
referred to as the "Dividend Multiple". In the event the Corporation
shall at any time after August 16, 1999 declare or pay any dividend or
make any distribution on Common Stock payable in shares of Common
Stock, or effect a subdivision or split or a combination,
consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, then
in each such case the Dividend Multiple thereafter applicable to the
determination of the amount of Dividends which holders of shares of
Series S Preferred Stock shall be entitled to receive shall be the
Dividend Multiple applicable immediately prior to such event
multiplied by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(b) The Corporation shall declare each Dividend at the same time
it declares any cash or non-cash dividend or distribution on the
Common Stock in respect of which a Dividend is required to be paid. No
cash or non-cash dividend or distribution on the Common Stock in
respect of which a Dividend is required to be paid shall be paid or
set aside for payment on the Common Stock unless a Dividend in respect
of such dividend or distribution on the Common Stock shall be
simultaneously paid, or set aside for payment, on the Series S
Preferred Stock.
(c) Preferential Dividends shall begin to accrue on outstanding
shares of Series S Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issuance of any shares of Series S
Preferred Stock. Accrued but unpaid Preferential Dividends shall
cumulate but shall not bear interest. Preferential Dividends paid on
the shares of Series S Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding.
(2) Voting Rights. The holders of shares of Series S Preferred Stock
shall have the following voting rights:
(a) Subject to the provisions for adjustment hereinafter set
forth, each share of Series S Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the holders
of the Common Stock. The number of votes which a holder of Series S
Preferred Stock is entitled to cast, as the same may be adjusted from
time to time as hereinafter provided, is hereinafter referred to as
the "Vote Multiple". In the event the Corporation shall at any time
after August 16, 1999 declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or split or
a combination, consolidation or reverse split of the outstanding
shares of Common Stock into a greater or lesser number of shares of
Common Stock, then in each such case the Vote Multiple thereafter
applicable to the determination of the number of votes per share to
which holders of shares of Series S Preferred Stock shall be entitled
after such event shall be the Vote Multiple immediately prior to such
event multiplied by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(b) Except as otherwise provided in this Restated Certificate of
Incorporation or by law, the holders of shares of Series S Preferred
Stock and the holders of shares of Common Stock shall vote together as
one class on all matters submitted to a vote of stockholders of the
Corporation.
(c) In the event that the Preferential Dividends accrued on the
Series S Preferred Stock for four or more quarterly dividend periods,
whether consecutive or not, shall not have been declared and paid or
irrevocably set aside for payment, the holders of record of Preferred
Stock of the Corporation of all series (including the Series S
Preferred Stock), other than any series in respect of which such right
is expressly withheld by this Restated Certificate of Incorporation,
shall have the right, at the next meeting of shareholders called for
the election of directors, to elect two members to the Board of
Directors, which directors shall be in addition to the number required
prior to such event, to serve until the next Annual Meeting and until
their successors are elected and qualified or their earlier
resignation, removal or incapacity or until such earlier time as all
accrued and unpaid Preferential Dividends upon the outstanding shares
of Series S Preferred Stock shall have been paid (or irrevocably set
aside for payment) in full. The holders of shares of Series S
Preferred Stock shall continue to have the right to elect directors as
provided by the immediately preceding sentence until all accrued and
unpaid Preferential Dividends upon the outstanding shares of Series S
Preferred Stock shall have been paid (or set aside for payment) in
full. Such directors may be removed and replaced by such shareholders,
and vacancies in such directorships may be filled only by such
shareholders (or by the remaining director elected by such
shareholders, if there be one) in the manner permitted by law;
provided, however, that any such action by shareholders shall be taken
at a meeting of shareholders and shall not be taken by written consent
thereto.
(d) Except as otherwise required by this Restated Certificate of
Incorporation or by law or set forth herein, holders of Series S
Preferred Stock shall have no other special voting rights and their
consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for the
taking of any corporate action.
(3) Certain Restrictions.
(a) Whenever Preferential Dividends or Dividends are in arrears
or the Corporation shall be in default of payment thereof, thereafter
and until all accrued and unpaid Preferential Dividends and Dividends,
whether or not declared, on shares of Series S Preferred Stock
outstanding shall have been paid or set irrevocably aside for payment
in full, and in addition to any and all other rights which any holder
of shares of Series S Preferred Stock may have in such circumstances,
the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration, any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series S Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity as to
dividends with the Series S Preferred Stock, unless dividends are
paid ratably on the Series S Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are
then entitled if the full dividends accrued thereon were to be
paid;
(iii) except as permitted by subparagraph (iv) of this
paragraph 3(a), redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series S Preferred Stock, provided that the Corporation may
at any time redeem, purchase or otherwise acquire shares of any
such parity stock in exchange for shares of any stock of the
Corporation ranking junior (both as to dividends and upon
liquidation, dissolution or winding up) to the Series S Preferred
Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series S Preferred Stock, or any shares of stock
ranking on a parity with the Series S Preferred Stock (either as
to dividends or upon liquidation, dissolution or winding up),
except in accordance with a purchase offer made to all holders of
such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any Subsidiary (as
hereinafter defined) of the Corporation to purchase or otherwise
acquire for consideration any shares of stock of the Corporation
unless the Corporation could, under paragraph (a) of this Section 3,
purchase or otherwise acquire such shares at such time and in such
manner. A "Subsidiary" of the Corporation shall mean any corporation
or other entity of which securities or other ownership interests
having ordinary voting power sufficient to elect a majority of the
board of directors of such corporation or other entity or other
persons performing similar functions are beneficially owned, directly
or indirectly, by the Corporation or by any corporation or other
entity that is otherwise controlled by the Corporation.
(c) The Corporation shall not issue any shares of Series S
Preferred Stock except upon exercise of Rights issued pursuant to that
certain Rights Agreement dated as of June 16, 1999 between the
Corporation and First Chicago Trust Company of New York, as Rights
Agent, as it may be amended from time to time, a copy of which is on
file with the Secretary of the Corporation at its principal executive
office and shall be made available to shareholders of record without
charge upon written request therefor addressed to said Secretary.
Notwithstanding the foregoing sentence, nothing contained in the
provisions of this Subarticle A shall prohibit or restrict the
Corporation from issuing for any purpose any series of Preferred Stock
with rights and privileges similar to, different from, or greater
than, those of the Series S Preferred Stock.
(4) Reacquired Shares. Any shares of Series S Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All
such shares upon their retirement and cancellation shall become authorized
but unissued shares of Preferred Stock, without designation as to series,
and such shares may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors.
(5) Liquidation, Dissolution or Winding Up. Upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (i) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series S Preferred Stock unless the holders of shares of Series
S Preferred Stock shall have received for each share of Series S Preferred
Stock, subject to adjustment as hereinafter provided, (A) $16,400 plus an
amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment or, (B) if greater
than the amount specified in clause (i)(A) of this sentence, an amount
equal to 100 times the aggregate amount to be distributed per share to
holders of Common Stock, as the same may be adjusted as hereinafter
provided and (ii) to the holders of stock ranking on a parity upon
liquidation, dissolution or winding up with the Series S Preferred Stock,
unless simultaneously therewith distributions are made ratably on the
Series S Preferred Stock and all other shares of such parity stock in
proportion to the total amounts to which the holders of shares of Series S
Preferred Stock are entitled under clause (i)(A) of this sentence and to
which the holders of such parity shares are entitled, in each case upon
such liquidation, dissolution or winding up. The amount to which holders of
Series S Preferred Stock may be entitled upon liquidation, dissolution or
winding up of the Corporation pursuant to clause (i)(B) of the foregoing
sentence is hereinafter referred to as the "Participating Liquidation
Amount" and the multiple of the amount to be distributed to holders of
shares of Common Stock upon the liquidation, dissolution or winding up of
the Corporation applicable pursuant to said clause to the determination of
the Participating Liquidation Amount, as said multiple may be adjusted from
time to time as hereinafter provided, is hereinafter referred to as the
"Liquidation Multiple". In the event the Corporation shall at any time
after August 16, 1999 declare or pay any dividend on Common Stock payable
in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of
Common Stock into a greater or lesser number of shares of Common Stock,
then, in each such case, the Liquidation Multiple thereafter applicable to
the determination of the Participating Liquidation Amount to which holders
of Series S Preferred Stock shall be entitled after such event shall be the
Liquidation Multiple applicable immediately prior to such event multiplied
by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(6) Certain Reclassifications and Other Events.
(a) In the event that holders of shares of Common Stock of the
Corporation receive after August 16, 1999, in respect of their shares
of Common Stock any share of capital stock of the Corporation (other
than any share of Common Stock of the Corporation), whether by way of
reclassification, recapitalization, reorganization, dividend or other
distribution or otherwise (a "Transaction"), then, and in each such
event, the dividend rights, voting rights and rights upon the
liquidation, dissolution or winding up of the Corporation of the
shares of Series S Preferred Stock shall be adjusted so that after
such event the holders of Series S Preferred Stock shall be entitled,
in respect of each share of Series S Preferred Stock held, in addition
to such rights in respect thereof to which such holder was entitled
immediately prior to such adjustment, to (i) such additional dividends
as equal the Dividend Multiple in effect immediately prior to such
Transaction multiplied by the additional dividends which the holder of
a share of Common Stock shall be entitled to receive by virtue of the
receipt in the Transaction of such capital stock, (ii) such additional
voting rights as equal the Vote Multiple in effect immediately prior
to such Transaction multiplied by the additional voting rights which
the holder of a share of Common Stock shall be entitled to receive by
virtue of the receipt in the Transaction of such capital stock and
(iii) such additional distributions upon liquidation, dissolution or
winding up of the Corporation as equal the Liquidation Multiple in
effect immediately prior to such Transaction multiplied by the
additional amount which the holder of a share of Common Stock shall be
entitled to receive upon liquidation, dissolution or winding up of the
Corporation by virtue of the receipt in the Transaction of such
capital stock, as the case may be, all as provided by the terms of
such capital stock.
(b) In the event that holders of shares of Common Stock of the
Corporation receive after August 16, 1999, in respect of their shares
of Common Stock any right or warrant to purchase Common Stock
(including as such a right, for all purposes of this paragraph, any
security convertible into or exchangeable for Common Stock) at a
purchase price per share less than the Fair Market Value of a share of
Common Stock on the date of issuance of such right or warrant, then
and in each such event the dividend rights, voting rights and rights
upon the liquidation, dissolution or winding up of the Corporation of
the shares of Series S Preferred Stock shall each be adjusted so that
after such event the Dividend Multiple, the Vote Multiple and the
Liquidation Multiple shall each be the product of the Dividend
Multiple, the Vote Multiple and the Liquidation Multiple, as the case
may be, in effect immediately prior to such event multiplied by a
fraction the numerator of which shall be the number of shares of
Common Stock outstanding immediately before such issuance of rights or
warrants plus the maximum number of shares of Common Stock which could
be acquired upon exercise in full of all such rights or warrants and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately before such issuance of rights or warrants
plus the number of shares of Common Stock which could be purchased, at
the Fair Market Value of the Common Stock at the time of such
issuance, by the maximum aggregate consideration payable upon exercise
in full of all such rights or warrants.
(c) In the event that holders of shares of Common Stock of the
Corporation receive after August 16, 1999, in respect of their shares
of Common Stock any right or warrant to purchase capital stock of the
Corporation (other than shares of Common Stock), including as such a
right, for all purposes of this paragraph, any security convertible
into or exchangeable for capital stock of the Corporation (other than
Common Stock), at a purchase price per share less than the Fair Market
Value of such shares of capital stock on the date of issuance of such
right or warrant, then and in each such event the dividend rights,
voting rights and rights upon liquidation, dissolution or winding up
of the Corporation of the shares of Series S Preferred Stock shall
each be adjusted so that after such event each holder of a share of
Series S Preferred Stock shall be entitled, in respect of each share
of Series S Preferred Stock held, in addition to such rights in
respect thereof to which such holder was entitled immediately prior to
such event, to receive (i) such additional dividends as equal the
Dividend Multiple in effect immediately prior to such event
multiplied, first, by the additional dividends to which the holder of
a share of Common Stock shall be entitled upon exercise of such right
or warrant by virtue of the capital stock which could be acquired upon
such exercise and multiplied again by the Discount Fraction (as
hereinafter defined) and (ii) such additional voting rights as equal
the Vote Multiple in effect immediately prior to such event
multiplied, first, by the additional voting rights to which the holder
of a share of Common Stock shall be entitled upon exercise of such
right or warrant by virtue of the capital stock which could be
acquired upon such exercise and multiplied again by the Discount
Fraction and (iii) such additional distributions upon liquidation,
dissolution or winding up of the Corporation as equal the Liquidation
Multiple in effect immediately prior to such event multiplied, first,
by the additional amount which the holder of a share of Common Stock
shall be entitled to receive upon liquidation, dissolution or winding
up of the Corporation upon exercise of such right or warrant by virtue
of the capital stock which could be acquired upon such exercise and
multiplied again by the Discount Fraction. For purposes of this
paragraph, the "Discount Fraction" shall be a fraction the numerator
of which shall be the difference between the Fair Market Value of a
share of the capital stock subject to a right or warrant distributed
to holders of shares of Common Stock of the Corporation as
contemplated by this paragraph immediately after the distribution
thereof and the purchase price per share for such share of capital
stock pursuant to such right or warrant and the denominator of which
shall be the Fair Market Value of a share of such capital stock
immediately after the distribution of such right or warrant.
(d) For purposes of this Subarticle A, the "Fair Market Value"
of a share of capital stock of the Corporation (including a share of
Common Stock) on any date shall be deemed to be the average of the
daily closing price per share thereof over the 30 consecutive Trading
Days (as such term is hereinafter defined) immediately prior to such
date; provided, however, that, in the event that such Fair Market
Value of any such share of capital stock is determined during a period
which includes any date that is within 30 Trading Days after (i) the
ex-dividend date for a dividend or distribution on stock payable in
shares of such stock or securities convertible into shares of such
stock, or (ii) the effective date of any subdivision, split,
combination, consolidation, reverse stock split or reclassification of
such stock, then, and in each such case, the Fair Market Value shall
be appropriately adjusted by the Board of Directors of the Corporation
to take into account ex-dividend or post-effective date trading. The
closing price for any day shall be the last sale price, regular way,
or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way (in either case, as reported
in the applicable transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock
Exchange), or, if the shares are not listed or admitted to trading on
the New York Stock Exchange, as reported in the applicable transaction
reporting system with respect to securities listed on the principal
national securities exchange on which the shares are listed or
admitted to trading or, if the shares are not listed or admitted to
trading on any national securities exchange, the last quoted price or,
if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or
such other system then in use, or if on any such date the shares are
not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a
market in the shares selected by the Board of Directors of the
Corporation. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the shares are listed
or admitted to trading is open for the transaction of business or, if
the shares are not listed or admitted to trading on any national
securities exchange, on which the New York Stock Exchange or such
other national securities exchange as may be selected by the Board of
Directors of the Corporation is open. If the shares are not publicly
held or not so listed or traded on any day within the period of 30
Trading Days applicable to the determination of Fair Market Value
thereof as aforesaid, "Fair Market Value" shall mean the fair market
value thereof per share as determined in good faith by the Board of
Directors of the Corporation. In either case referred to in the
foregoing sentence, the determination of Fair Market Value shall be
described in a statement filed with the Secretary of the Corporation.
(7) Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each
outstanding share of Series S Preferred Stock shall at the same time be
similarly exchanged for or changed into the aggregate amount of stock,
securities, cash and/or other property (payable in like kind), as the case
may be, for which or into which each share of Common Stock is changed or
exchanged multiplied by the highest of the Vote Multiple, the Dividend
Multiple or the Liquidation Multiple in effect immediately prior to such
event.
(8) Effective Time of Adjustments.
(a) Adjustments to the Series S Preferred Stock required by the
provisions hereof shall be effective as of the time at which the event
requiring such adjustments occurs.
(b) The Corporation shall give prompt written notice to each
holder of a share of Series S Preferred Stock of the effect of any
adjustment to the voting rights, dividend rights or rights upon
liquidation, dissolution or winding up of the Corporation of such
shares required by the provisions of this Subarticle A.
Notwithstanding the foregoing sentence, the failure of the Corporation
to give such notice shall not affect the validity of or the force or
effect of or the requirement for such adjustment.
(9) No Redemption. The shares of Series S Preferred Stock shall not
be redeemable at the option of the Corporation or any holder thereof.
Notwithstanding the foregoing sentence of this Section, the Corporation may
acquire shares of Series S Preferred Stock in any other manner permitted by
law and the provisions of the Restated Certificate of Incorporation of the
Corporation.
(10) Ranking. Unless otherwise provided in this Restated Certificate
of Incorporation of the Corporation, as amended from time to time, the
Series S Preferred Stock shall rank junior to all other series of the
Corporation s preferred stock as to the payment of dividends and the
distribution of assets on liquidation, dissolution or winding up and senior
to the Common Stock.
(11) Amendment. The provisions by this Restated Certificate of
Incorporation of the Corporation shall not be amended in any manner which
would adversely affect the rights, privileges or powers of the Series S
Preferred Stock without, in addition to any other vote of stockholders
required by law, the affirmative vote of the holders of two-thirds or more
of the outstanding shares of Series S Preferred Stock, voting together as a
single class.
4. The location of the current registered office of the Corporation in
this State is 301 Carnegie Center, P. O. Box 2066, Princeton, New Jersey
08543-2066, and the name of the current agent therein and in charge thereof upon
whom process against this Corporation may be served is Richard F. Ober, Jr.
5. The current Board of Directors consists of eighteen persons whose names
and addresses are as follows:
ROBERT L. BOYLE Publisher Emeritus
of the Dispatch
7 Orchard Lane
Rumson, NJ 07760
JAMES C. BRADY Partner
Mill House Associates, Inc.
Box 351
Gladstone, NJ 07934
JOHN G. COLLINS Vice Chairman
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
ROBERT G. COX President
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
T. J. DERMOT DUNPHY Chairman & CEO
Sealed Air Corporation
Park 80 Plaza East
Saddle Brook, NJ 07662
ANNE EVANS ESTABROOK Owner
Elberon Development Co.
P.O. Box 677
Kenilworth, NJ 07033-0677
ELINOR J. FERDON National President
Girls Scouts of the USA
Litchfield Way
Alpine, NJ 07620
WILLIAM M. FREEMAN President and Chief Executive Officer
Bell Atlantic - New Jersey
540 Broad Street
Newark, NJ 07102
THOMAS H. HAMILTON 218 Philadelphia Avenue
Egg Harbor, NJ 08215
FRED G. HARVEY Vice President
E. & E. Corp.
204 Second Street
Catasauqua, PA 18032
FRANCIS J. MERTZ 167 Stanie Brae Drive
Watchung, NJ 07060
GEORGE L. MILES, JR. President & CEO
WQED Pittsburgh
4802 Fifth Avenue
Pittsburgh, PA 15213
WILLIAM R. MILLER 1812 Franklin Boulevard
Linwood, NJ 08221
T. JOSEPH SEMROD Chairman and CEO
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, NJ 08543-2066
RAYMOND SILVERSTEIN Consultant
Alloy, Silverstein, Shapiro,Adams
Mulford & Co.
900 North Kings Highway
Cherry Hill, NJ 08034
ORIN R. SMITH Chairman and CEO
Engelhard Corporation
101 Wood Avenue
Iselin, NJ 08830
JOSEPH M. TABAK Chairman and CEO
JPC Enterprises, Inc.
30 South Adelaide Avenue
Penthouse F
Highland Park, NJ 08904
DOUGLAS G. WATSON 52 Liberty Corner Road
Far Hills, NJ 07931
The Board of Directors shall consist of not less than five (5)
persons and not more than forty (40) persons, as may be determined from time to
time in the discretion of the Board of Directors.
Except as otherwise provided by statute, by this Restated Certificate
of Incorporation as the same may be amended from time to time, or by By-Laws as
the same may be amended from time to time, all corporate powers may be exercised
by the Board of Directors. Without limiting the foregoing, the Board of
Directors shall have power, without shareholders' action:
A. To authorize and cause to be executed and/or issued mortgages,
liens, bonds, debentures or other obligations including bonds, debentures
or other obligations convertible into, or exchangeable for stock of any
class, or bearing, warrants or other evidences of optional rights to
purchase or subscribe to, or both, stock of any class, upon the terms, in
the manner and under the condition fixed by resolution of the Board of
Directors prior to the issue thereof, secured or not secured, upon the real
and personal or other property of the Corporation, or any part thereof,
provided that a majority of the whole Board of Directors concur therein by
resolution or in writing.
B. With the sanction of a resolution passed by the holders of
two-thirds of the shares issued and outstanding at any annual or special
meeting of shareholders duly called for that purpose, to sell, assign,
transfer or otherwise dispose of all the rights, franchises and property of
the Corporation as an entirety; and any such sale may be wholly or partly
in consideration of the bonds, mortgages, debenture obligations, securities
or evidences of indebtedness, or shares of the capital stock, of any
corporation or corporations of any state, territory or foreign country,
formed or to be formed for the purpose of purchasing the same.
C. To loan money to, or guarantee an obligation of, or otherwise
assist any officer or other employee of the Corporation or of any
subsidiary, including an officer or employee who is also a director of the
Corporation, whenever, in the judgment of the Board of Directors, such
loan, guarantee, or assistance may reasonably be expected to benefit the
Corporation.
D. To designate three (3) or more of their number to constitute an
executive committee, which committee shall for the time being and subject
to the control and direction of the Board of Directors have and exercise
all the powers of the Board of Directors which may be lawfully delegated
for the management of the business and affairs of the Corporation, and
shall have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
6. 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 owed 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 person's 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 by such person
of an improper personal benefit. Neither the amendment or repeal of this Article
6 nor the adoption of any provision of this Restated Certificate of
Incorporation inconsistent with this Article 6 shall eliminate or reduce the
effect of this Article 6 in respect of any matter which occurred, or any cause
of action, suit or claim which but for this Article 6 would have accrued or
arisen, prior to such amendment, repeal or adoption.
7. Except as may be otherwise provided in respect of directors to be
elected by the holders of Preferred Stock, or any series thereof, by the terms
of any resolution or resolutions of the Board of Directors providing for any
series of Preferred Stock adopted pursuant to the provisions of Article 3
hereof, the Board of Directors shall be classified, with respect to the time for
which directors shall hold office, into three classes, as determined by the
Board of Directors, each as nearly equal in number as possible. At the annual
meeting of the shareholders of the Corporation at which this Article 7 is
adopted, the first such class of directors shall be elected for a term expiring
upon the next following annual meeting of shareholders and upon the election and
qualification of their respective successors, the second such class of directors
shall be elected for a term expiring upon the second following annual meeting of
shareholders and upon the election and qualification of their respective
successors, and the third such class of directors shall be elected for a term
expiring upon the third following annual meeting of shareholders and upon the
election and qualification of their respective successors. At each annual
meeting of shareholders following the annual meeting at which this Article 7 is
adopted, directors of the class of directors whose term expires at such annual
meeting shall be elected for a term expiring upon the third following annual
meeting of shareholders and upon the election and qualification of their
respective successors. Whenever the number of directors constituting the whole
Board of Directors is changed, except as may be otherwise provided in respect of
directors to be elected by the holders of Preferred Stock, or any series
thereof, by the terms of any resolution or resolutions of the Board of Directors
providing for any series of Preferred Stock adopted pursuant to the provisions
of Article 3 hereof, any increase or decrease in the number of directors shall
be apportioned by the Board of Directors among the three classes so as to
maintain all the classes as equal in number as possible, and each such director
shall hold office until the next annual meeting of shareholders and until such
director's successor shall have been elected and qualified; provided, however,
that no decrease in the number of directors shall effect the then-current term
of any director then in office.
A director may be disqualified from office as required by law or
under any applicable rules, regulations or orders of any federal or state
regulatory authority or by provisions of general applicability in the Restated
Certificate of Incorporation or By-Laws adopted prior to such director's
election.
Any action by the Board of Directors or shareholders creating one or
more vacancies on the Board of Directors by increasing the authorized number of
directors shall be effective only if such action has received the affirmative
vote, in the case of the Board of Directors, of eighty percent (80%) or more of
the directors then holding office or, in the case of the shareholders, of eighty
percent (80%) or more of the combined voting power of the then outstanding
shares of all classes and series of stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class.
8. Subject to the rights of the holders of shares of any series of
Preferred Stock or any other class of stock or series thereof having a
preference over the Common Stock as to dividends or upon liquidation, any action
required or permitted to be taken by the shareholders of the Corporation must be
effected exclusively either at a duly called annual or special meeting of
shareholders of the Corporation or by the unanimous (but no less than unanimous)
written consent of the shareholders.
9. In addition to any requirements of law and any other provision of the
Restated Certificate of Incorporation of the Corporation or any resolution or
resolutions of the Board of Directors providing for any series of Preferred
Stock adopted pursuant to Article 3 hereof (and notwithstanding the fact that
approval by a lesser vote may be permitted by law, any other Article, or other
provisions hereof or any such resolution or resolutions), the affirmative vote
of the holders of eighty percent (80%) or more of the combined voting power of
the then outstanding shares of all classes and series of stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend, alter or repeal, or
adopted any provision or take action inconsistent with, this Article 9 or
Articles 7 or 8 hereof.
Exhibit 10HH. (i)
James J. Lynch
Re: Executive Severance Plan and Termination Agreement
Dear Mr. Lynch:
On October 15, 1997, the Board of Directors of Summit Bancorp. (the
"Company") amended and restated the Summit Bancorp. Executive Severance Plan (as
amended, the "Plan"). A copy of the Plan, reflecting all amendments, is attached
hereto and made a part hereof as if fully set forth in this letter. Unless the
context otherwise requires or unless otherwise defined in this letter,
capitalized terms used in this letter have the meanings assigned to them in the
Plan.
The Committee, as a matter of separate inducement and not in lieu of any
salary or other compensation for services, has selected you to participate in
the Plan, subject to the terms and conditions of the Plan and this letter. This
letter constitutes your Participation Letter under the Plan.
Your participation in the Plan commences as of the effective date and time
of the merger of Prime Bancorp, Inc. into First Valley Corporation ("Effective
Time"). You cease to be a Participant in the Plan upon the earliest to occur of
(i) October 15, 2002 (the "Expiration Date"), (ii) the Date of Termination, and
(iii) your Retirement. The Expiration Date will be automatically extended for an
additional year (each such anniversary being the new Expiration Date) unless at
least 90 calendar days prior to the then Expiration Date, the Company notifies
you that the then Expiration Date will not be extended (it being understood that
the automatic extension operates in successive years so long as no notice is
given).
The payments and benefits to which you as a Participant in the Plan may
become entitled will be determined under the Plan. It is an express condition to
your entitlement to the payments of amounts and the provision of benefits
provided for by paragraph 5(a) of the Plan that the Company receive on the Date
of Termination a Release, Covenant Not to Sue, Non-Disclosure and
Non-Solicitation Agreement executed by you, or your legal representative (in the
event of your death or Disability) in the form set forth in Exhibit A to the
Plan, and that such Agreement be effective.
The following special provisions ("Letter Amendments") supplement, amend
and supersede the provisions of the Plan, as applied to you:
A. At the Effective Time, your title shall be Senior Executive Vice
President of Summit Bancorp. Effective at the first meeting of the Board of
Directors of Summit Bank (PA) following the merger of Prime Bank with and
into Summit Bank (PA), you shall also have the titles of Chairman of the
Board, Chief Executive Officer and President of Summit Bank (PA). Your
duties shall be those as assigned to you from time to time by the Boards of
Directors of the Company and Summit Bank (PA) and the Chairman of the Board
and President of the Company and as are appropriate to the position of
Chairman of the Board and Chief Executive Officer of a bank subsidiary of a
publicly held bank holding company. Your base salary shall be not less than
$345,000, and your annual cash bonus shall be not less than $120,750. Your
Welfare Plans and perquisites shall be the welfare plans and perquisites
provided to you by Prime Bancorp, Inc. as of the Effective Time until the
sooner of the integration of the welfare plans and benefits of Prime
Bancorp, Inc. with those of the Company or one year from the Effective
Time, after which they shall be the Welfare Plans and perquisites provided
to a Senior Executive Vice President of the Company.
B. During the period from the Effective Time until the end of the Window
Month, as defined below, Section 6(d) of the Plan is amended to delete the
word "or" at the end of subparagraph 6(d)(vi), to delete the period at the
end of subparagraph 6(d)(vii) and insert "; or" in its place, and to add
the following subparagraph 6(d)(viii):
(viii) A termination of employment by the Participant for any reason
other than Disability or Retirement on or after Participant's
Normal Retirement Date during the calendar month which is the
nineteenth full calendar month following the Effective Date (such
calendar month being referred to herein as the "Window Month").
This Paragraph B of this Participation Letter shall be null and void and of
no effect commencing at the end of the Window Month.
C. During the period from the Effective Time until the end of the Window
Month, subparagraph 5(a)(v) of the Plan shall be null and void and
subparagraph 5(a)(i) shall be revised to read as follows:
(i) receive, promptly following the effective date of
the Release Agreement, a lump sum cash amount
equal to 2.99 times Participant's Base Salary and
Bonus Amount, provided, however, that in the event
that any of the lump sum cash amount and all other
payments and benefits received or to be received
by the Participant from the Company or any
affiliate or under any plan, arrangement or
agreement of or maintained by the Company or any
affiliate, in the opinion of independent tax
counsel to the Company, would be subject to the
excise tax (the "Excise Tax") imposed by Section
4999 of the Code (as hereafter defined), then the
lump sum cash amount shall be reduced to the
largest amount as will result in none of such
payments and benefits being subject to the Excise
Tax. The determination of any reduction in the
lump sum cash amount shall be made by independent
tax counsel to the Company in consultation with
the independent certified public accountants of
the Company.
This Paragraph C of this Participation Letter shall be null and void and of
no effect commencing at the end of the Window Month, and the original
subparagraphs 5(a)(i) and 5(a)(v) shall be reinstated.
D. Subparagraph 6(d)(iii) is amended by replacing the words
"301 Carnegie Center, West Windsor Township, New Jersey"
with "7411 Valley Green Road, Fort Washington,
Pennsylvania."
E. Paragraph 3a of the Release, Covenant Not to Sue, Non- Disclosure and
Non-Solicitation Agreement, which is Exhibit A to the Plan and Exhibit A to
the Termination Agreement between the Company and you which is also
effective as of the Effective Time, shall be null and void and paragraph 3a
of Exhibit A to both documents shall read as follows:
a. Non-Competition with SUB. The parties recognize that
Executive is an important officer of SUB, that his
reputation and business and personal relationships are
of significant benefit to SUB, and a consideration in
the price paid to acquire the bank holding company of
which Executive was Chief Executive Officer, and that
he has access to information about SUB's plans and
projections as well as other confidential information.
The parties further agree that SUB is in direct
competition with certain banks and bank holding
companies and thrift institutions and their affiliates
and the Executive agrees that, for a period of two (2)
years from the date hereof, he will not accept
employment or serve in any capacity with any bank,
savings bank or savings and loan association the
deposits or accounts or shares of which are insured by
the Federal Deposit Insurance Corporation or credit
union the deposits or accounts or shares of which are
insured by the National Credit Union Administration or
any holding company for such bank, savings bank,
savings and loan association or credit union or other
entity controlling, controlled by or under common
control with such financial institution at a principal
place of employment within 25 miles of any office of
SUB or any entity controlling, controlled by or under
common control with SUB open to the public at the time
of this Agreement.
For purposes of this letter and the Plan, notices and all communications
provided for in this letter or the Plan shall be in writing and shall be treated
as having been duly given when delivered or mailed by United States certified
mail, return receipt requested, postage prepaid, addressed as follows: (i) if to
you, your address indicated on the first page of this letter; (ii) if to the
Company or the Subsidiary, Summit Bancorp., 301 Carnegie Center, P.O. Box 2066,
Princeton, New Jersey 08543- 2066, Attention: Corporate Secretary; or (iii) to
such other address as either party may have furnished to the other in writing in
accordance with this paragraph, except that notices of change of address shall
be effective only upon receipt.
All questions pertaining to the construction, regulation, validity and
effect of the provisions hereof will be determined in accordance with the law of
the State of New Jersey regardless of the law that might otherwise govern under
applicable New Jersey principles of conflict of laws.
Your participation in the Plan is conditioned on your acknowledgment of the
terms of this letter. You also agree that this letter and your participation in
the Plan supersedes all prior participation letters and understandings relating
to severance benefits payable by the Company or the Subsidiary under severance
plans of the Company and its Subsidiaries, and all such prior letters and
understandings shall be null and void except for your Termination Agreement,
dated as of the date of merger of Prime Bancorp, Inc. into Summit Bancorp. You
agree that this letter and your participation in the Plan supersedes your
Employment Agreement with Prime Bancorp, Inc. dated December 18, 1995, as
amended June 17, 1999, other than the terms of such agreement relating to your
stock options, and any other agreements and understandings relating to
employment contracts with or severance benefits payable by Prime Bancorp, Inc.
or Prime Bank and that such Employment Agreement, except as aforesaid, and any
other such agreements and understandings shall be null and void. Please sign the
enclosed copy of this letter and deliver it to the Company in order to evidence
such acknowledgment and agreement.
Sincerely,
SUMMIT BANCORP.
By: /s/ Richard F. Ober, Jr.
-----------------------------
Richard F. Ober, Jr.,Secretary
Acknowledged and Agreed:
/s/ James J. Lynch
- - ----------------------
James J. Lynch
Dated: July 30, 1999
Summit Bancorp. Executive Severance Plan
(Incorporated by reference to Exhibit (10)FF(ii)
on Form 10-Q for the quarter ended June 30, 1998)
EXHIBIT A
RELEASE, COVENANT NOT TO SUE,
NON-DISCLOSURE AND NON-SOLICITATION
AGREEMENT
This RELEASE, COVENANT NOT TO SUE, NON-DISCLOSURE AND NON- SOLICITATION
AGREEMENT (the "AGREEMENT") dated as of_________ among (1)
______________("Executive"), and (2) Summit Bancorp. and all parent and
subsidiary corporations, partnerships and other entities and affiliates
controlled by, controlling or under common control with Summit Bancorp.
(together with any predecessor and successor entities hereinafter being
collectively referred to as "SUB") sets forth the agreements of the parties
hereto with regard to the matters set forth herein:
1. Background. Executive is an Executive of SUB and
participates in SUB's Executive Severance Plan pursuant to a
Participation Letter dated ______________ and a party to a
Termination Agreement dated ________________ [as last amended
_____________](the Plan and the Letter and Agreement, as amended
from time to time, together being collectively referred to as the
"Contracts"). Any capitalized terms used but not defined herein
shall have the meaning set forth in the applicable Contract.
1. A Change of Control [has/has NOT] occurred [on (date)]. If a Change of
Control has NOT occurred, Executive is not entitled to any benefits
under the Termination Agreement.
2. Executive's employment with SUB will or has terminated on
______________, which shall be the Date of Termination for purposes of
the Contracts, notwithstanding any failure to adhere to the provisions
for giving a Notice of Termination and the method of determining the
Date of Termination set forth in the Contracts, any such failures
being hereby waived by the parties.
3. This termination shall constitute a termination "[for cause/
disability /retirement /other than for cause /by mutual agreement]"
for purposes of any stock options and restricted stock which Executive
holds, and the Termination Date shall be the termination date for the
purposes of such options. Attached hereto as Appendix A is a list of
all outstanding SUB options held by Executive on the date hereof.
2. Payment. Executive shall receive within two business days
following the EFFECTIVE DATE (as defined in paragraph 7 hereof)
$_____________, the gross amount due to Executive under the
Contracts, which shall be paid to Executive as $_________________
by check or deposit in Executive's bank account, with the balance
withheld in respect of federal, state and local taxes and
benefits contributions, which Executive acknowledges represents
all amounts currently due Executive under the Contracts.
Executive acknowledges and agrees that Executive is not entitled
to any severance payments under any other severance program of
SUB, the Contracts being intended to substitute for any such
other severance program. SUB continues to be obligated to
provide certain welfare and pension benefits and perquisites, as
more fully set forth in the Contracts.
3. Restrictive Covenants. In consideration of the payments to
Executive as specified in paragraph 2 above, Executive agrees as
follows:
a. Non-Competition with SUB. The parties recognize that
Executive is an important officer of SUB, that his
reputation and business and personal relationships are
of significant benefit to SUB, and a consideration in
the price paid to acquire the bank holding company of
which Executive was Chief Executive Officer, and that
he has access to information about SUB's plans and
projections as well as other confidential information.
The parties further agree that SUB is in direct
competition with certain banks and bank holding
companies and thrift institutions and their affiliates
and the Executive agrees that, for a period of two (2)
years from the date hereof, he will not accept
employment or serve in any capacity with any bank,
savings bank or savings and loan association the
deposits or accounts or shares of which are insured by
the Federal Deposit Insurance Corporation or credit
union the deposits or accounts or shares of which are
insured by the National Credit Union Administration or
any holding company for such bank, savings bank,
savings and loan association or credit union or other
entity controlling, controlled by or under common
control with such financial institution at a principal
place of employment within 25 miles of any office of
SUB or any entity controlling, controlled by or under
common control with SUB open to the public at the time
of this Agreement.
b. Non-Solicitation of SUB Employees. For a period of
five (5) years from the date hereof, Executive will not
solicit or induce any person who is an employee of SUB
or was such at any time within three months prior to
the date hereof to become employed by any other person,
firm or corporation or approach any such employee for
such purpose or authorize or knowingly approve the
taking of such actions by other persons, without the
prior written consent of SUB.
c. Non-Disclosure of Proprietary Information. Executive
acknowledges that during the course of Executive's
employment with SUB Executive received, obtained or
became aware of or had access to proprietary
information, lists and records of customers and trade
secrets which are the property of SUB and which are not
known by competitors or generally by the public
("Proprietary Information") and recognizes such
Proprietary Information to be valuable and unique
assets of SUB. For purposes of this subparagraph: (i)
Proprietary Information is deemed to include, without
limitation, (A) marketing materials, marketing manuals,
policy manuals, procedure manuals, policy and procedure
manuals, operating manuals and procedures and product
documentation, (B) all information about pricing,
products, procedures, practices, business methods,
systems, plans, strategies or personnel of SUB, (C)
circumstances surrounding the relationships with,
knowledge of, or information about the customers,
clients, and accounts of SUB, including but not limited
to the identity of current active customers or
prospects who have been contacted by SUB, the
expiration dates and other terms of loans or deposit or
other banking relationships, details or special product
provisions or special combinations of products, or
special prices, and (D) all other information about SUB
which has not been disclosed in documents filed with
the U.S. Securities and Exchange Commission or
otherwise publicly disseminated by SUB, whether or not
that information is recorded and notwithstanding the
method of recordation, if any; and (ii) Proprietary
Information is deemed to exclude all information
legally in the public domain. Executive agrees to hold
the Proprietary Information in the strictest confidence
and agrees not to use or disclose any Proprietary
Information, directly or indirectly, at any time for
any purpose, without the prior written consent of SUB
or to use for Executive's benefit or the benefit of any
person, firm, corporation or other entity (other than
SUB), any Proprietary Information, and to use
Executive's best efforts to prevent such prohibited use
or disclosure by any other persons. Executive has
returned all Proprietary Information in Executive's
possession or control to SUB.
d. Cooperation, No Detrimental Actions. Executive will
cooperate with SUB in enforcing its claims against
customers and former customers of SUB, including
appearing as a witness for SUB in court or
administrative proceedings, subject to reasonable
reimbursement for Executive's time and expenses.
Executive will not take actions or make disparaging
statements which are detrimental to SUB or the
RELEASEES, as defined in paragraph 5 below.
e. Remedies. Executive hereby acknowledges that
Executive's duties and responsibilities under this
paragraph 3 are unique and extraordinary and that
irreparable injury may result to SUB in the event of a
breach of the terms and conditions of this paragraph 3,
which may be difficult to ascertain, and that the award
of damages would not be adequate relief to SUB and the
RELEASEES. Executive therefore agrees that in the
event of Executive's breach of any of the terms or
conditions of this paragraph 3, SUB shall have the
right, without posting any bond or other security, to
preliminary and permanent injunctive relief as well as
damages and an equitable accounting of all earnings,
profits and other benefits arising from such violation,
which rights shall be cumulative and in addition to any
other rights or remedies in law or equity to which SUB
may be entitled against Executive. The covenants of
Executive in paragraphs 3a, 3b, 3c and 3d of this
Agreement shall each be construed as an agreement
independent of any other provision in this AGREEMENT,
and the existence of any claim or cause of action of
Executive against SUB, whether predicated on this
Agreement or otherwise, shall not constitute a defense
to the enforcement by SUB of paragraphs 3a, 3b, 3c and
3d.
f. Enforcement. If at the time of the enforcement of subparagraphs 3a,
3b, 3c, 3d or 3e above a court shall hold that the period or scope of
the provisions thereof are unreasonable under the circumstances then
existing, the parties hereby agree that the maximum period or scope
under the circumstances shall be substituted for the period or scope
stated in those subparagraphs.
4. Short-Swing Securities Profits. Executive acknowledges that Executive will
remain subject to the short-swing liability provisions of Section 16 of the
federal Securities Exchange Act of 1934 for six months following
termination of employment.
5. Release. In consideration of the payments to Executive as specified in
paragraph 2 above, Executive grants SUB a RELEASE of only all claims, both
known and unknown, that Executive may have that relate to the termination
of Executive's employment (hereafter a "WRONGFUL TERMINATION CLAIM"). The
Executive and SUB agree that a WRONGFUL TERMINATION CLAIM, specifically and
without limitation, does not include claims:
1. for indemnification as a corporate agent of SUB against
claims by third parties;
2. under employee benefit plans, including supplemental employee
retirement plans, maintained by SUB or any of the predecessor
organizations thereof, including but not limited to rights under any
workers compensation program, Section 502(a) of the Employee
Retirement Income Security Act, as amended, 29 U.S.C. 1001 et seq.,
and under the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA");
3. arising out of enforcement of the Contracts or this
Agreement by Executive; or
4. constituting cross-claims against SUB as a result of claims brought by
unaffiliated third parties against Executive based on Executive's
service as an executive of SUB.
The statutes which could form the basis for a WRONGFUL TERMINATION CLAIM
include, but are not limited to, Title VII of the Civil Rights Act of 1964,
as amended, 42 U.S.C. 1971 et seq.; the Age Discrimination in Employment
Act of 1967, as amended, 29 U.S.C. 621 et seq.; Section 510 of the Employee
Retirement Income Security Act of 1974, as amended, 29 U.S.C. 1001 et seq.;
the Americans With Disabilities Act, as amended, 42 U.S.C. 12101 et seq.;
the Older Workers Benefit Protection Act, as amended, 29 U.S.C. 621 et
seq.; the Civil Rights Act of 1866, as amended, 42 U.S.C. 1981 et seq.; the
New Jersey Law Against Discrimination, as amended, N.J.S.A. 10:5-1 et seq.;
the New Jersey Conscientious Employee Protection Act, as amended, N.J.S.A.
34:19-1 et seq.; the New York Human Rights Law, Executive Law 290 et seq.;
the Pennsylvania Human Relations Act, as amended, 43 P.S. 951 et seq.; and
the Pennsylvania Whistleblower Law, as amended, 43 P.S. 1421 et seq. The
common law (non-statutory) theories under which a WRONGFUL TERMINATION
CLAIM could be made include, but are not limited to, breach of an express
employment contract, breach of a contract implied from a personnel handbook
or manual, or commission of a civil wrong (known as a "tort") resulting in
Executive's termination, or for alleged violation of the public policy of
the United States or any state. Granting a RELEASE of any WRONGFUL
TERMINATION CLAIM pursuant to this AGREEMENT means that on behalf of
Executive and all who succeed to Executive's rights and responsibilities,
Executive releases and gives up only any and all WRONGFUL TERMINATION
CLAIMS that Executive may have against SUB, and any of its subsidiaries,
affiliates or divisions, and all of their directors, officers,
representatives, shareholders, agents, employees, and all who succeed to
their rights and responsibilities (collectively referred to as "RELEASEES".
With respect to any charges filed concerning events or actions relating to
a WRONGFUL TERMINATION CLAIM that occurred on or before the date of this
AGREEMENT or Executive's Termination Date (whichever is later), Executive
waives and releases any right that Executive may have to recover in any
lawsuit or proceeding brought by Executive or by an administrative agency
on Executive's behalf against the RELEASEES.
6. Covenant Not to Sue. Executive covenants not to sue the
RELEASEES over any WRONGFUL TERMINATION CLAIM. Such a covenant
not to sue the RELEASEES means that Executive represents that
Executive has not through the date of execution of this Agreement
filed a WRONGFUL TERMINATION CLAIM, charge or lawsuit with any
court or government agency against the RELEASEES, and that
Executive will not file such a lawsuit subsequent to execution of
this Agreement. Executive also waives any right to become, and
promises not to become, a member of any class in a case in which
WRONGFUL TERMINATION CLAIMS are asserted against any of the
RELEASEES.
7. Review Period. Executive acknowledges that Executive has up
to 21 days to review this AGREEMENT, and was advised to review it
with an attorney of Executive's choice. Executive also
acknowledges that Executive was further advised that Executive
has seven days after Executive signs this AGREEMENT to revoke it
by notifying SUB in writing, of such revocation as set forth
under Notices below. This AGREEMENT shall become effective on
the tenth (10th) day following its execution by Executive (the
"EFFECTIVE DATE"), unless revoked in accordance with the preceding
sentence.
8. Revocation of Authority. Executive agrees and acknowledges
that as of the Termination Date Executive shall no longer be
empowered to bind SUB in any agreement, whether verbal or
written, and that Executive shall have no authority to execute
any documents, deeds, leases, or other contracts on behalf of
SUB. To the extent not effected by termination of Executive
under the Contracts, Executive resigns from all offices and
positions with SUB.
9. Successors and Assigns. All rights and duties of SUB under this Agreement
shall be binding on and inure to the benefit of SUB, its successors and
assigns. All rights of Executive hereunder shall be binding upon and inure
to the benefit of Executive's personal or legal representatives.
10. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed
to have been duly given if delivered personally with receipt
acknowledged or sent by registered or certified mail, postage
prepaid or by reputable national overnight delivery service, to
the addresses shown below, unless changed by notices given as
herein provided, except that notice of change of address only
shall be effective upon actual receipt:
If to SUB, to:
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey 08543-2066
Attention: Executive Vice President of
Human Resources
With a copy to:
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey 08543-2066
Attention: General Counsel
If to the Executive, to:
With a copy to:
11. Covenant Not to Challenge Enforceability. Both Executive and SUB understand
that this AGREEMENT is final and binding when executed by both parties,
subject to paragraph 7 above, and both agree not to thereafter challenge
its enforceability.
12. Applicable Law. This AGREEMENT shall be deemed to have been made within the
State of New Jersey, and it shall be interpreted, construed, and enforced
in accordance with the law of the State of New Jersey, and before the
Courts of the State of New Jersey.
13. Amendments, Modifications, Waivers. This AGREEMENT cannot be amended or
modified except by a written document signed by both SUB and Executive and
no provision can be waived except by a written document signed by the
waiving party.
14. By signing this AGREEMENT, Executive acknowledges:
1. EXECUTIVE HAS READ THIS AGREEMENT COMPLETELY.
2. EXECUTIVE HAS HAD AN OPPORTUNITY TO CONSIDER THE TERMS OF THIS
AGREEMENT.
3. EXECUTIVE HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY OF EXECUTIVE'S
CHOOSING PRIOR TO EXECUTING THIS AGREEMENT.
4. EXECUTIVE KNOWS THAT EXECUTIVE MAY BE GIVING UP IMPORTANT LEGAL RIGHTS
BY SIGNING THIS AGREEMENT.
5. EXECUTIVE UNDERSTANDS AND MEANS EVERYTHING THAT EXECUTIVE HAS SAID IN
THIS AGREEMENT, AND EXECUTIVE AGREES TO ALL ITS TERMS.
6. EXECUTIVE IS NOT RELYING ON SUB OR ANY REPRESENTATIVE OF SUB TO
EXPLAIN THIS AGREEMENT AND RELEASE TO EXECUTIVE. EXECUTIVE HAS HAD AN
OPPORTUNITY TO CONSULT AN ATTORNEY OR OTHER ADVISOR TO EXPLAIN THIS
AGREEMENT AND ITS CONSEQUENCES TO EXECUTIVE BEFORE EXECUTIVE SIGNED
IT, AND EXECUTIVE HAS AVAILED HIMSELF OR HERSELF OF THIS OPPORTUNITY
TO WHATEVER EXTENT EXECUTIVE DESIRED.
7. EXECUTIVE HAS SIGNED THIS AGREEMENT VOLUNTARILY AND ENTIRELY OF
EXECUTIVE'S OWN FREE WILL, WITHOUT ANY PRESSURE FROM SUB OR ANY
REPRESENTATIVE OF SUB, OR ANYONE ELSE.
IN WITNESS WHEREOF, and intending to be legally bound hereby, this
Agreement has been executed as of the day and year first above
written.
ATTEST: SUMMIT BANCORP.
______________________________By:______________________________
Secretary Executive Vice President
------------------------------
EXECUTIVE
--------------------------------
(Social Security Number)
STATE OF NEW JERSEY:
COUNTY OF _______________________:
I certify that on this _______ day of ____________, _______ personally came
before me _______________(Executive), who, being duly sworn, acknowledged under
oath to my satisfaction that such person is named in and personally executed the
foregoing Receipt and Release as such person's voluntary act and deed, for the
purposes set forth therein.
IN WITNESS WHEREOF, I have set my hand this ____ day of
- - -------------, ------.
By: ___________________________________
Notary Public of the State of New Jersey
My Commission expires __________________
Exhibit 10 HH.(ii)
TERMINATION AGREEMENT
THIS AGREEMENT dated and entered into effective as of the merger of
Prime Bancorp, Inc. into First Valley Corporation, a wholly owned subsidiary of
Summit Bancorp., ("First Valley"), by and between Summit Bancorp., a New Jersey
corporation (the "Company"), and James J. Lynch, (the "Executive").
W I T N E S S E T H:
WHEREAS, should the Company receive a proposal from a third person,
whether solicited by the Company or unsolicited, concerning a possible business
combination with or the acquisition of a substantial share of the equity or
voting securities of, the Company, the Board of Directors of the Company (the
"Board") has deemed it imperative that it and the Company be able to rely on the
Executive to continue to serve in the Executive's position, and that the Board
and the Company be able to receive and rely upon the Executive's advice, if they
request it, as to the best interests of the Company and its shareholders,
without concern that the Executive might be distracted by the personal
uncertainties and risks that such a proposal might otherwise create; and
WHEREAS, the Company desires to enhance executive
morale and its ability to retain existing management; and
WHEREAS, the Company desires to reward the Executive for the
Executive's valuable, dedicated service to the Company or one or more of its
subsidiary corporations (each, a "Subsidiary") should the Executive's service be
terminated under circumstances hereinafter described; and
WHEREAS, the Board therefore considers it in the best interests of the
Company and its shareholders for the Company to enter into Termination
Agreements, in form similar to this Agreement, with certain key executive
officers of the Company and one or more of its Subsidiaries; and
WHEREAS, the Executive is presently the duly elected and acting Senior
Executive Vice President of the Company and is a key executive with whom the
Company has been authorized by the Board to enter into this Agreement;
NOW, THEREFORE, to assure the Company of the Executive's continued
dedication and the availability of the Executive's advice and counsel in the
event of any such proposal, to induce the Executive to remain in the employ of
the Company or a Subsidiary, and to reward the Executive for the Executive's
valuable, dedicated service to the Company or a Subsidiary should the
Executive's service be terminated under circumstances hereinafter described, and
for other good and valuable consideration, the receipt and adequacy whereof each
party acknowledges, the Company and the Executive agree as follows:
1. OPERATION, EFFECTIVE DATE, AND TERM OF AGREEMENT.
(a) This Agreement is effective and binding on both parties as of the
date hereof. Notwithstanding its present effectiveness, the provisions of
paragraphs 3 and 4 of this Agreement shall become operative only when, as and if
there has been a "Change in Control" of the Company. For purposes of this
Agreement, a "Change in Control" of the Company shall be deemed to occur (i)
upon a Change in Control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A or Item 1a of Form 8-K
promulgated under the Securities Exchange Act of 1934 ("Exchange Act"); or (ii)
if any "person" (including as such term is used in Sections 13(d)(3) and
14(d)(2) of the Exchange Act, but excluding the Company and its Subsidiaries or
an employee benefit plan of the Company (or any fiduciary thereof) or a
corporation controlled by the Company's shareholders in substantially the same
character and proportions as their ownership of stock of the Company, or an
underwriter temporarily holding securities pursuant to an offering of such
securities) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of the Company's outstanding securities then entitled to
vote for the election of directors; or (iii) if during any period of two (2)
consecutive years, individuals who at the beginning of such period constitute
the Board cease for any reason to constitute at least a majority thereof
(excluding, for purposes of this calculation, any director who dies during such
period); or (iv) if the Company shall meet the delisting criteria of the New
York Stock Exchange or any successor exchange in respect of the number of
publicly-held shares or the number of shareholders holding one hundred (100)
shares or more; or (v) if the Board shall approve the sale of all or
substantially all of the assets of the Company; or (vi) if the Board shall
approve any merger, consolidation, issuance of securities or purchase of assets,
the result of which would be the occurrence of any event described in clause
(i), (ii), (iii) or (iv) above or that the shareholders of the Company receive
or retain stock having less than 65% combined voting power of the company
resulting from such transaction in substantially the same proportions as their
prior ownership of the Company.
(b) The Company shall be obligated to make the payments referred to in
paragraphs 3 and 4 hereof following, and the provisions of paragraph 2 hereof
shall apply to, a Change in Control of the Company only if such Change in
Control shall have occurred prior to, or as a result of efforts designed to
attain such and known to the parties hereto to have commenced prior to, the
earliest to occur of the Executive's death, Disability (as hereinafter defined),
Normal Retirement Date (as hereinafter defined) or the 15th day of October,
2002; provided, however, that commencing on the 15th day of October, 2002 and
each annual anniversary of such day thereafter (such day and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"), the
term of this Agreement shall automatically be extended for one additional year
unless at the Renewal Date the Executive is no longer employed by the Company or
a Subsidiary or has reached the Executive's Normal Retirement Date or at least
twelve (12) months prior to the next Renewal Date (and prior to a Change in
Control of the Company), the Company shall have given notice to the Executive
that it does not wish to extend the term of this Agreement; provided, further,
however, if a Change in Control of the Company shall have occurred during the
term of this Agreement, this Agreement shall continue in effect for a period of
not less than thirty-six (36) months beyond the month in which each such Change
in Control of the Company occurred, and thereafter solely to the extent
necessary for the Executive to enforce the obligations of the Company or
Subsidiary employing Executive incurred prior thereto.
2. EMPLOYMENT OF EXECUTIVE.
Nothing herein shall affect any right which the Executive or the
Company or a Subsidiary may otherwise have to terminate the Executive's
employment by the Company or a Subsidiary at any time in any lawful manner,
subject always to the Company's providing to the Executive the payments and
benefits specified in paragraphs 3 and 4 of this Agreement to the extent
hereinbelow provided.
In the event any person commences a tender or exchange offer,
circulates a proxy statement to the Company's shareholders or takes other steps
designed to effect a Change in Control of the Company as defined in paragraph 1
of this Agreement, the Executive agrees that the Executive will not voluntarily
leave the employ of the Company or a Subsidiary, and will continue to perform
the Executive's regular duties and to render the services specified in the
recitals of this Agreement, until such person has abandoned or terminated that
person's efforts to effect a Change in Control or until a Change in Control has
occurred, provided that the Executive may voluntarily leave the employ of the
Company or a Subsidiary on or after his Normal Retirement Date or during the
nineteenth full calendar month following the effective date of this agreement.
Should the Executive voluntarily terminate the Executive's employment before any
such effort to effect a Change in Control of the Company has commenced, or after
any such effort has been abandoned or terminated without effecting a Change in
Control and no other such effort is then being undertaken by any other person,
this Agreement shall lapse and be of no further force or effect.
3. TERMINATION FOLLOWING CHANGE IN CONTROL.
(a) If any of the events described in paragraph 1 hereof constituting
a Change in Control of the Company shall have occurred, the Executive shall be
entitled to the benefits provided in paragraph 4 hereof upon the subsequent
termination of the Executive's employment within the applicable period set forth
in paragraph 4 hereof following such Change in Control unless such termination
is (i) due to the Executive's death after the Window Period referred to below or
Retirement (as hereinafter defined)(other than Early Retirement during the
Window Period, as hereinafter defined); or (ii) by the Company or a Subsidiary
by reason of the Executive's Disability or for Cause (as hereinafter defined);
or (iii) by the Executive other than for Good Reason (as hereinafter defined).
(b) If following a Change in Control the Executive's employment is
terminated by reason of the Executive's death after the Window Period,
Retirement (other than Early Retirement during the Window Period) or Disability,
the Executive shall be entitled to death, retirement or disability benefits, as
the case may be, from the Company no less favorable than those benefits to which
the Executive would have been entitled had the death, Retirement or termination
for Disability occurred during the six (6) month period prior to the Change in
Control. If prior to any such termination for Disability, the Executive fails to
perform the Executive's duties as a result of incapacity due to physical or
mental illness, the Executive shall continue to receive the Executive's Base
Salary (as hereinafter defined), less any benefits as may be available to the
Executive under the Company's or Subsidiary's disability plans, until the
Executive's employment is terminated for Disability.
(c) If following a Change in Control the Executive's employment shall
be terminated by the Company or a Subsidiary for Cause or by the Executive other
than for Good Reason, the Company shall pay (subject to any applicable payroll
or other taxes required to be withheld) to the Executive the Executive's Base
Salary through the Date of Termination (as hereinafter defined), and the Company
or a Subsidiary shall have no further obligations to the Executive under this
Agreement. This paragraph 3(c) shall not apply to a termination of the
Executive's employment by the Company or a Subsidiary by reason of Death,
Retirement or Disability.
(d) For purposes of this Agreement:
(i) "Disability" shall mean the Executive's incapacity to perform the
Executive's duties with the Company or Subsidiary on a full-time basis
for one hundred eighty (180) consecutive days due to physical or
mental illness such that the Executive shall have become qualified to
receive benefits under the Company's or a Subsidiary's long-term
disability plans applicable to the Executive. Any question as to the
existence of Disability upon which the Executive and the Company or
Subsidiary cannot agree shall be determined by a qualified independent
physician selected by the Company or Subsidiary employing the
Executive or its insurers and acceptable to the Executive or an adult
member of the Executive's immediate family, which acceptance shall not
be unreasonably withheld. The Executive shall be obligated to submit
to such medical examinations as may be necessary to determine whether
Disability exists.
(ii) "Retirement" shall mean that the Executive shall have reached the
normal retirement date provided in the Company's or Subsidiary's
defined benefit retirement plans applicable to such Executive (the
"Normal Retirement Date") or that the Executive shall have taken early
retirement (as defined in such retirement plans) and shall no longer
be employed by the Company or a Subsidiary ("Early Retirement").
(iii) "Cause" shall mean:
(A) the willful commission by the Executive of an illegal act or
other act of willful misconduct that causes or will probably
cause substantial economic damage to the Company or a Subsidiary
or substantial injury to the business reputation of the Company
or a Subsidiary;
(B) the commission by the Executive of an act of fraud in the
performance of such Executive's duties on behalf of the Company
or a Subsidiary;
(C) the continuing willful failure of the Executive to perform
the duties of such Executive to the Company or a Subsidiary
(other than any such failure resulting from the Executive's
incapacity due to physical or mental illness) after written
notice thereof (specifying the particulars thereof in reasonable
detail) and a reasonable opportunity to be heard and cure such
failure are given to the Executive by the Compensation Committee
of the Board; or
(D) the final order of a federal or state regulatory agency or a
court of competent jurisdiction requiring the termination of the
Executive's employment with the Company or a Subsidiary.
(iv) "Good Reason" shall mean, excluding for this purpose an isolated,
insubstantial and inadvertent action or failure to act, which is not
in bad faith and which is remedied by the Company or applicable
Subsidiary promptly after receipt of notice thereof given by the
Executive:
(A) Without the Executive's express written consent, the
assignment by the Company or a Subsidiary to the Executive of
duties which (i) are materially different or require travel
significantly more time consuming or extensive than the
Executive's duties or business travel obligations immediately
prior to the Change in Control, or (ii) result, without the
Executive's express written consent, in either a significant
reduction in the Executive's authority and responsibility as a
senior executive of the Company or Subsidiary employing the
Executive when compared to the highest level of authority and
responsibility assigned to the Executive at any time during the
six (6) month period prior to the Change in Control, or, (iii)
the removal of the Executive from, or any failure to reappoint or
reelect the Executive to, the highest title held since the date
six (6) months before the Change in Control, except in connection
with a termination of the Executive's employment by the Company
or a Subsidiary for Cause (including during the pendency of any
Dispute), during any period of incapacity due to physical or
mental illness, or by reason of the Executive's death, Disability
or Retirement;
(B) A reduction by the Company or a Subsidiary of the Executive's
Base Salary, or the failure to grant increases in the Executive's
Base Salary on a basis at least substantially comparable to those
granted to other executives of the Company or a Subsidiary of
comparable title, salary grade and performance ratings made in
good faith;
(C) Requiring the Executive to be based anywhere other than an
executive office of the Company or a Subsidiary located in New
Jersey or Pennsylvania within twenty-five (25) geographic (not
road) miles of the location of the Executive's office prior to
the Change in Control, except for required travel on the
Company's or a Subsidiary's business to an extent substantially
consistent with the Executive's present business travel
obligations, without the Executive's express written consent, or
in the event of any relocation of the Executive with the
Executive's express written consent, the failure by the Company
or a Subsidiary to pay (or reimburse the Executive for) all
reasonable moving expenses by the Executive relating to a change
of principal residence in connection with such relocation and to
indemnify the Executive against any loss realized in the sale of
the Executive's principal residence in connection with any such
change of residence, all to the effect that the Executive shall
incur no loss on an after tax basis;
(D) The failure by the Company or a Subsidiary to continue to
provide the Executive with substantially the same welfare
benefits and perquisites, including participation on a comparable
basis in the Company's or a Subsidiary's retirement plans,
Incentive Bonus Plan (cash bonus plan), Savings Incentive Plan,
Incentive Stock and Option Plans, Executive Severance Plan and
other plans in which executives of the Company or a Subsidiary of
comparable title and salary grade participate, as were provided
to the Executive in the twelve (12) months immediately prior to
such Change in Control of the Company, or with a package of
welfare benefits and perquisites, that, though one or more of
such benefits or perquisites may vary from those set forth above,
is substantially comparable in all material respects to such
welfare benefits and perquisites, taken as a whole;
(E) The failure of the Company to obtain the express written
assumption of and agreement to perform this Agreement by any
successor as contemplated in subparagraph 6(c) hereof;
(F) A termination of employment by the Executive for any reason
other than Disability or Retirement on or after Executive's
Normal Retirement Date during the thirty (30) day period
immediately following the first anniversary of a Change in
Control of the Company defined in subparagraphs 1(a)(i), (ii)
(iii) or (iv) or the consummation of a transaction described in
subparagraphs 1(a)(v) or (vi) (such thirty (30) day period being
referred to herein as the "Window Period").
(G) The giving by the Company or applicable Subsidiary of a
notice that participation by the Executive in the Company's
Executive Severance Plan or that the Executive's Termination
Agreement would not be renewed;
(H) The filing by the Company of a petition for bankruptcy or
similar insolvency of the Company or the filing by any other
party of such a petition which is not dismissed within sixty (60)
days; or
(I) Any failure by the Company or applicable Subsidiary to comply
with any provision of this Agreement with respect to Executive.
(v) "Dispute" shall mean (A) in the case of termination of employment
of the Executive with the Company or a Subsidiary by the Company or a
Subsidiary for Disability or Cause, that the Executive challenges the
existence of Disability or Cause and (B) in the case of termination of
employment of an Executive with the Company or a Subsidiary by the
Executive for Good Reason, that the Company or a Subsidiary challenges
the existence of Good Reason.
(vi) "Base Salary" shall mean the amount determined by multiplying the
Executive's highest semi-monthly or other periodic rate of base pay
paid to the Executive at any time during the period commencing twelve
(12) months prior to the Change of Control and ending on the date of
Notice of Termination by the number of pay periods per year. The
following items are not part of base pay, as used herein: reimbursed
expenses, any amount paid on account of overtime or holiday work,
payments on account of insurance premiums or other contributions made
to other welfare or benefit plans, and any year-end or other bonuses,
commissions and gifts.
(vii) "Bonus Amount" means the highest annual cash incentive bonus
earned by the Executive from the Company or a Subsidiary during the
last three (3) completed fiscal years of the Company immediately
preceding the Executive's Date of Termination (annualized in the event
the Executive was not employed by the Company or a Subsidiary for the
whole of any such fiscal year).
For purposes of this subparagraph (d), no act, or failure to act, on
the Executive's part shall be considered "willful" unless done, or omitted to be
done, by the Executive not in good faith and without reasonable belief that the
Executive's action or omission was in the best interests of the Company or a
Subsidiary.
(e) Any purported termination of employment by the Company or a
Subsidiary or by the Executive shall be communicated by written Notice of
Termination to the other party. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice given by the Executive or the Company or a
Subsidiary, as the case may be, which shall indicate the specific provision of
this Agreement applicable to such termination and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for determination
of any payments under this Agreement. The Executive shall not be entitled to
give a Notice of Termination that the Executive is terminating the Executive's
employment with the Company or a Subsidiary for Good Reason more than six (6)
months following the occurrence of the event alleged to constitute Good Reason.
(f) For purposes of this Agreement, except as provided below, the
"Date of Termination" shall mean the date specified in a Notice of Termination,
which shall be not more than ninety (90) days after such Notice of Termination
is given. The Date of Termination of a proposed Termination for Disability shall
be at least thirty (30) days after the giving of the Notice of Termination.
If within thirty (30) days after any Notice of Termination is given, the
party who receives such Notice of Termination notifies the other party that a
Dispute exists, the Date of Termination shall be the date on which the Dispute
is finally determined, either by mutual written agreement of the parties, or by
a final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected);
provided that the Date of Termination shall be extended by a notice of Dispute
only if such notice is given in good faith and the party giving such notice
pursues the resolution of such Dispute with reasonable diligence and provided
further that pending the resolution of any such Dispute, the Company or a
Subsidiary shall continue to pay the Executive the same Base Salary and to
provide the Executive with the same or substantially comparable employee
benefits and perquisites, including participation in the Company's or a
Subsidiary's retirement plans, Savings Incentive Plan, Incentive Bonus Plan,
Incentive Stock and Option Plans and Executive Severance Plan that the Executive
was paid and provided at any time during the period commencing twelve (12)
months prior to the Change of Control and ending on the date of Notice of
Termination
Should it ultimately be determined that a challenged termination by the
Company or a Subsidiary by reason of the Executive's Disability or for Cause was
justified, or that a challenged termination by the Executive for Good Reason was
not justified, then the Executive shall promptly pay the Company or a Subsidiary
(as the case may be) an amount equal to all sums paid by the Company or a
Subsidiary to the Executive from the date of termination specified in the Notice
of Termination until final resolution of the Dispute pursuant hereto, with
interest at the base rate charged from time to time by Summit Bank, New Jersey,
all options, rights and restricted stock granted to the Executive during such
period shall be canceled or returned to the Company or Subsidiary, and, to the
extent permitted by law, no service as an employee shall be credited to the
Executive for such period for pension purposes. The Executive shall not be
obligated to pay to the Company or a Subsidiary the cost of providing the
Executive with employee benefits and perquisites for such period (which cost for
purposes of health plans means the applicable premium under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended) unless the final
judgment, order or decree of a court resolving the Dispute determines that the
Executive acted in bad faith in giving a notice of Dispute.
Should it ultimately be determined that a challenged termination by the
Company or a Subsidiary by reason of the Executive's Disability or for Cause was
not justified, or that a challenged termination by the Executive for Good Reason
was justified, then the Executive shall be entitled to retain all sums paid to
the Executive pending resolution of the Dispute and shall be entitled to
receive, in addition, the payments and other benefits provided for in paragraph
4 hereof.
4. PAYMENTS AND BENEFITS UPON TERMINATION.
If within three (3) years after a Change in Control of the Company,
there occurs a termination of employment of the Executive with the Company or a
Subsidiary, other than a termination of employment which is (i) due to the
Executive's death after the Window Period or Retirement other than Early
Retirement during the Window Period; or (ii) by the Company or a Subsidiary by
reason of the Executive's Disability or for Cause; or (iii) by the Executive
other than for Good Reason, then, and expressly on the condition that the
Company or Subsidiary employing the Executive receive on the Date of Termination
a Release, Covenant Not to Sue, Non-Disclosure and Non-Solicitation Agreement
executed by the Executive (or the Executive's legal representative, in the event
of the death or Disability of the Executive), in the form set forth in Exhibit A
to this Agreement (the "Release Agreement"), and that such Release Agreement be
effective:
(a) The Company or a Subsidiary will pay to the Executive as
compensation for services rendered, promptly following the effective date of the
Release Agreement, a lump sum cash amount (subject to any applicable payroll or
other taxes required to be withheld computed at the rate for supplemental
payments) equal to (X) the sum of (i) three (3) times the Executive's Base
Salary, plus (ii) three (3) times the Executive's Bonus Amount, less (Y) the
aggregate lump sum cash severance amount in respect of base salary and bonus
pursuant to subparagraphs 5(a)(i) and (v) of the Company's Executive Severance
Plan (or any successor provision) payable to the Executive upon termination of
employment, delivery by the Executive of the Release, Covenant Not to Sue,
Non-Disclosure and Non-Solicitation Agreement referred to therein, and the
expiration of all periods during which the Executive may revoke any release of
claims in such agreement.
(b) The Executive will be entitled to receive "Special Retirement
Benefits" as provided herein, so that the total retirement benefits the
Executive receives from the Company will approximate the total retirement
benefits the Executive would have received under all defined benefit retirement
plans (which may include non-qualified, supplemental and excess benefits
retirement plans but shall not include severance plans) and other employment
contracts of the Company and its Subsidiaries in which the Executive
participates were the Executive fully vested under such retirement plans and
entitled to all benefits payable under such other employment contracts and had
the Executive continued in the employ of the Company or a Subsidiary for one
hundred twenty (120) months following the Date of Termination or until the
Executive's Normal Retirement Date, if earlier (provided that such additional
period shall be inclusive of and shall not be in addition to any period of
service credited under any severance plan of the Company or a Subsidiary). The
benefits specified in this subparagraph will include all ancillary benefits,
such as early retirement and survivor rights. The amount payable to the
Executive or the Executive's beneficiaries under this subparagraph shall equal
the excess of (1) the retirement benefits that would be paid to the Executive or
the Executive's beneficiaries, under all retirement plans and other employment
contracts of the Company and its Subsidiaries in which the Executive
participates if (A) the Executive were fully vested under such plans and
entitled to all benefits payable under such other employment contracts, (B) the
one hundred twenty (120) month period (or the period until the Executive's
Normal Retirement Date, if less) following the Date of Termination were added to
the Executive's credited service under such plans and contracts, (C) the terms
of such plans and the policies and procedures by which such plans were
administered were those most favorable to the Executive which were in effect at
any time during the period commencing twelve (12) months prior to the Change of
Control and ending on the date of Notice of Termination, and (D) the Executive's
highest average annual base salary as defined under such retirement plans and
other employment contracts and any cash bonus which under the terms of such plan
or contract is used to calculate benefits thereunder were calculated as if the
Executive had been employed by the Company or a Subsidiary for a one hundred and
twenty (120) month period (or the period until the Executive's Normal Retirement
Date, if earlier) following the Date of Termination and had the Executive's
salary and cash bonus during such period been equal to the Executive's Base
Salary and Bonus Amount; over (2) the retirement benefits that are payable to
the Executive or the Executive's beneficiaries under all retirement plans and
other employment contracts of the Company and its Subsidiary in which the
Executive participates. These Special Retirement Benefits are provided on an
unfunded basis, are not intended to meet the qualification requirements of
Section 401 of the Internal Revenue Code of 1986, as amended (the "Code"), and
shall be payable solely from the general assets of the Company. These Special
Retirement Benefits shall be payable at the times and in the manner provided in
the applicable retirement plans and other employment contracts to which they
relate, or at the election of the Executive they shall be paid in a lump sum
actuarial equivalent utilizing the actuarial assumptions of the defined benefit
pension plan applicable to the Executive.
(c)(i) As used herein, "Welfare Plans" shall mean the medical, dental,
vision, life, dependent life, personal accident, employee banking services, and
educational matching gift plans of the Company or a Subsidiary in which the
Executive was participating at the Date of Termination, and shall not include
disability, tuition reimbursement, medical and dependent care spending plans,
and business travel accident plans. The Executive will remain an active
participant in all Welfare Plans with the Executive's Base Salary used as the
basis for determining the level of benefits, for a period of thirty-six (36)
months after the Date of Termination or until the Participant's Normal
Retirement Date, if earlier; provided, however, that if employee contributions
are generally required by any such plan the Executive pays to the Company or
Subsidiary an amount equal to the required contribution, if any, which such
plans provide are to be made by employees of status and seniority comparable to
the status and seniority of the Executive at the Date of Termination, which
amounts shall be paid by the Executive at the time or times required by such
plans for employee contributions, and further provided, that the benefits
provided shall be reduced by any benefits provided under post-retirement benefit
programs (such as retiree life insurance) of the Company or a Subsidiary. In the
event applicable law or the terms of any such Welfare Plan do not permit
continued participation by the Executive, then the Company or a Subsidiary will
arrange to provide the Executive with benefits substantially similar to and no
less favorable than the benefits the Executive was entitled to receive under
such Welfare Plan at any time during the period commencing twelve (12) months
prior to the Change of Control and ending on the date of Notice of Termination
for a period terminating thirty-six (36) months after the Date of Termination;
provided, however, that if employee contributions are generally required by any
such plan the Executive pays to the Company or Subsidiary an amount equal to the
required contribution, if any, which such plans provide are to be made by
employees of status and seniority comparable to the status and seniority of the
Executive at the Date of Termination, which amounts shall be paid by the
Executive at the time or times required by such plans for employee
contributions.
(ii) In lieu of continued participation in the Company or a
Subsidiary's disability plans, in the event that the Executive becomes disabled
during the period of participation in Welfare Plans provided for herein, as
determined by approval for disability benefits under the federal Social Security
program, the Company or Subsidiary shall make direct payments to the Executive
commencing upon termination of participation in the Welfare Plans hereunder and
under any Severance Plan and during the continuation of such disability, as
determined under the federal Social Security program of the amounts and for the
periods the Executive would have received benefits under the Company or
Subsidiary's long-term disability plan (after taking into account any offsets to
income under such plan) as if the Executive had qualified for long-term
disability payments under the Company or Subsidiary's long-term disability plan
immediately prior to the Date of Termination.
(iii) The continuation of welfare benefits provided by this
subparagraph 4(c) shall be inclusive of any period of welfare benefits
continuation provided by any severance plan or other contract of the Company or
a Subsidiary, it being the intention of the parties that the Executive shall
receive continuation of welfare benefits for the longest period provided by any
severance plan or contract and this Agreement, not the sum of the periods
provided in various severance plans and contracts and this Agreement.
(iv) If any benefits provided hereunder are provided outside of a
Welfare Plan and would have been tax-exempt or tax-favored to the Executive if
provided under a Welfare Plan, the Company or Subsidiary shall make additional
payments to the Executive in reimbursement of taxes in order to put the
Executive in the same after tax position as if the benefits had been provided
under a Welfare Plan.
(v) In the event the Executive becomes employed with another
employer and becomes eligible to receive welfare benefits under plans provided
by such employer, the welfare benefits provided hereunder shall be secondary to
those provided under such other plans.
(vi) After the Date of Termination the Executive may also
participate in those post-retirement benefit programs under which the Executive
meets the qualifications, which qualifications may include contributions by the
Executive and appropriate elections at the Date of Termination.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) In the event that any payment or benefit received or to be
received by the Executive pursuant to the terms of this Agreement (the "Contract
Payments") or of any other plan, arrangement or agreement of the Company (or any
affiliate) ("Other Payments" and, together with the Contract Payments, the
"Payments") would, in the opinion of independent tax counsel selected by the
Company and reasonably acceptable to the Executive ("Tax Counsel"), be subject
to the excise tax (the "Excise Tax") imposed by section 4999 of the Code (in
whole or in part), as determined as provided below, then, unless subparagraph
5(e) below is applicable, the Company shall pay to the Executive, at the time
specified in subparagraph 5(b) hereof, an additional amount (the "Offset
Payment") such that the net amount retained by the Executive, after deduction of
the Excise Tax on the Payments and any federal, state and local income tax and
Excise Tax upon the payment provided for by this subparagraph 5(a), and any
interest, penalties or additions to tax payable by the Executive with respect
thereto, shall be equal to the total present value of the Contract Payments and
Other Payments at the time such Payments are to be made. For purposes of
determining whether any of the Payments will be subject to the Excise Tax and
the amounts of such Excise Tax, (1) the total amount of the Payments shall be
treated as "parachute payments" within the meaning of section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax, except to
the extent that, in the opinion of Tax Counsel, a Payment (in whole or in part)
does not constitute a "parachute payment" within the meaning of section
280G(b)(2) of the Code, or such "excess parachute payments" (in whole or in
part) are not subject to the Excise Tax, (2) the amount of the Payments that
shall be treated as subject to the Excise Tax shall be equal to the lesser of
(A) the total amount of the Payments or (B) the amount of "excess parachute
payments" within the meaning of section 280G(b)(1) of the Code (after applying
clause (1) hereof), and (3) the value of any noncash benefits or any deferred
payment or benefit shall be determined by Tax Counsel in accordance with the
principles of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Offset Payment, the Executive shall be deemed to
pay federal income taxes at the highest marginal rates of federal income
taxation applicable to individuals in the calendar year in which the Offset
Payment is to be made and state and local income taxes at the highest marginal
rates of taxation applicable to individuals as are in effect in the state and
locality of the Executive's residence in the calendar year in which the Offset
Payment is to be made, net of the maximum reduction in federal income taxes that
can be obtained from deduction of such state and local taxes, taking into
account any limitations applicable to individuals subject to federal income tax
at the highest marginal rates.
(b) The Offset Payments provided for in subparagraph 5(a) hereof shall
be made upon the earlier of (i) the payment to the Executive of any Contract
Payment or Other Payment or (ii) the imposition upon the Executive or payment by
the Executive of any Excise Tax.
(c) If it is established pursuant to a final determination of a court
or an Internal Revenue Service proceeding or the opinion of Tax Counsel that the
Excise Tax is less than the amount taken into account under subparagraph 5(a)
hereof, the Executive shall repay to the Company within five days of the
Executive's receipt of notice of such final determination or opinion the portion
of the Offset Payment attributable to such reduction (plus the portion of the
Offset Payment attributable to the Excise Tax and federal, state and local
income tax imposed on the Offset Payment being repaid by the Executive if such
repayment results in a reduction in Excise Tax or a federal, state and local
income tax deduction) plus any interest received by the Executive from the
taxing authorities on the amount of such repayment. If it is established
pursuant to a final determination of a court or an Internal Revenue Service
proceeding or the opinion of Tax Counsel that the Excise Tax exceeds the amount
taken into account hereunder (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Offset Payment), the
Company shall make an additional Offset Payment in respect of such excess within
five days of the Company's receipt of notice of such final determination or
opinion.
(d) In the event of any change in, or further interpretation of,
sections 280G or 4999 of the Code and the regulations promulgated thereunder
subsequent to a Change in Control, the Executive shall be entitled, by written
notice to the Company, to request an opinion of Tax Counsel regarding the
application of such change to any of the foregoing, and the Company shall use
its best efforts to cause such opinion to be rendered as promptly as
practicable. All fees and expenses of Tax Counsel incurred in connection with
this Agreement shall be borne by the Company.
(e) If in the opinion of Tax Counsel the Company would not be required
to make an Offset Payment if the Payments to the Executive that would be treated
as "parachute payments" under Section 280G of the Code were reduced by up to
$50,000, then the amounts payable to the Executive under this Agreement shall be
reduced (but not below zero) to the maximum amount that could be paid to the
Executive without giving rise to the Excise Tax (the "Safe Harbor Cap") and no
Offset Payment shall be required to be made to the Executive. The reduction of
the amounts payable under this Agreement, if applicable, shall be made by
reducing first the payments under paragraph 4(a) above, unless an alternative
method of reduction is elected by the Executive. For purposes of reducing the
Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and
no other Payments) shall be reduced. If the reduction of the amounts payable
hereunder by an amount not exceeding $50,000 would not result in a reduction of
the Payments to the Safe Harbor Cap, no amounts payable under this Agreement
shall be reduced pursuant to this provision.
6. GENERAL.
(a) The Company or a Subsidiary shall pay promptly as incurred the
Executive's reasonable attorney's fees and expenses incurred in good faith by
the Executive as a result of any dispute (regardless of the outcome thereof)
with the Company or a Subsidiary or any other party regarding the validity or
enforceability of, or liability under, any provision of this Agreement or the
act of any party thereunder or any guarantee of performance thereof and pay
prejudgment interest on any delayed payment to the Executive calculated at the
Summit Bank, New Jersey base rate of interest in effect from time to time from
the date that payment should have been made under this Agreement; provided,
however, that the Executive shall not have been found by the court to have acted
in bad faith. Any finding of bad faith must be final with the time to appeal
therefrom having expired and no appeal having been perfected.
(b) The Company's obligation to pay the Executive (or the Executive's
dependents, beneficiaries or estate) the compensation and to make the
arrangements provided herein shall be absolute and unconditional and shall not
be affected by any circumstance, including, without limitation, any set off,
counterclaim, recoupment, defense or other right which the Company may have
against the Executive or anyone else. All amounts payable by the Company
hereunder shall be paid without notice or demand. Except as expressly provided
herein, the Company waives all rights which it may now have or may hereafter
have conferred upon it, by statute or otherwise, to terminate, cancel or rescind
this Agreement in whole or in part. Except as provided in paragraphs 3(f) and
5(c) herein, each and every payment made hereunder by the Company shall be final
and the Company will not seek to recover for any reason all or any part of such
payment from the Executive or any person entitled thereto. The Executive shall
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by written
agreement to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this
paragraph 6 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
(d) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts would still be payable to the Executive hereunder if the
Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee or other designee or, if there be no such designee,
to the Executive's estate. The obligations of the Executive hereunder shall not
be assignable by the Executive.
(e) The Executive's rights under this Agreement shall be
non-transferable except by will or by the laws of descent and distribution and
except insofar as applicable law may otherwise require. Subject to the
foregoing, no right, benefit or interest hereunder shall be subject to
anticipation, alienation, sale, assignment, encumbrance, charge, pledge,
hypothecation or set-off in respect of any claim, debt or obligation, or to
execution, attachment, levy or similar process, or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall,
to the full extent permitted by law, be null, void and of no effect.
7. NOTICE.
For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, or if delivered
personally or by courier, receipt requested, or by facsimile transmission,
receipt acknowledged, addressed as follows:
If to the Executive:
James J. Lynch
If to the Company:
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey 08543-2066
Attention: Secretary to the Board
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
8. MISCELLANEOUS.
No provisions of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing, signed by
the Executive and such officer as may be specifically designated by the Board.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No assurances or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the law of
the State of New Jersey.
9. FINANCING.
All amounts due and benefits provided under this Agreement shall
constitute general obligations of the Company or Subsidiary employing the
Executive in accordance with the terms of this Agreement. The Executive shall
have only an unsecured right to payment thereof out of the general assets of the
Company or such Subsidiary. Notwithstanding the foregoing, the Company or such
Subsidiary may, by agreement with one or more trustees to be selected by the
Company or such Subsidiary, create a trust on such terms as the Company or such
Subsidiary shall determine to make payments to the Executive in accordance with
the terms of this Agreement.
10. VALIDITY.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect. Any provision in this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating or affecting the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
11. SUPERSEDEAS.
While this Agreement is in addition to and not in lieu of any other plan
providing for payments to or benefits for the Executive or any agreement now
existing or which hereafter may be entered into between the Company and the
Executive, this Agreement supersedes all prior agreements and understandings of
the parties hereto with respect to the Company's severance obligations to the
Executive and any other similar payments to the Executive due upon termination
of employment other than those agreements and understandings contained in the
Company's Executive Severance Plan or specifically provided for in any
employment contract between the Company and the Executive. This agreement
supersedes the Employment Agreement between Prime Bancorp, Inc. and Executive
dated December 18, 1995, as amended June 17, 1999, other than the terms of such
agreement relating to your stock options, and any other agreements and
understandings relating to the employment contracts with or severance benefits
payable by Prime Bancorp, Inc. or Prime Bank, which, except as aforesaid, are
hereby canceled and null and void as of the effective date of this Agreement.
The merger of Prime Bancorp, Inc. with First Valley does not constitute a Change
in Control for the purposes of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date set forth above.
SUMMIT BANCORP. EXECUTIVE
By:/s/ Richard F. Ober, Jr. /s/ James J. Lynch
---------------------- ---------------
Richard F. Ober, Jr., Secretary James J. Lynch
EXHIBIT A
RELEASE, COVENANT NOT TO SUE,
NON-DISCLOSURE AND NON-SOLICITATION
AGREEMENT
This RELEASE, COVENANT NOT TO SUE, NON-DISCLOSURE AND NON- SOLICITATION
AGREEMENT (the "AGREEMENT") dated as of_________ among (1)
______________("Executive"), and (2) Summit Bancorp. and all parent and
subsidiary corporations, partnerships and other entities and affiliates
controlled by, controlling or under common control with Summit Bancorp.
(together with any predecessor and successor entities hereinafter being
collectively referred to as "SUB") sets forth the agreements of the parties
hereto with regard to the matters set forth herein:
1. Background. Executive is an Executive of SUB and
participates in SUB's Executive Severance Plan pursuant to a
Participation Letter dated ______________ and a party to a
Termination Agreement dated ________________ [as last amended
_____________](the Plan and the Letter and Agreement, as amended
from time to time, together being collectively referred to as the
"Contracts"). Any capitalized terms used but not defined herein
shall have the meaning set forth in the applicable Contract.
1. A Change of Control [has/has NOT] occurred [on (date)]. If a Change of
Control has NOT occurred, Executive is not entitled to any benefits
under the Termination Agreement.
2. Executive's employment with SUB will or has terminated on
______________, which shall be the Date of Termination for purposes of
the Contracts, notwithstanding any failure to adhere to the provisions
for giving a Notice of Termination and the method of determining the
Date of Termination set forth in the Contracts, any such failures
being hereby waived by the parties.
3. This termination shall constitute a termination "[for cause/
disability /retirement /other than for cause /by mutual agreement]"
for purposes of any stock options and restricted stock which Executive
holds, and the Termination Date shall be the termination date for the
purposes of such options. Attached hereto as Appendix A is a list of
all outstanding SUB options held by Executive on the date hereof.
2. Payment. Executive shall receive within two business days
following the EFFECTIVE DATE (as defined in paragraph 7 hereof)
$_____________, the gross amount due to Executive under the
Contracts, which shall be paid to Executive as $_________________
by check or deposit in Executive's bank account, with the balance
withheld in respect of federal, state and local taxes and
benefits contributions, which Executive acknowledges represents
all amounts currently due Executive under the Contracts.
Executive acknowledges and agrees that Executive is not entitled
to any severance payments under any other severance program of
SUB, the Contracts being intended to substitute for any such
other severance program. SUB continues to be obligated to
provide certain welfare and pension benefits and perquisites, as
more fully set forth in the Contracts.
3. Restrictive Covenants. In consideration of the payments to
Executive as specified in paragraph 2 above, Executive agrees as
follows:
a. Non-Competition with SUB. The parties recognize that
Executive is an important officer of SUB, that his
reputation and business and personal relationships are
of significant benefit to SUB, and a consideration in
the price paid to acquire the bank holding company of
which Executive was Chief Executive Officer, and that
he has access to information about SUB's plans and
projections as well as other confidential information.
The parties further agree that SUB is in direct
competition with certain banks and bank holding
companies and thrift institutions and their affiliates
and the Executive agrees that, for a period of two (2)
years from the date hereof, he will not accept
employment or serve in any capacity with any bank,
savings bank or savings and loan association the
deposits or accounts or shares of which are insured by
the Federal Deposit Insurance Corporation or credit
union the deposits or accounts or shares of which are
insured by the National Credit Union Administration or
any holding company for such bank, savings bank,
savings and loan association or credit union or other
entity controlling, controlled by or under common
control with such financial institution at a principal
place of employment within 25 miles of any office of
SUB or any entity controlling, controlled by or under
common control with SUB open to the public at the time
of this Agreement.
b. Non-Solicitation of SUB Employees. For a period of
five (5) years from the date hereof, Executive will not
solicit or induce any person who is an employee of SUB
or was such at any time within three months prior to
the date hereof to become employed by any other person,
firm or corporation or approach any such employee for
such purpose or authorize or knowingly approve the
taking of such actions by other persons, without the
prior written consent of SUB.
c. Non-Disclosure of Proprietary Information. Executive
acknowledges that during the course of Executive's
employment with SUB Executive received, obtained or
became aware of or had access to proprietary
information, lists and records of customers and trade
secrets which are the property of SUB and which are not
known by competitors or generally by the public
("Proprietary Information") and recognizes such
Proprietary Information to be valuable and unique
assets of SUB. For purposes of this subparagraph: (i)
Proprietary Information is deemed to include, without
limitation, (A) marketing materials, marketing manuals,
policy manuals, procedure manuals, policy and procedure
manuals, operating manuals and procedures and product
documentation, (B) all information about pricing,
products, procedures, practices, business methods,
systems, plans, strategies or personnel of SUB, (C)
circumstances surrounding the relationships with,
knowledge of, or information about the customers,
clients, and accounts of SUB, including but not limited
to the identity of current active customers or
prospects who have been contacted by SUB, the
expiration dates and other terms of loans or deposit or
other banking relationships, details or special product
provisions or special combinations of products, or
special prices, and (D) all other information about SUB
which has not been disclosed in documents filed with
the U.S. Securities and Exchange Commission or
otherwise publicly disseminated by SUB, whether or not
that information is recorded and notwithstanding the
method of recordation, if any; and (ii) Proprietary
Information is deemed to exclude all information
legally in the public domain. Executive agrees to hold
the Proprietary Information in the strictest confidence
and agrees not to use or disclose any Proprietary
Information, directly or indirectly, at any time for
any purpose, without the prior written consent of SUB
or to use for Executive's benefit or the benefit of any
person, firm, corporation or other entity (other than
SUB), any Proprietary Information, and to use
Executive's best efforts to prevent such prohibited use
or disclosure by any other persons. Executive has
returned all Proprietary Information in Executive's
possession or control to SUB.
d. Cooperation, No Detrimental Actions. Executive will
cooperate with SUB in enforcing its claims against
customers and former customers of SUB, including
appearing as a witness for SUB in court or
administrative proceedings, subject to reasonable
reimbursement for Executive's time and expenses.
Executive will not take actions or make disparaging
statements which are detrimental to SUB or the
RELEASEES, as defined in paragraph 5 below.
e. Remedies. Executive hereby acknowledges that
Executive's duties and responsibilities under this
paragraph 3 are unique and extraordinary and that
irreparable injury may result to SUB in the event of a
breach of the terms and conditions of this paragraph 3,
which may be difficult to ascertain, and that the award
of damages would not be adequate relief to SUB and the
RELEASEES. Executive therefore agrees that in the
event of Executive's breach of any of the terms or
conditions of this paragraph 3, SUB shall have the
right, without posting any bond or other security, to
preliminary and permanent injunctive relief as well as
damages and an equitable accounting of all earnings,
profits and other benefits arising from such violation,
which rights shall be cumulative and in addition to any
other rights or remedies in law or equity to which SUB
may be entitled against Executive. The covenants of
Executive in paragraphs 3a, 3b, 3c and 3d of this
Agreement shall each be construed as an agreement
independent of any other provision in this AGREEMENT,
and the existence of any claim or cause of action of
Executive against SUB, whether predicated on this
Agreement or otherwise, shall not constitute a defense
to the enforcement by SUB of paragraphs 3a, 3b, 3c and
3d.
f. Enforcement. If at the time of the enforcement of subparagraphs 3a,
3b, 3c, 3d or 3e above a court shall hold that the period or scope of
the provisions thereof are unreasonable under the circumstances then
existing, the parties hereby agree that the maximum period or scope
under the circumstances shall be substituted for the period or scope
stated in those subparagraphs.
4. Short-Swing Securities Profits. Executive acknowledges that Executive will
remain subject to the short-swing liability provisions of Section 16 of the
federal Securities Exchange Act of 1934 for six months following
termination of employment.
5. Release. In consideration of the payments to Executive as specified in
paragraph 2 above, Executive grants SUB a RELEASE of only all claims, both
known and unknown, that Executive may have that relate to the termination
of Executive's employment (hereafter a "WRONGFUL TERMINATION CLAIM"). The
Executive and SUB agree that a WRONGFUL TERMINATION CLAIM, specifically and
without limitation, does not include claims:
1. for indemnification as a corporate agent of SUB against
claims by third parties;
2. under employee benefit plans, including supplemental employee
retirement plans, maintained by SUB or any of the predecessor
organizations thereof, including but not limited to rights under any
workers compensation program, Section 502(a) of the Employee
Retirement Income Security Act, as amended, 29 U.S.C. 1001 et seq.,
and under the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA");
3. arising out of enforcement of the Contracts or this
Agreement by Executive; or
4. constituting cross-claims against SUB as a result of claims brought by
unaffiliated third parties against Executive based on Executive's
service as an executive of SUB.
The statutes which could form the basis for a WRONGFUL TERMINATION CLAIM
include, but are not limited to, Title VII of the Civil Rights Act of 1964,
as amended, 42 U.S.C. 1971 et seq.; the Age Discrimination in Employment
Act of 1967, as amended, 29 U.S.C. 621 et seq.; Section 510 of the Employee
Retirement Income Security Act of 1974, as amended, 29 U.S.C. 1001 et seq.;
the Americans With Disabilities Act, as amended, 42 U.S.C. 12101 et seq.;
the Older Workers Benefit Protection Act, as amended, 29 U.S.C. 621 et
seq.; the Civil Rights Act of 1866, as amended, 42 U.S.C. 1981 et seq.; the
New Jersey Law Against Discrimination, as amended, N.J.S.A. 10:5-1 et seq.;
the New Jersey Conscientious Employee Protection Act, as amended, N.J.S.A.
34:19-1 et seq.; the New York Human Rights Law, Executive Law 290 et seq.;
the Pennsylvania Human Relations Act, as amended, 43 P.S. 951 et seq.; and
the Pennsylvania Whistleblower Law, as amended, 43 P.S. 1421 et seq. The
common law (non-statutory) theories under which a WRONGFUL TERMINATION
CLAIM could be made include, but are not limited to, breach of an express
employment contract, breach of a contract implied from a personnel handbook
or manual, or commission of a civil wrong (known as a "tort") resulting in
Executive's termination, or for alleged violation of the public policy of
the United States or any state. Granting a RELEASE of any WRONGFUL
TERMINATION CLAIM pursuant to this AGREEMENT means that on behalf of
Executive and all who succeed to Executive's rights and responsibilities,
Executive releases and gives up only any and all WRONGFUL TERMINATION
CLAIMS that Executive may have against SUB, and any of its subsidiaries,
affiliates or divisions, and all of their directors, officers,
representatives, shareholders, agents, employees, and all who succeed to
their rights and responsibilities (collectively referred to as "RELEASEES".
With respect to any charges filed concerning events or actions relating to
a WRONGFUL TERMINATION CLAIM that occurred on or before the date of this
AGREEMENT or Executive's Termination Date (whichever is later), Executive
waives and releases any right that Executive may have to recover in any
lawsuit or proceeding brought by Executive or by an administrative agency
on Executive's behalf against the RELEASEES.
6. Covenant Not to Sue. Executive covenants not to sue the
RELEASEES over any WRONGFUL TERMINATION CLAIM. Such a covenant
not to sue the RELEASEES means that Executive represents that
Executive has not through the date of execution of this Agreement
filed a WRONGFUL TERMINATION CLAIM, charge or lawsuit with any
court or government agency against the RELEASEES, and that
Executive will not file such a lawsuit subsequent to execution of
this Agreement. Executive also waives any right to become, and
promises not to become, a member of any class in a case in which
WRONGFUL TERMINATION CLAIMS are asserted against any of the
RELEASEES.
7. Review Period. Executive acknowledges that Executive has up
to 21 days to review this AGREEMENT, and was advised to review it
with an attorney of Executive's choice. Executive also
acknowledges that Executive was further advised that Executive
has seven days after Executive signs this AGREEMENT to revoke it
by notifying SUB in writing, of such revocation as set forth
under Notices below. This AGREEMENT shall become effective on
the tenth (10th) day following its execution by Executive (the
"EFFECTIVE DATE"), unless revoked in accordance with the preceding
sentence.
8. Revocation of Authority. Executive agrees and acknowledges
that as of the Termination Date Executive shall no longer be
empowered to bind SUB in any agreement, whether verbal or
written, and that Executive shall have no authority to execute
any documents, deeds, leases, or other contracts on behalf of
SUB. To the extent not effected by termination of Executive
under the Contracts, Executive resigns from all offices and
positions with SUB.
9. Successors and Assigns. All rights and duties of SUB under this Agreement
shall be binding on and inure to the benefit of SUB, its successors and
assigns. All rights of Executive hereunder shall be binding upon and inure
to the benefit of Executive's personal or legal representatives.
10. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed
to have been duly given if delivered personally with receipt
acknowledged or sent by registered or certified mail, postage
prepaid or by reputable national overnight delivery service, to
the addresses shown below, unless changed by notices given as
herein provided, except that notice of change of address only
shall be effective upon actual receipt:
If to SUB, to:
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey 08543-2066
Attention: Executive Vice President of
Human Resources
With a copy to:
Summit Bancorp.
301 Carnegie Center
P.O. Box 2066
Princeton, New Jersey 08543-2066
Attention: General Counsel
If to the Executive, to:
With a copy to:
11. Covenant Not to Challenge Enforceability. Both Executive and SUB understand
that this AGREEMENT is final and binding when executed by both parties,
subject to paragraph 7 above, and both agree not to thereafter challenge
its enforceability.
12. Applicable Law. This AGREEMENT shall be deemed to have been made within the
State of New Jersey, and it shall be interpreted, construed, and enforced
in accordance with the law of the State of New Jersey, and before the
Courts of the State of New Jersey.
13. Amendments, Modifications, Waivers. This AGREEMENT cannot be amended or
modified except by a written document signed by both SUB and Executive and
no provision can be waived except by a written document signed by the
waiving party.
14. By signing this AGREEMENT, Executive acknowledges:
1. EXECUTIVE HAS READ THIS AGREEMENT COMPLETELY.
2. EXECUTIVE HAS HAD AN OPPORTUNITY TO CONSIDER THE TERMS OF THIS
AGREEMENT.
3. EXECUTIVE HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY OF EXECUTIVE'S
CHOOSING PRIOR TO EXECUTING THIS AGREEMENT.
4. EXECUTIVE KNOWS THAT EXECUTIVE MAY BE GIVING UP IMPORTANT LEGAL RIGHTS
BY SIGNING THIS AGREEMENT.
5. EXECUTIVE UNDERSTANDS AND MEANS EVERYTHING THAT EXECUTIVE HAS SAID IN
THIS AGREEMENT, AND EXECUTIVE AGREES TO ALL ITS TERMS.
6. EXECUTIVE IS NOT RELYING ON SUB OR ANY REPRESENTATIVE OF SUB TO
EXPLAIN THIS AGREEMENT AND RELEASE TO EXECUTIVE. EXECUTIVE HAS HAD AN
OPPORTUNITY TO CONSULT AN ATTORNEY OR OTHER ADVISOR TO EXPLAIN THIS
AGREEMENT AND ITS CONSEQUENCES TO EXECUTIVE BEFORE EXECUTIVE SIGNED
IT, AND EXECUTIVE HAS AVAILED HIMSELF OR HERSELF OF THIS OPPORTUNITY
TO WHATEVER EXTENT EXECUTIVE DESIRED.
7. EXECUTIVE HAS SIGNED THIS AGREEMENT VOLUNTARILY AND ENTIRELY OF
EXECUTIVE'S OWN FREE WILL, WITHOUT ANY PRESSURE FROM SUB OR ANY
REPRESENTATIVE OF SUB, OR ANYONE ELSE.
IN WITNESS WHEREOF, and intending to be legally bound hereby, this
Agreement has been executed as of the day and year first above
written.
ATTEST: SUMMIT BANCORP.
______________________________By:______________________________
Secretary Executive Vice President
------------------------------
EXECUTIVE
--------------------------------
(Social Security Number)
STATE OF NEW JERSEY:
COUNTY OF _______________________:
I certify that on this _______ day of ____________, _______ personally came
before me _______________(Executive), who, being duly sworn, acknowledged under
oath to my satisfaction that such person is named in and personally executed the
foregoing Receipt and Release as such person's voluntary act and deed, for the
purposes set forth therein.
IN WITNESS WHEREOF, I have set my hand this ____ day of
- - -------------, ------.
By: ___________________________________
Notary Public of the State of New Jersey
My Commission expires __________________
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT (27)
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1999 10-Q FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> Jun-30-1999
<CASH> 1,009,863
<INT-BEARING-DEPOSITS> 15,297
<FED-FUNDS-SOLD> 16,463
<TRADING-ASSETS> 18,990
<INVESTMENTS-HELD-FOR-SALE> 4,375,966
<INVESTMENTS-CARRYING> 6,378,484
<INVESTMENTS-MARKET> 6,238,289
<LOANS> 21,538,820
<ALLOWANCE> 321,700
<TOTAL-ASSETS> 34,225,760
<DEPOSITS> 23,442,900
<SHORT-TERM> 3,734,712
<LIABILITIES-OTHER> 444,757
<LONG-TERM> 4,001,925
0
0
<COMMON> 142,018
<OTHER-SE> 2,459,448
<TOTAL-LIABILITIES-AND-EQUITY> 34,225,760
<INTEREST-LOAN> 407,045
<INTEREST-INVEST> 161,054
<INTEREST-OTHER> 612
<INTEREST-TOTAL> 568,711
<INTEREST-DEPOSIT> 166,807
<INTEREST-EXPENSE> 260,120
<INTEREST-INCOME-NET> 308,591
<LOAN-LOSSES> 16,500
<SECURITIES-GAINS> 2,094
<EXPENSE-OTHER> 207,216
<INCOME-PRETAX> 180,802
<INCOME-PRE-EXTRAORDINARY> 120,337
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120,337
<EPS-BASIC> 0.71
<EPS-DILUTED> 0.70
<YIELD-ACTUAL> 3.92
<LOANS-NON> 94,825
<LOANS-PAST> 37,674
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 64,476
<ALLOWANCE-OPEN> 328,302
<CHARGE-OFFS> 28,838
<RECOVERIES> 5,736
<ALLOWANCE-CLOSE> 321,700
<ALLOWANCE-DOMESTIC> 167,485
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 154,215
</TABLE>
