<PAGE>
As filed with the Securities and Exchange Commission on January 31, 2000
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
SUMMIT BANCORP.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
New Jersey 6711 22-1903313
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer Identification Number)
of incorporation) Classification Code Number)
</TABLE>
301 Carnegie Center, P.O. Box 2066
Princeton, New Jersey 08543-2066
(609) 987-3200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Richard F. Ober, Jr., Esq.
Executive Vice President, General Counsel and Secretary
301 Carnegie Center, P.O. Box 2066
Princeton, New Jersey 08543-2066
(609) 987-3430
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
Robert M. LaRose, Esq.
Thompson Coburn LLP
One Mercantile Center
St. Louis, Missouri 63101
(314) 552-6000
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement and upon
consummation of the merger as described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Proposed Proposed
Title of each class of Amount maximum offering maximum aggregate Amount of
security to be registered to be registered price per share offering price /(2)/ registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.80 per share (and associated
stock purchase rights) /(1)/ 1,344,256 shares $13.98 $18,795,432 $4,962
====================================================================================================================================
</TABLE>
(1) Prior to the occurrence of certain events, the stock purchase rights will
not be evidenced separately from the common stock.
(2) Estimated solely for the purposes of computing the registration fee
pursuant to the provisions of Rule 457(f), and based upon the $18,795,432
aggregate book value of the 100 shares of Class A common stock and
3,061,045.20 shares of Class B common stock of MSFG, Inc. issued and
outstanding as of December 31, 1999.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
MSFG, Inc.
14 Commerce Drive
Cranford, New Jersey 07016-3505
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held February 29, 2000 at 10:00 a.m.
To our shareholders:
A special meeting of shareholders of MSFG, Inc. will be held at 10:00 a.m.,
local time, on February 29, 2000, at the Plainfield Country Club, 1591 Woodland
Avenue, Edison, New Jersey 08820 for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Reorganization, dated December 31, 1999, by and
among Summit Bancorp., Summit Bank (New Jersey), MSFG, Inc. and the
shareholders of MSFG, Inc. who are signatories to the Agreement and
Plan of Reorganization, and the transactions contemplated thereby,
including the merger of a to-be-formed wholly owned subsidiary of
Summit Bancorp. into MSFG, Inc., pursuant to which each share of
common stock of MSFG, Inc. will be converted into the right to receive
0.4391 of a share of common stock of Summit Bancorp., as more fully
described in the accompanying Proxy Statement-Prospectus; and
2. To transact such other business as may properly come before the
special meeting.
Shareholders of record as of the close of business on January 15, 2000 are
entitled to notice of and to vote at the special meeting. All shareholders are
cordially invited to attend the special meeting.
THE BOARD OF DIRECTORS OF MSFG, INC. HAS UNANIMOUSLY APPROVED THE AGREEMENT
AND PLAN OF REORGANIZATION AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
BY ORDER OF THE BOARD OF DIRECTORS OF
MSFG, INC.
__________________________________________________
Thomas J. Sharkey, Sr.
Chairman of the Board
Cranford, New Jersey
February ___, 2000
Whether or not you expect to attend the special meeting, please complete,
date and sign the enclosed proxy card and promptly mail the proxy card in the
enclosed envelope in order to assure representation of your shares at the
special meeting. No postage is required if mailed in the United States. If you
attend the special meeting, you may vote either in person or by proxy. Any
proxy given may be revoked by you in writing at any time before the proxy is
voted at the meeting.
<PAGE>
SUMMIT BANCORP. PROSPECTUS
_______________
MSFG, INC. PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 29, 2000
The boards of directors of Summit Bancorp. and MSFG, Inc. have agreed upon
a merger combining MSFG and a wholly owned subsidiary of Summit. Pursuant to the
terms of the Agreement and Plan of Reorganization, dated December 31, 1999,
among Summit, Summit Bank (New Jersey), MSFG and the shareholders of MSFG who
are signatories to the Agreement and Plan of Reorganization, a to-be-formed
wholly owned subsidiary of Summit will merge into MSFG. As a result of the
merger, MSFG will be a wholly owned subsidiary of Summit. Immediately after the
merger becomes effective, Summit will contribute all of the shares of MSFG to
its subsidiary bank, Summit Bank (New Jersey). We cannot complete the merger
unless the shareholders of MSFG approve it. A special meeting of shareholders of
MSFG will be held on February 29, 2000 at the Plainfield Country Club, 1591
Woodland Avenue, Edison, New Jersey 08820 at 10:00 a.m., local time, to vote on
the merger. Summit shareholders do not need to approve the merger.
If the merger is completed, you will be entitled to receive that number of
whole shares of common stock of Summit determined by multiplying the number of
shares of MSFG common stock you own on the effective date of the merger by
0.4391, the exchange ratio.
This Proxy Statement-Prospectus gives you detailed information about the
merger we are proposing and it includes our Agreement and Plan of Reorganization
as an appendix. It is a proxy statement that MSFG is using to solicit proxies
for use at the MSFG special meeting of shareholders. It is also a prospectus
relating to Summit's issuance of up to 1,344,256 shares of Summit common stock,
and associated preferred stock purchase rights under Summit's shareholder rights
plan, in connection with the merger.
Summit common stock is traded on the New York Stock Exchange under the
symbol "SUB." On February __, 2000, the closing sale price for Summit common
stock as reported on the New York Stock Exchange Composite Tape was $_____ per
share. MSFG common stock is not actively traded or regularly quoted.
This Proxy Statement-Prospectus also includes a formal Notice of Special
Meeting of Shareholders. A proxy card and return envelope are enclosed to
facilitate your voting if you cannot attend the meeting. YOUR VOTE IS VERY
IMPORTANT. Please mail your proxy promptly.
The MSFG board of directors unanimously recommends that you vote "FOR"
approval of the merger.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
Proxy Statement-Prospectus is accurate or adequate. Any representation to the
contrary is a criminal offense.
The securities of Summit being offered through this document are not
savings accounts, deposits or other obligations of any bank or savings
association and are not insured by the Federal Deposit Insurance Corporation or
any other governmental agency.
This Proxy Statement-Prospectus is dated February __, 2000 and was first
mailed to MSFG shareholders on or about February __, 2000.
<PAGE>
FINDING IMPORTANT INFORMATION
This Proxy Statement-Prospectus contains important information about our
companies and the merger that you should read and consider carefully before you
vote your shares. The principal sections of this document are located at the
pages referenced in the Table of Contents. The reorganization agreement is
included as an appendix to this document. In addition, we have incorporated by
reference important business and financial information about Summit from
documents filed with the Securities and Exchange Commission and such documents
have been delivered with this Proxy Statement-Prospectus.
Additional copies of the documents that have been delivered with this Proxy
Statement-Prospectus are available to you without charge upon your written or
oral request. You can obtain additional copies of the documents incorporated by
reference in this document, excluding exhibits, by requesting them in writing or
by telephone from Summit Bancorp., Attention: Corporate Secretary, 301 Carnegie
Center, Princeton, New Jersey 08543, Telephone (609) 987-3442.
We will mail to you any incorporated documents you request by first class
mail, or another equally prompt means, within one business day after we receive
your request. In order to ensure timely delivery of these documents to you, we
must receive your request by February 22, 2000. See "WHERE YOU CAN FIND MORE
INFORMATION" for more information about the documents incorporated by reference
in this Proxy Statement-Prospectus.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY.................................................................................................................... 1
General.................................................................................................................. 1
The Companies............................................................................................................ 1
MSFG Special Meeting..................................................................................................... 2
The Merger............................................................................................................... 2
Market Prices and Dividends.............................................................................................. 5
Pro Forma MSFG........................................................................................................... 5
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING
INFORMATION.............................................................................................................. 7
INTRODUCTION............................................................................................................... 8
SPECIAL MEETING............................................................................................................ 8
Record Date.............................................................................................................. 8
Quorum and Vote Required................................................................................................. 8
Stock Held by MSFG Directors and
Others................................................................................................................ 9
Voting of Proxies........................................................................................................ 9
How to Revoke a Proxy.................................................................................................... 9
Solicitation of Proxies.................................................................................................. 9
SELECTED FINANCIAL DATA.................................................................................................... 11
COMPARATIVE AND PRO FORMA
PER SHARE FINANCIAL
INFORMATION.............................................................................................................. 14
MARKET PRICE AND DIVIDEND
MATTERS.................................................................................................................. 15
Market Price and Dividend History........................................................................................ 15
Dividend Limitations..................................................................................................... 16
TERMS OF THE PROPOSED MERGER............................................................................................... 16
General.................................................................................................................. 16
Closing and Effective Time............................................................................................... 16
Determination of Number of Shares
to be Issued at Closing............................................................................................... 17
Purpose and Issuance of the Shares
Retained by Summit.................................................................................................... 17
Purpose and Issuance of Shares
Deposited in Escrow Account........................................................................................... 18
Exchange of Shares....................................................................................................... 19
Conversion of MSFG Stock Options......................................................................................... 20
Recommendation of MSFG Board............................................................................................. 20
Background of the Merger................................................................................................. 20
Reasons for the Merger................................................................................................... 22
Regulatory Action........................................................................................................ 23
Interests of Certain Persons in the
Merger................................................................................................................ 23
The Reorganization Agreement............................................................................................. 25
Indemnification.......................................................................................................... 27
Dissenters Rights........................................................................................................ 27
New York Stock Exchange Listing.......................................................................................... 28
Accounting Treatment..................................................................................................... 28
Certain Federal Income Tax
Consequences of the Merger............................................................................................ 28
Resale of Summit Common Stock............................................................................................ 29
Differences in Shareholders' Rights...................................................................................... 29
SUMMIT BANCORP............................................................................................................. 37
Description of Business.................................................................................................. 37
Recent Developments...................................................................................................... 38
Management Information................................................................................................... 38
DESCRIPTION OF SUMMIT CAPITAL
STOCK.................................................................................................................... 38
Common Stock............................................................................................................. 39
Shareholder Rights Plans................................................................................................. 39
MSFG, INC.................................................................................................................. 40
Description of Business.................................................................................................. 40
Management's Discussion and
Analysis of Financial Condition and
Results of Operations................................................................................................. 42
Beneficial Ownership of MSFG
Common Stock.......................................................................................................... 45
Description of MSFG Capital
Stock................................................................................................................. 45
SHAREHOLDER PROPOSALS...................................................................................................... 45
OTHER MATTERS.............................................................................................................. 46
LEGAL MATTERS.............................................................................................................. 46
EXPERTS.................................................................................................................... 47
WHERE YOU CAN FIND MORE
INFORMATION.............................................................................................................. 47
MSFG, INC. CONSOLIDATED FINANCIAL STATEMENTS............................................................................... 50
APPENDIX A................................................................................................................. A-1
</TABLE>
iii
<PAGE>
SUMMARY
This summary highlights selected information from this document. It does
not contain all of the information that is important to you. We urge you to read
carefully this entire document and the documents we have referred you to in
order to fully understand the merger. Generally, each of the headings in this
summary is followed by a reference to other pages of this document where you can
read more about that particular topic. See "WHERE YOU CAN FIND MORE INFORMATION"
to find out how you can obtain more information about Summit.
General
We are proposing to merge a to-be-formed wholly owned subsidiary of Summit
into MSFG with MSFG as the surviving corporation. As a result of the merger,
MSFG will be a wholly owned subsidiary of Summit. Immediately after the merger
becomes effective, Summit will contribute all of the shares of MSFG to Summit
Bank (New Jersey). In the merger, you will receive shares of Summit common stock
for your shares of MSFG common stock as described in this Proxy Statement-
Prospectus.
The Companies (see pages 37 and 40)
Summit Bancorp. Summit Bancorp. is a New Jersey corporation and a
registered bank holding company. The principal executive offices of Summit are
located at 301 Carnegie Center, Princeton, New Jersey 08543. Summit's telephone
number is (609) 987-3200. Summit's subsidiary banks, Summit Bank (New Jersey),
Summit Bank (Pennsylvania) and Summit Bank (Connecticut), operated 484 banking
offices located in New Jersey, eastern Pennsylvania and southwestern Connecticut
as of September 30, 1999. Summit's subsidiary banks are engaged in a general
banking business, offering the following services and products:
. demand and interest bearing deposit accounts;
. asset management accounts;
. business, real estate, personal and installment loans; and
. lease financing, fiduciary, investment management, investment advisory,
custodial, correspondent, capital markets, financial advisory, money
desk and treasury services.
In addition, Summit owns subsidiaries that are engaged in:
. securities products and services;
. life, health, property and casualty insurance products and services;
. venture capital investment;
. commercial finance lending, lease financing and asset based lending;
. letter of credit issuance;
. data processing; and
. reinsuring credit life and disability insurance policies related to
consumer loans made by the bank subsidiaries.
MSFG, Inc. MSFG, Inc., a New Jersey corporation, is an insurance and
benefits brokerage firm with several offices located in New Jersey and
Pennsylvania. MSFG offers a variety of services through its subsidiaries,
including business and personal insurance,
1
<PAGE>
bonding, health benefits, retirement benefits and administration of employee
benefit plans. The principal executive offices of MSFG are located at 14
Commerce Drive, Cranford, New Jersey 07016-3505. MSFG's telephone number is
(908) 272-8100.
MSFG Special Meeting (see page 8)
Time, Date, Place and Purpose. MSFG will hold a special meeting of its
shareholders on February 29, 2000 at 10:00 a.m., local time, at the Plainfield
Country Club, 1591 Woodland Avenue, Edison, New Jersey 08820 to vote on the
approval of the reorganization agreement and the merger.
Record Date, Quorum and Vote Required. You can vote at the special meeting
if you owned shares of MSFG common stock at the close of business on January 15,
2000. A majority of the outstanding shares of each class of common stock of
MSFG as of January 15, 2000 must be present, in person or by proxy, to
constitute a quorum at the special meeting. The merger will be approved if a
majority of the votes cast by the holders of Class A common stock, voting as a
separate class, a majority of the votes cast by the holders of Class B common
stock, voting as a separate class, and (iii) a majority of the votes cast by the
holders of Class A common stock and Class B common stock, voting as a single
class, is voted for approval of the reorganization agreement and the merger.
The Merger (see page 16)
Anticipated Effective Date of the Merger. If the merger is approved by
MSFG's shareholders and all the conditions to closing are satisfied or waived,
we will file a certificate of merger with the State of New Jersey which will
specify the date and time at which the merger will become effective.
We currently expect that the merger will become effective during the first
calendar quarter of 2000.
A copy of the reorganization agreement is attached as Appendix A to this
Proxy Statement-Prospectus.
Exchange of Shares. In the merger, you will receive shares of Summit
common stock and associated preferred stock purchase rights in exchange for the
shares of MSFG common stock you own. You will be entitled to receive that
number of whole shares of common stock of Summit determined by multiplying the
number of shares of MSFG common stock you own on the effective date of the
merger by 0.4391, the exchange ratio.
Fractional shares of Summit common stock will not be issued in connection
with the merger. Instead, the number of shares of Summit common stock to which
you will be entitled upon completion of the merger will be rounded to the
nearest whole share.
Pursuant to the terms of the reorganization agreement, three percent (3%)
of the shares of Summit common stock to which you will be entitled to in
connection with the merger will be retained by Summit for the purpose of funding
any shortfalls with respect to levels of working capital and/or shareholders'
equity on the effective date of the merger as agreed upon in the reorganization
agreement. Any shares of Summit common stock remaining after the final
determination of any shortfalls in working capital and/or shareholders' equity
will be distributed to the MSFG shareholders in accordance with their pro rata
ownership interest in MSFG on the effective date of the merger.
In addition, Thomas J. Sharkey, Jr., William Dittman, James Manhardt,
Edward D. Sharkey, Ann McCormick, Ellen Del Mauro, Brian Leddy and a limited
partnership of which Thomas J. Sharkey, Sr. is the general partner have agreed
to deposit 161,311 shares of Summit common stock to which they are entitled to
receive pursuant to the merger in an escrow account with Manchester Trust Bank,
the escrow agent, to fund any indemnification
2
<PAGE>
claims by Summit under the reorganization agreement. Each of these shareholders
will deposit that number of shares of Summit common stock determined by
multiplying the 161,311 shares by a percentage determined by dividing the
shareholder's share ownership in MSFG as of the closing date by the share
ownership of all these shareholders as of the closing date.
Recommendation and Reasons of MSFG Board of Directors. MSFG's board of
directors unanimously recommends that MSFG shareholders vote to approve the
reorganization agreement and the merger.
MSFG's board of directors has concluded that the proposed merger is in the
best interest of MSFG, its shareholders, employees and customers, and the
communities which MSFG serves. The MSFG's board of directors considered a
number of important factors, some of which are listed below:
. the MSFG board of director's familiarity with, and review of, Summit's
business, financial condition, results of operations and prospects;
. the current and prospective environment in which MSFG operates;
. the potential for appreciation in market value of MSFG common stock on
both a short- and long-term basis in comparison to the value of the
Summit common stock to be issued as consideration in the merger;
. information about Summit derived from publicly available data as well as
other financial data provided by Summit and discussions with Summit
management concerning the business, financial condition, results of
operations and asset quality of Summit;
. the competitive position and future growth prospects of Summit following
the merger;
. the financial and other terms and conditions of the reorganization
agreement;
. the effect on MSFG's employees and market area of the merger; and
. the expectation that Summit will continue to provide quality services to
the customers served by MSFG and Summit's capacity to provide a wider
range of services to such customers.
Dissenters Rights. Under New Jersey law, which governs the rights of MSFG
shareholders, you do not have dissenters rights in connection with the merger.
Federal Income Tax Consequences. You will not recognize any gain or loss
for federal income tax purposes as a result of the merger. MSFG has received an
opinion that the federal income tax treatment for MSFG shareholders who exchange
their shares of MSFG common stock for Summit common stock will be as we have
discussed in this document.
Accounting Treatment. Summit expects to account for the merger under the
purchase method of accounting. Under the purchase method of accounting, the
amount by which the purchase price paid by Summit exceeds the fair value of the
net assets acquired will be treated as goodwill. Intangible assets, including
goodwill, recorded in the transaction will be amortized over a period not to
exceed 20 years.
Conditions to the Merger. The completion of the merger depends on a number
3
<PAGE>
of conditions being satisfied or waived. Some of these conditions include:
. the approval of the merger by the shareholders of MSFG;
. the receipt of a waiver as to the manner in which the merger will occur
from the Federal Reserve System;
. the New York Stock Exchange's indication that the shares of Summit
common stock to be issued in the merger will be listed on the New York
Stock Exchange; and
. the expiration of any waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
There are other normal and customary conditions to completion of the
merger, including receipt of legal opinions and execution and delivery of
related agreements.
Termination of Reorganization Agreement. The reorganization agreement may
be terminated by the companies as follows:
. by mutual agreement; and
. by either party if the merger has not been completed by March 30, 2000.
Interests of Certain Persons in the Merger. At the time of the closing of
the merger, six officers of MSFG shall enter into employment agreements with
MSFG, as a subsidiary of Summit, following the merger.
Escrow Agreement. At the time of the closing of the merger, Thomas J.
Sharkey, Jr., William Dittman, James Manhardt, Edward Sharkey, Ann McCormick,
Ellen Del Mauro, Brian Leddy and a limited partnership of which Thomas J.
Sharkey, Sr. is the general partner shall enter into an escrow agreement with
Summit and Manchester Trust Bank, the escrow agent. Pursuant to the terms of
the escrow agreement, these shareholders have agreed to deposit with the escrow
agent an aggregate of 161,311 shares of Summit common stock to which they are
entitled to receive pursuant to the merger to fund any indemnification claims by
Summit under the reorganization agreement. Each of these shareholders will
deposit that number of shares of Summit common stock determined by multiplying
the 161,311 shares by a percentage determined by dividing the shareholder's
share ownership in MSFG as of the closing date by the share ownership in MSFG of
all of these shareholders as of the closing date. The shares shall be held in
escrow for a period of not more than three years and, to the extent not used in
the payment of any indemnification claims arising under the reorganization
agreement, shall be returned to the shareholders in the same percentage as the
shareholders had deposited the shares into the escrow account.
Difference in Shareholders' Rights. The rights of MSFG shareholders and the
rights of Summit shareholders are both determined by New Jersey law. However,
the rights of MSFG sharesholders may differ from the rights of Summit
shareholders due to differences between MSFG's Certificate of Incorporation and
Bylaws and Summit's Restated Certificate of Incorporation and By-Laws. Upon
completion of the merger, your rights as a shareholder of Summit will be
governed by Summit's Restated Certificate of Incorporation and By-Laws.
4
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Market Prices and Dividends (see page 15)
Summit common stock is listed and traded on the New York Stock Exchange
under the symbol "SUB." The following table presents for the periods indicated,
rounded to the nearest full cent, the high and low sale prices of a share of
Summit common stock as reported on the New York Stock Exchange. The table also
reports quarterly dividends declared per share on Summit common stock. There is
no existing market for MSFG common stock, nor has there been any trading in MSFG
common stock since the inception of MSFG. In 1998, MSFG paid a cash dividend of
$.01 per share of outstanding MSFG common stock.
<TABLE>
<CAPTION>
Summit Common Stock
Sale Price
-------------------
Dividends
Calendar Year High Low Per Share
- ------------- ---- --- ---------
<S> <C> <C> <C>
1998............................ $53.88 $30.75 $1.17
1999............................ 44.50 28.50 1.29
2000 (through February __)......
</TABLE>
The table below presents, rounded to the nearest full cent, the following
prices for Summit common stock:
. the closing price on December 31, 1999, which was the last full
trading day prior to the public announcement of the execution of the
reorganization agreement; and
. the closing price on February __, 2000 (the most recent practicable
date prior to the date of this Proxy Statement-Prospectus).
Also set forth below for each of these dates is the pro forma equivalent in
Summit common stock of a share of MSFG common stock computed by multiplying the
applicable price of Summit common stock by the exchange ratio of 0.4391.
Pro Forma MSFG
Summit Equivalent
------ ----------
December 31, 1999............. $30.625 $13.447
February __, 2000.............
The following table presents, as of February __, 2000, the current
annualized dividend rate for a share of Summit common stock and, rounded to the
nearest full cent, for the pro forma equivalent in Summit common stock of a
share of MSFG common stock computed by multiplying the annualized dividend rate
of a share of Summit common stock by the exchange ratio of 0.4391.
5
<PAGE>
Pro Forma MSFG
Summit Equivalent
------ ----------
February __, 2000........ $ 1.32 $ 0.5796
On the date that the merger is completed and on the date you receive Summit
common stock certificates in exchange for your MSFG certificates, the price of a
share of Summit common stock and the pro forma MSFG equivalent may be different
from those set forth above. You should obtain current price quotations. In
addition, the timing and amount of future dividends declared on Summit common
stock will be set at the discretion of Summit's board of directors and will be
determined after consideration of various factors, including, without
limitation, the earnings and financial condition of Summit and its subsidiaries.
6
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Each of us makes forward-looking statements in this Proxy Statement-
Prospectus, and in the public documents to which we refer that are subject to
risks and uncertainties. These forward-looking statements include information
about possible or assumed future results of our operations or the performance of
the combined company after the merger. Also, when we use any of the words
"believes," "expects," "anticipates," "estimates" or similar expressions we are
making forward-looking statements.
These forward-looking statements are intended to qualify for the safe
harbor provided by the Private Securities Litigation Reform Act of 1995. While
each of us believes that our forward-looking statements are reasonable, you
should not place undue reliance on any forward-looking statements, which speak
only as of the date made. You should understand that the following important
factors, in addition to those discussed elsewhere in this Proxy Statement-
Prospectus and in the public documents to which we refer could affect the future
results and performance of each of us and the combined company. This could
cause those results to differ materially from those expressed in our forward-
looking statements. Factors that might cause such a difference include the
following:
. customer loss or revenue loss following the merger may be greater than
expected;
. expected cost savings from the merger may not be fully realized or
realized within the expected time frame;
. difficulties in integrating our businesses may be greater than expected;
. competition with other financial institutions may increase
significantly;
. inflation and changes in the interest rate environment may reduce our
margins;
. general economic or business conditions, either nationally or in the
combined company's market areas, may be less favorable than expected;
. adverse changes may occur in the insurance markets;
. legislative or regulatory changes may adversely affect our business; and
. our ability to enter new markets successfully and capitalize on growth
opportunities may be more difficult than expected.
7
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INTRODUCTION
We are providing this Proxy Statement-Prospectus to shareholders of MSFG in
connection with the solicitation of proxies by the board of directors of MSFG
for the special meeting of shareholders of MSFG to be held on February 29, 2000
at the Plainfield Country Club, 1591 Woodland Avenue, Edison, New Jersey 08820
at 10:00 a.m., local time, or any adjournments thereof. At the special meeting,
the shareholders of MSFG will vote upon a proposal to approve the Agreement and
Plan of Reorganization, dated December 31, 1999, between Summit, Summit Bank
(New Jersey), MSFG and the shareholders of MSFG who are signatories to the
Agreement and Plan of Reorganization, and the transactions contemplated thereby,
including the merger.
MSFG's board of directors has unanimously approved the reorganization
agreement and unanimously recommends that MSFG shareholders vote "FOR" its
approval.
SPECIAL MEETING
Record Date
The record date for determining the MSFG shareholders entitled to vote on
the merger at the special meeting is January 15, 2000. All holders of record of
MSFG common stock, whether voting or non-voting, as of the close of business on
that date are entitled to vote on the reorganization agreement at the special
meeting. Each share of MSFG common stock entitles the holder to one vote on the
reorganization agreement proposal. As of the record date, there was one holder
of record of MSFG Class A common stock and 100 shares of MSFG Class A common
stock outstanding and eligible to be voted at the special meeting and 36 holders
of record of MSFG Class B common stock and 3,061,045.20 shares of MSFG Class B
common stock outstanding and eligible to be voted at the special meeting. MSFG
had no other outstanding voting securities entitled to vote on the
reorganization agreement at the close of business on the record date.
Quorum and Vote Required
Generally, in order to conduct business at a shareholders meeting, a quorum
must be present. A majority of the shares of each class of MSFG common stock
entitled to vote, whether present in person or represented by proxy, will
constitute a quorum for the transaction of business at the special meeting. The
Class A common stock and Class B common stock will vote together as a single
class on the proposal to approve the reorganization agreement. In addition, the
Class A common stock and Class B common stock will vote as separate classes on
the proposal to approve the reorganization agreement. The proposal to approve
the reorganization agreement must be approved by (i) a majority of the votes
cast at the special meeting by the holders of Class A common stock and Class B
common stock, voting together as a single class, (ii) a majority of the votes
cast at the special meeting by the holders of Class A common stock, voting as a
separate class, and a majority of the votes cast at the special meeting by the
holders of Class B common stock, voting as a separate class, and (iii) a
majority of the votes cast at the special meeting by the holders of Class B
common stock, voting as a separate class.
By checking the appropriate box on the proxy card provided by MSFG's board
of directors, you may vote "FOR" approval of the reorganization agreement, vote
"AGAINST" approval of the reorganization agreement or "ABSTAIN" from voting.
8
<PAGE>
Stock Held by MSFG Directors and Others
The directors and executive officers of MSFG and certain persons who may be
deemed to be affiliates of MSFG beneficially owned, as of January 15, 2000, all
of the shares of MSFG Class A common stock and 2,851,990.81 shares of MSFG Class
B common stock. This figure represents 100% of the outstanding shares of MSFG
Class A common stock and approximately 93% of the outstanding shares of MSFG
Class B common stock.
Voting of Proxies
Shares represented by a proxy will be voted at the special meeting as
specified in the proxy.
Proxies Without Voting Instructions. Proxies that are properly signed and
dated but which do not contain voting instructions will be voted for approval of
the reorganization agreement.
Abstentions. MSFG will count a properly executed proxy marked "ABSTAIN" as
present at the meeting for purposes of determining whether there is a quorum and
for purposes of determining the number of shares represented and entitled to
vote at the meeting. Because the affirmative vote of a majority of the votes
cast is required for approval of the merger, if you mark your proxy "ABSTAIN" it
will have no effect on the approval of the reorganization agreement.
Other Matters. If you sign the proxy card, you grant authority to the
holders of the proxy to vote in their discretion on any other matters that may
properly come before the special meeting or any adjournment or postponements
thereof. MSFG's management does not presently know of any other matters to be
brought before the special meeting. As to other matters that may properly come
before the special meeting, unless otherwise provided in MSFG's Certificate of
Incorporation or Bylaws or by statute, the matter will be approved if a majority
of the votes cast are in favor of the matter.
How to Vote Shares Held Through Custodians. If you hold MSFG common stock
in the name of a custodian and wish to vote those shares in person at the
special meeting, you must obtain from the custodian holding the MSFG common
stock in the custodian's name a properly executed "legal proxy" identifying you
as a MSFG shareholder, authorizing you to act on behalf of the custodian at the
special meeting and identifying the number of shares with respect to which the
authorization is granted.
How to Revoke a Proxy
Granting a proxy on the enclosed proxy card will not prevent you from
voting in person at the MSFG special meeting or otherwise revoking your proxy.
You may revoke a proxy at any time prior to the special meeting by delivering a
properly signed revocation or a proxy bearing a later date, to Thomas J.
Sharkey, Jr., President of MSFG, 14 Commerce Drive, Cranford, New Jersey 07016-
3505 or by giving written notice of revocation in person at MSFG's special
meeting prior to any vote being taken or appearing in person and voting at the
special meeting.
Solicitation of Proxies
MSFG will bear the cost of soliciting proxies. In addition to solicitation
by mail, MSFG's directors, officers or employees may solicit proxies from
shareholders by telephone, in person or by other means. These persons will not
receive additional compensation, although they will be reimbursed for the
reasonable, out-of-pocket expenses they incur in connection with this
solicitation. MSFG will
9
<PAGE>
also make arrangements with fiduciaries and other custodians who hold shares of
record to forward solicitation materials to the beneficial owners of those
shares. MSFG will reimburse those fiduciaries and other custodians for their
reasonable out-of-pocket expenses in connection with this solicitation. Summit
will pay the expenses incurred for the printing and mailing of this Proxy
Statement-Prospectus and related filing fees.
10
<PAGE>
SELECTED FINANCIAL DATA
The following tables present selected historical financial information for
Summit and MSFG for each of the five years in the period ended December 31, 1998
and the nine-month periods ended September 30, 1999 and 1998. This information
is provided to aid your financial analysis of the merger. We derived this
information from the consolidated financial statements of Summit and MSFG,
including the respective notes to those financial statements contained in the
Form 10-Ks and Form 10-Qs of Summit filed with the Securities and Exchange
Commission, certain of which are incorporated by reference in this Proxy
Statement-Prospectus and have been delivered herewith. See "WHERE YOU CAN FIND
MORE INFORMATION." The unaudited selected historical financial information for
Summit and MSFG for the nine-month periods ended September 30, 1999 and 1998
reflects, in the opinion of the managements of Summit and MSFG, respectively,
all adjustments, comprising only normal recurring accruals, necessary for a fair
presentation of the respective consolidated operating results and financial
position of Summit and MSFG for these interim periods. Results for the interim
periods are not necessarily indicative of results for the full year or any other
period.
11
<PAGE>
SUMMIT BANCORP.
Summary of Selected Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------------ ---------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(Unaudited) (Unaudited)
Summary of Operations:
Interest income...................... $ 1,730,474 $ 1,619,762 $ 2,175,212 $ 2,064,706 $ 1,906,996 $ 1,831,934 $ 1,572,370
Interest expense..................... 795,231 743,731 1,001,406 919,617 853,707 822,232 599,732
Net interest income.................. 935,243 876,031 1,173,806 1,145,089 1,053,289 1,009,702 972,638
Provision for loan losses............ 109,500 51,000 66,000 59,100 64,034 72,090 94,347
Non-interest income excluding
securities gains................... 291,728 255,672 343,581 296,248 256,180 226,657 212,772
Securities gains..................... 7,055 4,440 6,646 5,637 3,862 8,595 4,954
Non-interest expense................. 624,610 577,738 782,807 816,691 815,591 705,459 758,355
Net income........................... 332,697 348,755 465,819 370,965 283,675 300,412 213,917
Net income per diluted share......... 1.91 1.96 2.63 2.09 1.67 1.87 1.36
Cash dividends declared per
share.............................. 0.96 0.87 1.17 1.02 0.90 0.79 0.63
Average diluted common
shares outstanding................. 174,423 177,505 177,043 177,459 168,788 159,249 155,520
Balance Sheet Data (at period end):
Total assets......................... $36,163,338 $31,852,214 $33,101,314 $29,964,172 $27,767,271 $26,647,452 $25,484,073
Securities........................... 11,151,693 9,806,968 9,999,304 9,267,655 8,320,520 8,026,968 8,445,936
Loans................................ 22,736,054 20,300,663 21,126,577 18,888,366 17,386,059 16,413,222 15,048,579
Deposits............................. 24,351,165 22,146,853 23,145,128 22,329,436 21,629,531 21,232,926 19,981,071
Long-term debt....................... 3,970,698 2,401,826 3,572,710 1,246,750 695,793 431,754 552,736
Shareholders' equity................. 2,851,148 2,627,974 2,722,427 2,612,420 2,290,838 2,130,108 1,813,445
Book value per common
share.............................. 16.31 15.19 15.67 14.79 13.61 13.04 11.40
</TABLE>
All sale prices and dividends shown above for Summit common stock have been
adjusted for the 3-for-2 stock split paid on September 24, 1997.
12
<PAGE>
MSFG, Inc.
Summary of Selected Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------------ ---------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(Unaudited) (Unaudited)
Summary of Operations:
Revenues........................... $15,484 $15,306 $20,447 $19,052 $17,646 $16,212 $14,722
Investment and other income........ 1,353 1,986 2,177 882 401 555 416
Operating expenses................. 13,115 12,751 17,668 16,540 16,048 14,845 13,495
Interest expense................... 35 41 55 25 39 74 59
Net income......................... 2,205 2,750 2,760 2,154 1,097 1,034 1,461
Net income per diluted share....... .73 .91 .91 .73 .37 .33 .46
Average diluted common shares
outstanding...................... 3,024 3,026 3,026 2,971 2,959 3,169 3,169
Balance Sheet Data (at period end):
Total assets....................... 32,041 28,836 28,558 25,941 22,465 22,505 22,165
Cash and investments............... 21,505 13,777 19,657 11,957 7,501 7,107 8,291
Accounts (brokerage) receivables... 3,592 2,962 2,473 2,846 4,869 5,251 4,854
Intangibles........................ 1,861 2,113 2,048 1,026 1,138 1,187 1,557
Accounts (insurance premiums)
payable.......................... 7,979 8,521 7,054 7,289 7,845 9,027 9,002
Balances due to customers.......... 1,815 508 457 615 1,261 590 766
Long-term obligations.............. 700 1,087 839 152 193 1,348 2,865
Minority interest.................. 205 236 229 18 16 80 68
Stockholders' equity............... 18,353 15,790 16,242 14,281 10,201 8,758 7,587
Book value per common share........ 6.11 5.26 5.41 4.83 3.45 2.76 2.39
</TABLE>
13
<PAGE>
COMPARATIVE AND PRO FORMA PER SHARE FINANCIAL INFORMATION
The per share data below shows the net income, dividends and book value per
share for Summit and MSFG on an historical basis and on a pro forma basis. We
derived the pro forma combined data by combining historical consolidated
financial information of Summit and MSFG using the purchase method of accounting
for business combinations. We derived the pro forma MSFG equivalent data by
multiplying the Summit pro forma data by the exchange ratio of 0.4391.
The pro forma information does not reflect cost savings anticipated to be
realized from the merger. The purchase accounting adjustments used for the
purpose of calculating the pro forma combined results are subject to final
determination, based upon estimates and other evaluations of fair value, at the
effective time of the merger. Therefore, the pro forma amounts reflected in the
pro forma per share financial information may differ from the amounts ultimately
determined. The unaudited pro forma information is not necessarily indicative
of the combined financial position or results of operations of future periods.
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Net Income Per Diluted Share
Historical:
Summit....................... $ 1.91 $ 2.63
MSFG......................... .73 .91
Pro Forma Combined............ 1.91 2.63
Pro Forma MSFG Equivalent..... .84 1.16
Dividends per Share
Historical:
Summit....................... $ 0.96 $ 1.17
MSFG......................... -- --
Pro Forma Combined............ .96 1.17
Pro Forma MSFG Equivalent..... .42 .51
Book Value per Share
Historical:
Summit....................... $16.31 $15.67
MSFG......................... 6.11 5.41
Pro Forma Combined............ 16.31 15.67
Pro Forma MSFG Equivalent..... 7.16 6.88
</TABLE>
14
<PAGE>
MARKET PRICE AND DIVIDEND MATTERS
Market Price and Dividend History
Summit common stock, including associated preferred stock purchase rights,
is listed and traded on the New York Stock Exchange and is quoted under the
symbol "SUB." The following table sets forth, for the periods indicated, the
high and low sale prices of Summit common stock, as reported on the New York
Stock Exchange, along with the quarterly cash dividends per share.
<TABLE>
<CAPTION>
Summit Common
Sales Price
-------------------
High Low Dividends
---- --- ---------
<S> <C> <C> <C>
1998
First Quarter $53.88 $45.88 $0.27
Second Quarter 53.50 44.75 0.30
Third Quarter 49.44 32.75 0.30
Fourth Quarter 45.00 30.75 0.30
1999
First Quarter $44.50 $37.06 $0.30
Second Quarter 44.00 37.38 0.33
Third Quarter 42.56 30.63 0.33
Fourth Quarter 35.50 28.50 0.33
2000
First Quarter (through February __)
</TABLE>
There is no public market for the MSFG common stock and, since the
inception of MSFG, there has been no trading in MSFG common stock. MSFG has no
current intention of listing or including any shares of its common stock on a
stock exchange or a quotation system. Shortly after the consummation of the
merger, all of the shares of MSFG common stock will be held by Summit Bank (New
Jersey).
As of December 31, 1999, 100 shares of MSFG Class A common stock were
outstanding and held by one shareholder and 3,061,045.20 shares of MSFG Class B
common stock were outstanding and held by 36 shareholders. In 1998, MSFG paid a
cash dividend of $.01 per share of outstanding MSFG common stock. MSFG does not
expect to pay any dividends in the future.
On December 31, 1999, which was the last full trading day prior to the
public announcement of the signing of the reorganization agreement, the last
sale price of a share of Summit common stock was $30.625. On February __, 2000,
the last sale price of Summit common stock was $_____.
15
<PAGE>
On the date the merger is completed and on the date you receive a Summit
stock certificate in exchange for your MSFG certificate(s), the price of a share
of Summit common stock may differ from those set forth above. MSFG shareholders
should obtain current price quotations. In addition, past dividends paid on
Summit common stock and MSFG common stock are not necessarily indicative of
future dividends which may be paid. No assurance can be given concerning
dividends to be declared and paid on Summit common stock and MSFG common stock
before or after the merger. The timing and amount of future dividends declared
on Summit common stock will be set at the discretion of Summit's board of
directors and will depend on various factors, including, without limitation, the
earnings and financial condition of Summit and its subsidiaries.
Dividend Limitations
Summit's primary source of funds to pay dividends to its shareholders is
provided by dividends from its subsidiary banks. Summit's bank subsidiaries are
restricted by law in the amount of dividends they may pay to Summit. In
addition, some debt agreements restrict the amount of dividends Summit may pay
to its shareholders. At September 30, 1999, Summit's subsidiary banks had
approximately $59.1 million available, under the most restrictive limitations,
for the payment of dividends to shareholders of Summit.
TERMS OF THE PROPOSED MERGER
The discussion in this Proxy Statement-Prospectus of the merger and the
description of the principal terms and conditions of the reorganization
agreement and the merger are subject to and qualified in their entirety by
reference to the reorganization agreement. A copy of the reorganization
agreement is attached hereto as Appendix A and is incorporated herein by
reference.
General
The reorganization agreement provides for the acquisition of MSFG by Summit
by means of a merger of a to-be-formed wholly owned subsidiary of Summit into
MSFG with MSFG as the surviving corporation. As a result of the merger, MSFG
will be a wholly owned subsidiary of Summit. Immediately after the merger
becomes effective, Summit will contribute all of the shares of MSFG common stock
to its wholly owned subsidiary, Summit Bank (New Jersey).
Upon consummation of the merger, each outstanding share of MSFG common
stock will be converted into and represent the right to receive 0.4391 of a
share of Summit common stock, subject to certain holdbacks and escrows described
below. Summit expects to repurchase in the open market the number of shares of
Summit common stock equal to the number of shares to be delivered in connection
with the merger or reissue previously acquired shares held in treasury,
depending on market conditions or other factors.
Closing and Effective Time
The merger will become effective on the date and at the time specified in
the certificate of merger required to be filed with the Department of Treasury
of the State of New Jersey. If MSFG shareholders approve the reorganization
agreement on the scheduled date of the special meeting, subject to the
satisfaction or waiver of certain other conditions described herein, we
presently expect that the merger
16
<PAGE>
will become effective during the first calendar quarter of 2000. Either party
may terminate the reorganization agreement if, among other things, the closing
fails to occur on or before the later of March 30, 2000. See "THE MERGER -- The
Reorganization Agreement -- Conditions to the Merger; Termination."
Determination of Number of Shares to be Issued at Closing
In the merger, your shares of MSFG common stock will be converted into and
represent the right to receive shares of Summit common stock. As discussed
above, you will be entitled to receive 0.4391 of a share of Summit common stock
for each share of MSFG common stock you own on the effective date of the merger,
subject to certain holdbacks and escrows described below. Fractional shares of
Summit common stock will not be delivered in connection with the merger.
Instead, the number of shares of Summit common stock to which you will be
entitled upon completion of the merger will be rounded to the nearest whole
share.
You will be entitled to receive an aggregate number of shares of Summit
common stock determined by multiplying the total number of shares of MSFG common
stock you own on the effective date of the merger by 0.4391, the exchange ratio
in the merger. Pursuant to the terms of the reorganization agreement, three
percent (3%) of the shares of Summit common stock to which you will be entitled
to in connection with the merger will be retained by Summit for the purpose of
funding any shortfalls with respect to levels of working capital and/or
shareholders' equity on the effective date of the merger as agreed upon in the
reorganization agreement. In addition, Thomas J. Sharkey, Jr., William Dittman,
James Manhardt, Edward Sharkey, Ann McCormick, Ellen Del Mauro, Brian Leddy and
a limited partnership of which Thomas J. Sharkey, Sr. is the general partner
have agreed to deposit with Manchester Trust Bank, the escrow agent, an
aggregate of 161,311 shares of Summit common stock to which they are entitled to
receive pursuant to the merger to fund any indemnification claims by Summit
under the reorganization agreement. Each of these shareholders will deposit
that number of shares of Summit common stock determined by multiplying the
161,311 shares by a percentage determined by dividing the shareholder's share
ownership in MSFG as of the closing date by the share ownership of all of these
shareholders as of the closing date.
Purpose and Issuance of the Shares Retained by Summit
Prior to the closing date of the merger, MSFG will deliver to Summit a
projected consolidated balance sheet of MSFG and its subsidiaries dated as of
the closing date. In the event that the projected balance sheet indicates that
(i) the stockholders' equity is less than $18,800,000 plus all retained earnings
after December 31, 1999 or (ii) the working capital is less than $15,000,000,
the aggregate number of shares of Summit common stock to which the shareholders
of MSFG will be entitled to receive pursuant to the merger will be reduced by
the greater of the two shortfalls. In the event of a shortfall, the number of
shares of Summit common stock that would have otherwise been payable to MSFG
shareholders upon the consummation of the merger will be reduced, but not by
more than 40,348 shares in the aggregate, so that the fair market value of the
shares not issued equals the dollar amount of the largest shortfall indicated on
the projected balance sheet.
Within 60 days after the closing date, MSFG shall deliver to Summit a
consolidated balance sheet of MSFG and its subsidiaries which, at the option of
Summit, may be audited by Moore Stephens, P.C., the independent auditors for
MSFG. In the event that this balance sheet indicates a shortfall in either
shareholders' equity or working capital that is greater than the projected
shortfall at the time of closing as described above, the shareholders shall
simultaneoously pay to Summit an amount in cash equal to the shortfall less the
value of the shares reduced at the closing date as described above. If the
shortfall reflected in this balance sheet is less than the shortfall reflected
on the projected balance sheet, Summit shall deliver to each shareholder, pro
rata, the number of shares of Summit common stock having a market value equal to
the difference between the actual shortfall and the projected shortfall amounts.
In the event of any dispute between Summit and MSFG, the parties shall hire a
mutually acceptable Big 5 accounting firm to resolve the dispute.
17
<PAGE>
In the event of a shortfall, your share of the reduction in the aggregate
number of shares of Summit common stock to be issued in the merger will be
determined by dividing the total number of shares of Summit common stock subject
to reduction by a percentage determined by dividing the total number of shares
of MSFG common stock you own as of the closing date by the total number of
shares of MSFG common stock that are outstanding as of the closing date. The
aggregate number of shares of Summit common stock payable to you pursuant to the
merger will not be reduced by more than 3% due to the shortfall reimbursement
provisions described above. If the shares retained by Summit are not sufficient
to satisfy the shortfall, the excess amount will be an indemnifiable claim by
Summit.
To the extent that all or any portion of the shares of Summit common stock
that will be retained by Summit is not used to fund the shareholders' equity or
working capital shortfalls, Summit will deliver the remaining shares to each of
the MSFG shareholders as soon as practicable after final agreement as to the
amount of the shortfall, if any, by Summit and MSFG. You will receive that
number of the remaining shares of Summit common stock determined by multiplying
that number of shares by your percentage stock ownership interest in MSFG as of
the closing date. In addition, at your discretion, you may elect to pay your
share of the shortfall, based upon your percentage ownership interest in the
MSFG shares as of the closing date, in cash and receive all of the shares of
Summit common stock retained by Summit from the shares of Summit common stock
that would have been otherwise payable to you in the merger.
Purpose and Issuance of Shares Deposited in Escrow Account
Thomas J. Sharkey, Jr., William Dittman, James Manhardt, Edward Sharkey,
Ann McCormack, Ellen Del Mauro, Brian Leddy and a limited partnership of which
Thomas J. Sharkey, Sr. is the general partner have each agreed by executing the
reorganization agreement to fund an escrow account with Manchester Trust Bank,
as the escrow agent, with 161,311 shares of Summit common stock to which they
are entitled to receive in the merger. The escrow account has been established
to fund any indemnification claims of Summit under the reorganization agreement,
including claims for the reimbursement of shortfall amounts described above in
excess of the value of the shares retained for that purpose by Summit. Each of
the named shareholders will deposit that number of shares of Summit common stock
determined by multiplying the 161,311 shares by a percentage determined by
dividing the shareholder's share ownership in MSFG as of the closing date by the
share ownership in MSFG of all of the named shareholders as of the closing date.
Pursuant to the escrow agreement, Summit shall notify the escrow agent and
each of the named shareholders of Summit's intention to exercise its rights to
indemnification under the reorganization agreement, specifying a reasonable
estimate of the dollar amount of indemnification sought and the nature and basis
of the claim giving rise to the indemnification amount. To the extent that the
named shareholders do not pay the indemnification claim within 15 days of the
receipt of Summit's notice, the claim shall be submitted to a panel of
arbitrators. The shares of Summit common stock deposited in the escrow account
may be sold by the escrow agent to fund the amount of an arbitration award.
18
<PAGE>
At any time during the term of the escrow agreement, the named shareholders
can collectively substitute cash or cash equivalents for the shares of Summit
common stock deposited in the escrow account. In such event that the named
shareholders elect to substitute cash or cash equivalents for the escrowed
shares, the cash or cash equivalent amount that will be required to be deposited
in the escrow account will be determined by multiplying the number of shares of
Summit common stock then-held in the escrow account by $29.77. Upon release of
the Summit common stock from escrow, each of the named shareholders will receive
the number of shares equal to the percentage that the shareholder's initial
deposit of shares of Summit common stock into the escrow account bore to the
initial deposits of shares of Summit common stock into the escrow account by all
named shareholders.
The escrow agent will disburse the remaining amounts of cash and/or shares
of Summit common stock not used for the funding of indemnification claims from
the escrow account on the third anniversary of the closing date. If Summit has
submitted an indemnification notice prior to that date, then the escrow agent
shall delay the disbursement of these amounts until all such claims have been
finally resolved. Each of the named shareholders will receive upon
disbursement, the number of shares and the amount of cash equal to the
percentage that the shareholder's initial deposit of shares of Summit common
stock into the escrow account bore to the initial deposits of shares of Summit
common stock into the escrow account by all named shareholders.
Exchange of Shares
Prior to the effective time of the merger, Summit will appoint First
Chicago Trust Company of New York, a division of Equiserve or another entity
reasonably satisfactory to MSFG as the exchange agent for the merger. As
promptly as practicable after the effective time, but in no event more than ten
days after the exchange agent receives an accurate and complete list of all
holders of record of outstanding MSFG common stock as of the effective time of
the merger, Summit will cause the exchange agent to send to each MSFG
shareholder a letter of transmittal and instructions for exchanging his or her
MSFG common stock certificate(s) for a certificate representing the number of
whole shares of Summit common stock.
To effect a proper surrender and exchange of MSFG stock certificates, you
must surrender to the exchange agent all of your MSFG stock certificates along
with properly executed and completed letters of transmittal. Until you have
properly surrendered your MSFG stock certificate(s), Summit may, at its option,
refuse to pay to you dividends or other distributions, if any, payable to
holders of Summit common stock. However, upon proper surrender and exchange of
your MSFG stock certificate(s), Summit will pay to you the amount, without
interest, of dividends and other distributions on such Summit common stock, if
any, to which you were entitled but were not paid. No transfer of MSFG common
stock will be made on the stock transfer books of MSFG at and after the
effective time of the merger. Such transfers may be effected using the
procedures set forth in the letter of transmittal.
The exchange agent shall have reasonable discretion to determine whether
letters of transmittal have been properly completed and executed and to
disregard immaterial defects, and any good faith decisions of Summit regarding
any matters as may be referred to it by the exchange agent shall be binding and
conclusive.
Summit will not issue stock certificates or scrip certificates for
fractions of shares of Summit common stock and MSFG shareholders who would
otherwise be entitled to receive fractions of shares of
19
<PAGE>
Summit common stock will have none of the rights with respect to any fractions
of shares, including, without limitation, the right to receive dividends, that a
holder of a full share of Summit common stock would possess in respect of a full
share. Instead, the number of shares to which you will be entitled in connection
with the merger will be rounded to the nearest whole share.
If a MSFG shareholder surrenders more than one MSFG stock certificate,
Summit will issue to that MSFG shareholder a single Summit stock certificate
representing the total number of whole shares of Summit common stock to which
that owner is entitled pursuant to the reorganization agreement based on the
total number of shares of MSFG common stock represented by all MSFG stock
certificates surrendered by that MSFG shareholder.
You should not surrender your MSFG stock certificates for exchange until
you receive a letter of transmittal, instructions and other exchange materials
from the exchange agent. However, you are urged to notify John Trelease, Chief
Financial Officer and Corporate Secretary of MSFG, at (908) 931-3031 if your
MSFG stock certificates are lost, stolen, destroyed or not properly registered,
in order to begin the process of obtaining replacement MSFG stock certificates.
Conversion of MSFG Stock Options
Pursuant to the terms of the reorganization agreement, you must exercise
your options to purchase shares of MSFG common stock prior to the effective date
of the merger.
Recommendation of MSFG Board
The reorganization agreement has been unanimously approved by MSFG's board
of directors. MSFG's board of directors believes that the merger is in the best
interests of MSFG shareholders. MSFG's board of directors unanimously recommends
that MSFG shareholders vote "FOR" the proposal to approve the reorganization
agreement.
Background of the Merger
From time to time, the board of directors of MSFG has evaluated various
strategic alternatives relating to the future financial and operational well-
being of MSFG, including the potential acquisition of MSFG by another company.
Beginning in the second half of 1997 and continuing through the first half of
1998, MSFG engaged in a number of discussions with Summit regarding the
potential acquisition of MSFG by Summit. In connection with these discussions,
MSFG exchanged financial information and other operational information with
Summit. These initial discussions between MSFG and Summit were terminated in
April of 1998 after MSFG and Summit failed to reach an agreement on the purchase
price to be paid by Summit for MSFG.
During 1999, MSFG was approached by another publicly-traded financial
institution regarding the potential acquisition of MSFG. In October 1999,
several representatives of the other financial institution met with MSFG board
member, Thomas J. Sharkey, Sr., and several officers of MSFG to discuss the
proposed acquisition.
In early November 1999, MSFG received a preliminary term sheet from the
other financial institution outlining general terms of a proposed share exchange
between MSFG and the other financial
20
<PAGE>
institution, under which MSFG's shareholders would exchange their shares of
common stock of MSFG for shares of common stock of the other financial
institution.
Also in early November 1999, Summit again expressed an interest in
acquiring MSFG. On the evening of November 8, 1999, MSFG board members, Thomas
J. Sharkey, Sr. and Thomas J. Sharkey, Jr., met with Summit Vice Chairman, John
Collins, to discuss Summit's renewed interest in acquiring MSFG. At that time,
the parties discussed MSFG's contemplated role in the future operations of
Summit's insurance business if MSFG was to be acquired by Summit.
On November 10, 1999, Summit representatives, Stewart McClure, a Senior
Executive Vice President at Summit, and John Collins met with MSFG board
members, Thomas J. Sharkey, Sr. and Thomas J. Sharkey, Jr., at MSFG's offices in
Cranford, New Jersey to discuss the potential acquisition of MSFG by Summit. At
this meeting, MSFG informed Summit's representatives that MSFG had received a
preliminary offer from the other financial institution.
On November 17, 1999, MSFG received a letter from Summit in which Summit
expressed an interest in acquiring MSFG through a share exchange similar to that
proposed by the other financial institution, with MSFG's shareholders to receive
shares of common stock of Summit with a dollar value of approximately
$40,000,000. The letter from Summit advised MSFG that more detailed terms
relating to the proposed acquisition would be forthcoming, with due diligence
and the exchange of financial and operational information to occur shortly
thereafter.
In late November and early December, MSFG board members and other
representatives met with the other financial institution to discuss the proposed
share exchange and MSFG's role in the other financial institution's insurance
operations if MSFG was acquired by the other financial institution.
On the morning of December 3, 1999, MSFG board members, Thomas J. Sharkey,
Sr. and Thomas J. Sharkey, Jr., met with Summit representatives, John Collins
and Stewart McClure, to further discuss the terms and conditions of Summit's
offer, including certain financial and operational issues relating to the
potential acquisition of MSFG by Summit.
After lengthy discussions among the members of MSFG's board of directors
relative to the respective offers made by Summit and the other financial
institution, and a careful consideration and evaluation of the terms and
conditions of such offers, at the direction of the MSFG board, MSFG notified
Summit on December 14, 1999 of its intent to proceed with a definitive agreement
with Summit.
In reaching their decision to pursue a transaction with Summit, the members
of MSFG's board of directors considered various factors, including (i)
historical dividend information pertaining to the stock being offered, (ii) the
potential for price appreciation in the stock being offered, (iii) the present
value of the stock being offered and (iv) the impact MSFG would have on the
future results of the respective operations of Summit and the other financial
institution. In evaluating the impact MSFG would have on the future results of
the respective operations of Summit and the other financial institution, the
MSFG board considered (a) the synergies between the operations of MSFG and the
operations of Summit and the other financial institution, (b) the historical
operations and practices of the respective insurance businesses of Summit and
the other financial institution and the future direction of such businesses and
(c) the reputation of Summit and the other financial institution in the
insurance market.
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<PAGE>
After the final determination was made by MSFG's board of directors to
accept Summit's offer, numerous discussions and negotiations took place over the
final few weeks of December 1999 between MSFG and its attorneys and Summit and
its attorneys, including an all day meeting on December 22, 1999 at Summit's New
Jersey headquarters in Princeton, New Jersey, at which time the parties began
finalizing the overall structure of the acquisition and the terms and conditions
of a definitive agreement to be entered into between MSFG and Summit.
Discussions and negotiations continued up until the date of the signing of a
definitive agreement by MSFG and Summit which occurred on December 31, 1999. On
January 3, 2000, a joint press announcement was made by MSFG and Summit relative
to the prospective acquisition of MSFG by Summit.
Reasons for the Merger
MSFG's board of directors has approved the reorganization agreement and the
transactions contemplated by the reorganization agreement and determined that
the merger is fair to, and in the best interests of, MSFG and its shareholders.
The MSFG board of directors therefore recommends that holders of MSFG common
stock vote to approve and adopt the reorganization agreement and the
transactions contemplated by the reorganization agreement.
The MSFG board of directors believes that the merger will enable holders of
MSFG common stock to realize increased value due to the premium being paid by
Summit for MSFG common stock, as represented by the exchange ratio. The MSFG
board of directors also believes that the merger may enable MSFG's shareholders
to participate in opportunities for appreciation of Summit common stock. In
addition, the Summit common stock is traded on the New York Stock Exchange,
which gives you an established public market upon which to sell your stock when
you choose. Without assigning any relative or specific weight, the MSFG board
of directors considered the following material factors, many of which are
subjective in nature, both from a short-term and long-term perspective:
(i) the MSFG board of director's familiarity with, and review of
Summit's business, financial condition, results of operations and
prospects, including, but not limited to, its potential growth,
development, profitability and the business risks associated
therewith;
(ii) the current and prospective environment in which MSFG operates,
including national and local economic conditions, the highly
competitive environment for insurance companies generally, the
regulatory burden on insurance companies, and the trend toward
consolidation in the insurance industry;
(iii) the potential for appreciation in market value of MSFG common stock
on both a short- and long-term basis, as a stand-alone entity, in
comparison to the value of the Summit common stock to be issued as
consideration in the merger;
(iv) information about Summit derived from publicly available data as
well as other financial data provided by Summit and discussions with
Summit management concerning the business, financial conditions,
results of operations and asset quality of Summit;
(v) the competitive position and future growth prospects of Summit
following the merger;
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<PAGE>
(vi) the financial and other terms and conditions of the reorganization
agreement, including the tax-free nature of the merger to the MSFG
shareholders receiving shares of Summit common stock in the merger;
(vii) the effect on MSFG's employees and market area of the merger with
Summit, including potential employee retention and stay bonuses;
and
(viii) the expectation that Summit will continue to provide quality
services to the customers served by MSFG and Summit's capacity, as
a larger institution with a larger capital base, to provide a wider
range of services to such customers.
Regulatory Action
The merger is subject to the waiver of the Board of Governors of the
Federal Reserve System with respect to the Federal Reserve's prohibition on the
acquisition of an insurance company by a bank holding company. The request for
the waiver is based upon the fact that Summit intends to transfer the
outstanding stock of MSFG to Summit Bank (New Jersey) immediately after the
merger becomes effective. Summit requested such waiver from the Federal Reserve
on January 26, 2000.
In addition, under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules promulgated thereunder by the Federal Trade
Commission, the merger may not be consummated until notifications have been
given and certain information has been furnished to the FTC and the Antitrust
Division of the Department of Justice and specified waiting period requirements
have been satisfied. Summit and MSFG expect to file the notification and report
forms with the FTC and the Antitrust Division on or around February 4, 2000. At
any time before or after the consummation of the merger, and notwithstanding
that the waiting period has been terminated, the Antitrust Division could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the consummation of the merger or
seeking divestiture of substantial assets of Summit and MSFG. At any time before
or after the consummation of the merger, and notwithstanding that the waiting
period has been terminated, any state could take such action under the antitrust
laws as it deems necessary or desirable in the public interest. Such action
could include seeking to enjoin the consummation of the merger or seeking
divestiture of MSFG or businesses of Summit or MSFG. Private parties may also
seek to take legal action under the antitrust laws under certain circumstances.
MSFG and Summit believe that the merger can be effected in compliance with
federal and state antitrust laws. However, there can be no assurance that a
challenge to the consummation of the merger on antitrust grounds will not be
made or that, if such a challenge were made, MSFG and Summit would prevail or
would not be required to accept certain conditions, possibly including certain
divestitures, in order to consummate the merger.
Interests of Certain Persons in the Merger
On the closing date of the merger, MSFG will enter into employment
agreements with Thomas J. Sharkey, Jr., Thomas J. Sharkey, Sr., Peter Gruenberg,
Brian Leddy and James O'Connor.
The employment agreement between MSFG and Thomas J. Sharkey, Jr. provides
for the employment of Mr. Sharkey as Chief Executive Officer of MSFG for an
initial term ending on the third anniversary of the effective date of the
merger, subject to automatic one-year extensions of the
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<PAGE>
employment term annually beginning on December 31, 2000 unless Mr. Sharkey or
MSFG notifies the other party of his or its intention not to extend such term.
In consideration for his services under the employment agreement, Mr. Sharkey
will be entitled to receive a base salary of $300,000 annually, customary health
and welfare benefits, an automobile allowance of $750 per month, reimbursement
of club dues and reimbursement of travel and business entertainment expenses.
In addition, in the event that Mr. Sharkey terminates his employment with
MSFG for good reason or MSFG elects not to renew the employment term for an
additional year at any time during the employment period, Mr. Sharkey will be
entitled to a lump-sum payment within 30 days of termination equal to his salary
for the balance of the term of the employment agreement. Good reason under Mr.
Sharkey's employment agreement includes such things as the assignment of duties
or responsibilities not consistent with his position as Chief Executive Officer,
the failure to make payments due Mr. Sharkey under his employment agreement, the
relocation of Mr. Sharkey's office more than 50 miles from the current office or
the failure to provide Mr. Sharkey with normal and customary employee benefits.
The employment agreement between MSFG and Thomas J. Sharkey, Sr. provides
for the employment of Mr. Sharkey as Vice Chairman of MSFG until the first
anniversary of the effective date of the merger. In consideration for his
services under the employment agreement, Mr. Sharkey will be entitled to receive
a base salary of $100,000, customary health and welfare benefits, an automobile
allowance of $750 per month, reimbursement of club dues and reimbursement of
travel and business entertainment expenses.
The employment agreement between MSFG and Peter Gruenberg provides for the
employment of Mr. Gruenberg as President of Meeker Sharkey Benefit Consultants,
Inc., a subsidiary of MSFG, for an initial term ending on the first anniversary
of the effective date of the merger, subject to the MSFG's option to renew such
agreement for additional one-year terms. In consideration for his services
under the employment agreement, Mr. Gruenberg will be entitled to receive a base
salary of $200,000 annually, customary health and welfare benefits, an
automobile allowance of $500 per month and reimbursement of travel and business
entertainment expenses.
The employment agreement between MSFG and Brian Leddy provides for the
employment of Mr. Leddy as President - Property and Casualty of MSFG for an
initial term ending on the first anniversary of the effective date of the
merger, subject to MSFG's option to renew such agreement for additional one-year
terms. In consideration for his services under the employment agreement, Mr.
Leddy will be entitled to receive a base salary of $200,000 annually, customary
health and welfare benefits, an automobile allowance of $500 per month and
reimbursement of travel and business entertainment expenses.
The employment agreement between MSFG and James O'Connor provides for the
employment of Mr. O'Connor as Executive Vice President - Marketing and Sales of
MSFG for an initial term ending on the first anniversary of the effective date
of the merger, subject to MSFG's option to renew such agreement for additional
one-year terms. In consideration for his services under the employment
agreement, Mr. O'Connor will be entitled to receive a base salary of $200,000
annually, customary health and welfare benefits, an automobile allowance of $500
per month and reimbursement of travel and business entertainment expenses.
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<PAGE>
The employment agreements of each of Messrs. Gruenberg, Leddy and O'Connor
contain a provision pursuant to which the individual officer will receive a
lump-sum payment within 30 days of termination equal to the individual officer's
salary for the balance of the term of the employment agreement, but in no case
less than six months of salary, in the event that the officer terminates his
employment with MSFG for good reason or if MSFG elects not to renew the
officer's employment term during the employment period. Good reason in the case
of the officers' employment agreements includes the same things as under Mr.
Sharkey's employment agreement, except that an assignment of duties or
responsibilities inconsistent with the officer's present title and office will
not constitute good reason for purposes of such officers' employment agreements.
The Reorganization Agreement
The following discussion highlights selected information from the
reorganization agreement but may not contain all of the information that is
important to you. To understand the reorganization agreement fully, you should
read carefully the entire document which is included as Appendix A hereto.
General
Pursuant to the terms of the reorganization agreement, Summit will form a
wholly owned subsidiary which will merge into MSFG with MSFG as the surviving
corporation. As a result of the merger, MSFG will be a wholly owned subsidiary
of Summit. Immediately after the merger becomes effective, Summit will
contribute all of the shares of MSFG common stock to Summit Bank (New Jersey).
Upon consummation of the merger, the MSFG shareholders will be entitled to
receive shares of Summit common stock based upon the agreed-upon exchange ratio
and subject to the terms and conditions set forth above in "--Determination of
Number of Shares to be Issued at Closing," "--Purpose and Issuance of Shares
Retained by Summit," and "--Purpose and Issuance of Shares Deposited in Escrow
Account."
MSFG Covenants
Pursuant to the reorganization agreement, MSFG has agreed, among other
things, that, until the closing of the merger or termination of the
reorganization agreement, MSFG will advise Summit of any material adverse change
in MSFG's business and of certain other circumstances, and the business of MSFG
and its subsidiaries will be carried on substantially in the same manner as
prior to the execution of the reorganization agreement. Furthermore, until the
closing of the merger or termination of the reorganization agreement, without
the prior written consent of Summit, MSFG will not declare or pay any dividend
and will refrain from taking some other actions, including certain actions
relating to changes in its capital stock, the incurrence of liabilities, the
making of certain expenditures, the relinquishment of certain rights, the
amendment of its Certificate of Incorporation and Bylaws and the issuance of
capital stock.
MSFG also has agreed that, until termination of the reorganization
agreement or the closing of the merger, neither MSFG nor any of its subsidiaries
nor any of the officers or directors of MSFG or its subsidiaries shall, and MSFG
shall direct and use its best efforts to cause its employees, agents, affiliates
and representatives (including investment bankers, brokers, financial or
investment advisors, attorneys or accountants retained by MSFG or any of its
subsidiaries) not to, initiate, solicit or encourage, directly or indirectly,
any inquiries, proposals or offers with respect to, or engage in any
negotiations or discussions with any person or provide any non-public
information or authorize or enter into any agreement or agreement in principle
concerning, or recommend, endorse or otherwise facilitate any effort or attempt
to
25
<PAGE>
induce or implement any offer, including an exchange offer or tender offer, or
proposal concerning a merger, consolidation, business combination or takeover
transaction involving MSFG or any of its subsidiaries, or the acquisition of any
assets or any securities of MSFG or any of its subsidiaries. MSFG has agreed to
notify Summit promptly upon receipt of any communication with respect to any
proposal, offer, inquiry or other contact with another person or receipt of a
request for information from any governmental or regulatory authority with
respect to a proposed acquisition of MSFG or any of its subsidiaries or assets
by another party and thereafter to keep Summit informed of the status and terms
of any such proposal or offer. In addition, both MSFG and Summit have agreed to
hold in confidence all non-public information obtained in connection with the
reorganization agreement unless compelled to disclose such non-public
information by law.
The reorganization agreement obligates MSFG to disclose to Summit
information regarding environmental conditions affecting any property now or
previously owned, occupied, leased or held or managed in a representative or
fiduciary capacity. The reorganization agreement also provides Summit with
certain investigative rights prior to the closing of the merger with respect to
the properties, books, records and such other information of MSFG that Summit
might reasonably request on or after the date of the reorganization agreement.
The reorganization agreement contains an indemnification provision which
obligates certain shareholders to indemnify Summit for expenses, damages and
fees Summit might incur as a result of third party claims based on of MSFG's
actions or omissions prior to the closing of the merger or if MSFG were to
breach representations, warranties and covenants of the reorganization
agreement. Summit's sole remedy under the indemnification provision are the
procedures set forth in the escrow agreement. See " - Indemnification."
Conditions to the Merger; Termination
The obligations of both parties to consummate the merger are subject to the
satisfaction of certain conditions, including the following:
. Approval of the reorganization agreement by the requisite vote of the
shareholders of MSFG;
. Continued effectiveness of the registration statement on Form S-4
filed by Summit with the Securities and Exchange Commission for the
purpose of registering the shares of Summit common stock that Summit
will issue in the merger;
. The New York Stock Exchange's indication that the shares of Summit
common stock to be issued in the merger will be listed on the New York
Stock Exchange, subject to official notice of issuance;
. The receipt of all required waivers, consents, authorizations, orders
and approvals with any governmental authorities, including the waiver
from the Federal Reserve, and the expiration of all required waiting
periods imposed by governmental authorities, including the waiting
period applicable to the notification and report form under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended;
. The receipt of legal opinions from counsel to Summit and MSFG;
. The delivery of the executed escrow agreement;
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. The delivery of the executed employment agreements with Thomas J.
Sharkey, Jr., Thomas J. Sharkey, Sr., Peter Gruenberg, Brian Leddy,
James O'Connor, and Robert Nitti; and
. Other customary conditions described in the reorganization agreement.
Any of these conditions may be waived by the party for whose benefit the
condition was included. However, the merger will not be consummated without the
receipt of the requisite shareholder and regulatory approvals.
The reorganization agreement may be terminated as follows:
. MSFG and Summit may mutually agree to terminate the reorganization
agreement; or
. Either party may terminate the reorganization agreement if the closing
of the merger does not occur on or before March 30, 2000.
Amendment
MSFG and Summit may jointly amend the reorganization agreement at any time.
However, after the special meeting, no amendment may reduce the amount, or
change the form, of consideration to be received by MSFG shareholders unless the
modification is submitted to a vote of MSFG shareholders.
Indemnification
Thomas J. Sharkey, Jr., William Dittman, James Manhardt, Edward Sharkey,
Ann McCormick, Ellen Del Mauro, Brian Leddy and a limited partnership of which
Thomas J. Sharkey, Sr. is the general partner have jointly and severally agreed
to indemnify Summit and its affiliates from any and all claims, damages,
liabilities, losses, costs and expenses incurred by Summit arising out of:
. third-party claims arising from acts or omissions or alleged acts or
omissions by MSFG or its agents occurring on or prior to the closing
date of the merger; and
. breaches of any representation, warranty or covenant made by MSFG or
any of the named shareholders in the reorganization agreement or any
related agreement or document, except the employment agreements to be
executed by certain officers of MSFG.
The indemnification obligation is after the deduction of insurance proceeds
and tax or other cash benefits realized by Summit in connection with the claim,
damage, liability, loss, cost or expense upon which the indemnification claim is
based. In addition, the named shareholders shall only be liable under their
escrow obligation to the extent that aggregate claims for indemnification exceed
$100,000, and then only to the extent of the amount above $100,000.
Indemnification claims in the aggregate are limited to the lesser of $20,000,000
or the fair market value of the shares of Summit common stock as of the date
payment is to be made by the named shareholders.
Dissenters Rights
Pursuant to Section 14A:11-1 of the NJBCA, you do not have the right to
dissent from the merger because the shares of Summit common stock to be received
in connection with the merger will be listed on the New York Stock Exchange and
will be held of record by not less than 1,000 holders.
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<PAGE>
New York Stock Exchange Listing
Summit has agreed in the reorganization agreement to use its best efforts
to cause the shares of Summit common stock to be issued to MSFG shareholders in
connection with the merger to be listed on the New York Stock Exchange. The New
York Stock Exchange's indication that the necessary shares of Summit common
stock are to be listed on the New York Stock Exchange, subject to official
notice of issuance, is a condition to the completion of the merger.
Accounting Treatment
Summit expects to account for the merger under the purchase method of
accounting. Under the purchase method of accounting, the amount by which the
purchase price paid by Summit exceeds the fair value of the net assets acquired
will be treated as goodwill. Intangible assets, including goodwill, recorded in
the transaction will be amortized over a period not to exceed 20 years.
Certain Federal Income Tax Consequences of the Merger
MSFG has received an opinion from Moore Stephens, P.C., MSFG's certified
public accountants, to the effect that, assuming the merger occurs in accordance
with the reorganization agreement, the merger will constitute a "reorganization"
for federal income tax purposes under Section 368(a)(1)(A) and Section
368(a)(2)(E) of the Internal Revenue Code, with the following federal income tax
consequences:
. You will recognize no gain or loss as a result of the
conversion/exchange of your MSFG common stock solely for shares of
Summit common stock pursuant to the merger.
. The tax basis of the shares of Summit common stock you receive in the
merger will be equal to the tax basis of the shares of MSFG common
stock converted/exchanged.
. The holding period of the shares of Summit common stock you receive in
the merger will include the holding period of the shares of MSFG
common stock converted/exchanged.
. To the extent that the shares of Summit common stock that are retained
by Summit or deposited into the escrow account pursuant to the terms
of the reorganization agreement are used to satisfy the shortfall in
the agreed-upon levels of shareholders' equity or working capital at
closing and/or the indemnification obligations of MSFG, these shares
will be treated as sold under Section 1001 of the Internal Revenue
Code by the MSFG shareholder who would have been entitled to receive
the shares and gain or loss will be recognized by such shareholder
between the fair market value of the shares on the date the shares are
transferred to Summit and the shareholder's tax basis in the stock.
The opinion of Moore Stephens, P.C. is based upon an examination of the
reorganization agreement as executed by Summit, MSFG and certain shareholders of
MSFG, and the attached forms of escrow agreement and employment agreements for
Messrs. Thomas J. Sharkey, Sr., Thomas J. Sharkey, Jr., Peter Gruenberg, Brian
Leddy, James O'Conner and Robert Nitti. Any alterations or changes in any of
the agreements could alter the tax consequences discussed in this section. The
opinion of Moore Stephens, P.C. is also based upon the Internal Revenue Code,
regulations proposed or promulgated
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thereunder, judicial precedent and current administrative rulings and practice,
all of which are subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences discussed in this section. The
opinion, unlike a private letter ruling from the Internal Revenue Service, has
no binding effect. The Internal Revenue Service could take a position contrary
to the opinion of Moore Stephens, P.C. and, if the matter were litigated, a
court may reach a decision contrary to the opinion. Neither Summit nor MSFG has
requested an advance ruling as to the federal income tax consequences of the
merger, and the Internal Revenue Service is not expected to issue such a ruling.
Resale of Summit Common Stock
The shares of Summit common stock into which your shares of MSFG common
stock are converted at the closing of the merger will be freely transferable
under the Securities Act of 1933, as amended, unless you are deemed to be an
"affiliate" of MSFG for purposes of Rule 145 under the Securities Act as of the
date of the special meeting. Affiliates of MSFG may not sell their shares of
Summit common stock acquired in connection with the merger except pursuant to an
effective registration statement under the Securities Act covering the resale of
those shares, or in compliance with Rule 145 under the Securities Act or another
applicable exemption from the registration requirements of the Securities Act.
Persons who may be deemed to be affiliates of MSFG generally include individuals
or entities that control, are controlled by or are under common control with
MSFG and may include executive officers, directors and principal shareholders of
MSFG and any entities these individuals control.
Differences in Shareholders' Rights
Both MSFG and Summit are New Jersey corporations and the rights of their
shareholders which are controlled by New Jersey law are identical. However, the
rights of MSFG shareholders which are determined by MSFG's Certificate of
Incorporation and Bylaws may differ from the rights of Summit shareholders which
are determined by Summit's Restated Certificate of Incorporation and By-Laws.
The differences in shareholders' rights between MSFG's Certificate of
Incorporation and Bylaws and Summit's Restated Certificate of Incorporation and
By-Laws are described below.
Certain of the rights provided for by Summit's Restated Certificate of
Incorporation or By-Laws also may be deemed to have an anti-takeover effect and
will be applicable to MSFG shareholders only after becoming Summit shareholders
after the closing of the merger. The following is a summary discussion of the
most significant differences in the rights of shareholders of MSFG and Summit.
This summary is qualified in its entirety by reference to the governing
documents of MSFG and Summit referred to above.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Summit Shareholder Rights MSFG Shareholder Rights
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Classified Board and Summit's Restated Certificate of MSFG's Certificate of Incorporation
Related Provisions: Incorporation provides that Summit's and Bylaws provide that MSFG's board
board of directors shall consist of of directors shall consist of not less
not less than five and not more than than three directors and each such
forty persons and divides Summit's director shall serve until his or her
board of directors into three classes, successor is duly elected and qualified.
with each class of directors serving a Directors are elected by receiving a
staggered term of three years. Each majority of the votes cast. Presently,
class of directors must consist, as there are four directors of
- --------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Summit Shareholder Rights MSFG Shareholder Rights
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
nearly as possible, of one-third of the MSFG. Holders of MSFG common
number of directors constituting the stock may not cumulate their votes in
entire Summit board of directors. elections of directors.
Directors are elected by receiving the
highest number of votes cast by
shares entitled to vote, even if not a
majority. Presently there are seven
directors in Class I, six directors in
Class II and six directors in Class III.
Holders of Summit common stock
may not cumulate their votes in
elections of directors.
Summit's Restated Certificate of
Incorporation further requires that
resolutions increasing the number of
directors be approved by 80% of
either the directors holding office or
the combined voting shares of
Summit, voting as a single class.
Summit's Restated Certificate of
Incorporation also provides that the
affirmative vote of the holders of
80% or more of the combined voting
shares of Summit, voting as a single
class, is required to amend, repeal or
take any action inconsistent with the
classified board of directors or the
requirement for an 80% affirmative
vote to approve any increase in the
number of directors. The effect of the
classified board and related
provisions is to make it difficult for
persons other than those negotiating
directly with Summit's board of
directors to acquire seats on
Summit's board of directors and
obtain control of Summit.
- --------------------------------------------------------------------------------------------------------------
Meetings, Voting Under Summit's By-Laws, except as Under MSFG's Bylaws, special
and Consents: otherwise provided by law, special meetings may be called by the
meetings may be called only by the President or the board of directors of
Chairman, Vice Chairman, President MSFG.
or majority of the entire Summit
board of directors. MSFG's Certificate of Incorporation
provides that Class A shareholders
Summit's Restated Certificate of hold the entire voting privilege of
Incorporation requires that, subject to MSFG. Class B shareholders are not
- --------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Summit Shareholder Rights MSFG Shareholder Rights
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
the rights of holders of any series of entitled to vote.
Summit's preferred stock or other
class or series of stock having Under MSFG's Bylaws, Class A
preference over the Summit common shareholders may act at a duly called
stock as to dividends or upon annual or special meeting or through
liquidation, all actions by the unanimous written consent.
shareholders of Summit must be
taken exclusively at a duly called
annual or special meeting of
Summit's shareholders or by the
unanimous, but not less than
unanimous, written consent of the
shareholders. An additional
provision in Summit's Restated
Certificate of Incorporation provides
that the affirmative vote of the
holders of 80% or more of the
combined voting shares of Summit,
voting as a single class, is required to
amend, alter, repeal or take any action
inconsistent with this requirement.
Under Summit's By-Laws, except as
otherwise required by law or
Summit's Restated Certificate of
Incorporation, all actions by
shareholders must be taken at a
meeting unless the board of directors
determines that such action shall be
taken by written consent.
- --------------------------------------------------------------------------------------------------------------
Summit Summit has in effect a shareholder MSFG has not adopted a shareholders
Shareholder Rights rights plan which provides that rights plan.
Plans: holders of shares of Summit common
stock possess one preferred stock
purchase right for each share of
Summit common stock held by them.
Each preferred stock purchase right
entitles the holder to buy, as of the
close of business on the tenth day
following the occurrence of certain
takeover-related events, one one-
hundredth (1/100) of a share of a
series of preferred stock, designated
the Series S preferred stock, at $164
per one one-hundredth share. Each
full share of the Series S preferred
stock has rights per share equal to
100 times the rights of Summit
- --------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Summit Shareholder Rights MSFG Shareholder Rights
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
common stock with respect to voting,
dividends and distributions upon
liquidation or merger, and entitles the
holder to an additional preferential
dividend.
The provisions contained in Summit's
Restated Certificate of Incorporation
relating to the Series S preferred
stock may not be amended in a
manner which adversely affects the
holders of Series S preferred stock
without the affirmative vote of the
holders of two-thirds of the
outstanding shares of Series S
preferred stock.
Upon the occurrence of certain
events, holders of the preferred stock
purchase rights become entitled to
purchase either shares of the Series S
preferred stock or, if the right was not
previously exercised, a number of
shares of the acquiring entity equal in
market value to approximately twice
the exercise price of the preferred
stock purchase right. Summit's board
of directors has the power to redeem
the preferred stock purchase rights at
any time prior to the close of business
on the tenth day after a public
announcement that a person or group
has acquired "beneficial ownership"
of 15% or more of Summit's voting
stock, upon the majority vote of the
board of directors. In addition, the
Summit board of directors may
exchange the rights for shares of
Summit common stock under certain
circumstances.
The combination of prohibitive
dilution of the acquiring entity's
share value and the power of
Summit's board of directors to
redeem the preferred stock purchase
rights is intended to encourage
potential acquiring entities to
negotiate with Summit's board of
- --------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Summit Shareholder Rights MSFG Shareholder Rights
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
directors with respect to the terms of
any acquisition or business
combination and to the extent
possible, discourage or defeat partial
or two-tiered acquisition proposals.
For a further description of Summit's
shareholder rights plans, see
"Description of Summit Capital Stock
-- Shareholder Rights Plans."
- --------------------------------------------------------------------------------------------------------------
Nominations to the Summit's By-Laws contain MSFG's Bylaws provide that the
Board, Shareholder provisions that empower Summit's annual meeting of shareholders shall
Proposals and board of directors to adopt rules, be held upon not less than 10 days
Conduct of Meeting: regulations and procedures governing nor more than 60 days prior notice.
meetings of Summit shareholders and The Class A shareholders shall elect
empower the chairman of a meeting the board of directors at the annual
of Summit shareholders, subject to shareholders' meeting.
the rules and regulations adopted by
Summit's board of directors, to adopt
rules, regulations and procedures and
to take actions that the chairman
deems necessary, appropriate or
convenient for the proper conduct of
a shareholder meeting. Summit's By-
Laws also contain provisions that:
. Establish rules governing
nominations for director and
shareholder proposals made at
meetings of shareholders and, in
general, authorize the chairman
of an annual meeting to
determine whether nominations
and shareholder proposals have
been made at least 80 days in
advance of the anniversary of the
preceding year's annual meeting
or otherwise comply with the
requirements of the By-Laws, and
. Establish rules governing
nominations for directors made at
special meetings of shareholders
and authorize the chairman of a
special meeting to determine
whether nominations have been
made at least 70 days prior to the
special meeting or the tenth day
following the day on which
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Summit Shareholder Rights MSFG Shareholder Rights
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
public announcement of the
special meeting is first made or
otherwise comply with the
requirements of the By-Laws.
- --------------------------------------------------------------------------------------------------------------
Vote Required for As discussed above, Summit's MSFG's Bylaws may be amended
Charter and Bylaw Restated Certificate of Incorporation or repealed by either the board of
Amendments: requires that certain provisions directors or the shareholders. Any
relating to increases in the number of Bylaw amended, adopted or
directors, changes to the classified repealed by the shareholders of
board provision and changes to the MSFG may be amended or repealed
provision requiring that actions by by the board of directors, unless the
shareholders be effected at an annual resolutions of such shareholders
or special meeting or by unanimous adopting such Bylaw expressly
written consent, receive the reserves to the shareholders the right
affirmative vote of holders of 80% of to amend or repeal it.
the combined voting shares of
Summit, voting as a single class.
Summit's Bylaws provide for
amendments upon two-thirds vote of
the board of directors.
- --------------------------------------------------------------------------------------------------------------
Supermajority Vote With the exception of a sale of all of MSFG's Certificate of Incorporation
on Certain Summit's property in the entirety, does not contain a supermajority vote
Transactions: Summit's Restated Certificate of provision.
Incorporation does not contain any
supermajority voting provisions with
respect to mergers or similar change
of control transactions.
- --------------------------------------------------------------------------------------------------------------
Removal of Summit's Restated Certificate of MSFG's Bylaws provide that a
Directors: Incorporation contains no specific director may be removed with or
provisions with respect to removal of without cause by a majority vote of
directors, other than for directors the shareholders.
elected by preferred shareholders.
- --------------------------------------------------------------------------------------------------------------
Authorized Shares: Summit's Restated Certificate of MSFG's Certificate of Incorporation
Incorporation authorizes the issuance authorizes the issuance of 100 shares
of 390,000,000 shares of common of Class A common stock, $10.00 par value,
stock and 6,000,000 shares of and 10,000,000 shares of Class B common
preferred stock, no par value. As of stock, no par value. Under MSFG's
September 30, 1999, there were Certificate of Incorporation, all voting
approximately 174,766,133 shares of rights are vested in the Class A
Summit common stock outstanding, shareholders and all right to
2,744,256 shares of Summit common dividends and the assets upon
stock held in treasury and 2,000,000 liquidation are vested in the Class B
shares of Summit Series S preferred shareholders. Class B shares have no
stock reserved for issuance under preemptive or preferential right of
Summit's shareholder rights plan. subscription. The board of directors
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Summit Shareholder Rights MSFG Shareholder Rights
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Summit's Restated Certificate of of MSFG may issue shares of MSFG
Incorporation authorize Summit's or obligations convertible into shares
board of directors to amend Summit's without offering the same to the Class
Restated Certificate of Incorporation B shareholders. As of December 31,
without shareholder concurrence to 1999, 100 Class A shares of MSFG
divide the authorized shares of were outstanding and 3,061,045.20
preferred stock into series, to Class B shares of MSFG were
determine the designations and the outstanding.
number of shares of any series, and to
determine the relative voting,
dividend, conversion, redemption,
liquidation and other rights,
preferences and limitations of the
authorized shares of preferred stock.
Holders of Summit common stock do
not have preemptive rights.
- --------------------------------------------------------------------------------------------------------------
Indemnification; Summit's By-Laws provide that MSFG's Certificate of Incorporation
Limitation of corporate agents, which term includes and Bylaws do not contain a
Liability: directors, officers and employees, of provision indemnifying or limiting
Summit shall be indemnified and held the liability of officers and directors.
harmless by Summit to the fullest
extent authorized by New Jersey laws
against expenses and liabilities
arising in connection with actions
performed by the corporate agent on
behalf of Summit. Summit's By-
Laws permit it to maintain insurance
for corporate agents against liabilities
and expenses.
- --------------------------------------------------------------------------------------------------------------
Dissenters Rights Summit's By-Laws and Restated MSFG's Certificate of Incorporation
Relating to Certificate of Incorporation do not states that all assets of MSFG shall be
Disposition of contain dissenters rights provisions. distributed to the Class B
Assets: shareholders, but does not contain a
dissenters rights provision.
- --------------------------------------------------------------------------------------------------------------
Shareholder approval Summit's shareholders' right to vote MSFG's Certificate of Incorporation
of Merger or in the case of a merger or provides that Class B shareholders
Consolidation/Class consolidation is governed by New shall not have the right to vote as a
Voting: Jersey law. Under New Jersey law, class in the case of merger or
any class or series of shares shall be consolidation. However, the board of
entitled to vote as a class if the plan directors of MSFG is granting the Class
of merger or consolidation contains B shareholders the right to vote
any provisions that, if contained in a on the merger.
proposed charter amendment, would
entitle the class or series to vote
as a class on the amendment.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Summit Shareholder Rights MSFG Shareholder Rights
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shareholder Summit's Restated Certificate of The approval of the sale of assets of
Approval of Asset Incorporation provides that Summit's MSFG by MSFG's shareholders is
Sales: board of directors may sell all rights, governed by New Jersey law.
franchises and property of Summit as
an entirety with the approval of two-
thirds of the outstanding shares.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
SUMMIT BANCORP.
Description of Business
Summit commenced operations on October 1, 1970 as a bank holding company
registered under the Bank Holding Company Act. Summit owns three bank
subsidiaries and several active non-bank subsidiaries. At September 30, 1999,
Summit had total consolidated assets of $36.1 billion on the basis of which it
ranked as the largest New Jersey-based bank holding company.
Summit's bank subsidiaries engage in a general banking business. Summit
Bank (New Jersey) is Summit's largest bank subsidiary, accounting for
approximately 85.7% of Summit's total consolidated assets at September 30, 1999.
Summit's non-bank subsidiaries engage primarily in securities products and
services, life, health, property and casualty insurance products and services,
venture capital investment, commercial finance lending, lease financing, asset-
based lending, letter of credit issuance, data processing and reinsuring credit
life and disability insurance policies related to consumer loans made by the
bank subsidiaries.
As of September 30, 1999, Summit's bank subsidiaries operated 484 banking
offices located in major trade centers and suburban areas in New Jersey,
Pennsylvania and southwestern Connecticut. The following table lists, as of
September 30, 1999, each bank subsidiary, the number of its banking offices and,
in thousands of dollars, its total assets and deposits. All of Summit's bank
subsidiaries are state banks and both the New Jersey and Pennsylvania
subsidiaries are members of the Federal Reserve System.
<TABLE>
<CAPTION>
No. of Banking Total Assets (1) Total Deposits (1)
Location of Principal Offices Offices (in thousands) (in thousands)
- ------------------------------- ---------------- ------------------ --------------
<S> <C> <C> <C>
Summit Bank (New Jersey)....... 366 $30,979,496 $20,969,964
Summit Bank (Pennsylvania)..... 105 4,162,130 2,810,205
Summit Bank (Connecticut)...... 13 892,729 581,581
</TABLE>
- -----------
(1) Not adjusted to exclude interbank deposits or other transactions among the
subsidiaries.
Summit is a legal entity separate and distinct from its subsidiaries. There
are various legal limitations on the extent to which a bank subsidiary may
finance or otherwise supply funds to Summit or its nonbank subsidiaries. Under
federal law, no bank subsidiary may, subject to limited exceptions, make loans
or extensions of credit to, or investments in the securities of Summit or its
non-bank subsidiaries or take their securities as collateral for loans to any
borrower. Each bank subsidiary is also subject to collateral security
requirements for any loans or extensions of credit permitted by such exceptions.
In addition, bank regulatory limitations exist on the availability of
subsidiary bank undistributed net assets for the payment of dividends to Summit
without the prior approval of the bank regulatory authorities. The Federal
Reserve Act, which affects both Summit Bank (New Jersey) and Summit Bank
(Pennsylvania), restricts the payment of dividends in any calendar year to the
net profit of the current year combined with retained net profits of the
preceding two years. Summit Bank (Connecticut), as a Connecticut chartered bank,
is subject to a similar restriction. Further, Summit Bank (New Jersey), as a
37
<PAGE>
New Jersey state-chartered bank, may declare a dividend only if, after payment,
its capital stock would be unimpaired and its surplus would equal at least fifty
percent of its capital stock or its surplus would not be reduced. Summit Bank
(Pennsylvania), as a Pennsylvania-chartered bank, may declare and pay a dividend
only out of accumulated net earnings and only if it has surplus at least equal
to its capital and its surplus would not be reduced by payment of the proposed
dividend. In addition, under the Federal Deposit Insurance Corporation
Improvement Act, all institutions are prohibited from paying dividends if after
doing so an institution would be undercapitalized. Summit may not pay dividends
to its shareholders if after paying any dividends it would be unable to pay its
debts as they become due in the usual course of business or its total assets
would be less than its total liabilities. At September 30, 1999, the total
undistributed net assets of Summit's subsidiary banks were $2.8 billion of which
$59.1 million was available under the most restrictive limitations for the
payment of dividends to Summit.
Recent Developments
On January 19, 2000, Summit reported net income for the year ended December
31, 1999 of $442.6 million as compared with $465.8 million for the year ended
December 31, 1998. Net income per diluted share for 1999 was $2.54 as compared
with $2.63 for 1998. Net income for 1999 reflected an additional provision for
loan losses of $60 million pretax, or $.20 per diluted share, recorded in the
third quarter, and a restructuring charge of $27.9 million pretax, or $.10 per
diluted share, recorded in the fourth quarter, associated with Summit's business
realignment. Summit's total assets at December 31, 1999 were $36.4 billion as
compared with $33.1 billion at December 31, 1998.
Management Information
Summit's Annual Report on Form 10-K for the year ended December 31, 1998
incorporates by reference or sets forth information about the directors and
executive officers of Summit, executive compensation, voting securities and
their principal holders, various relationships and related transactions and
other related information pertaining to Summit. We incorporate the Annual Report
on Form 10-K in this Proxy Statement-Prospectus by reference. A copy of the
Annual Report has been delivered with this Proxy Statement-Prospectus.
DESCRIPTION OF SUMMIT CAPITAL STOCK
Summit is presently authorized to issue 390,000,000 shares of common stock
and 6,000,000 shares of preferred stock, without par value. As of September 30,
1999, there were approximately 174,766,133 shares of Summit common stock
outstanding, 2,744,256 shares of Summit common stock held in treasury, 2,000,000
shares of Summit Series S preferred stock designated in Summit's Restated
Certificate of Incorporation and reserved for issuance under the Summit
shareholder rights plan described below, and no shares of Summit preferred stock
outstanding. Pursuant to New Jersey law, Summit's board of directors has
authority to set the terms and conditions of the authorized but unissued Summit
preferred stock. Summit may issue any authorized Summit common stock and Summit
preferred stock without further shareholder vote, unless a shareholder vote is
required for a particular transaction by applicable law or New York Stock
Exchange rules. Summit common stock is presently listed on the New York Stock
Exchange. The issuance of additional Summit common stock or Summit preferred
stock, including Summit preferred stock that might be convertible into Summit
common stock, may, among other things, affect the earnings per share applicable
to existing Summit common stock and the equity and voting rights of existing
holders of Summit common stock.
38
<PAGE>
The following summary is not a complete description of all provisions
relating to Summit capital stock and is subject in all respects to the
applicable provisions of the New Jersey law, Summit's Restated Certificate of
Incorporation and Summit's shareholder rights plan.
Common Stock
The rights of holders of Summit common stock are subject to the preferences
as to dividends and liquidation rights and other prior rights, if any, of any
class or series of Summit preferred stock that may be issued. The holders of
Summit common stock are entitled to one vote for each share with respect to all
matters voted upon by shareholders, including the election of directors, and are
entitled to receive dividends when, as and if declared by Summit's board of
directors out of funds of Summit legally available for the payment of dividends.
Shares of Summit common stock do not have cumulative voting rights. Accordingly,
at any annual meeting of Summit shareholders, or at any special meeting of
shareholders where an election of directors is conducted, the holders of fifty
percent plus one of the shares represented at the meeting, provided a quorum is
present, can fill all positions on Summit's board of directors that are up for
election at that meeting if they so choose. In that event, the holders of the
remaining shares will not be able to fill any positions on the board up for
election at that meeting. Summit has a classified board of directors, under
which approximately one-third of the directors are elected each year.
In the event of the liquidation of Summit, holders of Summit common stock
are entitled to share pro rata in the distribution of Summit's assets available
for common shareholders. All shares of Summit common stock are fully paid and
nonassessable. No preemptive rights attach to the ownership of Summit common
stock and no personal liability is imposed on the holders of common stock by
reason of the ownership of those shares. First Chicago Trust Company of New
York, a division of Equiserve, is the transfer agent, dividend disbursing agent
and registrar for the Summit common stock. Summit Bank (New Jersey) is the co-
transfer agent.
Shareholder Rights Plans
In June, 1999, Summit adopted a shareholder rights plan under which
preferred stock purchase rights ("Rights") attached to Summit common stock
outstanding as of the close of business on August 16, 1999. The shareholder
rights plan adopted in June, 1999 replaced Summit's shareholder rights plan
adopted in August, 1989, which expired August 16, 1999. Holders of shares of
Summit common stock issued subsequent to August 16, 1999 receive the Rights with
their shares. Except as indicated below, each Right entitles the registered
holder to purchase from Summit one one-hundredth (1/100) of a share of a series
of Summit preferred stock, designated the Series S preferred stock ("Summit
Series S Preferred"). The Rights expire on August 31, 2009, and are subject to
redemption and amendment in certain circumstances. The Rights trade
automatically with shares of Summit common stock and become exercisable only
under certain circumstances as described below.
The Rights are not currently exercisable. In general, the Rights will
become exercisable upon the earlier to occur of the following: (1) ten days
following a public announcement that a person or group has acquired beneficial
ownership of 15% or more of the outstanding Summit common stock or voting
securities of Summit representing 15% or more of the total voting power of
Summit (such person or group becoming an "acquiring person," as defined in the
rights plan) or (2) ten business days, or such later date as Summit's board of
directors may determine, after the commencement of a tender offer or exchange
offer that would result in a person or group beneficially owning 15% or more of
the
39
<PAGE>
outstanding Summit common stock or voting securities representing 15% or more of
the total voting power of Summit.
Generally, in the event the Rights become exercisable by virtue of a person
or group becoming an acquiring person, other than pursuant to an offer for all
outstanding shares of Summit common stock and other voting securities that
Summit's board of directors determines to be fair to shareholders and otherwise
in the best interests of Summit, each Right, other than Rights owned by the
acquiring person, will entitle the holder to receive, upon exercise of the Right
and payment of the exercise price, Summit Series S Preferred having a value
equal to two times the exercise price of the Right.
In the event that the Rights become exercisable and Summit is acquired in a
merger or other business combination, or 50% or more of Summit's assets or
earning power is transferred in one or a series of transactions, each Right will
entitle the holder to receive, upon the exercise of the Right, common stock of
the acquiring person having a value equal to two times the exercise price of the
Right.
The combination of prohibitive dilution of the acquiring person's share
values and the power of Summit's board of directors to redeem the Rights is
intended to encourage potential acquiring persons to negotiate with Summit's
board of directors with respect to the terms of any acquisition or business
combination and, to the extent possible, discourage or defeat partial or two-
tiered acquisition proposals.
The foregoing description of the rights plan is not complete and is
qualified in its entirety by reference to the terms of the rights plan, which
are more fully described in Summit's registration statement on Form 8-A filed
with the Securities and Exchange Commission on July 27, 1999.
MSFG, INC.
Description of Business
MSFG is an insurance and benefits brokerage firm with five offices located
in New Jersey and Pennsylvania. MSFG employs approximately 200 professionals and
other persons to service its clients. Over 2,000 businesses and 15,000
individuals are currently serviced by MSFG. MSFG offers its services locally as
well as nationally and internationally.
MSFG offers a variety of services primarily through two subsidiaries,
Meeker Sharkey Financial Group, Inc. and Meeker Sharkey Benefit Consultants,
Inc., which currently generate over $180,000,000 of business, health and
personal insurance premiums. MSFG's revenues are generated by commissions
received for premiums billed.
Meeker Sharkey Financial Group, Inc. offers business insurance, personal
and marine insurance and bonding. In addition, risk management services are
offered by Meeker Sharkey Financial Group to its clients. Risk management
services are offered by Meeker Sharkey Financial Group through loss control
specialists. Risk management services include proactive claims management and
assistance with risk financing decisions. Meeker Sharkey Financial Group
currently accounts for approximately 65% of MSFG's operating revenues.
Meeker Sharkey Benefit Consultants, Inc. offers health benefits, retirement
benefits and administration of employee benefit plans. Clients receive
assistance in the design, implementation and management of group health plans,
dental plans, cafeteria plans, employee communications and
40
<PAGE>
voluntary benefits programs. In addition, consultants and actuaries employed by
Meeker Sharkey Benefit Consultants design and administer a full range of
qualified and non-qualified retirement plans. Meeker Sharkey Benefit Consultants
currently accounts for approximately 35% of MSFG's operating revenues.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
MSFG was formed in February 1995 to effect the reorganization of Meeker
Sharkey Financial Group into a holding company structure. Pursuant to the
reorganization, Meeker Sharkey Financial Group became a wholly owned subsidiary
of MSFG. MSFG does not conduct, nor does management believe that it will
conduct, any business except the holding of the capital stock of its
subsidiaries. All insurance and related services are provided by MSFG's
subsidiaries.
MSFG has two principal subsidiaries, Meeker Sharkey Financial Group and
Meeker Sharkey Benefit Consultants. Meeker Sharkey Financial Group was formed in
July 1984 to engage in the sale of insurance in the State of New Jersey. Meeker
Sharkey Benefit Consultants was formed in February 1995 to conduct insurance
consulting for the establishment of pension plans, welfare plans and benefit
plans. The two subsidiaries collectively broker over $180,000,000 of business,
health and personal insurance premiums. They service over 2,000 businesses and
15,000 individuals locally, nationally and internationally. Revenues are
generated by commissions received for premiums billed. Commissions on policies
billed by MSFG are recorded generally on the later of the billing or effective
date of the policies. Premium adjustments, including policy cancellations, are
recorded upon notification from insurance companies. Commissions on policies
billed and collected directly by insurance companies and from contingent
agreements with insurance companies (i.e., agreements with insurance carriers
wherein an agency participates in profit sharing for meeting and/or exceeding
predetermined production or profitability goals) are reported as received.
Results of Operations for the three months ended September 30, 1999 and 1998
Operating Revenues. For the three months ended September 30, 1999, commission
- ------------------
income and fees for property and casualty insurance totaled $3.0 million, which
equaled the $3.0 million generated during the same period in 1998. For the three
months ended September 30, 1999, group health benefit and life commissions
totaled $1.4 million compared to $1.2 million for the same period in 1998. The
increase of $0.2 million was due to aggressive collection efforts in direct
bill commission receipts. Pension commissions and fees were $0.2 million for the
three months ended September 30, 1999, which equaled the $0.2 million generated
during the same period of 1998. Other income resulting from fees and contingent
commission arrangements for the three months ended September 30, 1999 was $0.5
million compared to $0.1 million for the same period of the prior year. The
increase of $0.4 million was due to increased fees for risk underwriting
services which we have actively marketed.
Investment Income. Income resulting from investments for the three months ended
- -----------------
September 30, 1999 was $0.8 million compared to $0.3 million for the same period
of the prior year. The increase of $0.5 million was due to realized gain on the
sale of securities.
Compensation Expenses. Compensation expenses for the three months ended
- ---------------------
September 30, 1999 were $3.4 million compared to $3.0 million for the same
period in 1998. The increase of $0.4 million, for the
41
<PAGE>
most part, was related to increased commissions paid and related benefit expense
for increased group health revenues.
Other Operating Expenses. Other operating expenses for the three months ended
- ------------------------
September 30, 1999 were $0.9 million compared to $1.0 million for the same
period in 1998. The decrease of $0.1 million, for the most part, was related to
a decrease in bad debt expense as a result of new collection procedures.
Results of Operations for the nine months ended September 30, 1999 and 1998
Operating Revenues. For the nine months ended September 30, 1999, commission
- ------------------
income and fees for property and casualty insurance totaled $8.5 million
compared to $9.2 million for the same period in 1998. The $0.7 million decrease
stems from lost business related to the departure of several producers who
accounted for a combined book of business of $1.0 million annually. For the nine
months ended September 30, 1999, group health benefit and life commissions
totaled $4.2 million compared to $3.6 million during the same period in 1998.
The increase of $0.6 million was due to increased sales as a result of market
conditions relating to group health programs, allowing for higher pricing.
Pension commissions and fees were $0.6 million for the nine months ended
September 30, 1999 compared to $0.5 million for the same period in 1998. Other
income resulting from fees and contingent commission arrangements for the nine
months ended September 30, 1999 was $2.2 million compared to $1.5 million for
the same period of the prior year. The increase of $0.7 million was due to an
improvement in contingent income, which resulted from continuing market
conditions that allowed MSFG to target its products with carriers who provided
the best incentives. Income from the ownership interest in Gweedore, L.L.C. for
the nine months ended September 30, 1998 was $0.5 million. The ownership
interest was sold in 1998.
Investment Income. Income resulting from investments for the nine months ended
- -----------------
September 30, 1999 was $1.4 million compared to $2.0 million for the same period
of the prior year. The decrease of $0.6 million was the result of a lower
realized gain on the sale of securities.
Compensation Expenses. Compensation expenses for the nine months ended
- ---------------------
September 30, 1999 were $10.1 million compared to $9.7 million for the same
period in 1998. The increase of $0.4 million, for the most part, was related to
increased commissions paid and related benefit expense for increased group
health revenues.
Other Operating Expenses. Other operating expenses for the nine months ended
- ------------------------
September 30, 1999 were $3.0 million, as compared to $3.1 million incurred
during the same period in 1998.
Results of Operations for the years ended December 31, 1998 and 1997
Operating Revenues. For the year ended December 31, 1998, commission income and
- ------------------
fees for property and casualty insurance totaled $12.2 million compared to $12.1
million for 1997. For the year ended December 31, 1998, group health benefit and
life commissions totaled $5.2 million or a $1.1 million increase over the $4.1
million generated during 1997. The increase of $1.1 million was due to increased
sales as a result of market conditions relating to group health programs,
allowing for higher pricing. Pension commissions and fees for the year ended
December 31, 1998 were $1.0 million compared to $1.1 million for 1997. Other
income resulting from fees and contingent commission arrangements for the year
ended December 31, 1998 was $1.5 million compared to $0.9 million for the prior
year, which resulted from market conditions that allowed MSFG to target its
products with carriers who provided the best incentives. The increase of $0.6
million was due to increased contingent commissions which resulted from market
conditions that allowed MSFG to target its products with carriers who provided
the best incentives. Income from the ownership interest in Gweedore, L.L.C. for
the year
42
<PAGE>
ended December 31, 1998 was $0.5 million compared to $0.8 million for 1997. The
ownership interest was sold in 1998.
Investment Income. Income resulting from investments for the year ended
- -----------------
December 31, 1998 was $2.2 million compared to $0.9 million for 1997. The
increase of $1.3 million was due to realized gain on the sale of securities and
increased interest income.
Compensation Expenses. Compensation expenses for the year ended December 31,
- ---------------------
1998 were $13.6 million compared to $12.0 million for 1997. The increase of
$1.6 million, for the most part, was related to increased commissions paid and
related benefit expense for increased group and voluntary benefits revenues.
Other Operating Expenses. Other operating expenses for the year ended December
- ------------------------
31, 1998 were $4.1 million compared to $4.5 million for 1997. The decrease of
$0.4 million was attributable to the effect of decreased insurance expense,
professional fees and bad debt expense.
Miscellaneous. During 1997 and 1998, MSFG leases its principal offices from
- -------------
Gweedore, L.L.C., a limited liability company of which MSFG held a 93% interest
until May 1998. The results of operations of Gweedore, L.L.C. are included in
MSFG's consolidated financial statements for 1997. All related transactions
have been eliminated in consolidation.
Results of Operations for the years ended December 31, 1997 and 1996
Operating Revenues. For the year ended December 31, 1997, commission income and
- ------------------
fees for property and casualty insurance totaled $12.1 million compared to $12.0
million for 1996. For the year ended December 31, 1997, group health benefit and
life commissions totaled $4.1 million or a $0.5 million increase over the $3.6
million generated during 1996. The increase was due to increased sales as a
result of market conditions which allowed for higher pricing. Pension
commissions and fees for the year ended December 31, 1997 were $1.1 million,
which equaled the $1.1 million generated in 1996. Other income resulting from
fees and contingent commission arrangements for the year ended December 31, 1997
was $0.9 million compared to $1.0 million for 1996.
Investment Income. Income resulting from investments for the year ended
- -----------------
December 31, 1997 was $0.9 million compared to $0.4 million for 1996. The
increase of $0.5 million was due, in part, to realized gain on the sale of
securities.
Compensation Expenses. Compensation expenses for the year ended December 31,
- ---------------------
1997 were $12.0 million compared to $12.3 million for 1996.
Other Operating Expenses. Other operating expenses for the year ended December
- ------------------------
31, 1997 were $4.5 million compared to $3.7 million for 1996. The increase of
$0.8 million was due to higher occupancy expenses and bad debt expenses.
Miscellaneous. During 1997 and 1996, MSFG leased its principal offices from
- -------------
Gweedore, L.L.C., a limited liability company of which MSFG held a 93% interest.
The results of operations of Gweedore, L.L.C. are included in MSFG's
consolidated financial statements for 1997 and 1996. All related transactions
have been eliminated in consolidation.
Liquidity and Capital Resources
43
<PAGE>
In 1994, MSFG acquired a 93% interest in Gweedore, L.L.C. MSFG leases its
principal offices, located at 14 Commerce Drive, Cranford, New Jersey, from
Gweedore, L.L.C. On May 15, 1998, MSFG sold its entire interest in Gweedore,
L.L.C. for $1,610,000.
In 1998, MSFG purchased the assets of an insurance agency for a purchase
price of $1,314,656, consisting of $265,835 cash and a note payable of
$1,048,829. MSFG recorded $1,248,829 of the purchase price as an intangible
asset. Subsequent to the acquisition of the insurance agency, 20% of Meeker
Sharkey Devine Company, Inc., the MSFG subsidiary formed as a result of the
acquisition, was sold to a former employee for $249,766.
As of September 30, 1999, MSFG's cash and marketable securities totaled
$21.5 million. Marketable securities totaled $7.6 million, valued at fair
market value as of September 30, 1999. By December 31, 1999, cash and cash
equivalents totaled approximately $20.2 million and marketable securities
totaled $2.3 million. Marketable securities were converted into cash and cash
equivalents during the fourth quarter of 1999 in anticipation of the sale of
MSFG.
MSFG believes that its current cash position is sufficient to meet all
currently anticipated future operational needs and, therefore, MSFG does not
anticipate in the foreseeable future the need to raise additional capital
through the offering of stock or to incur any significant debt.
Total funds held in a fiduciary capacity at September 30, 1999 were $4.8
million. Fiduciary funds are premiums received for insureds but not yet
remitted to the carriers, being held as cash or investments. Premiums which are
due from insureds are reported as assets of MSFG and as corresponding
liabilities, net of commissions, to the insurance carriers.
Year 2000
MSFG has not experienced any material year 2000 problems with its internal
operations or third party suppliers and services as of the date of this Proxy
Statement - Prospectus. MSFG does not currently expect any significant year
2000 problems to be encountered for the remainder of the year 2000 that would
have a material effect on the financial condition of MSFG.
44
<PAGE>
Beneficial Ownership of MSFG Common Stock
Thomas J. Sharkey, Sr., the Chairman of the Board of MSFG, owns all 100
shares of MSFG Class A common stock currently outstanding. The following table
sets forth information, as of January 15, 2000, with respect to the beneficial
ownership (as defined in Rule 13d-3 of the Securities Exchange Act of 1934) of
the outstanding MSFG Class B common stock by each director of MSFG, each
executive officer of MSFG who earned over $100,000 in fiscal 1999, each person
or group of persons known by MSFG to be the beneficial owner of more than 5% of
MSFG Class B common stock and all directors and executive officers of MSFG as a
group.
<TABLE>
<CAPTION> Percent of
Name of Beneficial Owner (1) No. of Shares (2) Class
- ---------------------------- ----------------- ----------
<S> <C> <C>
Bloody Forland, L.P. (3).......................................... 1,602,810.00 52.36%
Thomas J. Sharkey, Sr. (4)........................................ 1,602,810.00(5) 52.36
Thomas J. Sharkey, Jr. (4) (6).................................... 248,961.80 8.13
Edward D. Sharkey (4)............................................. 235,419.00 7.69
Paul R. Williams (4).............................................. -- --
Brian P. Leddy (6)................................................ 134,437.88 4.39
James T. O'Connor (6)............................................. 24,930.73 0.81
Peter S. Gruenberg (6)............................................ 41,301.98 1.35
James H. Manhardt................................................. 340,870.31 11.14
Directors and Executive Officers as a Group (9 persons)........... 2,310,873.74 75.50
</TABLE>
____________________________
(1) Each person maintains a mailing address at 14 Commerce Drive, Cranford, New
Jersey 07016-3505.
(2) Except as otherwise indicated, all of the shares of MSFG Class B common
stock are held beneficially and of record.
(3) Bloody Forland, L.P. is a family limited partnership controlled by Thomas
J. Sharkey, Sr. Persons with an interest in the limited partnership
include Thomas J. Sharkey, Sr., Thomas J. Sharkey, Jr. and Edward D.
Sharkey, among other family members.
(4) Such person currently serves as a director of MSFG.
(5) Includes the shares held of record by Bloody Forland, L.P.
(6) Such person currently serves as an executive officer of MSFG.
Description of MSFG Capital Stock
MSFG is authorized to issue 10,000,000 shares of Class B common stock, no
par value, and 100 shares of Class A common stock, $10.00 par value. As of
December 31, 1999, 100 shares of MSFG Class A common stock were issued and
outstanding and 3,061,045.20 shares of MSFG Class B common stock were issued and
outstanding.
SHAREHOLDER PROPOSALS
MSFG shareholders will not be entitled to submit proposals for
consideration at the special meeting except to the extent the proposals relate
directly to the matters to come before the special meeting as set forth in this
Proxy Statement-Prospectus.
45
<PAGE>
Summit's By-Laws provide that shareholder proposals which do not appear in
the proxy statement may be considered at a meeting of shareholders only if
written notice of the proposal is received by the Secretary of Summit not less
than 80 and not more than 100 days before the anniversary of the preceding
year's annual meeting. However, if the date of the annual meeting is more than
30 days before or more than 60 days after that anniversary date, the notice of a
shareholder proposal, to be timely, must be received by the Secretary not later
than the close of business on the later of the 80th day prior to the annual
meeting or the tenth day following the day on which public announcement of the
meeting date is first made. Any notice of a shareholder proposal by a
shareholder to the Secretary of Summit must be accompanied by:
. the name and address of the shareholder who intends to present the
proposal for a vote;
. a representation that the shareholder is a holder of record of shares
entitled to vote at the meeting;
. a description of all agreements, arrangements or understandings
between the shareholder and any other shareholder relating to the
proposal to be voted on and any financial or contractual interest of
either shareholder in the outcome of the vote; and
. all other information regarding the proposal to be voted on and the
shareholder intending to present the proposal for a vote as would be
required to be included in a proxy statement soliciting the vote of
shareholders in respect of the proposal pursuant to the proxy rules of
the Securities and Exchange Commission.
Summit's board of directors will consider and include in Summit's proxy
statement for the 2000 annual meeting of Summit shareholders proposals which
meet the regulations of the Securities and Exchange Commission and New Jersey
law and which comply with Summit's By-Laws. In order to be eligible for
inclusion, proposals were required to be addressed to Summit's Secretary and
must have been received on or before November 9, 1999.
OTHER MATTERS
MSFG's board of directors is not aware of any business to come before the
special meeting other than those matters described in this Proxy Statement-
Prospectus. However, if any other matters should properly come before the
special meeting, the proxy holders intend to vote on those matters in accordance
with their reasonable business judgment.
LEGAL MATTERS
The legality of the Summit common stock offered by this Proxy Statement-
Prospectus will be passed upon for Summit by Thompson Coburn LLP. Certain legal
matters will be passed upon for MSFG by Garrubbo, Romankow & Rinaldo.
46
<PAGE>
EXPERTS
The consolidated financial statements of Summit Bancorp. and subsidiaries
as of December 31, 1998 and 1997 and for each of the years in the three-year
period ended December 31, 1998, included in Summit's Annual Report on Form 10-K,
incorporated by reference herein and in the registration statement on Form S-4,
have been incorporated by reference herein and in the registration statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by referenced herein, and upon the authority of KPMG LLP as experts
in accounting and auditing.
The consolidated financial statements of MSFG, Inc. and subsidiaries as of
December 31, 1998 and 1997 and for each of the years in the three-year period
ended December 31, 1998, included in this Proxy Statement-Prospectus, have been
included herein in reliance upon the report of Moore Stephens, P.C., independent
certified public accountants, included in this Proxy Statement-Prospectus, and
upon the authority of Moore Stephens, P.C. as experts in accounting and
auditing.
Certain tax matters were passed upon by Moore Stephens, P.C., certified
public accountants.
WHERE YOU CAN FIND MORE INFORMATION
Summit has filed with the Securities and Exchange Commission under the
Securities Act of 1933 the registration statement which registers the shares of
Summit common stock to be issued to MSFG shareholders in connection with the
merger. The registration statement, including the attached exhibits and
schedules, contains additional relevant information about Summit and Summit
common stock. The rules and regulations of the Securities and Exchange
Commission allow us to omit certain information included in the registration
statement from this Proxy Statement-Prospectus.
In addition, Summit files reports, proxy statements and other information
with the Securities and Exchange Commission under the Securities Exchange Act of
1934. You may read and copy this information at the following locations of the
Securities and Exchange Commission:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
The Securities and Exchange Commission also maintains an Internet world
wide web site that contains reports, proxy statements and other information
about issuers, like Summit, who file electronically with the Securities and
Exchange Commission. The address of that site is http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
Summit at the offices of the New York Stock Exchange, 20 Broad Street, New York,
New York 10005.
47
<PAGE>
The Securities and Exchange Commission allows Summit to "incorporate by
reference" information into this Proxy Statement-Prospectus. This means that we
can disclose important information to you by referring you to another document
filed separately with the Securities and Exchange Commission. The information
incorporated by reference is considered to be a part of this Proxy Statement-
Prospectus, except for any information that is superseded by information that is
included directly in this document.
This Proxy Statement-Prospectus incorporates by reference the documents
listed below that Summit has previously filed with the Securities and Exchange
Commission. Copies of each of the documents have been delivered with this Proxy
Statement Prospectus.
<TABLE>
<S> <C>
Proxy Statement............................. 1999 Annual Meeting held April 23, 1999
Annual Report on Form 10-K.................. Year ended December 31, 1998
Quarterly Report on Form 10-Q and
Amendment No. 1 to Quarterly Report on
Form 10-Q (Form 10-Q/A)................... Quarter ended March 31, 1999
Quarterly Reports on Form 10-Q.............. Quarters ended June 30, 1999 and September 30, 1999
Current Reports on Form 8-K................. Reports dated April 27, 1999 and June 16, 1999
</TABLE>
Summit incorporates by reference additional documents that Summit may file
with the Securities and Exchange Commission between the date of this Proxy
Statement-Prospectus and the date of the special meeting. The documents include
periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q and current reports on Form 8-K, as well as proxy statements.
You may read and copy any materials we file with the Securities and
Exchange Commission at the Securities and Exchange Commission's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission maintains an Internet site that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Securities and Exchange Commission. The address of the
Securities and Exchange Commission's website is http://www.sec.gov. You can
obtain additional copies of the documents incorporated by reference in this
Proxy Statement-Prospectus by requesting them in writing or by telephone from
the following address:
Summit Bancorp.
Attention: Corporate Secretary
301 Carnegie Center
Princeton, NJ 08543
Telephone: (609) 987-3442
If you would like to request additional copies of the documents, please do
so by February 22, 2000 to receive them before the special meeting. If you
request any documents from us, we will mail them to you by first class mail, or
another equally prompt means, within one business day after we receive your
request.
48
<PAGE>
We have not authorized anyone to give any information or make any
representation about the merger or our companies that is different from, or in
addition to, that contained in this Proxy Statement-Prospectus or in any of the
materials that we have incorporated into this document. Therefore, if anyone
does give you information of this sort, you should not rely on it. Information
in this Proxy Statement-Prospectus about Summit has been supplied by Summit and
information about MSFG has been supplied by MSFG. The information contained in
this document speaks only as of the date of this document unless the information
specifically indicates that another date applies. If you are in a jurisdiction
where offers to exchange or sell, or solicitations of offers to exchange or
purchase, the securities offered by this document or the solicitation of proxies
is unlawful, or if you are a person to whom it is unlawful to direct these types
of activities, then the offer presented in this document does not extend to you.
49
<PAGE>
MSFG, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
-----
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors.................................. F-1
Consolidated Balance Sheets..................................... F-2
Consolidated Statements of Operations and Comprehensive Income.. F-4
Consolidated Statements of Stockholders' Equity................. F-5
Consolidated Statements of Cash Flows........................... F-6
Notes to Consolidated Financial Statements...................... F-9
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors of
MSFG, Inc.
Cranford, New Jersey
We have audited the consolidated balance sheets of MSFG, Inc. and its
subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of operations and comprehensive income, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1998.
These consolidated financial statements are the responsibility of MSFG, Inc.'s
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of MSFG, Inc. and its subsidiaries as of December 31, 1998 and 1997,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
/s/ Moore Stephens, P.C.
-----------------------------
MOORE STEPHENS, P.C.
Certified Public Accountants.
Cranford, New Jersey
February 26, 1999
F-1
<PAGE>
MSFG, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
------------- ------------
1999 1998 1997
---- ---- ----
[Unaudited]
---------
<S> <C> <C> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $13,208,164 $12,780,559 $ 3,371,815
Short-Term Investments 618,618 597,873 675,376
Marketable Securities - Net 7,678,343 6,278,419 7,909,757
----------- ----------- -----------
Current Liquid Assets 21,505,125 19,656,851 11,956,948
Accounts Receivable - Net 3,592,011 2,472,700 2,846,028
Prepaid Expenses 185,220 138,044 111,227
Due from Related Parties 310,226 313,721 1,079,262
Miscellaneous Receivables 293,795 44,728 98,348
----------- ----------- -----------
Total Current Assets 25,886,377 22,626,044 16,091,813
----------- ----------- -----------
Property and Equipment:
Land -- -- 1,000,000
Building and Improvements -- -- 4,265,993
Leasehold Improvements 128,994 99,798 116,354
Furniture and Fixtures 3,055,103 2,740,081 2,552,157
Transportation Equipment 10,800 10,800 --
----------- ----------- -----------
Totals - At Cost 3,194,897 2,850,679 7,934,504
Less: Accumulated Depreciation 2,158,009 1,901,973 2,050,398
----------- ----------- -----------
Property and Equipment - Net 1,036,888 948,706 5,884,106
----------- ----------- -----------
Other Assets:
Cash Surrender Value - Officers' Life Insurance 1,239,063 1,153,201 1,936,705
Intangibles - Net 1,861,372 2,047,622 1,025,986
Note Receivable 25,000 25,000 50,000
Due from Related Parties 1,286,041 1,270,729 504,085
Investments 697,278 482,467 384,381
Other Assets 8,589 4,722 63,791
----------- ----------- -----------
Total Other Assets 5,117,343 4,983,741 3,964,948
----------- ----------- -----------
Total Assets $32,040,608 $28,558,491 $25,940,867
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
MSFG, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
------------- ------------
1999 1998 1997
---- ---- ----
[Unaudited]
---------
<S> <C> <C> <C>
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $ 7,978,900 $ 7,054,469 $ 7,289,360
Commissions Payable 400,154 467,594 415,065
Current Portion of Long-Term Debt 191,624 191,624 50,414
Accrued Expenses 1,429,920 1,993,290 1,418,432
Due to Customers 1,814,618 456,519 614,545
Current Income Taxes Payable 14,693 19,186 44,979
Deferred Income Taxes Payable 613,646 711,976 1,196,973
Other Current Liabilities 1,469 1,469 85,028
----------- ----------- -----------
Total Current Liabilities 12,445,024 10,896,127 11,114,796
Long-Term Debt:
Notes Payable - Other 699,842 839,458 151,953
Deferred Compensation 337,348 352,388 374,603
----------- ----------- -----------
Total Liabilities 13,482,214 12,087,973 11,641,352
----------- ----------- -----------
Minority Interest 205,486 228,904 18,200
----------- ----------- -----------
Stockholders' Equity:
Common Stock:
$10.00 Par Value; Class A, Voting, 100
Shares Authorized, Issued and Outstanding 1,000 1,000 1,000
Common Stock:
No Par Value; Class B, Non-Voting, Authorized
10,000,000 Shares; Issued 3,194,315 - At
Assigned Value, Outstanding 3,001,045, 3,004,131
and 3,008,205 in 1999, 1998 and 1997, Respectively 31,710 31,710 31,710
Additional Paid-in Capital 1,391,406 1,172,782 1,112,108
Accumulated Other Comprehensive Income
[Net of Tax] 1,388,656 1,536,182 2,262,998
Retained Earnings 16,351,281 14,146,576 11,416,787
----------- ----------- -----------
Totals 19,164,053 16,888,250 14,824,603
Less: Treasury Stock - At Cost - 193,270, 190,184
and 186,110 Shares of Class B Common Stock
in 1999, 1998 and 1997, Respectively (603,870) (559,836) (486,347)
Deferred Stock Bonus (207,275) (86,800) (56,941)
----------- ----------- -----------
Total Stockholders' Equity 18,352,908 16,241,614 14,281,315
----------- ----------- -----------
Total Liabilities and Stockholders' Equity $32,040,608 $28,558,491 $25,940,867
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
MSFG, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Nine months ended Years ended
----------------- ----------------- ---------------------------
September 30, September 30, December 31,
------------- ------------- ---------------------------
1999 1998 1999 1998 1998 1997 1996
---- ---- ---- ---- ---- ---- ----
[Unaudited] [Unaudited] [Unaudited] [Unaudited]
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue $5,107,825 $ 4,490,403 $15,484,363 $15,305,671 $20,447,440 $19,052,382 $17,646,104
---------- ----------- ----------- ----------- ----------- ----------- -----------
Operating Expenses:
Selling Expenses 1,638,616 1,420,043 4,640,275 4,613,398 6,559,477 5,903,624 5,955,676
General and Administrative
Expenses 2,628,921 2,611,404 8,474,790 8,137,216 11,108,171 10,636,733 10,092,817
---------- ----------- ----------- ----------- ----------- ----------- -----------
Total Operating Expenses 4,267,537 4,031,447 13,115,065 12,750,614 17,667,648 16,540,357 16,048,493
---------- ----------- ----------- ----------- ----------- ----------- -----------
Operating Income 840,288 458,956 2,369,298 2,555,057 2,779,792 2,512,025 1,597,611
---------- ----------- ----------- ----------- ----------- ----------- -----------
Other Income [Expense]:
Interest Expense (11,229) (16,763) (35,092) (40,865) (54,554) (25,224) (38,740)
Investment and Other Income 770,431 270,328 1,352,858 1,986,108 2,177,407 881,798 400,731
---------- ----------- ----------- ----------- ----------- ----------- -----------
Other Income - Net 759,202 253,565 1,317,766 1,945,243 2,122,853 856,574 361,991
---------- ----------- ----------- ----------- ----------- ----------- -----------
Income Before Provision for
Income Taxes and Minority
Interest 1,599,490 712,521 3,687,064 4,500,300 4,902,645 3,368,599 1,959,602
Less: Provision for Income Taxes 595,164 275,185 1,505,777 1,738,032 2,162,507 1,212,507 860,800
---------- ----------- ----------- ----------- ----------- ----------- -----------
Income Before Minority Interest 1,004,326 437,336 2,181,287 2,762,268 2,740,138 2,156,092 1,098,802
Less: Minority Interest Share of
[Loss]
Income of Subsidiaries (10,354) (5,491) (23,418) 12,594 (19,485) 1,775 1,461
---------- ----------- ----------- ----------- ----------- ----------- -----------
Net Income 1,014,680 442,827 2,204,705 2,749,674 2,759,623 2,154,317 1,097,341
---------- ----------- ----------- ----------- ----------- ----------- -----------
Other Comprehensive Income
[Net of Tax]:
Unrealized Holding Gains
[Losses] Arising During
Period (143,931) (205,344) 524,519 (114,194) 339,638 1,856,054 303,257
Less: Reclassification
Adjustment for Realized
Gains Included in
Net Income (224,015) (358,000) (672,045) (1,072,000) (1,066,185) (299,841) (5,778)
---------- ----------- ----------- ----------- ----------- ----------- -----------
Total Other Comprehensive [Loss]
Income (367,946) (563,344) (147,526) (1,186,194) (726,547) 1,556,213 297,479
---------- ----------- ----------- ----------- ----------- ----------- -----------
Comprehensive Income [Loss] $ 646,734 $ (120,517) $ 2,057,179 $ 1,563,480 $ 2,033,076 $ 3,710,530 $ 1,394,820
========== =========== =========== =========== =========== =========== ===========
Basic Net Income Per Common Share .34 .15 .73 .92 .92 .73 .37
========== =========== =========== =========== =========== =========== ===========
Diluted Net Income Per Common Share .34 .15 .73 .91 .91 .73 .37
========== =========== =========== =========== =========== =========== ===========
Weighted Average Common Shares
Outstanding-Basic 3,002,894 3,004,652 3,002,894 3,004,652 3,004,652 2,958,183 2,958,973
========== =========== =========== =========== =========== =========== ===========
Weighted Average Common Shares
Outstanding-Diluted 3,024,489 3,026,247 3,024,489 3,026,247 3,026,247 2,970,600 2,958,973
========== =========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
MSFG, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B Retained Earnings
------------------ -------------------- -------------------------
Common Common Additional Accumulated
------- ------- ---------- ------------
Number Stock Number Stock Paid-in Earnings
--------- ------- ----------- ------- ---------- ------------
of Shares $10 Par of Shares No Par Capital and Profits
--------- ------- ----------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31,
1995 100 $1,000 2,951,959 $31,710 $ 676,582 $ 8,165,129
Sale of Class B - Non-Voting
Treasury Stock -- -- 7,861 -- 26,085 --
Deferred Stock Bonus Award -- -- 5,966 -- 19,796 --
Unrealized Holding Gain -- -- -- -- -- --
Net Income for the Year
Ended December 31, 1996 -- -- -- -- -- 1,097,341
------ ------ --------- ------- ---------- -----------
Balance - December 31,
1996 100 1,000 2,965,786 31,710 722,463 9,262,470
Purchase of Class B - Non-Voting
Treasury Stock -- -- (60,935) -- -- --
Deferred Stock Bonus Award -- -- 7,412 -- 27,943 --
Sale of Class B - Non-Voting
Treasury Stock -- -- 95,942 -- 361,702 --
Unrealized Holding Gain -- -- -- -- -- --
Net Income for the Year
Ended December 31, 1997 -- -- -- -- -- 2,154,317
------ ------ --------- ------- ---------- -----------
Balance - December 31,
1997 100 1,000 3,008,205 31,710 1,112,108 11,416,787
Purchase of Class B - Non-Voting
Treasury Stock -- -- (18,875) -- -- --
Deferred Stock Bonus Award -- -- 7,345 -- 35,845 --
Sale of Class B - Non-Voting
Treasury Stock -- -- 7,456 -- 24,829 --
Unrealized Holding Gain -- -- -- -- -- --
Dividends Paid -- -- -- -- -- (29,834)
Net Income for the Year
Ended December 31, 1998 -- -- -- -- -- 2,759,623
------ ------ --------- ------- ---------- -----------
Balance - December 31,
1998 100 1,000 3,004,131 31,710 1,172,782 14,146,576
Stock Option Appreciation -- -- -- -- 200,400 --
Amortization of Stock
Option Appreciation -- -- -- -- -- --
Purchase of Class B-Non-Voting
Treasury Stock -- -- (7,091) -- -- --
Sale of Class B - Non-Voting
Treasury Stock -- -- 4,005 -- 18,224 --
Unrealized Holding Gain -- -- -- -- -- --
Deferred Stock Bonus Award -- -- -- -- -- --
Net Income for the Nine
Months Ended September 30, 1999 -- -- -- -- -- 2,204,705
------ ------ --------- ------- ---------- -----------
Balance - September 30,
1999 [Unaudited] 100 $1,000 3,001,045 $31,710 $1,391,406 $16,351,281
====== ====== ========= ======= ========== ===========
<CAPTION>
Accumulated
---------------------------
Treasury Stock Other Deferred
-------------------------- ----------- --------------
Number Comprehensive Stock Stockholders'
---------- -------------- ----------- --------------
of Shares Amount Income Bonus Equity
---------- -------------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Balance - December 31,
1995 242,356 $(525,505) $ 409,319 $ -- $ 8,758,235
Sale of Class B - Non-Voting
Treasury Stock (7,861) 17,389 -- -- 43,474
Deferred Stock Bonus Award (5,966) 13,196 -- -- 32,992
Unrealized Holding Gain -- -- 297,479 -- 297,479
Net Income for the Year
Ended December 31, 1996 -- -- -- -- 1,097,341
------- --------- ---------- ------------- -----------
Balance - December 31,
1996 228,529 (494,920) 706,798 -- 10,229,521
Purchase of Class B - Non-Voting
Treasury Stock 60,935 (215,705) -- -- (215,705)
Deferred Stock Bonus Award (7,412) 16,084 -- (56,941) (12,914)
Sale of Class B - Non-Voting
Treasury Stock (95,942) 208,194 -- -- 569,896
Unrealized Holding Gain -- -- 1,556,200 -- 1,556,200
Net Income for the Year
Ended December 31, 1997 -- -- -- -- 2,154,317
------- --------- ---------- ------------- -----------
Balance - December 31,
1997 186,110 (486,347) 2,262,998 (56,941) 14,281,315
Purchase of Class B - Non-Voting
Treasury Stock 18,875 (112,119) -- -- (112,119)
Deferred Stock Bonus Award (7,345) 19,170 -- (29,859) 25,156
Sale of Class B - Non-Voting
Treasury Stock (7,456) 19,460 -- -- 44,289
Unrealized Holding Gain -- -- (726,816) -- (726,816)
Dividends Paid -- -- -- -- (29,834)
Net Income for the Year
Ended December 31, 1998 -- -- -- -- 2,759,623
------- --------- ---------- ------------- -----------
Balance - December 31,
1998 190,184 (559,836) 1,536,182 (86,800) 16,241,614
Stock Option Appreciation -- -- -- (200,400) --
Amortization of Stock
Option Appreciation -- -- -- 60,120 60,120
Purchase of Class B-Non-Voting
Treasury Stock 7,091 (55,810) -- -- (55,810)
Sale of Class B - Non-Voting
Treasury Stock (4,005) 11,776 -- -- 30,000
Unrealized Holding Gain -- -- (147,526) -- (147,526)
Deferred Stock Bonus Award -- -- -- 19,805 19,805
Net Income for the Nine
Months Ended September 30, 1999 -- -- -- -- 2,204,705
------- --------- ---------- ------------- -----------
Balance - September 30,
1999 [Unaudited] 193,270 $(603,870) $1,388,656 $(207,275) $18,352,908
======= ========= ========== ============= ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
MSFG, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine months ended Years ended
-------------------------- ----------------------------------------
September 30, December 31,
-------------------------- ----------------------------------------
1 9 9 9 1 9 9 8 1 9 9 8 1 9 9 7 1 9 9 6
----------- ----------- ----------- ---------- -----------
[Unaudited] [Unaudited]
<S> <C> <C> <C> <C> <C>
Operating Activities:
Net Income $ 2,204,705 $ 2,749,674 $ 2,759,623 $2,154,317 $ 1,097,341
----------- ----------- ----------- ---------- -----------
Adjustments to Reconcile Net
Income to Net Cash Provided by
Operating Activities:
Depreciation and Amortization 446,238 390,443 504,499 609,018 721,474
Provision for Losses on Accounts
Receivable (17,397) (77,760) 49,317 (24,705) 73,880
Minority Interest (23,418) 12,594 (19,485) 1,775 1,461
Deferred Income Taxes -- -- (624) (127,700) 15,000
Loss on Sale of Fixed Assets -- -- -- -- 10,154
[Gain] on Sale of Marketable
Securities (672,045) (1,072,000) (1,066,185) (299,841) (5,778)
Deferred Compensation and
Stock Bonus 64,885 (61,832) (52,074) 172,492 10,674
Gain on Sale of Subsidiary -- (97,635) (97,635) -- --
----------- ----------- ----------- ---------- -----------
Subtotal - Adjustments to
Reconcile Net Income to Cash (201,737) (906,190) (682,187) 331,039 826,865
----------- ----------- ----------- ---------- -----------
Subtotal 2,002,968 1,843,484 2,077,436 2,485,356 1,924,206
----------- ----------- ----------- ---------- -----------
Changes in Assets and Liabilities:
[Increase] Decrease in:
Miscellaneous Receivables (249,068) 7,651 36,686 (29,708) 30,326
Accounts Receivable (1,101,914) (233,807) 284,430 2,059,305 314,194
Prepaid Expenses (47,176) 44,553 (28,191) (155) 47,676
Other Assets (3,867) 5,079 11,282 12,087 37,034
Increase [Decrease] in:
Accounts Payable 924,431 (25,408) (234,891) (555,154) (1,182,547)
Accrued Expenses (563,369) 47,077 601,894 (448,604) 333,994
Income Taxes Payable (4,493) (15,844) (25,793) 148,354 10,103
Commissions Payable (67,440) 23,971 52,529 68,624 (185,553)
Due to Customers 1,358,099 (67,137) (118,856) (646,240) 671,273
Other Current Liabilities -- (83,559) (83,559) (138,632) 47,628
----------- ----------- ----------- ---------- -----------
Total Change in Assets
and Liabilities 245,203 (297,424) 495,531 469,877 124,128
----------- ----------- ----------- ---------- -----------
Net Cash - Operating
Activities - Forward $ 2,248,171 $ 1,546,060 $ 2,572,967 $2,955,233 $ 2,048,334
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
MSFG, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine months ended Years ended
----------------- --------------------
September 30, December 31,
------------- --------------------
1 9 9 9 1 9 9 8 1 9 9 8 1 9 9 7 1 9 9 6
----------- ----------- ----------- ----------- -----------
[Unaudited] [Unaudited]
<S> <C> <C> <C> <C> <C>
Net Cash - Operating Activities -
Forwarded $ 2,248,171 $ 1,546,060 $ 2,572,967 $ 2,955,233 $ 2,048,334
----------- ----------- ----------- ----------- -----------
Investing Activities:
Purchase of Business -- (265,835) (265,835) -- (148,617)
Capital Expenditures (348,169) (135,926) (313,137) (219,953) (880,756)
Purchase of Marketable Securities (2,206,363) (1,337,587) (1,210,066) (2,131,566) (949,194)
Proceeds from Sale of Marketable
Securities 1,192,817 2,061,995 2,722,045 1,251,995 325,348
Purchase of Other Investments (175,000) -- (123,483) (70,000) --
Proceeds from Other Investments -- -- -- 16,697 --
Purchase of Short-Term Investment (315,905) (302,596) (597,009) (828,729) (187,556)
Proceeds from Sale of
Short-Term Investments 295,160 390,685 674,512 694,107 189,240
Issuance of Notes
Receivable - Related Parties (92,850) (774,021) (747,459) (834,281) --
Collection of Notes Receivable -
Related Parties 101,032 20,327 3,222,032 186,610 63,591
Issuance of Notes Receivable -- -- -- -- (50,000)
Collection of Notes Receivable -- -- 25,000 -- --
[Increase] Decrease in Cash
Value of Life Insurance (85,862) (95,024) 76,087 (276,104) (169,694)
----------- ----------- ----------- ----------- -----------
Net Cash - Investing
Activities - Forward (1,635,140) (437,982) 3,462,687 (2,211,224) (1,807,638)
----------- ----------- ----------- ----------- -----------
Financing Activities:
Payments of Line of Credit -- -- -- -- (1,200,000)
Dividends Paid -- -- (29,834) -- --
Payments of Debt (139,616) (134,062) (220,109) (42,379) (86,020)
Payments Received on Debt from
Former Subsidiary -- 3,635,863 3,635,863 -- --
Sale of Treasury Stock 10,000 -- 29,289 -- 10,000
Purchase of Treasury Stock (55,810) -- (42,119) (154,188) --
----------- ----------- ----------- ----------- -----------
Net Cash - Financing Activities (185,426) 3,501,801 3,373,090 (196,567) (1,276,020)
----------- ----------- ----------- ----------- -----------
Net Increase [Decrease] in Cash
and Cash Equivalents 427,605 4,609,879 9,408,744 547,442 (1,035,324)
Cash and Cash Equivalents -
Beginning of Years 12,780,559 3,371,815 3,371,815 2,824,373 3,859,697
----------- ----------- ----------- ----------- -----------
Cash and Cash Equivalents -
End of Years $13,208,164 $ 7,981,694 $12,780,559 $ 3,371,815 $ 2,824,373
=========== =========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
MSFG, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine months ended Years ended
----------------- --------------------------
September 30, December 31,
------------- --------------------------
1 9 9 9 1 9 9 8 1 9 9 8 1 9 9 7 1 9 9 6
------- ------- ------- ------- --------
[Unaudited] [Unaudited]
<S> <C> <C> <C> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash paid during the years for:
Interest $ 33,728 $ 35,878 $ 54,544 $ 25,224 $ 38,740
Income Taxes $1,501,971 $1,666,150 $2,221,535 $1,191,853 $852,173
</TABLE>
Supplemental Schedule of Non-Cash Investing and Financing Activities:
During 1996, MSFG, Inc. incurred a note payable of $138,777 in connection with
the acquisition of a customer list.
During 1996, MSFG, Inc. sold 7,861 shares of its treasury stock for $43,474,
receiving $10,000 in cash and notes receivable of $33,474.
MSFG, Inc. sold 95,942 shares of its treasury stock for $569,896 in 1997 for
notes receivable.
In 1997, MSFG, Inc. purchased 60,935 shares of its treasury stock for $215,705,
paying $154,188 in cash and $61,517 in connection with the cancellation of a
note receivable. In 1998, MSFG, Inc. purchased 18,875 shares of its treasury
stock for $112,119 paying $42,119 in cash and $70,000 in connection with the
cancellation of a note receivable.
In 1998, MSFG, Inc. sold 7,456 shares of its treasury stock for $44,289,
receiving $29,289 in cash and notes receivable of $15,000.
In 1998, MSFG, Inc. sold its interest in a subsidiary for a note receivable of
$1,610,000.
MSFG, Inc. incurred a note payable of $1,048,824 in connection with the
acquisition of the assets of an insurance agency. Subsequent to the acquisition,
MSFG, Inc. received $209,764 in notes receivable in exchange for the sale of a
20% interest in the acquired subsidiary.
During 1998, 1997 and 1996, MSFG, Inc. issued 7,345, 7,412 and 5,966 shares,
respectively, of its treasury stock to several employees as a stock bonus award.
During 1998, MSFG, Inc. transferred officers' life insurance policies to a
related trust for a note receivable of $707,417.
See Notes to Consolidated Financial Statements.
F-8
<PAGE>
MSFG, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[Information as of and for the periods ended September 30, 1999 and 1998 are
Unaudited]
- --------------------------------------------------------------------------------
[1] Summary of Significant Accounting Policies
[A] Description and Nature of MSFG, Inc.'s Operations - MSFG, Inc. is an
insurance and benefits brokerage firm with several offices located throughout
New Jersey and Pennsylvania. MSFG, Inc. offers a variety of services including
business and personal insurance, bonding, health benefits, retirement benefits
and administration of employee benefit plans.
[B] Corporate Organization and Principles of Consolidation - The consolidated
financial statements include the accounts of MSFG, Inc. and its wholly-owned
subsidiaries, Meeker Sharkey Financial Group, Inc., Meeker Sharkey Benefit
Consultants, Inc. and Meeker Sharkey Divine Company. In 1998, MSFG, Inc.
purchased the assets of an insurance agency for $1,314,659 consisting of cash of
$265,835 and a note payable of $1,048,829. An intangible of $1,248,829
consisting of a customer list resulted from the purchase. Subsequently, 20% of
the subsidiary formed as a result of the acquisition was sold to a former
employee for $249,766.
MSFG, Inc. sold its entire interest in Gweedore, LLC on May 15, 1998 for
$1,610,000, consisting entirely of notes receivable, resulting in a gain of
$97,635.
All significant intercompany balances and transactions have been eliminated in
consolidation.
[C] Unaudited Interim Financial Statements - The financial statements as of
September 30, 1999 and 1998 and for the nine months and three months ended
September 30, 1999 and 1998 are unaudited; however, in the opinion of
management, all adjustments [consisting solely of normal recurring adjustments]
necessary to a fair presentation of the financial statements for the interim
periods have been made. The results of the interim periods are not necessarily
indicative of the results to be obtained for a full fiscal year.
[D] Revenue Recognition - Commissions on policies billed by MSFG, Inc. are
recorded generally on the later of the billing or effective date of the
policies. Premium adjustments, including policy cancellations, are recorded upon
notification from insurance companies. Commissions on policies billed and
collected directly by insurance companies and from contingent agreements with
insurance companies are reported as received.
[E] Accounts Receivable - Accounts receivable is shown net of an allowance for
doubtful accounts of $205,740 and $156,423 as of December 31, 1998 and 1997,
respectively.
[F] Property and Equipment and Depreciation - Expenditures for improvements and
additions are capitalized while expenditures for normal repairs and maintenance
are charged against income as incurred. Depreciation and amortization are
provided primarily using the straight-line method over estimated useful lives as
follows:
Furniture, Fixtures and Office Equipment 5 Years
Automobiles 3 Years
Leasehold Improvements Shorter of useful life of asset
or length of lease
Building and Improvements 40 Years
During 1998, 1997 and 1996, depreciation expense was $277,311, $496,580 and
$385,597, respectively.
F-9
<PAGE>
MSFG, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
[Information as of and for the periods ended September 30, 1999 and 1998 are
Unaudited]
- --------------------------------------------------------------------------------
[1] Summary of Significant Accounting Policies [Continued]
[G] Marketable Securities - Management determines the appropriate
classifications of its investments in debt and equity securities at the time of
purchase and re-evaluates such determination at each balance sheet date. Debt
securities for which MSFG, Inc. does not have the intent or ability to hold to
maturity are classified as available for sale , along with MSFG, Inc.'s
investment in equity securities. Securities available for sale are carried at
fair value, with any unrealized holding gains and losses, net of tax, reported
in a separate component of shareholders' equity until realized. At December 31,
1998 and 1997, MSFG, Inc. had no investments that qualified as trading or held
to maturity. Marketable equity and debt securities available for current
operations are classified in the Balance Sheet as current assets while
securities held for non-current uses are classified as long-term assets.
Realized gains and losses on dispositions are based on the net proceeds and the
adjusted book value of the securities sold, using the specific identification
method. Unrealized gains and losses on investment securities available for sale
are based on the difference between book value and the fair value of each
security. At December 31, 1998, 1997 and 1996, such securities include an
unrealized holding gain of $2,560,751, $3,771,671 and $1,177,996, respectively,
reported net of tax of $1,024,300, $1,508,673 and $471,198, respectively. During
1998, 1997 and 1996, the unrealized holding gain decreased by $1,210,920 and
increased by $2,593,615 and $495,798, respectively. Realized gains are included
in other income.
Investment in securities are summarized as follows at December 31, 1998:
<TABLE>
<CAPTION>
Available for Sale Securities:
Gross
-----
Unrealized Unrealized Fair
---------- ---------- ----
Gain Loss Value
---- ---- -----
<S> <C> <C> <C>
Common Stock $2,547,615 $ -- $5,355,152
Preferred Stock 15,230 -- 645,537
Debt Securities [Maturing Within One Year] -- 2,094 277,730
---------- ---------- ----------
Totals $2,562,845 $2,094 $6,278,419
------ ========== ========== ==========
</TABLE>
Investment in securities are summarized as follows at December 31, 1997:
<TABLE>
<CAPTION>
Available for Sale Securities:
Gross
-----
Unrealized Unrealized Fair
---------- ---------- ----
Gain Loss Value
---- ---- -----
<S> <C> <C> <C>
Common Stock $3,736,389 $ -- $6,144,921
Preferred Stock 37,812 -- 818,002
Debt Securities [Maturing Within One Year] -- 2,530 946,834
---------- ---------- ----------
Totals $3,774,201 $2,530 $7,909,757
------ ========== ========== ==========
</TABLE>
F-10
<PAGE>
MSFG, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
[Information as of and for the periods ended September 30, 1999 and 1998 are
Unaudited]
- --------------------------------------------------------------------------------
[1] Summary of Significant Accounting Policies [Continued]
[G] Marketable Securities [Continued] - During 1998, 1997 and 1996, sales
proceeds and gross realized gains and losses on securities classified as
available-for-sale were as follows:
1 9 9 8 1 9 9 7 1 9 9 6
---------- ---------- --------
Sale Proceeds $2,722,045 $1,251,995 $325,348
========== ========== ========
Gross Realized Gains $1,087,947 $ 301,984 $ 5,778
========== ========== ========
Gross Realized Losses $ 21,762 $ 2,143 $ --
========== ========== ========
The estimated fair value of debt securities available for sale by contractual
maturity at December 31, 1998 and 1997 are as follows:
1 9 9 8 1 9 9 7
---------- ----------
Due in One to Five Years $ 25,092 $ 25,368
========== ==========
Expected maturities will differ from contractual maturities because the issuers
of the securities may have the right to prepay obligations without prepayment
penalties.
[H] Cash and Cash Equivalents - Cash equivalent are comprised of certain highly
liquid investments with a maturity of three months or less when purchased.
MSFG, Inc. did not have any cash equivalents as of December 31, 1998 or 1997.
[I] Short Term Investments - Short-term investments consist primarily of
certificates of deposit purchased with a maturity dates ranging from over three
months to one and a half years at various interest rates.
[J] Fiduciary Funds - Premiums which are due from insureds are reported as
assets of MSFG, Inc. and as corresponding liabilities, net of commissions, to
the insurance carriers. Premiums received for insureds but not yet remitted to
the carriers are held as cash or investment in a fiduciary capacity. Total funds
held in a fiduciary capacity at the end of 1998 and 1997 were $5,231,584 and
$5,362,008, respectively.
[K] Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and disclosures.
Actual amounts could differ from those estimates.
[L] Concentration of Credit Risk - Financial instruments which potentially
subject MSFG, Inc. to concentrations of credit risk consist principally of cash
and cash equivalents, and accounts receivable.
MSFG, Inc. maintains cash and cash equivalents and short term investments in
various financial institutions. At December 31, 1998 and 1997 MSFG, Inc. had
amounts in banks in excess of FDIC insurance limits in the amount of $11,351,373
and $3,847,743, respectively.
Generally, MSFG, Inc. does not require collateral or other security to support
customer receivables. MSFG, Inc. routinely assesses the financial strength of
its customers and based upon factors concerning credit risk, establishes an
allowance for uncollectible accounts. Management believes that accounts
receivable credit risk exposure beyond such allowance is limited.
[M] Advertising - MSFG, Inc. expenses advertising costs as incurred. Total
advertising costs charged to expense for 1998, 1997 and 1996 amounted to
$167,634, $148,237 and $186,422, respectively.
F-11
<PAGE>
MSFG,INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4
[Information as of and for the periods ended September 30,1999 and 1998 and
Unaudited]
- --------------------------------------------------------------------------------
[1] Summary of Significant Accounting Policies [Continued]
[N] Other Comprehensive Income - MSFG, Inc.'s other comprehensive income
consists entirely of unrealized gains and losses on investments.
<TABLE>
<CAPTION>
1 9 9 8 1 9 9 7 1 9 9 6
------- ------- -------
<S> <C> <C> <C>
Accumulated Other Comprehensive Income:
Unrealized Gains [Losses] on Securities:
Beginning Balance $ 2,262,998 $ 706,798 $ 409,319
Current - Period Change 297,484 3,064,873 768,677
Tax Effect (1,024,300) (1,508,673) (471,198)
----------- ----------- ---------
Ending Balance $ 1,536,182 $ 2,262,998 $ 706,798
-------------- =========== =========== =========
</TABLE>
[O] Earnings Per Common Share - Basic earnings per share represents the amount
of earnings for the period available to each share of common stock outstanding
during the reporting period. Diluted earnings per share reflects the amount of
earnings for the period available to each share of common stock outstanding
during the reporting period, while giving effect to all dilutive potential
common shares that were outstanding during the period, such as common shares
that could result from the potential exercise or conversion of securities into
common stock.
The computation of diluted earnings per share does not assume conversion,
exercise, or contingent issuance of securities that would have an antidilutive
effect on earnings per share. The dilutive effect of outstanding options and
warrants and their equivalents is reflected in diluted earnings per share by the
application of the treasury stock method which recognizes the use of proceeds
that could be obtained upon exercise of options and warrants in computing
diluted earning per share. It assumes that any proceeds would be used to
purchase common stock at the average market price during the period. Options and
warrants will have a dilutive effect only when the average market price of the
common stock during the period exceeds the exercise price of the option or
warrants.
Potential future dilutive securities include 60,000 shares issuable under
outstanding options as of December 31, 1998 and 1997, respectively.
[2] Intangible Assets
Acquired intangible assets generally consist of rights to use of trade names,
insurance account information expiration data, customer lists, goodwill and
restrictive covenants. The costs of intangible assets are amortized on a
straight-line basis over their useful lives. Summary information is as follows:
<TABLE>
<CAPTION>
1998 Life Amortization
- ---- ----- ------------
Years Cost Accumulated Net
----- ---- ----------- ---
<S> <C> <C> <C> <C>
Expiration and Customer Lists 5 -15 $5,049,146 $3,452,150 $1,596,996
Covenants Not-to-Compete 5- 15 1,563,583 1,411,944 151,639
Goodwill 10 - 40 704,383 405,396 298,987
---------- ---------- ----------
Totals $7,317,112 $5,269,490 $2,047,622
------ ========== ========== ==========
1997 Life Amortization
- ---- ---- ------------
Years Cost Accumulated Net
----- ---- ----------- ---
Expiration and Customer Lists 5 -15 $3,809,322 $3,282,520 $ 526,802
Covenants Not-to-Compete 5- 15 1,563,583 1,395,610 167,973
Goodwill 10 - 40 704,384 373,173 331,211
---------- ---------- ----------
Totals $6,077,289 $5,051,303 $1,025,986
------ ========== ========== ==========
</TABLE>
Amortization expense for 1998, 1997 and 1996 was $227,188, $112,438 and
$335,877, respectively.
Management evaluates the period of amortization of intangible assets to
determine whether events and circumstances warrant revised estimates of useful
lives. Additionally, management reviews long-lived assets including intangible
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable.
[3] Employee Benefit Plan
MSFG, Inc. has established a Profit Sharing Plan and a 401[K] Savings Plan which
cover substantially all employees. The Plans qualify under applicable sections
of the Internal Revenue Code. Contributions for the Profit Sharing Plan are
based on a formula and are at the discretion of management. Contributions for
the 401[K] Plan were approximately 33% of employee contributions up to $1,500 or
a maximum contribution per employee of $500. Total Company contributions to the
Plans were $443,025, $430,152 and $393,618 for 1998, 1997 and 1996,
respectively.
F-12
<PAGE>
MSFG, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
[Information as of and for the periods ended September 30, 1999 and 1998 are
Unaudited]
- --------------------------------------------------------------------------------
[4] Leases
MSFG, Inc. leases operating facilities from two related parties and two
unrelated parties, and certain equipment under operating leases which expire at
various dates through March 2003.
Future minimum payments under non-cancelable operating leases consisted of the
following at December 31, 1998:
Related Unrelated
------- ----------
Facilities Facilities Equipment
---------- ---------- ---------
Year Leases Leases Leases Total
- ---- ------ ------ ------ -----
1999 $ 605,223 $109,700 $ 52,344 $ 767,267
2000 250,466 109,700 33,260 393,426
2001 74,420 43,000 24,671 142,091
2002 75,372 39,417 -- 114,789
2003 31,405 -- -- 31,405
Thereafter -- -- -- --
---------- -------- -------- ----------
Totals $1,036,886 $301,817 $110,275 $1,448,978
------ ========== ======== ======== ==========
Total rent expense under non-cancelable operating leases for 1998, 1997 and 1996
was $345,245, $112,082 and $223,034, respectively. Rent expense paid to related
parties in 1998 was $391,635, and was $-0- in 1997 and 1996.
[5] Related Parties
Certain storage facilities are leased from a partnership controlled by a
principal of MSFG, Inc. Rental expense amounted to $8,500 for each of 1998,
1997 and 1996.
Amounts due from related parties consist of the following:
<TABLE>
<CAPTION>
1 9 9 8 1 9 9 7
---------- ----------
<S> <C> <C>
Demand Notes at 5% to 7.5% $ 859,577 $ 875,949
Term Notes, due in equal monthly payments including interest
at 5% to 6% through 2004. 724,873 707,398
---------- ----------
Totals 1,584,450 1,583,347
Less: Short-Term Portion 313,721 1,079,262
---------- ----------
Long-Term Portion $1,270,729 $ 504,085
----------------- ========== ==========
</TABLE>
Interest income amounted to $133,752, $40,742 and $25,974, respectively, for
1998, 1997 and 1996.
[6] Note Receivable
In March 1996, MSFG, Inc. loaned $50,000 to an unrelated party, secured by a
mortgage. The principal balance is due on the earlier of April 2011 or the date
of sale of the underlying real property. Interest is due at 12% annually.
MSFG, Inc. received $25,000 during 1998.
F-13
<PAGE>
MSFG, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
[Information as of and for the periods ended September 30, 1999 and 1998 are
Unaudited]
- --------------------------------------------------------------------------------
[7] Income Taxes
The components of income tax are:
<TABLE>
<CAPTION>
1 9 9 8 1 9 9 7 1 9 9 6
------- ------- -------
<S> <C> <C> <C>
Current Income Tax Expense:
Federal $1,682,256 $1,036,210 $657,976
State 480,875 303,997 187,824
---------- ---------- --------
Total Current Income Tax Expense 2,163,131 1,340,207 845,800
---------- ---------- --------
Deferred Income Tax Expense:
Federal (484) (98,974) 11,625
State (140) (28,726) 3,375
---------- ---------- --------
Total Deferred Income Tax Expense (624) (127,700) 15,000
---------- ---------- --------
Total Income Tax Expense $2,162,507 $1,212,507 $860,800
- ------------------------ ========== ========== ========
</TABLE>
Generally accepted accounting principles requires the use of the asset and
liability method for accounting for income taxes. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which temporary differences are expected to be recovered
or settled.
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:
<TABLE>
<CAPTION>
December 31,
-----------
1 9 9 8 1 9 9 7
------- -------
<S> <C> <C>
Deferred Tax Assets:
Intangibles - Customer List $ 21,840 $ --
Deferred Compensation and Bonus Awards 107,463 126,200
Provision for Doubtful Account 82,296 62,600
Accrued Expenses 100,725 122,900
----------- -----------
Total Deferred Tax Assets 312,324 311,700
Deferred Tax Liabilities:
Unrealized Holding Gain on Investments (1,024,300) (1,508,673)
----------- -----------
Net Deferred Tax Liability $ (711,976) $(1,196,973)
- --------------------------- =========== ===========
</TABLE>
The net deferred tax liability is shown as a current liability.
Major reconciling items affecting MSFG, Inc.'s effective federal income tax rate
consist of permanent differences and deductions for dividends received.
F-14
<PAGE>
MSFG, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7
[Information as of and for the periods ended September 30, 1999 and 1998 are
Unaudited]
- --------------------------------------------------------------------------------
[8] Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1 9 9 8 1 9 9 7
------- -------
<S> <C> <C>
Note payable, due in monthly installments through April 2003 $ 947,182 $ --
Note payable to former stockholder at prime plus 1%,
due in quarterly installments through February 1999 14,636 31,716
Note payable to former stockholder at prime plus 1%,
due in quarterly installments through May 2002 -- 81,562
Note payable other, due without interest in quarterly
installments through 2002 69,264 89,089
---------- --------
Totals 1,031,082 202,367
Less: Current Portion 191,624 50,414
---------- --------
Long-Term Portion $ 839,458 $151,953
- ------------------ ========== ========
</TABLE>
The interest rate on the notes payable to former stockholders cannot exceed ten
percent.
MSFG, Inc. terminated a $4,000,000 line of credit in 1998 prior to its December
1999 expiration.
Maturities of long-term debt at December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999 $ 191,624
2000 188,684
2001 195,450
2002 194,400
2003 194,056
Thereafter 66,868
----------
Total $1,031,082
- ------ ==========
</TABLE>
[9] Deferred Compensation
MSFG, Inc. has deferred compensation arrangements with three employees. The
change in the estimated present value of the benefits is charged to operations
over the period from the effective dates of each plan to the normal retirement
dates of the executives. The lives of the executives have been insured for
amounts sufficient to discharge death benefits provided in their respective
agreements. The estimated liabilities under the plans amounted to $352,388 and
$374,603, as of December 31, 1998 and 1997, respectively.
[10] Deferred Stock Bonus Award
During 1998, 1997 and 1996, MSFG, Inc. granted stock bonus awards of 7,345,
7,412 and 5,966 shares, respectively, to several employees. The shares will be
held in escrow for a five year vesting period. The compensation resulting from
the award is amortized over the vesting period and amounted to $25,155, $15,404
and $4,674 for 1998, 1997 and 1996, respectively.
F-15
<PAGE>
MSFG, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
[Information as of and for the periods ended September 30, 1999 and 1998 are
Unaudited]
- --------------------------------------------------------------------------------
[11] Stockholders' Equity
Treasury Stock is shown at cost and consists of 190,184, 186,110 and 228,529
shares of Class B, Non Voting Common Stock at December 31, 1998, 1997 and 1996,
respectively.
During the year 1998, 7,456 shares were sold for $44,289. In addition, MSFG,
Inc. purchased 18,875 shares for $112,119. During 1997, MSFG, Inc. sold 95,942
shares of stock for $569,896 and purchased $60,935 shares for $215,705. During
1996, MSFG, Inc. sold 7,861 shares of stock for $43,474.
During 1998, 1997 and 1996, MSFG, Inc. granted stock bonus awards of 7,345,
7,412 and 5,966 shares, respectively, of treasury stock to several employees.
[12] Minority Interests
The consolidated financial statements at December 31, 1998, include 100% of the
assets and liabilities of Meeker Sharkey Devine Company, Inc. and at December
31, 1997 included 100% of Gweedore, LLC both of which are less than 100% owned.
Ownership interests of the other stockholders are reflected as Minority
interests. MSFG, Inc. sold its entire interest in Gweedore, LLC in May 1998.
[13] Litigation
In the normal course of business, MSFG, Inc. is exposed to a number of other
asserted and unasserted potential claims. Management, after review and
consultation with counsel, believes it has meritorious defenses and considers
that any liabilities from these matters would not materially affect the
consolidated financial position, liquidity or results of operations of MSFG,
Inc.
[14] New Authoritative Accounting Pronouncements
The Financial Accounting Standard Board ["FASB"] has issued Statement of
Financial Accounting Standards ["SFAS"] No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. SFAS No.
133 requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and how it its designated, for
example, gain or losses related to changes in the fair value of a derivative not
designated as a hedging instrument is recognized in earnings in the period of
the change, while certain types of hedges may be initially reported as a
component of other comprehensive income [outside earnings] until the
consummation of the underlying transaction.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. Initial application of SFAS No. 133 should be as of the
beginning of a fiscal quarter; on that date, hedging relationships must be
designated anew and documented pursuant to the provisions of SFAS No. 133.
Earlier application of all of the provisions of SFAS No. 133 is encouraged, but
it is permitted only as of the beginning of any fiscal quarter. SFAS No. 133 is
not to be applied retroactively to financial statements of prior periods.
MSFG, Inc. does not currently have any derivative instruments and is not
currently engaged in any hedging activities.
F-16
<PAGE>
MSFG, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9
[Information as of and for the periods ended September 30, 1999 and 1998 are
Unaudited]
- --------------------------------------------------------------------------------
[15] Subsequent Events [Unaudited] -
In December of 1999, the Board of Directors of Summit Bancorp. and MSFG, Inc.
agreed upon a merger combining MSFG and Summit. Pursuant to the terms of the
agreement and plan of reorganization dated December 31, 1999, among Summit,
Summit Bank, MSFG and the shareholders of MSFG who are signatories to the
agreement and plan of reorganization, a to-be-formed wholly owned subsidiary of
Summit will merge into MSFG. As a result of the merger, MSFG will be a wholly
owned subsidiary of Summit. The merger cannot be completed unless the
shareholders of MSFG approve it. A special meeting of the shareholders of MSFG
will be held to vote on this merger. If the merger is completed, MSFG
shareholders will be entitled to receive 1,344,256 shares of Summit common stock
which will be divided amongst the MSFG shareholders based upon their current
MSFG ownership percentage. Pursuant to the terms of the reorganization
agreement, three percent of the shares of Summit common stock to be received in
connection with the merger will be retained by Summit for the purpose of
correcting any shortfalls with respect to agreed upon levels of working capital
and/or shareholder's equity. The merger has been conditioned so that the MSFG
shareholders will not recognize any gain or loss for federal tax purposes. The
reorganization agreement may be terminated by the companies by mutual agreement,
by either party if the merger has not been completed by March 30, 2000 or by
MSFG in the event that MSFG receives a legal opinion that the merger does not
qualify as a reorganization under the Internal Revenue Code.
. . . . . . . . . . .
F-17
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") dated as of the 31/st/ day
of December, 1999, among SUMMIT BANCORP., a New Jersey corporation ("Summit"),
SUMMIT BANK, a bank organized under the laws of the State of New Jersey and
wholly-owned subsidiary of Summit ("Bank"), MSFG, INC., a New Jersey corporation
("Company"), and certain holders of equity interests in the Company as listed on
the signature page hereof (individually, "Principal Shareholder;" collectively,
"Principal Shareholders").
BACKGROUND
The Company is engaged in the business of insurance and benefits brokerage and
consulting. The Company, its Principal Shareholders, Summit and a to be formed,
wholly-owned subsidiary of Summit ("Acquisitionco") wish to enter into this
Agreement and Plan of Reorganization under Section 368(a)(2)(E) of the Internal
Revenue Code of 1986, as amended (the "Code"), pursuant to which Acquisitionco
will merge with and into Company with the Company as the surviving corporation
on the terms and conditions hereinafter set forth (the "Reorganization").
Pursuant to the Reorganization, the Company will become a wholly-owned
subsidiary of Summit, and immediately thereafter Summit will transfer the
outstanding stock of the Company to the Bank.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, agreements and conditions contained herein, and in order to set forth
the terms and conditions of the Reorganization and in order to carry the same
into effect, the parties hereto hereby agree as follows:
ARTICLE I
THE REORGANIZATION
SECTION 1.01 Surviving Corporation. Subject to the terms and conditions of
---------------------
this Agreement, at the Effective Time (as defined in Section 1.02),
Acquisitionco shall be merged with and into Company, and Company shall be the
surviving corporation (hereinafter sometimes referred to as the "Surviving
Corporation") and shall continue its corporate existence under the laws of the
State of New Jersey. At the Effective Time, the separate existence of
Acquisitionco shall cease. The Certificate of Incorporation and By-laws of
Company, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation and By-laws of the Surviving Corporation until
thereafter amended as provided by law. The persons named by Summit
simultaneously with the Effective Time shall be the directors and officers of
the Surviving Corporation and shall hold office from the Effective Time until
their resignation or their respective successors are duly elected or appointed
and qualify in the manner provided in the Certificate of Incorporation and By-
laws of the Surviving Corporation.
SECTION 1.02 Closing. The closing of the transactions contemplated by this
-------
Agreement ("Closing") shall take place at the offices of Summit located at 301
Carnegie Center, Princeton, New Jersey, commencing at 10:00 A.M. on the 29/th/
day of February, 2000, or such other date and place as shall be fixed by
agreement between Summit and the Company ("Scheduled Date of Closing").
A-1
<PAGE>
The date that the Closing occurs is herein referred to as the "Closing Date."
The Reorganization shall become effective at the time specified as the effective
time in the Certificate of Merger (the "Certificate of Merger"), which shall be
specified in the Certificate of Merger as 11:59 p.m. on the Closing Date. The
date and time when the Reorganization becomes effective are herein referred to
as the "Effective Time."
SECTION 1.03 Purchase Price.
--------------
(a) Subject to the provisions of this Agreement, at the Effective Time, each
of the issued and outstanding shares of Company Common Stock (as hereinafter
defined) as of the Effective Time shall by virtue of the Reorganization and
without any action on part of the holder thereof, be converted into the right to
receive, and there shall be paid as hereinafter provided, in exchange for each
of the shares of Company Common Stock, the consideration described in Section
1.03(b). At the Closing, each holder of equity interest in the Company (a
"Shareholder" and collectively the "Shareholders") shall deliver to Summit
certificates for Company Common Stock representing all of the issued and
outstanding shares of Company Common Stock. Each Shareholder shall deliver one
or more certificates as appropriate, representing the number of shares of
Company Common Stock owned by such Shareholder. Such certificates shall not bear
any legend or marginal entry which causes the sale or alienation of the shares
represented thereby to Summit, or by Summit thereafter, to be restricted, except
for restrictions pursuant to applicable federal and state securities laws. Such
certificates shall be duly endorsed in blank or with appropriate duly executed
stock transfer powers attached, all requisite stock transfers stamped, attached
or provided for and shall be accompanied by any letter of transmittal reasonably
requested by Summit.
(b) (1) At the Effective Time, in consideration of the conveyance, transfer
and assignment of the Outstanding Stock (as hereinafter defined), and in full
payment for it, Summit shall (i) deliver directly to the Shareholders
certificates representing, in the aggregate, the number of shares of Summit
Common Stock (as hereinafter defined) determined by multiplying .85 times the
number of shares represented by the Summit Stock (as hereinafter defined) and
rounding, if necessary, to the nearest whole share, (ii) deliver to the Escrow
Agent (as defined in Section 1.04 hereof) certificates representing, in the
aggregate, the number of shares of Summit Common Stock determined by multiplying
.12 times the number of shares of Summit Stock and rounding, if necessary, to
the nearest whole share (the "Escrow Shares"), and (iii) subject to the
provisions of Section 1.05, retain certificates representing, in the aggregate,
the number of shares of Summit Common Stock determined by subtracting the
aggregate number of shares determined pursuant to clauses (i) and (ii) above
from the number of shares represented by the Summit Stock (the "Retained
Shares"). All of the shares of Summit Stock delivered to the Escrow Agent shall
come from consideration to be received by the Principal Shareholders. The
aggregate shares of Summit Stock being paid as consideration for the Outstanding
Stock are herein collectively referred to from time to time as the "Purchase
Price." The Summit Stock shall be appropriately adjusted in the event of stock
dividends, stock splits, reverse stock splits, recapitalizations or other
changes in the capitalization of Summit between the date hereof and the Closing
Date. Each Shareholder shall be entitled to receive in the aggregate that total
number of shares of Summit Stock, when required to be delivered, arrived at by
multiplying the total number of shares of Summit Stock by a fraction, the
numerator of which will be the number of shares of Outstanding Stock held by
such Shareholder and the denominator of
A-2
<PAGE>
which is the total number of Outstanding Stock ("Pro Rata Share"). The result
shall be rounded to the nearest whole share.
(2) The number of shares of Summit Common Stock constituting the Summit
Stock shall be One Million, Three Hundred Forty Four Thousand, Two Hundred Fifty
Six (1,344,256).
(c) At the Effective Time, each share of Acquisitionco Common Stock (as
hereinafter defined) issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Reorganization and without any action on the part
of the holder thereof, be converted into and exchangeable for one share of
issued, outstanding, fully paid and nonassessable share of common stock of the
Surviving Corporation. All certificates that immediately prior to the Effective
Time represented the outstanding common stock of Acquisitionco shall be deemed
for all purposes to represent the number of shares of common stock of the
Surviving Corporation into which such common stock of Acquisitionco has been
converted pursuant to this Section 1.03(c).
(d) In the event that any certificate representing shares of Outstanding
Stock ("Certificate") shall have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed no less than five business days prior to the Scheduled Date
of Closing, such Certificate shall be deemed to have been delivered in
accordance with Section 1.03(a).
(e) For purposes of this Agreement, (i) the common stock of the Company is
referred to as the "Company Common Stock," (ii) the Company Common Stock being
exchanged for shares of Summit Common Stock (as hereinafter defined) pursuant to
this Agreement is referred to as the "Outstanding Stock," (iii) "Summit Common
Stock" means the voting common stock, par value $.80 per share, of Summit and
the rights attached thereto ("Rights") pursuant to the Rights Agreement dated as
of June 16, 1999 between Summit and First Chicago Trust Company of New York, as
Rights Agent ("Rights Agreement"), (iv) "Summit Stock" means the shares of
Summit Common Stock required to be delivered by Summit to the Shareholders at
the Closing in consideration and exchange for the Outstanding Stock in
accordance with Section 1.03(b), and (v) "Acquisitionco Common Stock" means the
common stock of Acquisitionco.
SECTION 1.04 Escrow Agreement. The Escrow Shares shall be deposited by
----------------
Summit pursuant to Section 1.03 with Manchester Trust Bank, a New Jersey banking
corporation ("Escrow Agent"). At Closing, each Principal Shareholder shall
deliver to the Escrow Agent stock powers duly signed in blank covering the
certificates delivered to the Escrow Agent pursuant to Section 1.03. The Escrow
Shares shall be held by the Escrow Agent for the period of time specified in,
and pursuant to the other terms and conditions of, an escrow agreement in the
form attached hereto as Exhibit A ("Escrow Agreement").
---------
SECTION 1.05 Retained Shares. In the event that a Shortfall (as defined in
---------------
Section 5.07(b)) exists, the Purchase Price shall be reduced by the amount of
such Shortfall and Summit shall not be obligated to issue or deliver to
Shareholders that whole number of Retained Shares which have a Fair Market Value
as nearly as equal as possible to, but not less than, such Shortfall. If there
shall be insufficient Retained Shares to pay any such Shortfall, the Escrow
Agent shall be authorized to pay
A-3
<PAGE>
Summit out of the Escrow Fund (as defined in the Escrow Agreement) Cash
Consideration (as defined in the Escrow Agreement) in the amount of such
Shortfall. If there shall be insufficient Cash Consideration in the Escrow Fund
to pay any such Shortfall, the Escrow Agent shall sell a sufficient number of
Escrow Shares to produce, after all costs and expenses of sale are deducted,
sale proceeds which together with any other Cash Consideration in the Escrow
Fund are at least equal to the amount of such Shortfall and shall pay Cash
Consideration equal to the amount of such Shortfall to Summit. If, upon the
final agreement by the parties with respect to any Shortfall and the reduction
of Purchase Price and payment thereof to Summit out of the Retained Shares, any
Retained Shares remain pursuant to this Section 1.05, certificates representing
the remaining Retained Shares shall be distributed to the Shareholders in
accordance with their Pro Rata Share. Fair Market Value as used in this section
shall have the meaning set forth in the Escrow Agreement, replacing the term
"Escrow Shares" with "Retained Shares" in clause Y thereof.
SECTION 1.06 Shareholders' Rights upon Reorganization. Upon consummation of
----------------------------------------
the Reorganization, the Certificates shall cease to represent any rights with
respect thereto, and, subject to applicable law and this Agreement, the
Certificates shall only represent the holder's right to receive their Pro Rata
Share of the Purchase Price.
SECTION 1.07 Contribution to Bank. Immediately after the Effective Time and
--------------------
from time to time thereafter, Summit shall contribute all shares of Company
Common Stock held by Summit to Bank. Such contribution shall not affect any of
Summit's rights hereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL SHAREHOLDERS
The Company and each Principal Shareholder, jointly and severally, hereby
represent and warrant to Summit and the Bank, knowing and intending that Summit
and the Bank are relying hereon in entering into the transactions contemplated
hereby, as follows (as used herein, the knowledge of the Company or words of
similar import shall mean the actual knowledge of either Thomas Sharkey, Sr. or
Thomas Sharkey, Jr. or matters the knowledge of which could reasonably be
attributed to either of them):
SECTION 2.01 Authority Relative to Agreement. The Company has all requisite
-------------------------------
corporate power and authority and each Principal Shareholder has the legal
capacity to enter into and to perform its respective obligations hereunder. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been duly authorized by
all necessary corporate action and no other corporate proceedings are necessary
to authorize this Agreement and the transactions contemplated hereby.
SECTION 2.02 Organization, Standing and Qualification. The Company and each
----------------------------------------
direct and indirect subsidiary of the Company (individually, a "Subsidiary;"
collectively, the "Subsidiaries") (the term "subsidiary," as used in this
Agreement, shall mean any corporation or other organization of which 25% or more
of the shares or other interests having by their terms ordinary voting power
A-4
<PAGE>
to elect a majority of the board of directors or other group performing similar
functions with respect to such corporation or other organization are owned of
record or beneficially, directly or indirectly, by the Company; the term
"indirect" ownership means ownership through a succession of one or more other
subsidiaries) is a corporation, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and each has
the requisite corporate power and lawful authority to own or lease and operate
its properties and conduct its business as now owned, held and conducted in the
jurisdiction of its incorporation and the states (or other jurisdictions) in
which it has qualified as a foreign corporation authorized to do business. The
Company and each Subsidiary is qualified to do business and is in good standing
in all states (or other jurisdictions) in which such qualification is required
by reason of the nature or extent of business conducted by such corporation,
except where the failure to be so qualified would not have a Material Adverse
Effect (as defined in Section 2.22) on the Company and its Subsidiaries on a
consolidated basis. Schedule 2.02 lists (i) each state (and jurisdiction) in
-------------
which the Company and each Subsidiary is incorporated or qualified as a foreign
corporation, and (ii) the names of all holders of equity interests in the
Company, the nature of the equity interest held by each and the amount.
SECTION 2.03 Capital Stock.
-------------
(a) The authorized capital stock of the Company consists in its entirety of
100 shares of Class A Common voting stock and 10,000,000 shares of Class B
Common non-voting stock, of which 100 shares of Class A Common voting stock and
3,060,045.21 shares of Class B Common non-voting stock are validly issued and
outstanding, fully paid and nonassessable and were not issued in violation of
the preemptive rights of any shareholder. Schedule 2.03(a) lists all
----------------
outstanding agreements, commitments, subscriptions, warrants, convertible
securities, obligations, options or rights entitling others to acquire Company
Common Stock, all outstanding securities, options, warrants, rights or other
instruments convertible into shares of Company Common Stock, and all claims or
rights against the Company with respect to Company Common Stock. There are no
outstanding equity interests of whatsoever nature in the Company, other than set
forth in this Section 2.03(a) and Schedule 2.03(a).
----------------
(b) Schedule 2.03(b) sets forth the number of shares of the authorized
----------------
capital stock, issued capital stock and outstanding capital stock of each
Subsidiary and the names of all shareholders of each Subsidiary and the number
of shares of capital stock, identifying the capital stock, held by each. All
outstanding shares of the capital stock of each Subsidiary are validly issued,
fully paid and nonassessable and were not issued in violation of the preemptive
rights of any shareholder. There are no outstanding agreements, commitments,
subscriptions, warrants, convertible securities, obligations, options or rights
entitling others to acquire shares of capital stock of any Subsidiary, or any
outstanding securities, options, warrants, rights or other instruments
convertible into shares of capital stock of any Subsidiary nor is there claim or
other right outstanding against any Subsidiary with respect to its capital
stock.
SECTION 2.04 Subsidiaries and Other Investments. Other than the
----------------------------------
Subsidiaries, there is no corporation, partnership, limited liability company,
joint venture or other entity in which the Company or a Subsidiary has, directly
or indirectly, made any investment or purchased an equity interest of whatsoever
nature. Neither the Company nor any Subsidiary has made any advances of
A-5
<PAGE>
cash outstanding as of the date hereof other than advances for travel,
entertainment and other business expenses and, except as provided on
Schedule 2.04, neither the Company nor any Subsidiary is under any obligation
- -------------
to acquire any securities, including, without limitation, Company Common Stock,
from any person or entity, and neither the Company nor any Subsidiary is under
any obligation to make any investment or to advance any cash to any person or
entity.
SECTION 2.05 Certificates of Incorporation and By-Laws. True and complete
-----------------------------------------
copies of the Certificate of Incorporation and By-Laws (together with any
amendments thereto) of the Company and each Subsidiary are attached hereto as
Schedule 2.05.
- -------------
SECTION 2.06 Execution and Performance of Agreement; Validity and Binding
------------------------------------------------------------
Nature. The execution, delivery and performance of this Agreement by the
- ------
Company and each Principal Shareholder will not result in a breach of any of the
terms of, or constitute a violation or default under, or give rise to a claim or
right of termination, cancellation, or acceleration under, or result in the
creation of any lien or encumbrance upon any of the property of the Company or
the Outstanding Stock or constitute an event which with notice or lapse of time
will result in any of the foregoing under the Certificates of Incorporation and
By-Laws of the Company or a Subsidiary or any judgment, order, injunction,
decree, statute, contract, indenture or other instrument by which the Company, a
Subsidiary or the Principal Shareholders or any of their respective properties
are bound. This Agreement has been duly executed and delivered by the Company
and each Principal Shareholder and, together with the other documents and
agreements required to be delivered pursuant hereto executed by all parties
whose execution and delivery thereof is required, constitute the legal, valid
and binding obligations of the Company and each Principal Shareholder,
enforceable against the Company and each of the Principal Shareholders in
accordance with their respective terms, except to the extent that enforceability
may be limited by bankruptcy, receivership, moratorium, conservatorship,
reorganization, fraudulent transfer, fraudulent conveyance or other laws of
general application affecting the rights of creditors generally or by general
principles of equity.
SECTION 2.07 Financial Statements.
--------------------
The Company has delivered to Summit for the period ended December 31, 1998 the
financial statements indicated on Schedule 2.07, and for the eleven month period
-------------
ended November 30, 1999 its unaudited consolidated balance sheet and the related
unaudited consolidated statements of operation (hereinafter referred to
collectively as the "Financial Statements"). "Consolidated" for purposes of this
Agreement when used with respect to the Company means the Company and its
Subsidiaries on a consolidated basis. Each of the Financial Statements (i) is
true and correct and has been prepared from the books and records of the
Company, (ii) has been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis with prior periods covered
thereby, subject to normal recurring year-end adjustments, and the Financial
Statements as of and for the eleven months ended November 30, 1999 will not
contain footnote disclosures or statements of stockholders' equity or cash flow,
and (iii) except as may be described therein or in the related notes or in
accountants reports thereon, presents fairly the financial condition of the
Company and its Subsidiaries, on a consolidated basis, as of the date indicated
thereon and the results of the operations of the Company and its Subsidiaries,
on a consolidated basis, for the period
A-6
<PAGE>
covered thereby in all respects, subject to normal recurring year-end
adjustments. The books and records of the Company have been kept, and will
continue to be kept until the Closing Date, in reasonable detail and in
accordance with GAAP consistently applied and will fairly and accurately reflect
to the Closing Date all of the transactions of the Company and each Subsidiary
during the period to which such books and records relate.
SECTION 2.08 Intellectual Property Rights. Schedule 2.08(i) contains a
---------------------------- ----------------
complete and correct list and accurate description of all Intellectual Rights
(as defined below) used by the Company or a Subsidiary at any time since
December 31, 1994 ("Company Intellectual Rights"). "Intellectual Rights" means
trademarks, trade names, service marks, logos and other identifying symbols,
names or marks, copyrights, inventions, processes, designs, formulas, trade
secrets, patents, patent applications and other intellectual and/or proprietary
rights or interests. All Company Intellectual Rights are (i) owned by the
Company or a Subsidiary, all of which are owned by the applicable entity free
and clear of all licenses, liens, charges or encumbrances, or (ii) licensed to
the applicable entity under valid and enforceable agreements. The Company
Intellectual Rights constitute all Intellectual Rights necessary for the conduct
of the Company's or a Subsidiary's business, and the protection of patents is
not material to the conduct of the business of the Company or a Subsidiary.
Neither the Company nor any Principal Shareholder is aware of any infringements
by any third parties upon any Company Intellectual Rights or any conflict with
or infringement of asserted rights of others with respect to same. Schedule
--------
2.08(iv) sets forth (i) all names used by the Company or a Subsidiary, or, to
- --------
the Company's knowledge, any employee of the Company or a Subsidiary, at any
time since December 31, 1994, other than the legal name of the Company, a
Subsidiary or such employee, for the conduct of any business by the Company or
any Subsidiary ("Business Names"), (ii) the dates or periods during which each
such Business Name was used, (iii) the states or other jurisdictions in which
each such Business Name was used, and (iv) the nature of the business conducted
under each such Business Name. Schedule 2.08(v) contains a copy of all
----------------
certificates, registrations or other writings or instruments filed with any
federal, state or local jurisdiction with respect to a Business Name.
SECTION 2.09 Contracts and Contract Parties. Schedule 2.09(i) contains a
------------------------------ ----------------
complete list of (a) each contract, selling agreement, service agreement or
other arrangement, whether written or oral, to which the Company or a Subsidiary
is a party, and under which the Company or a Subsidiary provides insurance
brokerage, distribution, or general agency services to independent insurance
agents or other persons or entities, (b) each joint venture, co-marketing, co-
brokerage or similar contract or arrangement, whether written or oral, to which
the Company or a Subsidiary is a party, (c) each contract or arrangement,
whether written or oral, with an insurance company, general insurance agency,
distributor or broker to which Company is a party, and under which the Company
or a Subsidiary is authorized or obligated to sell or broker insurance or
related products or services (provided, the Company is only obligated to
schedule those agreements which over the past 12 months resulted in the top 20
premium amounts received by the Company), (d) each contract or arrangement,
whether written or oral, under which the Company or a Subsidiary receives
commissions or other income in connection with the conduct of its business, (e)
each lease or capital lease of equipment or other personal property, whether
written or oral, providing for payment obligations of $10,000 or more per year
to which the Company or a Subsidiary is a party, and (f) each consulting or
similar agreement, whether written or oral (to the extent oral, only those
providing
A-7
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for payment obligations of $10,000 or more per year), to which the Company or a
Subsidiary is a party, all of the foregoing including the names and addresses of
each party thereto other than the Company or a Subsidiary ("Contract Parties").
True and complete copies of all written contracts or arrangements listed on
Schedule 2.09(i) have been heretofore made available to Summit. Complete
- ----------------
descriptions of the material terms of all oral contracts or arrangements listed
on Schedule 2.09(i) are set forth on Schedule 2.09(ii). Except as described in
---------------- -----------------
Schedule 2.09(iii), none of the contracts or arrangements listed in Schedule
- ------------------ --------
2.09(i) require the Company or a Subsidiary to purchase any product or service
- -------
exclusively from a Contract Party, require the Company or a Subsidiary to deal
exclusively with a Contract Party with respect to any customer or class of
customers of the Company or a Subsidiary, or otherwise limit the Company or a
Subsidiary with respect to selling or purchasing any product or service to or
from any person or entity. To the best knowledge of the Company and each
Principal Shareholder, no Contract Party listed in Schedule 2.09(i) has
----------------
expressed to the Company or a Subsidiary or any Shareholder its intention to
modify or cancel or otherwise terminate its relationship with the Company or a
Subsidiary, and, to the best knowledge of the Company and each Principal
Shareholder, all of such contracts and arrangements will continue in full force
and effect after the Closing Date.
SECTION 2.10 Shareholders and Similar Agreements. Except as disclosed in
-----------------------------------
Schedule 2.10, neither the Company nor any Subsidiary is a party to any
- -------------
shareholders' agreement, buy-sell agreement, stock rights agreement or any
similar agreement or arrangement relating to capital stock of the Company or a
Subsidiary, as applicable, or has any obligation to any Shareholder or any other
person or entity for the purchase of any shares of the capital stock of the
Company or a Subsidiary, as applicable, or for the payment of any consideration
in respect of the purchase, sale or other disposition of shares of the capital
stock of the Company or a Subsidiary, as applicable.
SECTION 2.11. Pension and Benefit Plans.
-------------------------
(a) Neither the Company nor any of its Subsidiaries maintains an employee
pension benefit plan within the meaning of Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or has made any
contributions to any such employee pension benefit plan, except employee pension
benefit plans listed in Schedule 2.11(a) (individually, "Pension Plan;"
----------------
collectively, "Pension Plans"). In its present form each Pension Plan complies
in all material respects with all applicable requirements under ERISA and the
Code. Each Pension Plan and the trust created thereunder is qualified and exempt
under Sections 401(a) and 501(a) of the Code, and the Company or the Subsidiary
whose employees are covered by such Pension Plan has received from the Internal
Revenue Service ("IRS") a determination letter to that effect and such
determination letter may still be relied on. No event has occurred and there has
been no omission or failure to act which would adversely affect such
qualification or exemption. Each Pension Plan has been administered and
communicated to the participants and beneficiaries in all material respects in
accordance with its terms and ERISA. No employee or agent of the Company or any
Subsidiary whose employees are covered by a Pension Plan has engaged in any
action or failed to act in such manner that, as a result of such action or
failure, (i) the IRS could revoke, or refuse to issue (as the case may be), a
favorable determination as to such Pension Plan's qualification and the
associated trust's exemption or impose any liability or penalty under the Code,
or (ii) a participant or beneficiary or a nonparticipating employee has been
denied benefits properly due or to become due under such Pension Plan or has
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been misled as to his or her rights under such Pension Plan. No Pension Plan is
subject to Section 412 of the Code or Title IV of ERISA. No person has engaged
in any nonexempt prohibited transaction involving any Pension Plan or associated
trust within the meaning of Section 406 of ERISA or Section 4975 of the Code.
There are no pending or, to the best knowledge of the Company and Principal
Shareholders, threatened claims (other than routine claims for benefits) against
the Pension Plans or any fiduciary thereof which would subject the Company or
any of its Subsidiaries to a material liability. All reports, filings, returns
and disclosures and other communications which have been required to be made to
the participants and beneficiaries, other employees, the Pension Benefit
Guaranty Corporation ("PBGC"), the IRS, the U.S. Department of Labor or any
other governmental agency pursuant to the Code, ERISA, or other applicable
statute or regulation have been made in a timely manner and all such reports,
communications, filings, returns and disclosures were true and correct in all
material respects. No liability has been, or is likely to be, incurred on
account of delinquent or incomplete compliance or failure to comply with such
requirements. "ERISA Affiliate" where used in this Agreement means any trade or
business (whether or not incorporated) which is a member of a group of which the
Company is a member and which is under common control within the meaning of
Section 414 of the Code. Neither the Company nor any of its Subsidiaries has any
material liability under ERISA or the Code as a result of its being a member of
a group described in Sections 414(b), (c), (m) or (o) of the Code. There are no
unfunded benefit or pension plans or arrangements, or any individual agreements
whether qualified or not, to which the Company or any of its Subsidiaries or
ERISA Affiliates has any obligation to contribute and the present value of all
benefits vested and all benefits accrued under each Pension Plan which is
subject to Title IV of ERISA did not, in each case, as of the last applicable
annual valuation date, exceed the value of the assets of the Pension Plan
allocable to such vested or accrued benefits. No Pension Plan or any trust
created thereunder has been terminated, nor has there been any "reportable
events" (other than a reportable event for which notice thereof is waived) with
respect to any Pension Plan, as that term is defined in Section 4043 of ERISA
since January 1, 1993. No Pension Plan or any trust created thereunder has
incurred any "accumulated funding deficiency" as such term is defined in Section
302 of ERISA (whether or not waived). No Pension Plan is a "multiemployer plan"
as that term is defined in Section 3(37) of ERISA. There has been no change in
control of any Pension Plan.
(b) All employment, severance, termination, compensation, incentive, bonus,
deferred compensation, profit-sharing, retirement, pension, stock option, stock
award and stock purchase plans and all other employee benefit, health and
welfare plans, arrangements or agreements, and medical, major medical,
disability, life insurance, dental and other benefit and perquisite plans and
arrangements covering employees generally, other than the Pension Plans,
maintained by the Company or any of its Subsidiaries (collectively, "Benefit
Plans") are listed in Schedule 2.11(b) (unless already listed in Schedule
---------------- --------
2.11(a)) and comply in all material respects with all applicable requirements
- -------
imposed by ERISA, the Code, and all applicable rules and regulations thereunder.
The Benefit Plans have been administered and communicated to the participants
and beneficiaries in all material respects in accordance with their terms and
ERISA (as applicable), and, to the Company's knowledge, no employee or agent of
the Company or any of its Subsidiaries has engaged in any action or failed to
act in such manner that, as a result of such action or failure, (i) the IRS
could revoke, or refuse to issue, a favorable determination as to a Benefit
Plan's qualification and any associated trust's exemption or impose any
liability or penalty under the Code, or (ii) a participant
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<PAGE>
or beneficiary or a nonparticipating employee has been denied benefits properly
due or to become due under the Benefit Plans or has been misled as to their
rights under the Benefit Plans. There are no pending or, to the best knowledge
of the Company and the Principal Shareholders, threatened claims (other than
routine claims for benefits) against the Benefit Plans which would subject the
Company or any of its Subsidiaries to liability. Any trust which is intended to
be tax-exempt has received a determination letter from the IRS to that effect
and, to the Company's knowledge, no event has occurred which would adversely
affect such exemption. All reports, filings, returns and disclosures required to
be made to the participants and beneficiaries, other employees of the Company or
any of its Subsidiaries, the PBGC, the IRS, the U.S. Department of Labor and any
other governmental agency pursuant to the Code, ERISA, or other applicable
statute or regulation, if any, have been made in a timely manner and all such
reports, filings, returns and disclosures were true and correct in all material
respects. No material liability has been, or is likely to be, incurred on
account of delinquent or incomplete compliance or failure to comply with such
requirements.
(c) There is no pending or, to the Company's or any Principal Shareholder's
knowledge, threatened litigation, administrative action or proceeding relating
to any Benefit Plan or Pension Plan. There has been no announcement or
commitment by the Company or any Subsidiary to create an additional Benefit Plan
or Pension Plan, or to amend a Benefit Plan or Pension Plan, except for
amendments required by applicable law, which may materially increase the cost of
such Benefit Plan or Pension Plan and, except for any plans or amendments
expressly described on Schedule 2.11(a) or Schedule 2.11(b), the Company and its
---------------- ----------------
Subsidiaries do not have any obligations for post-retirement or post-employment
benefits under any Benefit Plan (exclusive of any coverage mandated by the
Consolidated Omnibus Reconciliation Act of 1986 ("COBRA") that cannot be amended
or terminated upon less than sixty (60) days' notice without incurring any
liability thereunder. Disclosed on and appended to Schedule 2.11(c) with respect
----------------
to each Benefit Plan and Pension Plan, to the extent applicable, is (A) the most
recent annual report on the applicable form of the Form 5500 series filed with
the IRS with all the attachments filed, (B) such Benefit Plan or Pension Plan,
including all amendments thereto, (C) each trust agreement and insurance
contract relating to such plan, including amendments thereto, (D) the most
recent summary plan description for such plan, including amendments thereto, if
the plan is subject to Title I of ERISA, (E) the most recent actuarial report or
valuation if such plan is a Pension Plan and (F) the most recent determination
letter issued by the IRS if such plan is qualified under Section 401(a) of the
Code.
SECTION 2.12 Inventory. Neither the Company nor a Subsidiary owns any
---------
inventory other than in the ordinary course of its business, and the ownership
and maintenance of inventory is not significant to the conduct of the business
of the Company or a Subsidiary.
SECTION 2.13 Real Estate.
-----------
(a) Neither the Company nor a Subsidiary has, or is party to an agreement
involving, any legal or equitable right, claim, entitlement or interest in or to
any real estate other than as may be set forth in Schedule 2.13(b).
----------------
(b) Schedule 2.13 (b) contains a true and correct list and description of all
-----------------
leases, subleases and other agreements under which either the Company or a
Subsidiary is lessee or subtenant, lessor or
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<PAGE>
sublessor or licensee or sublicensee of real estate (collectively, "Leases").
The Company has provided to Summit true and complete copies of all Leases, all
of which are in full force and effect. Neither the Company nor a Subsidiary has
any oral leases with respect to real estate. The Company and each Subsidiary
have not received any notice of a third party claim that would interfere with
the peaceful and undisturbed possession under any Lease.
(c) Each leased, subleased, licensed, or sublicensed real property (and
improvements thereon) described in Schedule 2.13(b) is in good operating
----------------
condition and repair and conforms in all material respects with all applicable
building, zoning, planning and other regulations, ordinances and laws, neither
the Company nor any Subsidiary is in default under any of the Leases, and the
Company or a Subsidiary, as the case may be, has the right to use all real
estate necessary to the conduct of its business as currently conducted. Neither
the Company nor a Subsidiary has received notice of any dispute from landlords
or other parties relating to any real property (and improvements thereon)
described in Schedule 2.13(b).
----------------
SECTION 2.14 Title to and Condition of Personal Property. The Company or a
-------------------------------------------
Subsidiary has good title as required by the terms of this Agreement to all
personal property reflected in the Financial Statements or acquired subsequent
to November 30, 1999, free and clear of all liens or encumbrances. All of the
personal property owned by the Company or a Subsidiary is in good operating
condition and repair. The Company or a Subsidiary, as the case may be, owns or
has the right to use all such properties which are necessary to the conduct of
its respective business as currently conducted.
SECTION 2.15 Accounts and Notes Receivable. The receivables of the Company
-----------------------------
as reflected in the Financial Statements or acquired by the Company or a
Subsidiary subsequent to November 30, 1999 (a) are bona fide receivables created
in the ordinary course of business collectible in amounts not less than the
aggregate amount thereof, except to the extent of any reserve for doubtful
accounts in the Company's financial statements, (b) are not subject to any
offsets, credits or counterclaims other than offsets and credits for return
premiums discovered in audits and policy cancellations, and (c) have not at any
time been placed for collection with any attorney, collection agency or similar
individual or firm.
SECTION 2.16 Premium Trust Requirements; Marketable Securities and Other
-----------------------------------------------------------
Investments.
- -----------
(a) The cash, cash equivalents and amounts billed to and receivable from
clients for insurance premiums of the Company and each Subsidiary are at least
equal to such entity's respective carrier premiums payable and are otherwise
sufficient to satisfy such entity's respective premium trust requirements.
(b) Schedule 2.16 (b) lists all of the marketable securities and other
-----------------
investments owned by the Company, including those reflected on the Financial
Statements unless disposed of since the date thereof (the "Company
Investments"), all of which Company Investments are owned by the Company, free
and clear of any liens, encumbrances or claims, except as shown in Schedule
--------
2.16(b). The value of each of the Company Investments shown on the Financial
- -------
Statements, reflects the fair market value thereof on the date of the respective
Financial Statements.
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SECTION 2.17 Taxes. The Company and each Subsidiary has properly completed
-----
and filed all federal, state, county, municipal and other tax returns, reports
and declarations which are required to be filed by it and has paid or accrued on
its financial statements all taxes, penalties and interest which have become due
pursuant thereto or which became due pursuant to asserted deficiencies or
assessments. All such returns are true and correct in all respects. There are no
outstanding claims or assessments against the Company or a Subsidiary of tax
deficiencies, additions to tax or tax penalties, and no tax return of the
Company or a Subsidiary is under examination. The last year for which the
federal or state income taxes or other taxes of the Company and each Subsidiary
have been examined is set forth accurately and completely on Schedule 2.17
-------------
hereto. There is not now in force any waiver of any statute of limitation with
respect to, or any extension of a period for the assessment of, any federal,
state, county, municipal or other tax of either the Company or any Subsidiary.
The accruals and reserves for taxes reflected in the Financial Statements are
adequate to cover all taxes (including interest and penalties, if any, thereon)
due and payable as a result of the operations of the Company and its
Subsidiaries for all periods covered by the Financial Statements. The Company
has not filed an election under the Code to be taxed as an "S corporation," as
that term is described at Section 1362(a) of the Code. The Company and each
Subsidiary has complied in all respects with all requirements relating to
information reporting, including tax identification reporting, and withholding,
including backup withholding and other requirements relating to the reporting of
income and other reportable payments under the Code and state and local tax laws
and the regulations promulgated thereunder and other requirements relating to
reporting under federal law including record keeping and reporting on monetary
instruments transactions.
SECTION 2.18 Litigation. Except as disclosed in Schedule 2.18, there is no
---------- -------------
litigation, investigation or proceeding pending or, to the best knowledge of the
Company and the Principal Shareholders, threatened, and there are no outstanding
orders, writs, injunctions or decrees of any court, governmental agency or
arbitration tribunal, involving either the Company, a Subsidiary or any of their
respective properties.
SECTION 2.19 Other Material Contracts and Commitments. Schedule 2.19 lists
---------------------------------------- -------------
all contracts or commitments to which either the Company or a Subsidiary is a
party, which contracts are material to its business and are not disclosed in
another Schedule hereto. Except as disclosed in Schedule 2.19 or another
-------------
Schedule hereto, neither the Company nor a Subsidiary is a party to and none of
their respective properties which are material to the operation of their
respective businesses are bound by any of the following types of contracts or
commitments, written or oral: (a) mortgages, indentures, security agreements and
other agreements and instruments relating to the borrowing of money or extension
of credit or imposition of an encumbrance on any of its assets; (b) other
contracts and commitments which in any case involve aggregate payments or
receipts of more than $10,000; (c) any contract with any officer, director or
with any employee (other than agreements relating to current wage or salary
payments terminable by the applicable entity on notice of thirty (30) days or
less); (d) any contract or promissory note or other instrument with any
Affiliate (as hereinafter defined); (e) any guarantee of the obligations of any
person or entity or obligation to provide funds or assume the debt of any person
or entity; (f) any option or right to acquire any assets of either the Company
or a Subsidiary; (g) contracts restricting the right of, or requiring, any
person or entity to engage in a business or activity or requiring any person or
entity to refrain from a business or
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activity, in any fashion or in any place whatsoever; (h) contracts restricting
any person or entity from employing specified persons or from soliciting
specified persons for employment; (i) confidentiality or nondisclosure
agreements; or (j) contracts requiring the separate or independent operation of
any unit, division, Subsidiary or other grouping of assets or personnel. The
Company has delivered to Summit complete and correct copies of all written
contracts and commitments listed in Schedule 2.19, together with all amendments
-------------
thereto, and accurate descriptions of all oral contracts and commitments listed
in Schedule 2.19. Neither the Company nor any Subsidiary is in default with
-------------
respect to any such contract or commitment, and, to the best knowledge of the
Company and the Principal Shareholders, no other party to any such contract or
commitment is in default with respect thereto. Except as set forth on Schedule
--------
2.19, each such contract will continue in full force and effect after the
- ----
Closing Date without any right on the part of any party thereto, other than the
applicable entity, to terminate such contract or commitment as a result of the
occurrence of the Reorganization. For purposes of this Agreement, an "Affiliate"
of any entity means (a) any corporation, partnership, trust or other entity in
control of, controlled by or under common control with such entity, and (b) any
officer, director, trustee, general partner or employee of any corporation,
partnership, trust or other entity in control of, controlled by or under common
control with such entity.
SECTION 2.20 Labor Relations. The Company and each Subsidiary, in the
---------------
conduct of its respective affairs, has complied in all material respects with
all applicable laws (including, without limitation, labor and tax laws) relating
to the hiring and employment of employees and independent contractors,
including, without limitation, those related to discrimination, wages, hours,
collective bargaining, employee pension and welfare benefit plans, and the
payment of (and withholding for) income, Social Security, unemployment and other
taxes, and neither the Company nor a Subsidiary is liable for any penalties or
damages for failure to comply with any of the foregoing. There are no unfair
labor practice claims or charges pending or, to the best knowledge of the
Company and the Principal Shareholders, threatened, involving either the Company
or a Subsidiary. There are no collective bargaining agreements or any agreements
with any labor union covering any employees of the Company or a Subsidiary.
Neither the Company's nor a Subsidiary's business is affected by any present
strike or other labor disturbance involving the employees of such entity nor, to
the best knowledge of the Company and the Principal Shareholders, is any union
attempting to represent, as collective bargaining agent, any person employed by
the Company or a Subsidiary.
SECTION 2.21 Insurance. The Company and each Subsidiary maintains the
---------
insurance policies and fidelity bonds (hereinafter collectively referred to as
"insurance policies") listed on and attached to this Agreement as Schedule 2.21.
-------------
Such policies are in full force and effect. All claims thereunder involving
amounts of $5,000 or more have been filed in a timely fashion. Schedule 2.21
-------------
further lists all claims presently pending or, to the best knowledge of the
Company and the Principal Shareholders, threatened, which are covered by such
policies. Schedule 2.21 also lists all claims against the Company and each
-------------
Subsidiary resolved in the current year and during the past three (3) fiscal
years, including the nature of each such claim and the terms of its resolution.
Since January 1, 1995, neither the Company nor a Subsidiary has been refused
insurance or bonds covering its properties for risks for which it has applied or
had any such insurance policy terminated (other that at its request) nor has it
received notice that (a) such insurance will be canceled or that coverage
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thereunder will be reduced or eliminated, or (b) premium costs with respect to
such insurance will be increased.
SECTION 2.22 Conduct of Business and Absence of Changes. Since November 30,
------------------------------------------
1999, and except as set forth in Schedule 2.22, the Company and its Subsidiaries
-------------
have conducted their business in the regular and ordinary course and, except as
permitted under the terms of this Agreement, have not (a) suffered any Material
Adverse Effect (as defined below in this Section 2.22), (b) declared, set aside,
made or paid any dividend or distribution or purchased, issued or sold any
shares of its capital stock, (c) incurred any indebtedness for borrowed money or
issued or sold any debt securities, (d) instituted any increase in the
compensation or bonuses payable or to become payable to any officers or
employees, or made any changes in personnel policies or employees benefits, or
(e) made any payment to any Shareholder except for regular salary, commissions
or draws against commissions and ordinary and necessary business expense
reimbursements. All written and significant oral personnel policies, employee
handbooks and similar materials are listed on Schedule 2.22 and true copies, or
-------------
a description of material terms if oral, thereof have heretofore been delivered
to Summit or are included in Schedule 2.22. As used in this Agreement, the term
-------------
"Material Adverse Effect" shall mean, with respect to any party, a material
adverse change in its condition (financial or otherwise), assets, liabilities,
business or operations (financial or otherwise) of such party, or its ability to
perform its obligations under, and to consummate the transactions contemplated
by, this Agreement.
SECTION 2.23 Compliance with Laws; Governmental Authorizations. The Company
-------------------------------------------------
and each Subsidiary is in compliance with all statutes, laws, ordinances, rules,
regulations, judgments, orders, injunctions, decrees, governmental licenses or
permits and other governmental licenses, permits, authorizations or approvals
applicable to it or any of its properties, and all governmental licenses,
permits, authorizations or approvals necessary in any material respect for the
conduct of its business have been duly and lawfully obtained and are in full
force and effect, and there are no proceedings pending or, to the best knowledge
of the Company and the Principal Shareholders, threatened, which may result in
the revocation, cancellation or suspension, or any materially adverse
modification, of any thereof. Since January 1, 1995, neither the Company nor any
Subsidiary has received notice of any alleged violation or breach of any
applicable statute, law, ordinance, rule, regulation, judgment, order,
injunction, decree, governmental permit or other governmental authorization or
approval necessary in any material respect for the conduct of the business of
such entity.
SECTION 2.24 Officers, Directors and Depositories. Schedule 2.24 hereto
------------------------------------ -------------
contains the names of all the officers and directors of the Company and each
Subsidiary, the names of all depositories of the funds of the Company and each
Subsidiary and the names of the officers and other persons empowered to sign
instruments withdrawing funds from said depositories.
SECTION 2.25 Environmental Matters.
---------------------
(a) Except as set forth in Schedule 2.25, the business and operations of the
-------------
Company and each Subsidiary comply with all federal, state and local laws,
rules, regulations and directives pertaining to the environment. With respect to
the business of the Company and each Subsidiary, any assets
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<PAGE>
owned or leased by any of them, real properties owned or leased by any of them,
or the condition, use or operation thereof by any of them, (i) neither the
Company nor any Subsidiary has received written notice of any claim against such
company arising out of any applicable federal, state or local law, rule,
regulation or directive pertaining to the environment, nor to the best knowledge
of the Company, is the assertion of any such claim threatened, and (ii) neither
the Company nor any Subsidiary (A) is, to the best of its and the Principal
Shareholders' knowledge, aware of any investigations contemplated, pending or
completed by any environmental regulatory authority, (B) has received any
information requests from any environmental regulatory authority, or (C) been
named as a potentially responsible or liable party with respect to an
environmental matter.
(b) To the best knowledge of the Company and the Principal Shareholders,
there are nowhere on any real property presently or formerly owned or leased by,
used by or otherwise under the control of either the Company or a Subsidiary any
deposits, dumps, or tanks of toxic or other poisonous, dangerous or noxious
waste, fluids, solvents, chemicals or effluents, which chemicals, fuels and
fluids are not properly and safely stored, identified, labeled and maintained in
accordance with applicable industrial standards and all governmental or other
laws or regulations relating thereto. Neither the Company nor any Subsidiary
presently discharges or previously has discharged from any real property owned,
leased, used or otherwise under its control, whether by effluent, emission or
other means, any noxious, toxic, hazardous or deleterious matter or gases except
in compliance with applicable law. All present or past discharges of waste
material and other substances from the operating facilities of the Company and
each Subsidiary, if any, are in full compliance with applicable law and covered
by valid permits and licenses, where required.
SECTION 2.26 Third Party and Governmental Consents. Except as set forth at
-------------------------------------
Schedule 2.26, no consent, waiver, authorization, approval, order, license,
- -------------
certificate or permit of or from, or registration, declaration or filing is
required by or with respect to either the Company, a Subsidiary or any
Shareholder, in connection with the execution, delivery or performance of this
Agreement or of any other agreement, document or instrument required to be
executed and delivered by the Company or any Shareholder pursuant hereto or in
connection herewith or the consummation of the transactions contemplated hereby
(i) with any governmental authority or any court or other tribunal or any other
person, firm or entity, or (ii) under any contract, indenture, mortgage, lease,
license or other agreement or instrument to which either the Company, a
Subsidiary or any Principal Shareholder is a party or by which either the
Company, a Subsidiary or any Principal Shareholder, or any of their respective
assets or properties, is subject or bound.
SECTION 2.27 Licenses and Permits. The Company and each Subsidiary has
--------------------
obtained all consents, approvals, waivers, licenses and permits from
governmental authorities required in order for it to conduct its business as
presently and heretofore conducted, including, without limitation, all required
insurance producer licenses, insurance agent licenses, insurance broker licenses
and similar licenses (herein collectively referred to as the "Company
Licenses"). Each employee and agent of the Company and each Subsidiary has
obtained all approvals, licenses and permits from governmental authorities
required in connection with the services provided by such employee or agent to
it, including, without limitation, insurance producer, insurance agent and
insurance broker licenses and similar licenses (herein collectively referred to
as the "Employee Licenses"). The Company Licenses and the Employee Licenses are
listed on Schedule 2.27 and no other licenses or
-------------
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<PAGE>
permits are required to conduct or operate any aspect of the business of either
the Company or a Subsidiary as presently conducted. There is no pending or, to
the best knowledge of the Company and the Principal Shareholders, threatened
revocation or suspension of a Company License or an Employee License, and there
are no disciplinary proceedings pending, or to the best knowledge of the Company
and the Principal Shareholders, threatened by, any issuer of any such license or
any other governmental authority against the holder thereof. Since December 31,
1994, neither the Company or any Subsidiary and no employee or agent of the
Company or a Subsidiary has held a license, permit or other regulatory
authorization to engage in an activity revoked or suspended or been the subject
of disciplinary proceedings.
SECTION 2.28 Software.
--------
(a) Schedule 2.28(a) hereto contains a true, complete and accurate list and
----------------
description of (i) all computer software and related programs owned by the
Company and each Subsidiary, other than software and related programs owned by
such companies that are not material to their businesses or the services
provided by them, and (ii) all computer software and related programs licensed
by the Company and each Subsidiary for use in connection with their businesses,
other than off-the-shelf software and related programs licensed to such
companies which are not material to the operation of their businesses or the
services provided by them (collectively, the "Software"). Schedule 2.28(a) also
----------------
sets forth whether or not the Company and each Subsidiary have access to, and
the manner of such access to, the source codes for each item of Software
licensed by them in the event of discontinuance by the vendor. The Company and
each Subsidiary either own or have a valid license to use and sublicense all of
the Software other than immaterial or off-the-shelf software and related
programs, free from any claim, security interest or other lien or encumbrance
whatsoever, except as set forth on Schedule 2.28(a). To the Company's
----------------
knowledge, the Company and each Subsidiary are the exclusive licensee of the
Software indicated on Schedule 2.28(a) as being exclusively licensed by them.
----------------
The Software constitutes the only material computer software or programs
necessary for the operation of the business of the Company and its Subsidiaries.
(b) The Company and each Subsidiary have provided to Summit true and complete
copies of all licenses, leases, contracts and other written instruments relating
to any material Software and/or source codes thereof which are not owned by them
(collectively, the "Software Contracts"), all of which are legally valid and
binding and enforceable against the party thereto in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, fraudulent transfer, fraudulent conveyance, reorganization,
receivership, conservatorship, moratorium or other laws of general application
relating to or affecting the enforcement of creditors' rights generally or by
general principles of equity. Neither the Company nor a Subsidiary, nor, to the
best knowledge of the Company or the Principal Shareholders, any other party
thereto, is in violation of any material term or provision of any Software
Contract. To the best knowledge of the Company and the Principal Shareholders,
the use of the owned Software by the applicable company, the use of any source
codes related to Software which is not owned by the applicable company, and the
exercise of the rights of such company in and to such source codes, as provided
in any of the Software Contracts, does not in any manner infringe upon the
rights of any third parties.
A-16
<PAGE>
(c) All source codes relating to Software owned exclusively by the Company or
a Subsidiary (the "Owned Source Codes") are in the possession of such company or
held in third party escrow and constitute trade secret information of such
company, and, except as set forth in Schedule 2.28(c), no third party has any
----------------
copy of any of the Owned Source Codes or any right, title, interest or license,
conditional or otherwise, with respect to any of the Owned Source Codes under
any circumstances whatsoever. Upon consummation of the Reorganization, Summit
shall own and have possession of, and shall have the right to use, the Owned
Source Codes, free from any claim, security interest or other lien or
encumbrance whatsoever.
(d) The Company and each Subsidiary owns in respect of all Software owned
exclusively by such companies and has possession of, and Summit will own in
respect of all Software owned exclusively by the Company and its Subsidiaries
and will have possession of immediately after the Closing, complete and adequate
documentation in all material respects, including without limitation,
documentation of source codes, object codes and engineering change notices,
reflecting the current versions of all Software listed on Schedule 2.28(a) so as
----------------
to enable Summit to conduct fully after the Closing the business conducted by
the Company and its Subsidiaries prior to the Closing in the same manner as
theretofore conducted.
SECTION 2.29 Loans to or from Shareholders or Employees. Except as set forth
------------------------------------------
in Schedule 2.29, neither the Company nor any Subsidiary has made any loans or
-------------
advances to or otherwise permitted any indebtedness to be incurred to it by any
Shareholder or any of its employees, former employees or former shareholders, or
any member of their respective families, and there are no outstanding loans,
advances or other indebtedness of the Company or a Subsidiary to any Shareholder
or any employee, former employee or former shareholder of such company, or any
member of their respective families other than travel, entertainment or other
business expenses ("Related Party Loans"). True and complete copies of all
promissory notes or other agreements or documents evidencing the Related Party
Loans ("Related Party Notes") have been heretofore delivered to Summit.
SECTION 2.30 Absence of Undisclosed Liabilities. Except as and to the extent
----------------------------------
disclosed or accrued on the Financial Statements, or incurred in the ordinary
course of business since November 30, 1999, or disclosed on any Schedule hereto,
there exist no liabilities or obligations of any nature whatsoever (whether
absolute, contingent or otherwise, matured or unmatured, or known or unknown) in
respect of the business or assets of the Company and its Subsidiaries of the
type required to be reflected in financial statements prepared in accordance
with GAAP and, to the Company's knowledge, there is no basis for assertion
against either the Company or a Subsidiary of any claim giving rise to such a
liability or obligation.
SECTION 2.31 Powers of Attorney. There are no outstanding powers of
------------------
attorney, other than any powers of attorney necessary to permit the Company or a
Subsidiary to file a tax return executed on behalf of the Company or any
Subsidiary.
SECTION 2.32 Tax and Regulatory Matters. Neither the Company, any Subsidiary
--------------------------
nor the Shareholders have taken or agreed to take any action, nor, to the best
knowledge of the Company and the Principal Shareholders, does any fact or
circumstance exist that would (a) materially impede
A-17
<PAGE>
or delay receipt of any consents or approvals required to be obtained hereunder
or the consummation of the transactions contemplated by this Agreement, or (b)
prevent the transactions contemplated hereby from qualifying as a
"reorganization" as described in Section 368(a)(2)(E) of the Code.
SECTION 2.33 Current Customers. Schedule 2.33 lists the twenty (20) largest
----------------- -------------
customers of the Company with the revenue amounts in the last fiscal year listed
opposite their respective names. Such customers continue to do business with the
Company on substantially the same basis as during prior periods, and, to the
best knowledge of the Company and the Principal Shareholders, neither the
Company nor the Shareholders have received any notice that any of such twenty
(20) customers intends to discontinue doing business with the Company or
substantially reduce the business it does with the Company.
SECTION 2.34 Brokers' Fees. Except as set forth on Schedule 2.34, the
------------- -------------
Company and the Principal Shareholders have entered into this Agreement with
Summit as a result of direct negotiations without the assistance or efforts of
any finder, broker, financial advisor or investment banker.
SECTION 2.35 Representations and Warranties True; No Misleading Statements.
-------------------------------------------------------------
All of the representations and warranties set forth in this Article II shall be
true and correct as of the date hereof and as of the Closing Date as if made at
that time, except to the extent that such representations and warranties
expressly relate to an earlier date (however, such representations and
warranties shall be true as of such date) and except as otherwise contemplated
by this Agreement. The representations and warranties made in this Agreement by
the Company or the Principal Shareholders (other than the representations and
warranties of the Principal Shareholders made in Article III), the Financial
Statements, and the contents of any Schedule, list or document delivered by the
Company or the Principal Shareholders pursuant to this Agreement (other than
Schedules delivered pursuant to Article III) or in connection with the
transactions contemplated by the Agreement do not contain any untrue statements
of a material fact or omit to state a material fact necessary in order to make
the statements herein or therein, in light of the circumstances under which they
were made, not misleading.
SECTION 2.36. Year 2000 Compliant. To the best knowledge of Company, all
-------------------
material computer software and hardware owned or licensed by Company or any of
its subsidiaries is, or Company has taken all required steps to be, Year 2000
compliant, which, for purposes of this Agreement, shall mean that the data
outside the range 1900-1999 will be correctly processed in any level of computer
hardware or software, including, but not limited to, microcode, firmware,
applications programs, files and databases. All material computer software owned
or licensed by Company is, or Company has taken steps (including obtaining
warranties from the vendors thereof in respect of compliance) to ensure that all
such computer software will be designed to be used prior to, during and after
the calendar year 2000 AD and such software will operate during each such time
period, without error relating to date data, specifically including any error
relating to, or the product of, date data that represents or references
different centuries or more than one century.
A-18
<PAGE>
ARTICLE III
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL SHAREHOLDERS
Each Principal Shareholder hereby represents and warrants to Summit, as to
himself, severally and not jointly, as follows, knowing and intending that
Summit is relying hereon in entering into the transactions contemplated hereby:
SECTION 3.01 Additional Representations and Covenants of Principal
-----------------------------------------------------
Shareholders.
- ------------
(a) Such Principal Shareholder has no beneficial interest, directly or
indirectly, in any person, firm, corporation, partnership or other entity which
is or within the past two years has been, and except as an employee of the
Company such Principal Shareholder is not and has not within the past two years
been, a supplier of any goods or services to the Company or a Subsidiary, and
the Company has not received any such fees from any such person, firm,
corporation, or partnership or other entity, including, without limitation, any
Contract Party, other than as the beneficial owner of one percent (1%) or less
of the voting securities of a publicly held corporation or from such Principal
Shareholder.
(b) Such Principal Shareholder is not bound by or subject to (i) any divorce
decree, domestic relations order, support decree or other judicial decree, order
or judgment, or (ii) any settlement or other agreement which grants his spouse
or any former spouse or any of his children or any other dependent or former
dependent any beneficial or other interest in any of the shares of Outstanding
Stock owned by such Principal Shareholder.
(c) The shares of Outstanding Stock beneficially owned by such Principal
Shareholder are so owned free and clear of all liens, options, claims,
encumbrances and restrictions whatsoever, except restrictions imposed by the
federal and applicable state securities laws.
(d) Except as set forth in Schedule 2.10, no Principal Shareholder is a party
-------------
to any shareholders' agreement, buy-sell agreement, stock rights agreement or
any similar agreement or arrangement, whether oral or written, relating to
Company Common Stock.
(e) Such Principal Shareholder has the full legal right and power and all
authorizations and approvals required by law or otherwise to sell, transfer and
deliver shares of Company Common Stock hereunder and to make the
representations, warranties and agreements set forth in this Agreement.
SECTION 3.02 Representations and Warranties True; No Misleading Statements.
-------------------------------------------------------------
All of the representations and warranties set forth in this Article III shall be
true and correct as of the date hereof and as the Closing Date as if made at
that time, except to the extent that such representations and warranties
expressly relate to an earlier date (however, such representations and
warranties shall be true as of such date) and except as otherwise contemplated
by this Agreement. The representations and warranties made in this Article III
do not contain any untrue statements of a
A-19
<PAGE>
material fact or omit to state a material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SUMMIT
Summit represents and warrants to the Company and each Shareholder as follows:
SECTION 4.01 Organization and Qualification of Summit. Summit is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of New Jersey and has all requisite corporate power and authority
to own or lease and operate its properties and assets and to carry on its
business as it is now being conducted. Summit is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction in
which the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect on Summit and its
subsidiaries, on a consolidated basis. Summit is registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended.
SECTION 4.02 Organization and Qualification of Bank. Bank is a banking
--------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of New Jersey and has all requisite corporate power and authority
to own or lease and operate its properties and to carry on its business as it is
now being conducted. Bank is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction in which the character
of its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect on Bank and its subsidiaries, on a consolidated
basis. All the outstanding shares of capital stock of Bank are validly issued,
fully paid and nonassessable and are owned by Summit.
SECTION 4.03 Organization and Qualification of Acquisitionco. At Closing,
-----------------------------------------------
Acquisitionco will be a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey and will be duly qualified as
a foreign corporation to do business, and will be in good standing, in each
jurisdiction in which the character of its properties owned or leased or the
nature of its activities makes such qualification necessary, except where the
failure to be so qualified would not have a Material Adverse Effect on
Acquisitionco and its subsidiaries, on a consolidated basis. At Closing, all the
outstanding shares of capital stock of Acquisitionco will be validly issued,
fully paid and nonassessable and will be owned by Summit.
SECTION 4.04 Capitalization of Summit. The authorized capital stock of
------------------------
Summit consists of (i) 390,000,000 shares of Summit Common Stock, of which
173,768,176 shares were issued and outstanding as of October 31, 1999, (ii)
6,000,000 shares of Preferred Stock, each without par value, of which no shares
are issued and outstanding on the date hereof, and (iii) 1,500,000 shares of
Series R Preferred Stock reserved for issuance as of the date hereof. All
outstanding shares of Summit Common Stock were validly issued and are fully paid
and nonassessable and were not issued in
A-20
<PAGE>
violation of the preemptive rights of any shareholder. When delivered to the
Shareholders hereunder, the Summit Stock constituting the Purchase Price will be
validly issued, fully paid and nonassessable shares of Summit Common Stock and
will not have been issued in violation of the preemptive right of any
shareholder.
SECTION 4.05 Authority Relative to Agreement. Summit has all requisite
-------------------------------
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement by Summit
and the consummation by Summit of the transactions contemplated hereby
(including delivery of the Summit Stock to the Shareholders pursuant to the
terms hereof) have been duly authorized by all requisite corporate action of
Summit and no further corporate action is required of Summit to authorize this
Agreement or the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Summit and constitutes the legal, valid and binding
obligation of Summit, enforceable against Summit in accordance with its terms,
except to the extent that enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, fraudulent transfer, receivership,
moratorium, conservatorship, reorganization laws of general application
affecting the rights of creditors generally or institutions the deposits of
which are insured by the Federal Deposit Insurance Act and the affiliates of
such institutions, or by general principles of equity.
SECTION 4.06 Non-Contravention. The execution and delivery of this Agreement
-----------------
by Summit and the consummation by Summit of the transactions contemplated hereby
will not (a) conflict with any provision of the Certificate of Incorporation or
By-Laws of Summit or any of its subsidiaries, or (b) result (with or without the
giving of notice or the lapse of time or both) in any violation of or default or
loss of a benefit under, or permit the acceleration of any obligation under, any
mortgage, indenture, lease, agreement or other instrument, permit, concession,
grant, franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Summit or any of its subsidiaries or any of
their respective properties, other than any such violation, default, loss or
acceleration that would not have a Material Adverse Effect with respect to
Summit and its subsidiaries, on a consolidated basis.
SECTION 4.07 Public Information. The Registration Statement (as defined in
------------------
Section 5.19), the representations and warranties made by Summit in Article IV
herein and any Schedule, list or document specifically referred to in this
Article IV and delivered by Summit pursuant hereto do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
SECTION 4.08 Financial Statements. Except as may be described therein or in
--------------------
the related notes or in accountants' reports thereon, the consolidated financial
statements of Summit to be included in the Registration Statement have been
prepared in accordance with GAAP consistently applied and consistent with prior
periods, subject, in the case of unaudited interim consolidated financial
statements, to year-end adjustments (which consist of normal recurring accruals)
and the absence of consolidated statements of changes in stockholders' equity
and certain footnote disclosures. Except as may be described therein or in the
related notes or in accountants' reports thereon, the consolidated balance
sheets of Summit included in the Registration Statement fairly
A-21
<PAGE>
present in all material respects the financial condition of Summit and its
consolidated subsidiaries as of their respective dates, and the related
consolidated statements of operations, stockholders' equity and cash flows to be
included in the Registration Statement fairly present in all material respects
the results of operations of Summit and its consolidated subsidiaries for the
respective periods then ended, subject, in the case of unaudited interim
financial statements, to year-end adjustments (which consist of normal recurring
accruals) and the absence of consolidated statements of changes in stockholders'
equity and certain footnote disclosures.
SECTION 4.09 Absence of Certain Changes or Events. Since September 30, 1999,
------------------------------------
Summit has not (i) incurred any material liabilities (absolute or contingent),
except in the ordinary course of business, or (ii) suffered any Material Adverse
Effect with respect to Summit and its subsidiaries, on a consolidated basis. It
is understood and agreed, however, by all parties hereto that Summit continually
evaluates possible acquisitions and prior to the Closing Date may enter into one
or more agreements providing for, and may consummate, the acquisition by it of
another company or entity or the assets thereof or determine to issue Summit
Common Stock or other equity or debt securities, or to redeem or repurchase
Summit Common Stock or other securities issued by it. Such actions, and any
transactions reasonably necessary or appropriate in connection therewith, are
not prohibited by, and shall not constitute a breach of, this Section 4.09.
SECTION 4.10 Governmental Consents. No consent, approval, order or
---------------------
authorization of, or registration, declaration or filing with, any federal,
state, local or foreign governmental or regulatory authority is required to be
made or obtained by Summit in connection with the execution and delivery of this
Agreement by Summit or the consummation by Summit of the transactions
contemplated hereby, except for (a) filings pursuant to the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the Securities and Exchange Commission
("SEC") thereunder, if applicable, (b) filings with state securities agencies
under state securities or blue sky laws, if applicable, (c) any licenses,
permits, franchises or other governmental authorizations pertaining to the
business of the Company that are required as a result of the consummation of the
transactions contemplated hereby and (d) such consents, approvals, orders or
authorizations which, if not obtained, or registrations, declarations or filings
which, if not made, would not have a Material Adverse Effect with respect to
Summit and its subsidiaries, on a consolidated basis.
SECTION 4.11 Governmental Licenses. Neither Summit nor any subsidiary has
---------------------
failed to obtain any licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its properties or to the conduct of
its business, except where the failure to obtain such licenses, permits,
franchises or other governmental authorizations would not have a Material
Adverse Effect on Summit and its subsidiaries, on a consolidated basis.
SECTION 4.12 Tax and Regulatory Matters. Neither Summit nor any subsidiary
--------------------------
has taken or agreed to take any action or has any knowledge of any fact or
circumstance that would (a) materially impede or delay receipt of any consents
or approvals required to be obtained hereunder or the consummation of the
transactions contemplated by this Agreement, or (b) prevent the transactions
contemplated hereby from qualifying as a "reorganization" described in Section
368(a)(2)(E) of the Code.
A-22
<PAGE>
SECTION 4.13 Investment. Summit is acquiring the Outstanding Stock in
----------
connection with the Reorganization solely for its own account for investment and
not with any present view to resale or distribution thereof, in whole or in
part. Summit does not have any agreement or arrangement, formal or informal,
written or oral, with any person to sell or transfer or otherwise dispose of all
or any part of the Outstanding Stock, and has no present plans to enter into any
such agreement or arrangement.
SECTION 4.14 Knowledge of Industry. Summit has a complete and thorough
---------------------
understanding of the industry in which the Company does business and is able to
evaluate the merits and risks of the Reorganization as provided herein in order
to make an informed investment decision with respect thereto.
SECTION 4.15 No Broker. Except as set forth on Schedule 4.15, Summit has
--------- -------------
entered into this Agreement with the Company and the Principal Shareholders as a
result of direct negotiations without the assistance or efforts of any finder,
broker, financial advisor or investment banker.
ARTICLE V
COVENANTS
SECTION 5.01 Conduct of the Businesses of the Company. The Company and each
----------------------------------------
Principal Shareholder covenants and agrees that, prior to the Closing Date,
unless Summit shall otherwise consent in writing or as otherwise expressly
contemplated by this Agreement:
(a) the business of the Company and its Subsidiaries shall be conducted only
in, and each such company shall not take any action except in, the normal and
ordinary course of business and consistent with past practice unless
specifically prohibited by this Agreement;
(b) the Company, each Subsidiary and each Principal Shareholder shall, to the
extent it or he is not required to incur any unreasonable or extraordinary cost
or expense, use its or his best efforts to preserve the goodwill of the business
of the Company and its Subsidiaries;
(c) neither the Company nor any Subsidiary shall, directly or indirectly, do
any of the following: (i) sell, pledge, dispose of or encumber any of its
assets; (ii) amend or propose to amend its Certificate of Incorporation or By-
Laws or other organizational agreements or documents; (iii) split, combine or
reclassify any outstanding shares of its capital stock or other equity
interests, or declare, set aside or pay any dividend with respect to its shares
of capital stock or other equity interests; (iv) redeem, purchase, acquire or
offer to acquire any shares of its capital stock of any class, any other equity
interests or any debt securities; or (v) enter into any contract, agreement,
commitment or arrangement with respect to any of the matters set forth in this
paragraph (c);
(d) neither the Company nor any Subsidiary shall (i) issue, sell, pledge or
dispose of, or agree to issue, sell, pledge or dispose of, any additional shares
of, or securities convertible or exchangeable
A-23
<PAGE>
for, or any options, warrants or rights of any kind to acquire, any shares of
its capital stock of any class or other of its equity interests, debt
securities, property or assets, (ii) acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof, (iii) incur any indebtedness for borrowed
money in excess of $25,000 in the aggregate, (iv) enter into or modify any
contract, lease, agreement or commitment except that the Company may enter into
and modify contracts, agreements and arrangements of the types described at
clauses (a), (b), (c) and (d) of Section 2.09 not material to the business of
the Company provided such actions are taken in the ordinary course of business,
(v) terminate, modify, assign, waive, release or relinquish any contract rights
or amend any rights or claims which individually exceeds $5,000 or in the
aggregate exceed $25,000, or (vi) settle or compromise any claim, action, suit
or proceeding pending or threatened against it, or, if such company may be
liable or obligated to provide indemnification, against the directors or
officers or persons occupying similar positions of such company, before any
court, governmental agency or arbitrator which individually exceeds $5,000 or in
the aggregate exceed $25,000; provided, that nothing herein shall require any
--------
action that might impair or otherwise affect the obligation of any insurance
carrier under any insurance policy maintained by such company;
(e) neither the Company nor any Subsidiary shall grant any increase in the
salary or other compensation of any employee or grant any bonus to any employee,
or enter into any new employment agreement or make any loan to or enter into any
material transaction of any other nature with any employee of such company,
except that the Company may grant annual merit-based salary increases to
employees consistent with past practices that do not in the aggregate exceed 4%;
(f) neither the Company nor any Subsidiary shall take any action to institute
any new severance or termination pay practices with respect to any of its
directors, officers or employees or to increase the benefits payable under its
severance or termination pay practices;
(g) neither the Company nor any Subsidiary shall adopt or amend, in any
respect, or make any voluntary or discretionary employee contribution to, except
as contemplated hereby or as may be required by applicable law or regulation,
any collective bargaining, bonus, profit sharing, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment or
other employee benefit plan, agreement, trust, fund, plan or arrangement for the
benefit or welfare of any of its respective directors, officers or employees or
take or fail to take any discretionary action the effect of which would likely
be to increase or enhance benefits thereunder;
(h) the Company and each Subsidiary shall use reasonable efforts, to the
extent not prohibited by the foregoing provisions of this Section 5.01, (i) to
maintain the relationships of such company with its respective customers,
carriers, co-brokers, co-marketers, partners and joint venturers, including,
without limitation, all Contract Parties, (ii) if and as requested by Summit
after the execution of this Agreement and to the extent it does not adversely
interfere with the normal business operations of the Company, to make reasonable
arrangements for representatives of Summit to meet with one or more of the
twenty (20) customers of the Company referred to in Section 2.33 hereof and the
carriers who are Contract Parties, each as designated by Summit and approved by
the Company, which approval shall not be unreasonably withheld, in furtherance
of efforts to keep the relationships of each company with such customers and
carriers in force under substantially the same
A-24
<PAGE>
terms following the Closing Date as are in effect on the date hereof, and (iii)
to schedule, and to cause senior management of each company to participate in,
meetings of representatives of Summit with employees of each company;
(i) all of the shareholders agreements and similar agreements listed on
Schedule 2.10, if any, shall be terminated and shall be of no further force or
- -------------
effect; and
(j) all liabilities of the Company for borrowed money shall be paid and
satisfied in full.
Notwithstanding the foregoing, the Company may take those actions set forth on
Schedule 5.01; provided, that such actions shall be given effect on the Closing
- ------------- --------
Balance Sheet (as defined in Section 5.07) and in the calculations set forth in
Section 5.07 hereof.
SECTION 5.02 Access to Information.
---------------------
(a) The Company shall, and shall cause each of its respective officers,
directors, employees, representatives and agents to, upon reasonable advance
notice, afford, from the date hereof to the Closing Date, the officers,
employees, representatives and agents of Summit reasonable access during regular
business hours to its officers, employees, agents, properties, books, records
and work papers, and shall furnish Summit all financial, operating and other
information and data as Summit, through its officers, employees or agents, may
reasonably request.
(b) No investigation pursuant to this Section 5.02 shall affect, add to or
subtract from any representations or warranties of the parties hereto or the
conditions to the obligations of the parties hereto to effect the transactions
contemplated hereby.
SECTION 5.03 Further Assurances. Subject to the terms and conditions herein
------------------
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including, without limitation, using all reasonable efforts to obtain all
necessary waivers, consents, authorizations and approvals and to effect all
necessary registrations and filings; provided, that the foregoing shall not
--------
require any parties hereto to agree to make, or to permit the Company to make,
any divestiture of a significant asset in order to obtain any waiver, consent,
authorization or approval.
SECTION 5.04 Inquiries and Negotiations. From the date hereof until the
---------------------------
earlier of the Closing Date or the date of a termination of this Agreement
pursuant to Section 7.01, neither the Company nor any Subsidiary nor any of
their respective Affiliates, shareholders, directors, officers, employees,
representatives or agents, shall, directly or indirectly, (a) solicit or
initiate any discussions, submissions of proposals or offers or negotiations
with, or (b) participate in any negotiations or discussions with, or provide any
information or data of any nature whatsoever to, or otherwise cooperate in any
other way with, or assist or participate in, facilitate or encourage any effort
or attempt by, any person, other than Summit and its Affiliates, representatives
and agents, concerning any merger, consolidation, sale of substantial assets,
sale of shares of capital stock or
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<PAGE>
other securities or equity interests, recapitalization, debt restructuring or
similar transaction involving the Company or any division or Subsidiary of the
Company. The Company shall immediately notify Summit if any proposal, offer,
inquiry or other contact is received by, any information is requested from, or
any discussions or negotiations are sought to be initiated or continued with,
any of such companies in respect of any such transaction, and shall, in any such
notice to Summit, indicate the identity of the offeror and the terms and
conditions of any proposals or offers or the nature of any inquiries or
contacts, and thereafter shall keep Summit informed of the status and terms of
any such proposals or offers. The Company shall not release any third party
from, or waive any provision of, any confidentiality or standstill agreement to
which either the Company or a Subsidiary is a party.
SECTION 5.05 Escrow Agreement. The Principal Shareholders, Summit and the
----------------
Escrow Agent shall enter into the Escrow Agreement, effective as of the Closing
Date.
SECTION 5.06 Employment Agreements. Each of the parties listed in Section
---------------------
6.02(e), on one hand, and the Company, on the other hand, shall enter into
employment agreements, forms of which have been delivered to such persons
simultaneously with execution of this Agreement with respect to their employment
with the Company commencing on the Closing Date (collectively, the "Employment
Agreements").
SECTION 5.07 Closing Calculation; Purchase Price Adjustment.
----------------------------------------------
(a) Prior to Closing Date, (i) the Principal Shareholders shall deliver to
Summit a consolidated balance sheet of the Company and its Subsidiaries setting
forth, based on the actual financial results of the Company and its Subsidiaries
through the date such balance sheet is prepared, a good faith projection of the
financial results of the Company and its Subsidiaries through the Closing Date,
specifically setting forth the projected stockholder's equity and the projected
Working Capital (as defined in Section 5.07(c) below) of the Company and its
Subsidiaries on a consolidated basis (the "Projected Balance Sheet"), and (ii)
in the event stockholder's equity as indicated on the Projected Balance Sheet is
less than an amount equal to Eighteen Million Eight Hundred Thousand Dollars
($18,800,000) plus all retained earnings after December 31, 1999 (a
"Stockholder's Equity Shortfall") or Working Capital as indicated on the
Projected Balance Sheet is less than Fifteen Million Dollars ($15,000,000) (a
"Working Capital Shortfall"), the Shareholders shall pay to the Company, in
accordance with Section 5.07(d), an amount equal to the greater of the
Stockholder's Equity Shortfall, if any, or the Working Capital Shortfall, if
any.
(b) Within 60 days of the Closing Date, (i) the Company shall deliver to
Summit a consolidated balance sheet of the Company and its Subsidiaries, dated
as of the Closing Date, prepared in accordance with GAAP consistent with past
practices and reviewed or, at the option of Summit, audited by Moore Stephens,
P.C., setting forth among other things the stockholders' equity and Working
Capital of the Company and its Subsidiaries on a consolidated basis (the
"Closing Balance Sheet") and (ii) in the event a Stockholder's Equity Shortfall
or a Working Capital Shortfall is indicated on the Closing Balance Sheet, the
Shareholders shall, simultaneously with the delivery of the Closing Balance
Sheet to Summit, pay to the Company, in accordance with Section 5.07(d), an
amount equal to the greater of the Stockholder's Equity Shortfall, if any, or
the Working Capital
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Shortfall, if any, less any amounts previously paid pursuant to Section 5.07(a)
(such amount being the "Shortfall"). If the Shortfall is less than the amount
paid by the Shareholders in connection with a Working Capital Shortfall or
Stockholder's Equity Shortfall indicated on the Projected Balance Sheet, Summit
shall deliver to the Shareholders shares of Summit Stock equal to the difference
between the amount previously paid and the Shortfall in accordance with each
such Shareholder's Pro Rata Share. If Summit disputes any amount on or
procedures used in determining the Closing Balance Sheet, Summit shall provide
notice thereof to the Shareholders within 30 days of receipt of the Closing
Balance Sheet. The parties shall meet and attempt to resolve such dispute. If
resolution is not made within 30 days, the parties shall hire a mutually
acceptable outside, independent "Big 5" accounting firm to resolve such
disputes. The parties shall make all working papers and requested information
available to the accountants. The fees and expenses of any accounting firm
incurred pursuant to this Section 5.07(b) shall be split 50/50 by Summit and the
Shareholders and the final determination of such accounting firm shall be final
and binding upon the parties.
(c) "Working Capital" means the difference obtained by subtracting "Current
Liabilities" from "Current Assets" in accordance with GAAP; provided, that
--------
Current Assets shall include the cash surrender value of officer life insurance.
(d) All amounts to be paid to Summit pursuant to this Section 5.07 shall be
paid from, initially, the Retained Shares pursuant to Section 1.05, and then
from the Escrow Fund or pursuant to Section 5.09 hereof. Upon final
determination of the Shortfall and payment to Summit of all amounts hereunder,
any remaining Retained Shares shall be delivered to the Shareholders pursuant to
Section 1.05. Each Shareholder, at its discretion, may elect to pay such
Shortfall in cash, and shall then receive its Pro Rata Share of Retained Shares
from the Company.
SECTION 5.08 Notification of Certain Matters. The Company and the Principal
-------------------------------
Shareholders shall give prompt notice to Summit, and Summit shall give prompt
notice to the Company and the Principal Shareholders, of (a) the occurrence, or
failure to occur, of any event that such party believes would cause any of its
or any other parties' hereto representations or warranties contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date hereof to the Closing Date, and (b) any material failure of either the
Company, a Subsidiary, any Principal Shareholder or Summit, as the case may be,
or any officer, director, employee or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that failure to give such notice shall not
------------------
constitute a waiver of any defense that may be validly asserted.
SECTION 5.09 Indemnification for Certain Breaches.
------------------------------------
(a) The Principal Shareholders, jointly and severally, shall be liable to,
and shall indemnify, protect, defend and hold harmless Summit and its Affiliates
(including, without limitation, the Bank), the officers, directors, employees,
consultants, advisors and agents (collectively, "Representatives") of Summit and
its Affiliates and the successors of each and, from and after the Closing Date,
the Company and its Subsidiaries and their respective Representatives and
successors (such parties being collectively referred to herein as the "Summit
Indemnitees") from and against any and all claims, damages, liabilities, losses,
costs and expenses (including reasonable attorneys'
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fees) sustained by the Summit Indemnitees, except to the extent that such
claims, damages, liabilities, losses, costs or expenses are in fact satisfied
out of insurance proceeds or to the extent a tax or other cash benefit is
realized, resulting from or in connection with (i) acts or omissions or alleged
acts or omissions by the Company or agents of Company on or prior to the Closing
Date or circumstances existing with respect to the Company or agents of the
Company on or prior to the Closing Date, to the extent that any such foregoing
claims, damages, liabilities, losses, costs or expenses arise out of third party
claims, or (ii) the breach of any representation, warranty or covenant made by
the Company or any Principal Shareholder in this Agreement or a breach of any
representation, warranty or covenant made by the Company or any Principal
Shareholder in an agreement or instrument executed and delivered by or on behalf
of the Company or a Principal Shareholder pursuant hereto or in connection with
the Closing or other action or transaction contemplated hereby, except the
Employment Agreements (provided, there shall be no liability with respect to
error and omissions claims unless and until such claims exceed the amount
recorded as a reserve on the Closing Balance Sheet) (an "Indemnification
Event"); provided, however, that:
-------- -------
(i) with respect to all claims for indemnification under this Section 5.09(a)
for Indemnification Events, the total liability of the Principal Shareholders
shall be limited to $20,000,000; provided, however, that at all times after
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the Closing that the Principal Shareholders shall continue to own all Summit
Stock delivered to them directly or to the Escrow Agent on their behalf at
Closing pursuant to Section 1.03, the total liability of the Principal
Shareholders for Indemnification Events shall be limited to the lesser of
$20,000,000 or the Fair Market Value (as defined below) of such Summit Stock
as of the date payment for a breach is to be made by the Principal
Shareholders. "Fair Market Value" as of a payment date means the product
obtained by multiplying the number of shares of Summit Stock delivered by
Summit at the Closing times the closing sale price of a share of Summit Common
Stock as reported on the New York Stock Exchange Composite Transactions List
on the last trading day immediately preceding the date of payment; and
(ii) the Principal Shareholders shall be liable for the indemnification
provided for in this Section 5.09 only after the aggregate amount of claims
for indemnification exceeds One Hundred Thousand Dollars ($100,000)
("Threshold Amount") and only to the extent of such excess.
(b) The sole remedy of Summit Indemnitees at law for a breach shall be the
procedures provided for in the Escrow Agreement until the earlier to occur of
(i) the date of termination of the Escrow Agreement, or (ii) the date the amount
of claims asserted in good faith pursuant to such procedures exceed the fair
market value of the assets in the Escrow Fund, after which date the restriction
imposed on Summit Indemnitees by this first sentence of Section 5.09(b) shall be
null and void and of no further force or effect and, subject to the second
sentence of Section 5.10(a), Summit Indemnitees shall be free, at their
election, to pursue any remedies available to them by law, equity, contract or
otherwise for a breach or to seek satisfaction of the Principal Shareholders'
obligations under Section 5.09(a) in accordance with the Escrow Agreement,
provided the Escrow Agreement has not terminated. Summit Indemnitees shall be
entitled to seek injunctive or other equitable relief for any breach of a
covenant by the Company or a Principal Shareholder.
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(c) In the event insurance proceeds relating to a breach are received by or a
tax or other cash benefit is realized by a Summit Indemnitee following receipt
of a payment from a Principal Shareholder relating to the same breach, such
Summit Indemnitee shall pay to the party who or which made such payment (being
either the Principal Shareholders or, provided the Escrow Agreement has not
terminated, the Escrow Agent) an amount of cash equal to such insurance proceeds
or tax or other cash benefit or, if less than the amount of such insurance
proceeds or tax or other cash benefit, the amount paid by such party with
respect to the relevant breach. Such payments made to the Escrow Agent shall
become part of the Escrow Fund. After a termination of the Escrow Agreement all
such payments shall be made to the relevant Principal Shareholder.
(d) Summit shall be liable to, and shall indemnify, protect, defend and hold
harmless each Shareholder, his representatives and his respective successors
("Shareholder Indemnitees") against any and all claims, damages, liabilities and
expenses (including reasonable attorneys' fees) sustained by any Shareholder
Indemnitee, except to the extent that such claims, damages, liabilities or
expenses are in fact satisfied out of insurance proceeds, resulting from or in
connection with the breach of any representation, warranty, covenant or other
agreement made by Summit in or pursuant to this Agreement or any other agreement
or instrument executed and delivered by or on behalf of Summit pursuant hereto
or in connection herewith except the Employment Agreements; provided, however,
-------- -------
that (i) with respect to all claims for indemnification under this Section
5.09(d) the total liability of Summit shall be limited to $20,000,000, and (ii)
Summit shall be liable for the indemnification provided for in this Section 5.09
only after the aggregate amount of claims for indemnification exceeds One
Hundred Thousand Dollars ($100,000) and only to the extent of such excess.
(e) The rights provided to Summit Indemnitees in this Section 5.09 shall
remain in effect after the Closing Date until the date which is two (2) years
after the Closing Date, except with respect to the rights provided with respect
to representations, warranties and covenants of the Company and the Principal
Shareholders relating to any federal, state or local taxes in which event the
rights provided by Section 5.09 shall survive until the first to occur of (i)
the expiration of the applicable statute of limitations period, as extended by
any waiver or consent, or (ii) if applicable, the date of a final decision,
judgment or decree of a court of competent jurisdiction from which no appeal is
allowed (the "Indemnification Termination Date"); provided, however, that any
-------- -------
claims made on or prior to the Indemnification Termination Date shall survive
until final resolution thereof.
SECTION 5.10 Other Provisions Governing Remedies.
------------------------------------
(a) Notwithstanding anything in this Agreement to the contrary, any party
hereto shall be entitled to (i) seek specific enforcement of the terms and
provisions of this Agreement in the event of a breach thereof, and (ii) sue for
damages in the event of a wrongful termination of this Agreement in violation of
Article VII hereof or the failure to consummate the transactions contemplated
hereby through no fault of such party. Except for the foregoing, the
indemnification obligations set forth in Section 5.09 shall be the parties' sole
remedy hereunder. No party to this Agreement shall have any rights of offset
hereunder for any payments owed to any Principal Shareholder other than as
expressly set forth herein. This Section 5.10 shall survive any termination of
this Agreement.
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(b) Promptly after receipt by a party of notice of any claim requiring legal
representation or of the commencement of any action or proceeding with respect
to which such party may be entitled to indemnification hereunder (an
"Indemnified Party"), the Indemnified Party shall notify the party required to
provide indemnification (the "Indemnifying Party") in writing of such claim or
the commencement of such action or proceeding. The Indemnifying Party shall
assume the defense of such action or proceeding, shall employ counsel
satisfactory to the Indemnified Party and shall pay the fees and expenses of
such counsel. Notwithstanding the preceding sentence, an Indemnified Party shall
be entitled to employ counsel separate from counsel for the Indemnifying Party
and from any other party in such action if such Indemnified Party reasonably
determines that there are defenses available to such Indemnified Party which are
different from or in addition to those available to the other parties, or if a
conflict of interest exists which makes representation by counsel chosen by the
Indemnifying Party not advisable. In such event, the reasonable fees and
disbursements of such separate counsel shall be paid by the Indemnifying Party.
In no event shall the Indemnifying Party be liable for the fees and
disbursements of more than one such separate counsel for all indemnified parties
in any jurisdiction in any single action or proceeding. In any action or
proceeding the defense of which the Indemnifying Party assumes, each Indemnified
Party shall have the right to participate in such litigation and to retain its
own counsel at such Indemnified Party's own expense. No party shall settle any
claim hereunder without the consent of the other party, which consent shall not
be unreasonably withheld.
SECTION 5.11 Confidentiality. Summit, on the one hand, and the Company and
---------------
each Principal Shareholder, on the other hand, shall hold, and shall use their
respective best efforts to cause their respective officers, directors,
employees, consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
other parties furnished to such party in connection with the transactions
contemplated by this Agreement (a party furnishing such documents or information
being hereinafter referred to as a "Submitter" and a party receiving such
documents or information being hereinafter referred to as a "Recipient"), except
to the extent that such information can be shown to have been (a) lawfully
available to Recipient on a nonconfidential basis from a source other than
Submitter prior to its disclosure to Recipient by Submitter, (b) in the public
domain through no fault of the Recipient, or (c) later lawfully acquired by the
Recipient from sources other than the Submitter; provided, that, with respect to
--------
clauses (a) and (c) of this Section 5.11, the other source as referred to
therein is not known by Recipient to be bound by any confidentiality or other
contractual legal or fiduciary obligations of confidentiality regarding such
information; provided, further, that each party may disclose such information to
-------- -------
its Affiliates and its Affiliates' officers, directors, employees, consultants,
advisors and agents, lenders and other investors in connection with the
transactions contemplated by this Agreement so long as such persons are informed
by such party of the confidential nature of such information and are directed by
such party to treat such information confidentially. If the transactions
contemplated by this Agreement are abandoned, such confidentiality shall be
maintained and each Recipient shall, and shall use its best efforts to cause its
Affiliates and the respective officers, directors, employees, consultants,
advisors and agents of it and its Affiliates to, destroy and certify to such
destruction or deliver to the appropriate Submitter, upon the request of a
Submitter, all documents and other materials, and all copies thereof, obtained
by such party or on its behalf from the other party(s) in
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connection with this Agreement that are subject to such confidentiality. The
terms of this Section 5.11 shall survive indefinitely.
SECTION 5.12 Additional Covenants.
--------------------
(a) Each Principal Shareholder hereby agrees that during the period from the
date hereof to the Effective Time he will not:
(1) sell, transfer, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with
respect to the sale, transfer, pledge, encumbrance, assignment or other
disposition of, any shares of Company Common Stock owned by such Principal
Shareholder, other than as provided herein;
(2) grant any proxies or enter into a voting agreement or other
arrangement with respect to any shares of Company Common Stock owned by such
Principal Shareholder; or
(3) deposit any shares of Company Common Stock owned by such Principal
Shareholder into a voting trust.
(b) Each Principal Shareholder hereby agrees not to take any action that
would make any representation or warranty herein of such Principal Shareholder
or the Company or a Subsidiary untrue or incorrect in any material respect or
that would have the effect of preventing or disabling such Principal Shareholder
from performing his obligations under this Agreement.
(c) Each Principal Shareholder hereby agrees to surrender the Certificates
owned by such Principal Shareholder in exchange for certificates representing
shares of the Summit Stock at the Closing and Summit agrees to deliver such
certificates to the Principal Shareholders at the Closing.
(d) The Principal Shareholders shall use reasonable efforts to obtain any
required consents or waivers on or prior to the Scheduled Date of Closing, and
thereafter if not obtained by such date.
SECTION 5.13 Termination of Shareholders' Agreements. Simultaneously with
---------------------------------------
the execution and delivery hereof, the Company and each Shareholder who is a
party to any shareholders' or similar agreement disclosed in Schedule 2.10, if
-------------
any, shall enter into a written agreement, in form and substance satisfactory to
Summit, terminating such agreements as of the Closing Date without further
obligation of the applicable company thereunder.
SECTION 5.14 Corporate Existence. During the period beginning on the Closing
-------------------
Date and ending on the second anniversary of the Closing Date, Summit shall not,
nor permit any subsidiary, affiliate or any person related to it or any of the
foregoing entities within the meaning of 26 C.F.R. (S)1-368-1(e) to take or
agree to take any action which would cause the Reorganization to cease to
qualify as, and shall use its best efforts to preserve the qualification of the
Reorganization as, a "reorganization" described in Section 368(a)(2)(E) of the
Code.
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SECTION 5.15 Stock Books and Ledgers. The Company shall deliver, at or prior
-----------------------
to the Closing, the stock ledgers and stock certificate books and minute books
and other corporate documents, instruments and filings for the Company and its
Subsidiaries and all canceled and all blank certificates for the capital stock
of the Company and the Subsidiaries.
SECTION 5.16 Settlement of Dispute. The Company currently is in a dispute
---------------------
with Edward Devine, Jr. regarding a claim by him of the right to purchase
Company Common Stock (the "Dispute"). The Company covenants that it will use
best efforts to obtain a settlement and release of the Dispute, satisfactory to
Summit, prior to Closing. If such settlement and release is not obtained prior
to Closing, Summit will proceed with Closing and such decision shall in no way
prejudice Summit's right to indemnification pursuant to Section 5.09 for any
claims, damages, liabilities, costs or expenses (including reasonable attorney
fees) arising from the Dispute.
SECTION 5.17 Options. The holders of outstanding options to purchase shares
-------
of Company Common Stock shall exercise such options prior to the Closing.
SECTION 5.18 Errors and Omissions Insurance. The Company shall purchase a
------------------------------
tail errors and omissions insurance policy providing for coverage not less than
three (3) years after the Closing Date and shall use its best efforts to obtain
coverage for six (6) years; provided, however, that in no case shall the Company
-------- -------
be required to pay a premium for such tail coverage in excess of 200% of the
Company's annual premium for the most recent coverage year. Such coverage shall
be in amounts not less than the amount of coverage in the Company's current
policy.
SECTION 5.19 Registration Statement; Listing of Summit Stock on the New York
---------------------------------------------------------------
Stock Exchange. Summit shall prepare and file with the SEC as soon as is
- --------------
reasonably practicable a registration statement on Form S-4 (the "Registration
Statement") (or the equivalent in the form of preliminary proxy materials) with
respect to the shares of Summit Stock to be issued in the Reorganization and
shall use its best efforts to cause the Registration Statement to become
effective. Summit shall also take any action required to be taken under any
applicable state blue sky or securities laws in connection with the issuance of
such shares of Summit Stock, and the Company shall furnish Summit all
information concerning the Company and Subsidiaries and the Shareholders thereof
as Summit may reasonably request in connection with any such action.
Furthermore, Summit shall take all action necessary for the Summit Stock to be
listed on the New York Stock Exchange.
SECTION 5.20 Shareholder Approval. The Company shall call a meeting of the
--------------------
Shareholders to be held as soon as practicable after the date the Registration
Statement is declared effective by the SEC for the purpose of voting upon this
Agreement. The Company shall deliver to its Shareholders any and all information
required pursuant to applicable law. The board of directors of the Company shall
submit for approval of the Company's Shareholders the matters to be voted upon
at such meeting. The board of directors of the Company hereby does and will
recommend this Agreement and the transactions contemplated hereby to the
Shareholders of the Company and use its reasonable best efforts to obtain any
vote of the Company's Shareholders necessary for the approval and adoption of
this Agreement.
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SECTION 5.21 Consents. The parties shall use best efforts to obtain or
--------
satisfy all waivers, consents, authorizations, orders and approvals of, filings
with, and waiting periods imposed by, any governmental authority or any court or
other tribunal or any other person, firm or entity which are required for the
performance of this Agreement and the agreements contemplated hereby and the
consummation by each party hereto and thereto of the transactions contemplated
hereby and thereby, including the Reorganization. Failure to obtain any such
consent shall not constitute a breach of this Agreement.
ARTICLE VI
CONDITIONS TO THE REORGANIZATION
SECTION 6.01 Conditions to Each Party's Obligation to Effect the
---------------------------------------------------
Reorganization. The respective obligations of each party to effect the
- ---------------
Reorganization shall be subject to the fulfillment of the following conditions
(which may be waived in whole or in part in writing by the parties):
(a) no preliminary or permanent injunction or other order, decree or ruling
of any court of competent jurisdiction shall have been threatened or issued and
no statute, rule, regulation or order of any governmental, regulatory or
administrative agency or authority shall be in effect or be proposed that would
prevent the consummation of the Reorganization as contemplated hereby;
(b) all waivers, consents, authorizations, orders and approvals of, filings
with, and waiting periods imposed by, any governmental authority which are
required for the performance of this Agreement and the agreements contemplated
hereby and the consummation by each party hereto and thereto of the transactions
contemplated hereby and thereby, including the termination of any waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act, shall have been obtained
or made or shall have expired, as appropriate;
(c) the Registration Statement shall have been declared effective by the SEC
and the Summit Stock shall have been listed on the New York Stock Exchange;
(d) any necessary approval or waiver of the Board of Governors of the Federal
Reserve System shall have been obtained;
(e) the Shareholders and Board of Directors of the Company shall have
approved the transaction in accordance with the New Jersey Business Corporation
Act (the "New Jersey Code"); and
(f) the Certificate of Merger shall have been executed and filed.
SECTION 6.02 Conditions to the Obligation of the Company to Effect the
---------------------------------------------------------
Reorganization. The obligation of the Company and the Principal Shareholders to
- --------------
effect the Reorganization shall be subject to the fulfillment of the following
additional conditions (any of which may be waived in whole or in part in writing
by the Company):
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(a) Summit shall have performed and complied with all obligations and
agreements required to be performed and complied with by it under this Agreement
at or prior to the Closing Date;
(b) the representations and warranties of Summit contained in this Agreement
shall be true and correct at and as of the Closing Date as if made at and as of
such date, except as otherwise contemplated or permitted by this Agreement;
(c) the Company and the Principal Shareholders shall have received a
certificate from the President or a Vice President of Summit, dated as of the
Closing Date, to the effect that the conditions set forth in paragraphs (a) and
(b) above have been satisfied;
(d) the Company and the Principal Shareholders shall have received the Escrow
Agreement, duly executed by Summit and the Escrow Agent;
(e) Thomas J. Sharkey, Sr., Thomas J. Sharkey, Jr., Brian Leddy, James
O'Connor, Peter Gruenberg and Robert Nitti each shall have received an
Employment Agreement, effective as of the Closing Date, duly executed by the
Company; and
(f) counsel to Summit shall deliver a legal opinion in the form mutually
agreed to by Summit and the Company.
SECTION 6.03 Conditions to the Obligation of Summit to Effect the
----------------------------------------------------
Reorganization. The obligation of Summit to effect the Reorganization shall be
- --------------
subject to the fulfillment of the following additional conditions (any of which
may be waived in whole or in part in writing by Summit):
(a) the Company and each of the Principal Shareholders shall have performed
and complied with all obligations and agreements required to be performed and
complied with by it or him under this Agreement at or prior to the Closing Date;
(b) the representations and warranties of the Company and the Principal
Shareholders contained in this Agreement shall be true and correct at and as of
the Closing Date as if made at and as of such date, except as otherwise
contemplated or permitted by this Agreement, or, if not true and correct at the
Closing Date, such breaches do not in the reasonable judgment of Summit exceed
$100,000 in claims, damages, liabilities or expenses of the type that would be
indemnifiable under Section 5.09(a) or have a Material Adverse Affect on the
Company and its Subsidiaries on a consolidated basis;
(c) Summit shall have received a certificate from the President of the
Company, dated as of the Closing Date, to the effect that the conditions set
forth in paragraphs (a) and (b) above have been satisfied;
(d) Neither the Company nor the Principal Shareholders shall have been
informed by Contract Parties of an intent to terminate or modify contracts or
arrangements where the effect of such terminations and modifications, taken
individually or in the aggregate, have a Material Adverse Effect on the business
of the Company and its Subsidiaries, on a consolidated basis;
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(e) Summit shall have received from the Company an affidavit of the
President, stating under penalties of perjury, that the Company is not and has
not been a United States real property holding company (as defined in Section
897(c)(2) of the Code), during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code;
(f) Summit shall have received the Escrow Agreement, duly executed by the
Principal Shareholders, and the Escrow Agent and the Principal Shareholders
shall have delivered to the Escrow Agent the stock powers signed in blank
contemplated by Section 1.04 hereof;
(g) Summit shall have received Employment Agreements, duly executed by each
individual named in Section 6.02(e);
(h) Summit shall have received the resignations of all directors of the
Company and its Subsidiaries to become effective as of the Closing Date;
(i) Summit shall have received from the Principal Shareholders current
letters of certification, good standing certificates or other appropriate
evidence that those licenses of the Company and the Subsidiaries are in full
force and effect in the following states: New Jersey; New York; Delaware;
California; Pennsylvania; Connecticut; and Maryland;
(j) Summit shall have received the opinion of Garrubbo, Romankow & Rinaldo,
counsel to the Company and the Principal Shareholders, substantially in the form
of Exhibit B attached hereto;
---------
(k) Summit shall have received the stock ledgers and stock certificate books
and minute books and other corporate documents, instruments and filings for the
Company and its Subsidiaries and all canceled and all blank certificates for the
capital stock of the Company and the Subsidiaries; and
(l) James Manhardt shall have paid to the Company all outstanding principal
and interest owed to the Company.
ARTICLE VII
TERMINATION AND ABANDONMENT
SECTION 7.01 Termination and Abandonment. This Agreement may be terminated
---------------------------
and the Reorganization may be abandoned prior to the Closing Date:
(a) By agreement between Summit and the Company;
(b) By either Summit or the Company if the Closing Date shall not have
occurred on or before the ninetieth (90/th/) day after the date of this
Agreement; or
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(c) By the Company if it receives and delivers a copy to Summit prior to
12:00 p.m., eastern time, on January 5, 2000, a written opinion from Charles E.
Falk that the Reorganization does not qualify as a "reorganization" described in
Section 368(a)(2)(E) of the Code.
SECTION 7.02 Effect of Termination. Except for Section 5.11 hereof with
---------------------
respect to confidentiality, Section 8.02 hereof with respect to certain
commissions, fees, expenses and indemnities and Section 8.03 with respect to
publicity, all of which shall survive any termination of this Agreement, in the
event of the termination of this Agreement, this Agreement shall thereafter
become void and have no effect, and no party hereto shall have any liability to
any other party hereto or its shareholders or directors or officers in respect
thereof, except that nothing herein shall relieve any party from liability for
any breach hereof.
SECTION 7.03 Effect of Breach of Section 5.04. In the event there occurs (i)
--------------------------------
a breach of one or more of the covenants set forth at the first sentence of
Section 5.04, (ii) a termination of this Agreement in accordance with Section
7.01(b) or (c), and (iii) within one year of such termination of this Agreement,
a sale of 25% or more of the outstanding capital stock or assets of the Company
or a Subsidiary or parent corporation in one transaction, or in a series of
transactions which commences within such year period, then in such event the
Principal Shareholders shall be jointly and severally obligated to pay, and
shall pay to Summit within one business day of such sale, the sum of $2,800,000
as liquidated damages in full satisfaction of all liabilities of the Principal
Shareholders under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Survival of Certain Representations and Warranties. All
--------------------------------------------------
covenants in this Agreement or instruments delivered pursuant hereto which by
their terms contemplate performance after the Closing Date shall survive the
Closing. The representations and warranties of the Company and the Principal
Shareholders, and covenants of the Company and the Principal Shareholders
required to be performed prior to Closing, contained in this Agreement or in any
instrument delivered pursuant hereto shall survive the Closing Date until the
date which is two (2) years after the Closing Date, except that such of the
foregoing representations, warranties and covenants of the Company and the
Principal Shareholders relating to federal, state or local taxes shall survive
until the first to occur of (i) the expiration of the applicable statute of
limitations period, as extended by any waiver or consent or (ii) if applicable,
the date of a final decision, judgment or decree of a court of competent
jurisdiction from which no appeal is allowed; provided, that this Section 8.01
--------
shall not limit any other covenant or agreement of the parties that by its terms
contemplates performance beyond the Closing Date or such period.
SECTION 8.02 Fees and Expenses.
-----------------
(a) In the event the transactions contemplated by this Agreement are not
consummated, neither the Company nor the Principal Shareholders, on the one
hand, nor Summit, on the other hand, shall
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<PAGE>
have any obligation to pay any of the fees and expenses of the other incurred in
the negotiation, preparation and execution of this Agreement or in connection
with the actions and transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of counsel, accountants, advisors,
investment bankers and other experts and finders and brokers; provided, however,
-------- -------
that this Section 8.02(a) is not intended to limit or proscribe damages that
would otherwise be recoverable by a party hereto for a breach of this Agreement.
(b) In the event the transactions contemplated by this Agreement are
consummated, the Principal Shareholders, jointly and severally, shall be liable
for and shall pay all costs, fees and expenses, including without limitation all
counsel, accounting (including the fees payable under Section 5.07(b)),
advisors', investment banking, finders' or brokerage commissions, fees and
expenses, incurred by the Company or by the Principal Shareholders in connection
with the negotiation, preparation and execution of this Agreement or in
connection with the actions of the Company and the Principal Shareholders and
transactions contemplated by this Agreement; provided, that such fees and
--------
expenses may be paid by the Company if reflected on the Closing Balance Sheet.
(c) Summit agrees that it shall be liable for and shall pay all costs, fees
and expenses, including without limitation, all counsel, accounting, advisors',
investment banking, finders' or brokerage commissions, fees and expenses,
incurred by Summit or an Affiliate of Summit (other than the Company) in
connection with the negotiation, preparation and execution of this Agreement or
in connection with the actions of Summit and its Affiliates and transactions
contemplated by this Agreement.
(d) The Principal Shareholders, on the one hand, and Summit, on the other
hand, shall indemnify the other and hold it harmless from and against any claims
for fees or expenses for which the other is liable under this Section 8.02. The
parties agree that any fees or expenses for which the Principal Shareholders are
responsible for and which are paid by the Company shall be reflected on the
Closing Balance Sheet.
SECTION 8.03 Publicity. The Company, the Principal Shareholders and Summit
---------
agree that they will not issue any press release or make any other public
announcement or disclosure concerning this Agreement or the transactions
contemplated hereby (including, without limitation, the fact of the existence of
this Agreement or the Purchase Price) without the prior written consent of the
other parties granted in their discretion, except that Summit or Bank may make
such public disclosure that it believes in good faith to be required by law,
including the Registration Statement.
SECTION 8.04 Execution in Counterparts. For the convenience of the parties,
-------------------------
this Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
SECTION 8.05 Notices.
-------
(a) Each notice, request, demand and other communication required or
permitted hereunder shall not satisfy the requirements of the section of this
Agreement requiring or permitting such notice, request, demand or other
communication unless the notice, request, demand or other communication
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<PAGE>
is in writing. Such notices and other communications hereunder shall be given to
the parties at their respective addresses set forth below and shall be sent by
(i) hand delivery, (ii) certified mail, return receipt requested, postage
prepaid, (iii) a recognized overnight delivery service, or (iv) telecopy
provided written confirmation of receipt of the telecopy is received from the
recipient (by telecopy or as otherwise permitted herein) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice). Notices sent by hand delivery shall be deemed received when
delivered to the address and person set forth below; notices sent by certified
mail shall be deemed received when accepted; notices sent by overnight delivery
service shall be deemed received when delivered and notices sent by telecopy
shall be deemed received upon receipt of the confirmation as required by this
Section 8.05:
If to Summit, Bank, or after the Closing, to the Company:
Richard F. Ober, Jr.
Executive Vice President and General Counsel
Summit Bancorp.
301 Carnegie Center - P.O. Box 2066
Princeton, New Jersey 08543-2066
Telecopy: 609-987-3435
Telephone: 609-987-3430
with a copy to: Robert LaRose
Thompson Coburn LLP
One Mercantile Center
St. Louis, MO 63101
Telecopy: 314-552-7000
Telephone: 314-552-6000
If to the Principal Shareholders, or prior to the Closing, to the Company:
Thomas J. Sharkey, Sr.
195 High Tor Drive
Watchung, NJ 07060
Telephone: 908-753-8410
Thomas J. Sharkey, Jr.
#1 Starlite Drive
Clark, NJ 07066
Telephone: 732-574-0744
with a copy to: Paul R. Williams, Jr.
Garrubbo, Romankow & Rinaldo
53 Cardinal Drive
Westfield, NJ 07090
(908) 233-5575
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<PAGE>
Kenneth F. Kunzman
Connell, Foley & Geiser
85 Livingston Avenue
Roseland, NJ 07068
(973) 535-0500
John A. Aiello
Giordano, Halleran & Ciesla
125 Half Mile Road
P.O. Box 190
Middletown, NJ 07748
(732) 741-3900
(b) No notice, request, demand or other communication from the Principal
Shareholders required or permitted pursuant to this Agreement shall be valid for
any purpose under this Agreement unless signed by all Shareholders or one or
both of the Sellers Representatives (as defined in Section 8.13).
SECTION 8.06 Waivers. The Company and the Shareholders, on the one hand, and
-------
Summit, on the other hand, may, by written notice to the other, (a) extend the
time for the performance of any of the obligations or other actions of the other
under this Agreement, (b) waive any inaccuracies in the representations or
warranties of the other contained in this Agreement or in any document delivered
pursuant to this Agreement, (c) waive compliance with any of the conditions of
the other contained in this Agreement, or (d) waive performance of any of the
obligations of the other under this Agreement. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
SECTION 8.07 Entire Agreement. This Agreement, its Schedules and Exhibits
----------------
and the related agreements and documents referenced herein executed on or as of
the Closing Date constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof. No representation, warranty, promise, inducement or
statement of intention has been made by any party that is not embodied in this
Agreement or a related agreement or document referenced herein executed on or as
of the Closing Date, and none of the parties shall be bound by, or be liable
for, any alleged representation, warranty, promise, inducement or statement of
intention not embodied herein or therein.
SECTION 8.08 Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of New Jersey, without regard
to principles of conflict of laws.
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<PAGE>
SECTION 8.09 Binding Effect, Benefits. This Agreement shall inure to the
------------------------
benefit of and be binding upon the parties hereto and their respective permitted
successors and assigns. Notwithstanding anything contained in this Agreement to
the contrary, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective permitted
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
SECTION 8.10 Assignability. Neither this Agreement nor any of the parties'
-------------
rights hereunder shall be assignable by any party hereto without the prior
written consent of the other parties hereto.
SECTION 8.11 Amendments. This Agreement may only be amended, varied or
----------
supplemented by an instrument in writing, signed by all of the parties hereto.
SECTION 8.12 Articles and Section Headings. Article and section headings
-----------------------------
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
SECTION 8.13 Shareholder Representative. Each of the Principal Shareholders
--------------------------
have made, constituted and appointed and by the execution of this Agreement
hereby irrevocably makes, constitutes and appoints Thomas J. Sharkey, Sr. and
Thomas J. Sharkey, Jr., and each of them, as the Principal Shareholders
representatives (the "Sellers Representatives") as such person's true and lawful
attornies in fact and agent, for such person and in such person's name, (i) to
receive all notices and communications directed to such Principal Shareholders
under this Agreement or the Escrow Agreement and to take any action (or to
determine to take no action) with respect thereto, as either of them may deem
appropriate as effectively as such Principal Shareholders could act for himself
or herself, including, without limitation, the settlement or compromise of any
dispute or controversy, and (ii) to execute and deliver all instruments and
documents of every kind incident to the foregoing to all intents and purposes
and with the same effect as such Principal Shareholders could do personally, and
each such Principal Shareholder hereby ratifies and confirms his or her own act,
all that either of the Sellers Representatives shall do or cause to be done
pursuant to the provisions hereof. Summit may at all times rely on the Sellers
Representatives status as attornies in fact and agents of the Principal
Shareholders.
SECTION 8.14 Schedules. If information is contained in any Schedule hereto,
---------
it also shall apply to any other Schedule hereto other than those Schedules
which state "none" or "not applicable" or other like phase.
SECTION 8.15 Gender. Where required by the context, the gender of personal
------
pronouns shall be construed as either masculine, feminine or neuter.
A-40
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties have
executed and delivered this Agreement and Plan of Reorganization as of the day
and year first above written.
SUMMIT BANCORP.
By: /s/ John R. Feeney
-------------------------------------------
John R. Feeney
Executive Vice President
SUMMIT BANK
By: /s/ John R. Feeney
-------------------------------------------
John R. Feeney
Executive Vice President
MSFG, INC.
By: /s/ Thomas J. Sharkey
-------------------------------------------
Thomas J. Sharkey
Chairman
PRINCIPAL SHAREHOLDERS:
BLOODY FORELAND, L.P.
By: /s/ Thomas J. Sharkey
-------------------------------------------
Thomas J. Sharkey, Sr., its General Partner
/s/ Thomas J. Sharkey
-------------------------------------------
Thomas J. Sharkey, Jr.
/s/ William Dittman
-------------------------------------------
William Dittman
/s/ James Manhardt
-------------------------------------------
James Manhardt
/s/ Edward D. Sharkey
-------------------------------------------
Edward D. Sharkey
/s/ Ann McCormick
-------------------------------------------
Ann McCormick
A-41
<PAGE>
/s/ Ellen Del Mauro
-----------------------------------------------
Ellen Del Mauro
/s/ Brian Leddy
-----------------------------------------------
Brian Leddy
A-42
<PAGE>
PROXY
MSFG, INC.
14 Commerce Drive
Cranford, New Jersey 07016-3505
For the Special Meeting of Shareholders to be held February 29, 2000
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder(s) of MSFG, INC. ("MSFG"), does hereby
nominate, constitute and appoint Thomas J. Sharkey, Sr. and Thomas J. Sharkey,
Jr. or each of them (with full power to act alone), true and lawful proxies and
attorneys-in-fact, with full power of substitution, for the undersigned and in
the name, place and stead of the undersigned to vote all of the shares of common
stock of MSFG standing in the name of the undersigned on the books of MSFG at
the close of business on January 15, 2000 at the special meeting of shareholders
to be held at the Plainfield Country Club, 1591 Woodland Avenue, Edison, New
Jersey 08820, on February 29, 2000, at 10:00 a.m., local time, and at any
adjournments or postponements thereof, with all the powers the undersigned would
possess if personally present, as follows:
1. To consider and vote upon a proposal to approve and adopt the Agreement and
Plan of Reorganization, dated December 31, 1999, by and among Summit
Bancorp., Summit Bank (New Jersey), MSFG, Inc. and the shareholders of
MSFG, Inc. who are signatories to the Agreement and Plan of Reorganization,
and the transactions contemplated thereby, including the merger of a to-be-
formed wholly owned subsidiary of Summit Bancorp. into MSFG, Inc., pursuant
to which each share of common stock of MSFG, Inc. will be converted into
the right to receive 0.4391 of a share of common stock of Summit Bancorp.,
as more fully described in the accompanying Proxy Statement-Prospectus.
[_] FOR [_] AGAINST [_] ABSTAIN
2. To transact such other business as may properly come before the special
meeting.
The Board of Directors unanimously recommends a vote "FOR" approval and adoption
of the Agreement and Plan of Reorganization.
The undersigned hereby revokes any other proxies to vote at such
meeting and hereby ratifies and confirms all that the proxies and attorneys-in-
fact, or each of them, appointed hereunder may lawfully do by virtue hereof.
Said proxies and attorneys-in-fact, without limiting their general authority,
are specifically authorized to vote in accordance with their best judgment with
respect to all matters incident to the conduct of the special meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN
HEREIN, THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL LISTED ABOVE.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY.
RETURN USING THE ENVELOPE PROVIDED
MSFG, INC. SPECIAL MEETING
Check appropriate box Date____________________ NO. OF SHARES
Indicate changes below:
Address Change? [_] Name Change? [_] ____________________________
____________________________
Signature(s) In Box
When signing as attorney,
executor, administrator,
trustee or guardian, please
give your full title. If
more than one person holds
the power to vote the same
shares, all must sign. All
joint owners must sign. The
undersigned hereby
acknowledges receipt of the
Notice of Special Meeting
and the Proxy Statement-
Prospectus (with all
enclosures and attachments),
dated February __, 2000,
relating to the Special
Meeting.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
With respect to the indemnification of directors and officers, Section 5 of
Article IX of the By-Laws of Summit Bancorp provides:
Section 5. Indemnification and Insurance (a) Each person who was or is
made a party or is threatened to be made a party to or is involved in any
proceeding, by reason of the fact that he or she is or was a corporate agent of
the Corporation, whether the basis of such proceeding is alleged action in an
official capacity as a corporate agent or in any other capacity while serving as
a corporate agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the laws of the State of New Jersey as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expenses and liabilities in connection
therewith, and such indemnification shall continue as to a person who has ceased
to be a corporate agent and shall inure to the benefit of such corporate agent's
heirs, executors, administrators and other legal representatives; provided,
--------
however, that except as provided in Section 5(c) of this By-Law, the Corporation
- -------
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors. The right to
indemnification conferred in this By-Law shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition, such advances
to be paid by the Corporation within 20 days after the receipt by the
Corporation of a statement or statements from the claimant requesting such
advance or advances from time to time; provided, however, that the advancement
-------- -------
of counsel fees to a claimant other than a claimant who is or was a director or
Executive Vice President or higher ranking officer of the Corporation shall be
made only when the Board of Directors or the General Counsel of the Corporation
determines that arrangements for counsel are satisfactory to the Corporation;
and provided, further, that if the laws of the State of New Jersey so require,
-------- -------
the payment of such expenses incurred by a corporate agent in such corporate
agent's capacity as a corporate agent (and not in any other capacity in which
service was or is rendered by such person while a corporate agent, including,
without limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding shall be made only upon delivery to the Corporation
of an undertaking by or on behalf of such corporate agent to repay all amounts
so advanced if it shall ultimately be determined that such corporate agent is
not entitled to be indemnified under this By-Law or otherwise.
(b) To obtain indemnification under this By-Law, a claimant shall submit
to the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to the claimant and is
reasonably necessary to determine whether and to what extent the claimant is
entitled to indemnification. Upon written request by a claimant for
indemnification pursuant to the first sentence of this Section 5(b), a
determination, if required by applicable law, with respect to the claimant's
entitlement thereto shall be made as follows: (1) if requested by a claimant who
is or was a director or Executive Vice President or higher ranking officer of
this Corporation, by independent counsel (as hereinafter defined) in a written
opinion to the Board of Directors, a copy of which shall be
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<PAGE>
delivered to the claimant; or (2) if the claimant is not a person described in
Section 5(b)(1), or is such a person and if no request is made by such a
claimant for a determination by independent counsel, (A) by the Board of
Directors by a majority vote of a quorum consisting of disinterested directors
(as hereinafter defined), or (B) if a quorum of the Board of Directors
consisting of disinterested directors is not obtainable or, even if obtainable,
such quorum of disinterested directors so directs, by independent counsel in a
written opinion to the Board of Directors, a copy of which shall be delivered to
the claimant. In the event the determination of entitlement to indemnification
is to be made by independent counsel at the request of the claimant, the
independent counsel shall be selected by the Board of Directors and paid by the
Corporation. If it is so determined that the claimant is entitled to
indemnification, payment to the claimant shall be made within 20 days after such
determination.
(c) If a claim under Section 5(a) of this By-Law is not paid in full by
the Corporation within thirty days after a written claim pursuant to Section
5(b) of this By-Law has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such claim, including
attorney's fees. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any proceeding in
advance of its final disposition where the required undertaking, if any is
required, has been tendered to the Corporation) that the claimant has not met
the standard of conduct which makes it permissible under the laws of the State
of New Jersey for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors or
independent counsel) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the circumstances
because the claimant has met the applicable standard of conduct set forth in the
laws of the State of New Jersey, nor an actual determination by the Corporation
(including its Board of Directors or independent counsel) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
(d) If a determination shall have been made pursuant to Section 5(b) of
this By-Law that the claimant is entitled to indemnification, the Corporation
shall be bound by such determination in any judicial proceeding commenced
pursuant to Section 5(c) of this By-Law.
(e) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this By-
Law shall not be exclusive of any other rights which any person may have or
hereafter acquire under any statute, provision of the Restated Certificate of
Incorporation, By-Laws, agreement, vote of shareholders or disinterested
directors or otherwise. No repeal or modification of this By-Law shall in any
way diminish or adversely affect the rights of any corporate agent of the
Corporation hereunder in respect of any occurrence or matter arising prior to
any such repeal or modification.
(f) The Corporation may maintain insurance, at its expense, to protect
itself and any corporate agent of the Corporation or other enterprise against
any expense or liability, whether or not the Corporation would have the power to
indemnify such person against such expense or liability under the laws of the
State of New Jersey.
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<PAGE>
(g) If any provision or provisions of this By-Law shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (1) the validity,
legality and enforceability of the remaining provisions of this By-Law
(including, without limitation, each portion of any section of this By-Law
containing any such provision held to be invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; and (2) to the fullest
extent possible, the provisions of this By-Law (including, without limitation,
each such portion of any section of this By-Law containing any such provision
held to be invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
(h) For purposes of this By-Law:
(1) "disinterested director" means a director of the Corporation who
is not and was not a party to or otherwise involved in the matter in
respect of which indemnification is sought by the claimant.
(2) "independent counsel" means a law firm, a member of a law firm,
or an independent practitioner that is experienced in matters of
corporation law and shall include any person who, under the applicable
standards of professional conduct then prevailing, would not have a
conflict of interest in representing either the Corporation or the claimant
in an action to determine the claimant's rights under this By-Law.
(3) "corporate agent" means any person who is or was a director,
officer, employee or agent of the Corporation or of any constituent
corporation absorbed by the Corporation in an consolidation or merger and
any person who is or was a director, officer, trustee, employee or agent of
any subsidiary of the Corporation or of any other enterprise, serving as
such at the request of this Corporation, or of any such constituent
corporation, or the legal representative of any such director, officer,
trustee, employee or agent;
(4) "other enterprise" means any domestic or foreign corporation,
other than the Corporation, and any partnership, joint venture, sole
proprietorship, trust or other enterprise, whether or not for profit,
served by a corporate agent;
(5) "expenses" means reasonable costs, disbursements and counsel
fees;
(6) "liabilities" means amounts paid or incurred in satisfaction of
settlements, judgments, fines and penalties;
(7) "proceeding" means any pending, threatened or completed civil,
criminal, administrative, legislative, investigative or arbitrative action,
suit or proceeding, and any appeal therein and any inquiry or investigation
which could lead to such action, suit or proceeding; and
(8) References to "other enterprises" include employee benefit plans;
references to "fines" include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the
request of the indemnifying corporation" include any service as a corporate
agent which imposes duties on, or involves services by, the corporate agent
with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner the
person reasonably believed to be in the interest of the participants
II-3
<PAGE>
and beneficiaries of an employee benefit plan shall be deemed to have acted
in a manner "not opposed to the best interests of the corporation."
(i) Any notice, request or other communication required or permitted to be
given to the Corporation under this By-Law shall be in writing and either
delivered in person or sent by facsimile, telex, telegram, overnight mail or
courier service, or certified or registered mail, postage prepaid, return
receipt requested, to the Secretary of the Corporation and shall be effective
only upon receipt by the Secretary.
(j) This By-Law shall be implemented and construed to provide any
corporate agent described above who is found to have acted in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation the maximum indemnification, advancement of
expenses, and reimbursement for liabilities and expenses allowed by law.
Such provision is consistent with Section 14A:3-5 of the Business
Corporation Act of the State of New Jersey, the state of Summit's incorporation,
which permits the indemnification of officers and directors, under certain
circumstances and subject to specified limitations, against liability which any
officer or director may incur in such capacity.
Article 7 of Summit's Restated Certificate of Incorporation provides that:
Except to the extent prohibited by law, no Director or officer of the
Corporation shall be personally liable to the Corporation or its shareholders
for damages for breach of any duty owned to the Corporation or its shareholders
provided that a Director or officer shall not be relieved from liability for any
breach of duty based upon an act or omission (a) in breach of such persons duty
of loyalty to the Corporation or its shareholders, (b) not in good faith or
involving a knowing violation of law or (c) resulting in receipt of an improper
personal benefit. Neither the amendment or repeal of this Article 7, nor the
adoption of any provision of this Restated Certificate of Incorporation
inconsistent with this Article 7, nor the adoption of any provision of this
Restated Certificate of Incorporation inconsistent with this Article 7, shall
eliminate or reduce the effect of this Article 7 in respect of any matter which
occurred, or any cause of action, suit or claim which but for this Article 7
would have accrued or arisen, prior to such amendment, repeal or adoption.
Summit carries officers' and directors' liability insurance policies which
provide coverage against judgments, settlements and legal costs incurred because
of actual or asserted acts or omissions of such officers and directors of Summit
arising out of their duties as such, subject to certain exceptions, including,
but not limited to, damages based upon illegal personal profits or adjudicated
dishonesty of the person seeking indemnification. The policies provide coverage
of $50,000,000 in the aggregate.
II-4
<PAGE>
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
This registration statement includes the following exhibits:
Exhibit No. Description
- ----------- -----------
2(a) Agreement and Plan of Reorganization, dated December 31, 1999,
among Summit, Summit Bank, MSFG and the shareholders of MSFG who
are signatories to the Agreement and Plan of Reorganization
(included as Appendix A to the Proxy Statement - Prospectus
included in this Registration Statement).
2(b) Form of Escrow Agreement between Summit, the shareholders of MSFG
who are signatories to the Agreement and Plan of Reorganization
and Manchester Trust Bank, as escrow agent.
2(c) Annual Report on Form 10-K for the year ended December 31, 1998.*
2(d) Quarterly Report on Form 10-Q for the quarter ended March 31,
1999, as amended by Form 10-Q/A.**
2(e) Quarterly Report on Form 10-Q for the quarter ended June 30,
1999.***
2(f) Quarterly Report on Form 10-Q for the quarter ended September 30,
1999.****
4(a) Restated Certificate of Incorporation of Summit, as restated
August 16, 1999 (incorporated by reference to Exhibit (3)A on
Form 10-Q for the quarter ended June 30, 1999).
4(b) By-Laws of Summit as amended through October 18, 1995
(incorporated by reference to Exhibit (2)B on Form 10-K for the
year ending December 31, 1995).
4(c) Rights Agreement, dated as of June 16, 1999, by and between
Summit Bancorp. and First Chicago Trust Company of New York, as
Rights Agent (including as an exhibit thereto the form of Rights
Certificate) (incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated June 16, 1999).
4(d) Note Agreement, dated as of August 19, 1993, between Summit
Bancorp. (under former name UJB Financial Corp.) and The
Northwestern Mutual Life Insurance Company relating to
$20,000,000 of 7.95% Senior Notes Due August 25, 2003
(incorporated by reference to Exhibit (4) D. on Form 10-Q for the
quarter ended September 30, 1993).
4(e) (i) Fiscal and Paying Agency Agreement, dated as of June 30,
1993, between Summit Bank, as issuer, and Summit Bank, as fiscal
and paying agent acting through its Trust Department, relating to
$50,000,000 of 6 3/4% Subordinated Notes due June 15, 2003 of
Summit Bank (incorporated by reference to Exhibit (4) E. (i) on
Form 8-K, dated April 11,
II-5
<PAGE>
1996) and (ii) Specimen of Global Certificate for 6 3/4%
Subordinated Notes due June 15, 2003 of Summit Bank (incorporated
by reference to Exhibit (4) E. (ii) on Form 8-K, dated April 11,
1996).
4(f) (i) Subordinated Indenture, dated as of December 1, 1992, between
Summit Bancorp. (under former name UJB Financial Corp.) and
Citibank, N.A., Trustee, relating to $175,000,000 of 8 5/8%
Subordinated Notes Due December 10, 2002 of Summit Bancorp.
(incorporated by reference to Exhibit (4) G. on Form 10-K for the
year ended December 31, 1992) and (ii) Specimen of Summit
Bancorp.'s 8 5/8% Subordinated Notes Due December 10, 2002
(incorporated by reference to Exhibit 4 on Form 8-K, dated
December 10, 1992).
4(g) Indenture, dated as of March 20, 1997, between Summit Bancorp.
and the First National Bank of Chicago, as Trustee, for
Subordinated Debt Securities (incorporated by reference to
Exhibit 4.1 to Registration Statement No. 333-29019 on Form S-4
filed June 12, 1997).
4(h) First Supplemental Indenture, dated as of March 20, 1997, between
Summit Bancorp. and the First National Bank of Chicago, as
Trustee for $154,640,000 8.40% Junior Subordinated Deferrable
Interest Debentures due 2027 (incorporated by reference to
Exhibit 4.2 to Registration Statement No. 333-19019 on Form S-4
filed June 12, 1997).
4(i) Amended and Restated Declaration of Trust for Summit Capital
Trust I dated March 20, 1997 (incorporated by reference to
Exhibit 4.5 to Registration Statement No. 333-29019 on Form S-4
filed June 12, 1997).
4(j) Capital Securities Guarantee Agreement for Summit Capital Trust I
dated as of March 20, 1997 (incorporated by reference to Exhibit
4.7 to Registration Statement No. 333-29019 on Form S-4 filed
June 12, 1997).
5 Opinion of Thompson Coburn LLP regarding legality of securities
being issued.
8 Opinion of Moore Stephens, P.C. regarding tax matters.
10(a) Converted The Summit Bancorporation (predecessor corporation to
Summit Bancorp.) Stock Option Plan of Summit Bancorp.
(incorporated by reference to Exhibit 10 to Registration
Statement No. 333-02625 on Form S-8, filed April 17, 1996).
10(b) (i) Master Agreement of Lease, dated January 26, 1982, between
Summit Bancorp. (under former name United Jersey Banks) and Sha-
Li Leasing Associates, Inc. relating to equipment leases in
excess of $10,000,000 in aggregate lease obligations, including
form of Equipment Schedule (incorporated by referenced to Exhibit
(10) B. (i) on Form 10-Q for the quarter ended September 30,
1993), (ii) Assignment and Assumption of Equipment Lease,
effective December 31, 1991, between Summit Bancorp. (under
former name UJB Financial Corp.) and UJB Financial Service
Corporation (relating to assignment of Master Agreement of Lease)
(incorporated by reference to Exhibit (10) B. (ii) on Form 10-Q
for the quarter ended September 30, 1993), and (iii) Form of
Guaranty Agreement between Summit Bancorp. (under former name UJB
Financial Corp.) and
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<PAGE>
various lenders under the Master Agreement of Lease relating to
certain equipment leases in excess of $10,000,000 in aggregate
lease obligations (incorporated by reference to Exhibit (10) B.
(iii) on Form 10-Q for the quarter ended September 30, 1993).
10(c) (i) Summit Bancorp. 1993 Incentive Stock and Option Plan
(incorporated by reference to Attachment A to the Proxy Statement
of Registrant dated April 12, 1996), (ii) Compensation Committee
Regulations for the Grant and Exercise of Stock Options and
Restricted Stock (adopted July 19, 1993) (incorporated by
reference to Exhibit (10) C. (ii) on Form 10-Q for the quarter
ended June 30, 1993), (iii) Compensation Committee Interpretation
of Section 5 (e) (ii) (F) (incorporated by reference to Exhibit
(10) C. (iii) on Form 10-Q for the quarter ended March 31, 1994),
(iv) Compensation Committee Interpretation of Stock Incentive
Plans adopted June 19, 1996 (incorporated by reference to Exhibit
(10) C.(iv) on Form 10-Q for the quarter ended June 30, 1996),
(v) Compensation Committee Consent adopted February 18, 1998
(incorporated by reference to Exhibit (10) C. (v) on Form 10-K
for the year ended December 31, 1997), (vi) Amendment dated April
17, 1998 to Summit Bancorp. 1993 Incentive Stock and Option Plan
(incorporated by reference to Exhibit (10) C. (vi) on Form 10-Q
for the quarter ended March 31, 1998) and (vii) Amendments dated
August 18, 1999 to Summit Bancorp. 1993 Incentive Stock and
Option Plan (incorporated by reference to Exhibit (10) C. (vii)
on Form 10-Q for the quarter ended September 30, 1999).
10(d) (i) UJB Financial Corp. (former name of Summit Bancorp.) 1990
Stock Option Plan (incorporated by reference to Exhibit (10) to
Registration Statement No. 33 -36209 on Form S-8, filed July 26,
1990), (ii) Compensation Committee Regulations for the Grant and
Exercise of Stock Options and Restricted Stock (adopted July 19,
1993) (incorporated by reference to Exhibit (10) C. (ii) on Form
10-Q for the quarter end June 30, 1993), (iii) Compensation
Committee Consent dated February 18, 1998 (incorporated by
reference to Exhibit (10) C. (v) on Form 10-K for the year ended
December 31, 1997) and (iv) Amendment dated April 17, 1998 to UJB
Financial Corp. 1990 Stock Option Plan (incorporated by reference
to Exhibit (10) C. (vi) on Form 10-Q for the quarter ended
March 31, 1998).
10(e) Supplemental Executive Retirement Plan of The Summit
Bancorporation (predecessor corporation to Summit Bancorp.)
(incorporated by reference to Exhibit (10) E. on Form 8-K, dated
April 11, 1996).
10(f) Management Incentive Plan, effective January 1, 1999
(incorporated by reference to Exhibit (10) F. on Form 10-K for
the year ended December 31, 1998).
10(g) (i) Deferred Compensation Plan for Directors, as revised October
17, 1979, (incorporated by reference to Exhibit (10) G. (i) on
Form 10-K for the year ended December 31, 1994), and (ii)
Amendment adopted April 25, 1994 (incorporated by reference to
Exhibit (10) G. (ii) on Form 10-K for the year ended December 31,
1994).
10(h) (i) Agreement dated April 2, 1981 between Summit Bancorp. (under
former name United Jersey Banks) and T. Joseph Semrod
(incorporated by reference to Exhibit (10) H. (i) on Form 10-K
for the year ended December 31, 1994), with (ii) Amendment No. 1
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<PAGE>
dated May 5, 1981 (incorporated by reference to Exhibit (10)
H.(ii) on Form 10-K for the year ended December 31, 1994), (iii)
Amendment No. 2 dated December 15, 1982 (incorporated by
reference to Exhibit (10) H. (iii) on Form 10-K for the year
ended December 31, 1994), (iv) Amendment No. 3 dated August 20,
1986 (incorporated by reference to Exhibit (10) H. (iv) on Form
10-K for the year ended December 31, 1994) and (v) Amendment No.
4 dated January 20, 1999 (incorporated by reference to Exhibit
(10) H. (iv) on Form 10-K for the year ended December 31, 1998).
10(i) (i) Employment Agreement, dated March 1, 1996, between Summit
Bancorp. and Robert G. Cox (incorporated by reference to Exhibit
(10) I. (i) on Form 10-K for the year ended December 31, 1995),
(ii) Agreement, dated as of September 1, 1995, between The Summit
Bancorporation (predecessor corporation to Summit Bancorp.) and
Robert G. Cox assumed by Summit Bancorp. (incorporated by
reference to Exhibit (10) I. (ii) on Form 10-K for the year ended
December 31, 1995) and (iii) Amendment No. 1 dated March 1, 1999
to Employment Agreement dated March 1, 1996 between Summit
Bancorp. and Robert G. Cox (incorporated by reference to Exhibit
(10) I. (iii) on Form 10-K for the year ended December 31, 1998).
10(j) Retirement Program for Outside Directors of Franklin State Bank
(incorporated by reference to Exhibit (10) J. on Form 10-K for
the year ended December 31, 1996).
10(k) Franklin State Bank Deferred Compensation Plan adopted January
10, 1984 (incorporated by reference to Exhibit (10) K. on
Form 10-K for the year ended December 31, 1996).
10(l) (i) United Jersey Banks (former name of Summit Bancorp.) 1982
Stock Option Plan (incorporated by reference to Exhibit 4 to
Registration Statement No. 2-78500 on Form S-8, filed July 21,
1982) with (ii) Amendment No. 1, dated June 16, 1984
(incorporated by reference to Exhibit (10) L. (ii) on Form 10-K
for the year ended December 31, 1994), (iii) Amendment No. 2,
dated December 19, 1990 (incorporated by reference to Exhibit
(10)L.(iii) on Form 10-K for the year ended December 31, 1995)
and (iv) Compensation Committee Regulations for the Grant and
Exercise of Stock Options and Restricted Stock (adopted July 19,
1993)(incorporated by reference to Exhibit (10) C. (ii) on Form
10-Q for the quarter ended June 30, 1993) (File No. 1-6451).
10(m) (i) Retirement Restoration Plan, adopted April 19, 1983
(incorporated by reference to Exhibit (10) M. (i) on Form 10-K
for the year ended December 31, 1994), (ii) Supplemental
Retirement Plan, adopted August 16, 1989 (incorporated by
reference to Exhibit (10) M. (ii) on Form 10-K for the year ended
December 31, 1994), (iii) Written Consent of UJB Financial Corp.
(former name of Summit Bancorp.) Benefits Committee interpreting
the Retirement Restoration Plan, adopted August 30, 1989
(incorporated by reference to Exhibit (10) M. (iii) on Form 10-K
for the year ended December 31, 1994), (iv) Amendments to the
Retirement Restoration Plan and Supplemental Retirement Plan
adopted April 25, 1994 (incorporated by reference to Exhibit (10)
M. (iv) on Form 10-K for the year ended December 31, 1994) and
(v) Enhanced Retirement Income Plan effective, July 15, 1998
(incorporated by reference to Exhibit (10) M. (iv) on Form 10-K
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<PAGE>
for the year ended December 31, 1998).
(10(n) Summit Bancorp. 1999 Non-Executive Option Plan (incorporated by
reference to Appendix A to the Registrants Proxy Statement dated
March 9, 1999).
10(o) Agreement of Purchase and Sale between United Trust Limited
Partnership, as Purchaser, and Summit Bank, as Seller (relating
to Sale and Leaseback of 250 Moore Street, 214 Main Street, 210
Main Street and 210 Moore Street, Hackensack, N.J.) dated
November 5, 1999 (incorporated by reference to Exhibit (10) O.
(i) on Form 10-Q for the quarter ended September 30, 1999).
10(p) Twenty-year real estate lease executed and dated December 12,
1988 from Hartz Mountain Industries, Inc. for real property
located in Ridgefield Park, New Jersey used as a data processing
facility (incorporated by reference to Exhibit (10) P. on
Form 10-K for the year ended December 31, 1993).
10(q) (i) Twenty-five year real property lease, dated June 5, 1990,
between Summit Bancorp. (under name of predecessor corporation
The Summit Bancorporation) and Hartz Mountain Industries, Inc.
for data processing and operations center located in Cranford,
New Jersey (incorporated by reference to Exhibit (10) Q. (i) on
Form 8-K, dated April 11, 1996) and (ii) Lease Modification
Agreement, dated February 22, 1995 and effective October 1, 1994,
between Summit Bancorp. (under name of predecessor corporation
The Summit Bancorporation) and Hartz Mountain Industries, Inc.
relating to the twenty-five year lease for data processing and
operations center in Cranford, New Jersey (incorporated by
reference to Exhibit (10) Q. (ii) on Form 8-K, dated April 11,
1996).
10(r) (i) Retirement Plan for Outside Directors of UJB Financial Corp.,
(former name of Summit Bancorp.), as amended and restated
February 20, 1991 (incorporated by reference to Exhibit (10) W.
(i) on Form 10-K for the year ended December 31, 1995), (ii)
Interpretation, dated March 15, 1993, of the Retirement Plan for
Outside Directors of UJB Financial Corp. (former name of Summit
Bancorp.) (incorporated by reference to Exhibit (10) W. (ii) on
Form 10-K for the year ended December 31, 1992) and (iii)
Amendment adopted April 25, 1994 (incorporated by reference to
Exhibit (10) W. (iii) on Form 10-K for the year ended December
31, 1994).
10(s) (i) Form of Termination Agreement between Summit Bancorp. and
each of T. Joseph Semrod, Robert G. Cox, John G. Collins, Sabry
J. Mackoul, William J. Wolverton, Larry L. Betsinger, Alfred M.
D'Augusta, John R. Feeney, Peter D. Halstead, William J. Healy,
Dorinda Jenkins, James S. Little, Stewart McClure, Jr., Joseph A.
Micali, Jr., Richard F. Ober, Jr., Dennis Porterfield, Alan N.
Posencheg, Timothy S. Tracey, Edmund C. Weiss (incorporated by
reference to Exhibit (10) EE. (i) on Form 10-Q for the quarter
ended March 31, 1998).
10(t) (i) Summit Bancorp. Executive Severance Plan, as amended through
October 15, 1997 (incorporated by reference to Exhibit (10) FF.
(i) on Form 10-Q for the quarter ended March 31, 1998), and (ii)
Summit Bancorp. Executive Severance Plan Participation
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<PAGE>
Letter (incorporated by reference to Exhibit (10) FF. (ii) on
Form 10-Q for the quarter ended June 30, 1998).
10(u) (i) Summit Bancorp. Executive Severance Plan Participation Letter
for James J. Lynch (incorporated by reference to Exhibit (10) HH.
(i) on Form 10-Q for the quarter ended June 30, 1999), and (ii)
Termination Agreement between Summit Bancorp. and James J. Lynch
(incorporated by reference to Exhibit (10) HH. (ii) on Form 10-Q
for the quarter ended June 30, 1999).
10(v) (i) Retirement Plan for Outside Directors of Commercial
Bancshares, Inc. adopted May 1, 1986, (incorporated by reference
to Exhibit (10) JJ. on Form 10-K for the year ended December 31,
1996) and (ii) Compensation Committee Interpretation, dated July
19, 1993 (incorporated by reference to Exhibit (10) JJ. (ii) on
Form 10-Q for the quarter ended June 30, 1993).
10(w) (i) Commercial Bancshares, Inc. Directors Deferred Compensation
Plan adopted May 20, 1986 (substantially identical plans were
adopted by former subsidiaries of Commercial Bancshares, Inc.)
and (ii) related Master Trust Agreement (incorporated by
reference to Exhibit (10) KK. (i) and (ii), respectively, on Form
10-K for the year ended December 31, 1996).
10(x) (i) United Jersey Banks (former name of Summit Bancorp.) 1987
Stock Option Plan, (incorporated by reference to Exhibit (10) LL.
(i) on Form 10-K for the year ended December 31, 1996) with (ii)
Amendment dated April 25, 1989, (incorporated by reference to
Exhibit (10) LL. (ii) on Form 10-K for the year ended December
31, 1994), (iii) amendment dated June 30, 1990, (iv) Compensation
Committee Regulations for the Grant and Exercise of Stock Options
and Restricted Stock (adopted July 19, 1993) (incorporated by
reference to Exhibit (10) C. (ii) on Form 10-Q for the quarter
ended June 30, 1993), (v) Compensation Committee Consent dated
February 18, 1998 (incorporated by reference to Exhibit (10) C
(v) on Form 10-Q for the quarter ended March 31, 1998) and (vi)
Amendment dated April 17, 1998 to United Jersey Banks 1987 Stock
Option Plan (incorporated by reference to Exhibit (10) C. (vi) on
Form 10-Q for the quarter ended March 31, 1998).
10(y) Converted Collective Bancorp, Inc. Stock Option Plan of Summit
Bancorp. (incorporated by reference to Exhibit (10) to
Registration Statement No. 333-35075 on Form S-8, filed
September 5, 1997).
10(z) Collective Federal Savings and Loan Association Directors
Deferred Compensation Plan, Amendment No. 1 effective January 1,
1989, Amendment No. 2 effective July 22, 1997 and Rabbi Trust
Agreement under Collective Bancorp. Directors Deferred
Compensation Plan dated as of July 15, 1997 (incorporated by
reference to Exhibit (10) NN. on Form 10-K for the year ended
December 31, 1997).
23(a) Consent of KPMG LLP.
23(b) Consent of Moore Stephens, P.C.
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23(c) Consent of Thompson Coburn LLP to be included in its opinion
filed as Exhibit 5 to this registration statement.
23(d) Consent of Moore Stephens, P.C. to be included in its opinion
filed as Exhibit 8 to this registration statement.
24 Power of Attorney - included on the signature page of this
registration statement.
_______________
* Previously filed on March 29, 1999.
** Previously filed on May 17, 1999 and June 18, 1999, respectively.
*** Previously filed on August 16, 1999.
**** Previously filed on November 15, 1999.
(b) Financial Statement Schedules.
All financial statement schedules either are not required or are
included in the notes to the financial statements incorporated by reference
herein.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
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<PAGE>
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions set forth in response to
Item 20 hereof, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Township of West
Windsor and the State of New Jersey on this 26th day of January, 2000.
SUMMIT BANCORP.
By: /s/ T. Joseph Semrod
-------------------------------------
T. Joseph Semrod
Chairman of the Board of Directors
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints T. Joseph Semrod, William J. Healy and
Richard F. Ober, Jr., and each of them, the undersigned's true and lawful
attorney-in-fact and agents, with full power of substitution and resubstitution,
for the undersigned and in the undersigned's name, place and stead, in any and
all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement, and to file the same with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below on the 26th day of January, 2000 by
the following persons in the capacities indicated.
Signatures Titles
- ---------- ------
/s/ T. Joseph Semrod
- --------------------------- Chairman of the Board
T. Joseph Semrod of Directors (Chief Executive Officer)
/s/ Robert G. Cox
- --------------------------- President and Director
Robert G. Cox
/s/ William J. Healy
- --------------------------- Executive Vice President - Finance
William J. Healy (Principal Financial Officer)
/s/ Paul V. Stahlin
- --------------------------- Senior Vice President and Comptroller
Paul V. Stahlin (Principal Accounting Officer)
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<PAGE>
/s/ Robert L. Boyle
- ------------------------------- Director
Robert L. Boyle
/s/ James C. Brady
- ------------------------------- Director
James C. Brady
/s/ John G. Collins
- ------------------------------- Director
John G. Collins
/s/ T.J. Dermot Dunphy
- ------------------------------- Director
T.J. Dermot Dunphy
- ------------------------------- Director
Anne Evans Estabrook
/s/ Elinor J. Ferdon
- ------------------------------- Director
Elinor J. Ferdon
- ------------------------------- Director
William M. Freeman
- ------------------------------- Director
Thomas H. Hamilton
- ------------------------------- Director
Fred G. Harvey
- ------------------------------- Director
Arthur J. Kania
- ------------------------------- Director
Francis J. Mertz
- ------------------------------- Director
George L. Miles, Jr.
- ------------------------------- Director
William R. Miller
/s/ Raymond Silverstein
- ------------------------------- Director
Raymond Silverstein
/s/ Orin R. Smith
- ------------------------------- Director
Orin R. Smith
/s/ Joseph M. Tabak
- ------------------------------- Director
Joseph M. Tabak
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<PAGE>
_______________________________ Director
Douglas G. Watson
II-15
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
2(a) Agreement and Plan of Reorganization, dated December 31, 1999,
among Summit, Summit Bank, MSFG and the shareholders of MSFG who
are signatories to the Agreement and Plan of Reorganization
(included as Appendix A to the Proxy Statement - Prospectus
included in this Registration Statement).
2(b) Form of Escrow Agreement between Summit, the shareholders of MSFG
who are signatories to the Agreement and Plan of Reorganization
and Manchester Trust Bank, as escrow agent.
2(c) Annual Report on Form 10-K for the year ended December 31, 1998.*
2(d) Quarterly Report on Form 10-Q for the quarter ended March 31,
1999, as amended by Form 10-Q/A.**
2(e) Quarterly Report on Form 10-Q for the quarter ended June 30,
1999.***
2(f) Quarterly Report on Form 10-Q for the quarter ended September 30,
1999.****
4(a) Restated Certificate of Incorporation of Summit, as restated
August 16, 1999 (incorporated by reference to Exhibit (3)A on
Form 10-Q for the quarter ended June 30, 1999).
4(b) By-Laws of Summit as amended through October 18, 1995
(incorporated by reference to Exhibit (2)B on Form 10-K for the
year ending December 31, 1995).
4(c) Rights Agreement, dated as of June 16, 1999, by and between
Summit Bancorp. and First Chicago Trust Company of New York, as
Rights Agent (including as an exhibit thereto the form of Rights
Certificate) (incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated June 16, 1999).
4(d) Note Agreement, dated as of August 19, 1993, between Summit
Bancorp. (under former name UJB Financial Corp.) and The
Northwestern Mutual Life Insurance Company relating to
$20,000,000 of 7.95% Senior Notes Due August 25, 2003
(incorporated by reference to Exhibit (4) D. on Form 10-Q for the
quarter ended September 30, 1993).
4(e) (i) Fiscal and Paying Agency Agreement, dated as of June 30,
1993, between Summit Bank, as issuer, and Summit Bank, as fiscal
and paying agent acting through its Trust Department, relating to
$50,000,000 of 6 3/4% Subordinated Notes due June 15, 2003 of
Summit Bank (incorporated by reference to Exhibit (4) E. (i) on
Form 8-K, dated April 11, 1996) and (ii) Specimen of Global
Certificate for 6 3/4% Subordinated Notes due June 15, 2003 of
Summit Bank (incorporated by reference to Exhibit (4) E. (ii) on
Form 8-K, dated April 11, 1996).
<PAGE>
4(f) (i) Subordinated Indenture, dated as of December 1, 1992, between
Summit Bancorp. (under former name UJB Financial Corp.) and
Citibank, N.A., Trustee, relating to $175,000,000 of 8 5/8%
Subordinated Notes Due December 10, 2002 of Summit Bancorp.
(incorporated by reference to Exhibit (4) G. on Form 10-K for the
year ended December 31, 1992) and (ii) Specimen of Summit
Bancorp.'s 8 5/8% Subordinated Notes Due December 10, 2002
(incorporated by reference to Exhibit 4 on Form 8-K, dated
December 10, 1992).
4(g) Indenture, dated as of March 20, 1997, between Summit Bancorp.
and the First National Bank of Chicago, as Trustee, for
Subordinated Debt Securities (incorporated by reference to
Exhibit 4.1 to Registration Statement No. 333-29019 on Form S-4
filed June 12, 1997).
4(h) First Supplemental Indenture, dated as of March 20, 1997, between
Summit Bancorp. and the First National Bank of Chicago, as
Trustee for $154,640,000 8.40% Junior Subordinated Deferrable
Interest Debentures due 2027 (incorporated by reference to
Exhibit 4.2 to Registration Statement No. 333-19019 on Form S-4
filed June 12, 1997).
4(i) Amended and Restated Declaration of Trust for Summit Capital
Trust I dated March 20, 1997 (incorporated by reference to
Exhibit 4.5 to Registration Statement No. 333-29019 on Form S-4
filed June 12, 1997).
4(j) Capital Securities Guarantee Agreement for Summit Capital Trust I
dated as of March 20, 1997 (incorporated by reference to Exhibit
4.7 to Registration Statement No. 333-29019 on Form S-4 filed
June 12, 1997).
5 Opinion of Thompson Coburn LLP regarding legality of securities
being issued.
8 Opinion of Moore Stephens, P.C. regarding tax matters.
10(a) Converted The Summit Bancorporation (predecessor corporation to
Summit Bancorp.) Stock Option Plan of Summit Bancorp.
(incorporated by reference to Exhibit 10 to Registration
Statement No. 333-02625 on Form S-8, filed April 17, 1996).
10(b) (i) Master Agreement of Lease, dated January 26, 1982, between
Summit Bancorp. (under former name United Jersey Banks) and Sha-
Li Leasing Associates, Inc. relating to equipment leases in
excess of $10,000,000 in aggregate lease obligations, including
form of Equipment Schedule (incorporated by referenced to Exhibit
(10) B. (i) on Form 10-Q for the quarter ended September 30,
1993), (ii) Assignment and Assumption of Equipment Lease,
effective December 31, 1991, between Summit Bancorp. (under
former name UJB Financial Corp.) and UJB Financial Service
Corporation (relating to assignment of Master Agreement of Lease)
(incorporated by reference to Exhibit (10) B. (ii) on Form 10-Q
for the quarter ended September 30, 1993), and (iii) Form of
Guaranty Agreement between Summit Bancorp. (under former name UJB
Financial Corp.) and various lenders under the Master Agreement
of Lease relating to certain equipment leases in excess of
$10,000,000 in aggregate lease obligations (incorporated by
reference to Exhibit (10) B. (iii) on Form 10-Q for the quarter
ended September 30, 1993).
<PAGE>
10(c) (i) Summit Bancorp. 1993 Incentive Stock and Option Plan
(incorporated by reference to Attachment A to the Proxy Statement
of Registrant dated April 12, 1996), (ii) Compensation Committee
Regulations for the Grant and Exercise of Stock Options and
Restricted Stock (adopted July 19, 1993) (incorporated by
reference to Exhibit (10) C. (ii) on Form 10-Q for the quarter
ended June 30, 1993), (iii) Compensation Committee Interpretation
of Section 5 (e) (ii) (F) (incorporated by reference to Exhibit
(10) C. (iii) on Form 10-Q for the quarter ended March 31, 1994),
(iv) Compensation Committee Interpretation of Stock Incentive
Plans adopted June 19, 1996 (incorporated by reference to Exhibit
(10) C.(iv) on Form 10-Q for the quarter ended June 30, 1996),
(v) Compensation Committee Consent adopted February 18, 1998
(incorporated by reference to Exhibit (10) C. (v) on Form 10-K
for the year ended December 31, 1997), (vi) Amendment dated April
17, 1998 to Summit Bancorp. 1993 Incentive Stock and Option Plan
(incorporated by reference to Exhibit (10) C. (vi) on Form 10-Q
for the quarter ended March 31, 1998) and (vii) Amendments dated
August 18, 1999 to Summit Bancorp. 1993 Incentive Stock and
Option Plan (incorporated by reference to Exhibit (10) C. (vii)
on Form 10-Q for the quarter ended September 30, 1999).
10(d) (i) UJB Financial Corp. (former name of Summit Bancorp.) 1990
Stock Option Plan (incorporated by reference to Exhibit (10) to
Registration Statement No. 33 -36209 on Form S-8, filed July 26,
1990), (ii) Compensation Committee Regulations for the Grant and
Exercise of Stock Options and Restricted Stock (adopted July 19,
1993) (incorporated by reference to Exhibit (10) C. (ii) on Form
10-Q for the quarter end June 30, 1993), (iii) Compensation
Committee Consent dated February 18, 1998 (incorporated by
reference to Exhibit (10) C. (v) on Form 10-K for the year ended
December 31, 1997) and (iv) Amendment dated April 17, 1998 to UJB
Financial Corp. 1990 Stock Option Plan (incorporated by reference
to Exhibit (10) C. (vi) on Form 10-Q for the quarter ended March
31, 1998).
10(e) Supplemental Executive Retirement Plan of The Summit
Bancorporation (predecessor corporation to Summit Bancorp.)
(incorporated by reference to Exhibit (10) E. on Form 8-K, dated
April 11, 1996).
10(f) Management Incentive Plan, effective January 1, 1999
(incorporated by reference to Exhibit (10) F. on Form 10-K for
the year ended December 31, 1998).
10(g) (i) Deferred Compensation Plan for Directors, as revised October
17, 1979, (incorporated by reference to Exhibit (10) G. (i) on
Form 10-K for the year ended December 31, 1994), and (ii)
Amendment adopted April 25, 1994 (incorporated by reference to
Exhibit (10) G. (ii) on Form 10-K for the year ended December 31,
1994).
10(h) (i) Agreement dated April 2, 1981 between Summit Bancorp. (under
former name United Jersey Banks) and T. Joseph Semrod
(incorporated by reference to Exhibit (10) H. (i) on Form 10-K
for the year ended December 31, 1994), with (ii) Amendment No. 1
dated May 5, 1981 (incorporated by reference to Exhibit (10)
H.(ii) on Form 10-K for the year ended December 31, 1994), (iii)
Amendment No. 2 dated December 15, 1982 (incorporated by
<PAGE>
reference to Exhibit (10) H. (iii) on Form 10-K for the year
ended December 31, 1994), (iv) Amendment No. 3 dated August 20,
1986 (incorporated by reference to Exhibit (10) H. (iv) on Form
10-K for the year ended December 31, 1994) and (v) Amendment No.
4 dated January 20, 1999 (incorporated by reference to Exhibit
(10) H. (iv) on Form 10-K for the year ended December 31, 1998).
10(i) (i) Employment Agreement, dated March 1, 1996, between Summit
Bancorp. and Robert G. Cox (incorporated by reference to Exhibit
(10) I. (i) on Form 10-K for the year ended December 31, 1995),
(ii) Agreement, dated as of September 1, 1995, between The Summit
Bancorporation (predecessor corporation to Summit Bancorp.) and
Robert G. Cox assumed by Summit Bancorp. (incorporated by
reference to Exhibit (10) I. (ii) on Form 10-K for the year ended
December 31, 1995) and (iii) Amendment No. 1 dated March 1, 1999
to Employment Agreement dated March 1, 1996 between Summit
Bancorp. and Robert G. Cox (incorporated by reference to Exhibit
(10) I. (iii) on Form 10-K for the year ended December 31, 1998).
10(j) Retirement Program for Outside Directors of Franklin State Bank
(incorporated by reference to Exhibit (10) J. on Form 10-K for
the year ended December 31, 1996).
10(k) Franklin State Bank Deferred Compensation Plan adopted January
10, 1984 (incorporated by reference to Exhibit (10) K. on Form
10-K for the year ended December 31, 1996).
10(l) (i) United Jersey Banks (former name of Summit Bancorp.) 1982
Stock Option Plan (incorporated by reference to Exhibit 4 to
Registration Statement No. 2-78500 on Form S-8, filed July 21,
1982) with (ii) Amendment No. 1, dated June 16, 1984
(incorporated by reference to Exhibit (10) L. (ii) on Form 10-K
for the year ended December 31, 1994), (iii) Amendment No. 2,
dated December 19, 1990 (incorporated by reference to Exhibit
(10)L.(iii) on Form 10-K for the year ended December 31, 1995)
and (iv) Compensation Committee Regulations for the Grant and
Exercise of Stock Options and Restricted Stock (adopted July 19,
1993)(incorporated by reference to Exhibit (10) C. (ii) on Form
10-Q for the quarter ended June 30, 1993) (File No. 1-6451).
10(m) (i) Retirement Restoration Plan, adopted April 19, 1983
(incorporated by reference to Exhibit (10) M. (i) on Form 10-K
for the year ended December 31, 1994), (ii) Supplemental
Retirement Plan, adopted August 16, 1989 (incorporated by
reference to Exhibit (10) M. (ii) on Form 10-K for the year ended
December 31, 1994), (iii) Written Consent of UJB Financial Corp.
(former name of Summit Bancorp.) Benefits Committee interpreting
the Retirement Restoration Plan, adopted August 30, 1989
(incorporated by reference to Exhibit (10) M. (iii) on Form 10-K
for the year ended December 31, 1994), (iv) Amendments to the
Retirement Restoration Plan and Supplemental Retirement Plan
adopted April 25, 1994 (incorporated by reference to Exhibit (10)
M. (iv) on Form 10-K for the year ended December 31, 1994) and
(v) Enhanced Retirement Income Plan effective, July 15, 1998
(incorporated by reference to Exhibit (10) M. (iv) on Form 10-K
for the year ended December 31, 1998).
(10(n) Summit Bancorp. 1999 Non-Executive Option Plan (incorporated by
reference to Appendix A to the Registrants Proxy Statement dated
March 9, 1999).
<PAGE>
10(o) Agreement of Purchase and Sale between United Trust Limited
Partnership, as Purchaser, and Summit Bank, as Seller (relating
to Sale and Leaseback of 250 Moore Street, 214 Main Street, 210
Main Street and 210 Moore Street, Hackensack, N.J.) dated
November 5, 1999 (incorporated by reference to Exhibit (10) O.
(i) on Form 10-Q for the quarter ended September 30, 1999).
10(p) Twenty-year real estate lease executed and dated December 12,
1988 from Hartz Mountain Industries, Inc. for real property
located in Ridgefield Park, New Jersey used as a data processing
facility (incorporated by reference to Exhibit (10) P. on Form
10-K for the year ended December 31, 1993).
10(q) (i) Twenty-five year real property lease, dated June 5, 1990,
between Summit Bancorp. (under name of predecessor corporation
The Summit Bancorporation) and Hartz Mountain Industries, Inc.
for data processing and operations center located in Cranford,
New Jersey (incorporated by reference to Exhibit (10) Q. (i) on
Form 8-K, dated April 11, 1996) and (ii) Lease Modification
Agreement, dated February 22, 1995 and effective October 1, 1994,
between Summit Bancorp. (under name of predecessor corporation
The Summit Bancorporation) and Hartz Mountain Industries, Inc.
relating to the twenty-five year lease for data processing and
operations center in Cranford, New Jersey (incorporated by
reference to Exhibit (10) Q. (ii) on Form 8-K, dated April 11,
1996).
10(r) (i) Retirement Plan for Outside Directors of UJB Financial Corp.,
(former name of Summit Bancorp.), as amended and restated
February 20, 1991 (incorporated by reference to Exhibit (10) W.
(i) on Form 10-K for the year ended December 31, 1995), (ii)
Interpretation, dated March 15, 1993, of the Retirement Plan for
Outside Directors of UJB Financial Corp. (former name of Summit
Bancorp.) (incorporated by reference to Exhibit (10) W. (ii) on
Form 10-K for the year ended December 31, 1992) and (iii)
Amendment adopted April 25, 1994 (incorporated by reference to
Exhibit (10) W. (iii) on Form 10-K for the year ended December
31, 1994).
10(s) (i) Form of Termination Agreement between Summit Bancorp. and
each of T. Joseph Semrod, Robert G. Cox, John G. Collins, Sabry
J. Mackoul, William J. Wolverton, Larry L. Betsinger, Alfred M.
D'Augusta, John R. Feeney, Peter D. Halstead, William J. Healy,
Dorinda Jenkins, James S. Little, Stewart McClure, Jr., Joseph A.
Micali, Jr., Richard F. Ober, Jr., Dennis Porterfield, Alan N.
Posencheg, Timothy S. Tracey, Edmund C. Weiss (incorporated by
reference to Exhibit (10) EE. (i) on Form 10-Q for the quarter
ended March 31, 1998).
10(t) (i) Summit Bancorp. Executive Severance Plan, as amended through
October 15, 1997 (incorporated by reference to Exhibit (10) FF.
(i) on Form 10-Q for the quarter ended March 31, 1998), and (ii)
Summit Bancorp. Executive Severance Plan Participation Letter
(incorporated by reference to Exhibit (10) FF. (ii) on Form 10-Q
for the quarter ended June 30, 1998).
10(u) (i) Summit Bancorp. Executive Severance Plan Participation Letter
for James J. Lynch (incorporated by reference to Exhibit (10) HH.
(i) on Form 10-Q for the quarter ended June 30, 1999), and (ii)
Termination Agreement between Summit Bancorp. and James J.
<PAGE>
Lynch (incorporated by reference to Exhibit (10) HH. (ii) on Form
10-Q for the quarter ended June 30, 1999).
10(v) (i) Retirement Plan for Outside Directors of Commercial
Bancshares, Inc. adopted May 1, 1986, (incorporated by reference
to Exhibit (10) JJ. on Form 10-K for the year ended December 31,
1996) and (ii) Compensation Committee Interpretation, dated July
19, 1993 (incorporated by reference to Exhibit (10) JJ. (ii) on
Form 10-Q for the quarter ended June 30, 1993).
10(w) (i) Commercial Bancshares, Inc. Directors Deferred Compensation
Plan adopted May 20, 1986 (substantially identical plans were
adopted by former subsidiaries of Commercial Bancshares, Inc.)
and (ii) related Master Trust Agreement (incorporated by
reference to Exhibit (10) KK. (i) and (ii), respectively, on Form
10-K for the year ended December 31, 1996).
10(x) (i) United Jersey Banks (former name of Summit Bancorp.) 1987
Stock Option Plan, (incorporated by reference to Exhibit (10) LL.
(i) on Form 10-K for the year ended December 31, 1996) with (ii)
Amendment dated April 25, 1989, (incorporated by reference to
Exhibit (10) LL. (ii) on Form 10-K for the year ended December
31, 1994), (iii) amendment dated June 30, 1990, (iv) Compensation
Committee Regulations for the Grant and Exercise of Stock Options
and Restricted Stock (adopted July 19, 1993) (incorporated by
reference to Exhibit (10) C. (ii) on Form 10-Q for the quarter
ended June 30, 1993), (v) Compensation Committee Consent dated
February 18, 1998 (incorporated by reference to Exhibit (10) C
(v) on Form 10-Q for the quarter ended March 31, 1998) and (vi)
Amendment dated April 17, 1998 to United Jersey Banks 1987 Stock
Option Plan (incorporated by reference to Exhibit (10) C. (vi) on
Form 10-Q for the quarter ended March 31, 1998).
10(y) Converted Collective Bancorp, Inc. Stock Option Plan of Summit
Bancorp. (incorporated by reference to Exhibit (10) to
Registration Statement No. 333-35075 on Form S-8, filed September
5, 1997).
10(z) Collective Federal Savings and Loan Association Directors
Deferred Compensation Plan, Amendment No. 1 effective January 1,
1989, Amendment No. 2 effective July 22, 1997 and Rabbi Trust
Agreement under Collective Bancorp. Directors Deferred
Compensation Plan dated as of July 15, 1997 (incorporated by
reference to Exhibit (10) NN. on Form 10-K for the year ended
December 31, 1997).
23(a) Consent of KPMG LLP.
23(b) Consent of Moore Stephens, P.C.
23(c) Consent of Thompson Coburn LLP to be included in its opinion
filed as Exhibit 5 to this registration statement.
23(d) Consent of Moore Stephens, P.C. to be included in its opinion
filed as Exhibit 8 to this registration statement.
<PAGE>
24 Power of Attorney - included on the signature page of this
registration statement.
_______________
* Previously filed on March 29, 1999.
** Previously filed on May 17, 1999 and June 18, 1999, respectively.
*** Previously filed on August 16, 1999.
**** Previously filed on November 15, 1999.
<PAGE>
EXHIBIT 2(b)
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement") dated as of ____________, 2000, is
entered into by and among SUMMIT BANCORP., a New Jersey banking corporation
("Summit"), with an address at 301 Carnegie Center, Princeton, New Jersey 08543,
each of the individuals listed the signature page of the Reorganization
Agreement (as defined below) (individually, a "Principal Shareholder;"
collectively, "Principal Shareholders") and MANCHESTER TRUST BANK, a New Jersey
banking corporation having an office at 2002 Route 70, Lakehurst, New Jersey
08733 ("Escrow Agent").
W I T N E S S E T H:
-------------------
WHEREAS, Summit, the Principal Shareholders and MSFG, Inc. ("MSFG") have
executed and delivered that certain Agreement and Plan of Reorganization, dated
as of December 31, 1999 (the "Reorganization Agreement"), providing, among other
things, for the merger of a wholly-owned subsidiary of Summit with and into
MSFG, pursuant to which MSFG will become a wholly-owned subsidiary of Summit,
upon the terms and conditions set forth in the Reorganization Agreement; and
WHEREAS, the Reorganization Agreement provides for certain of the shares of
Summit Stock (as defined in the Reorganization Agreement) received by the
Principal Shareholders in the Reorganization (as defined in the Reorganization
Agreement) to be deposited into escrow and administered pursuant to the terms of
this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, Summit, the Principal Shareholders and the
Escrow Agent hereby agree as follows:
1. Certain Defined Terms.
---------------------
(a) Capitalized terms in this Agreement, unless specifically defined
herein, shall have the same meanings herein as ascribed to them in the
Reorganization Agreement.
(b) For purposes of this Agreement:
(i) "Cash Consideration" means any one or more of the following,
individually or collectively: (i) cash; (ii) Cash Equivalents (as defined at
Section 4(f) below); and (iii) following any exercise of the Substitution Right
(as defined at Section 4(d) below) or the Sale Right (as defined at Section 4(e)
below), the cash proceeds of a redemption of money market mutual fund shares
purchased pursuant to Section 4(k).
(ii) "Deposited Shares" means the shares of Summit Stock
delivered to the Escrow Agent at the Closing in accordance with the
Reorganization Agreement.
<PAGE>
(iii) "Escrow Shares" means the Deposited Shares and any stock
received by the Escrow Agent on account of the Deposited Shares by reason of
stock dividends, stock splits, reverse stock splits or recapitalizations.
(iv) "Escrow Fund" shall mean the Escrow Shares, any cash or
other property other than stock received by the Escrow Agent on account of the
Escrow Shares by reason of stock dividends, stock splits, reverse stock splits
or recapitalizations, any cash proceeds received by the Escrow Agent from a sale
of some or all of the Escrow Shares, any cash delivered to the Escrow Agent
pursuant to and in accordance with Section 4(a) hereof, any Cash Consideration
delivered to or received by the Escrow Agent pursuant to and in accordance with
Section 4(d), 4(e) and 4(k) and any cash representing insurance proceeds or as a
result of any tax or other cash benefit paid to the Escrow Agent by Summit
pursuant to Section 5.09(c) of the Reorganization Agreement.
(v) "Percentage Interest" shall mean with respect to an
individual Principal Shareholder the percentage obtained by dividing (A) by (B),
where (A) is the number of shares of Summit Stock registered in the particular
Principal Shareholder's name delivered to the Escrow Agent at Closing, and (B)
is the number of Deposited Shares.
2. Appointment of Escrow Agent; Escrow Account. Summit and the Principal
-------------------------------------------
Shareholders hereby appoint and designate Manchester Trust Bank as the Escrow
Agent, and the Escrow Agent accepts such appointment and designation upon the
terms and conditions and for the purposes set forth in this Agreement. The
Escrow Agent shall hold the Escrow Fund and all stock powers duly signed in
blank by a Principal Shareholder delivered to the Escrow Agent at Closing or
pursuant to this Agreement in escrow pursuant to this Agreement in an account
titled the "MSFG Escrow Account" (the "Escrow Account").
3. Distributions from the Escrow Fund.
----------------------------------
(a) To exercise the rights of one or more Summit Indemnitees under Section
5.09 of the Reorganization Agreement (the "Indemnification Rights"):
(i) Summit shall notify the Principal Shareholders and the Escrow
Agent that it intends to exercise the indemnification right provided for by the
Reorganization Agreement ("Indemnification Notice") and shall specify in the
Indemnification Notice its reasonable estimate of the amount sought (such
amount, as it may be revised from time to time, being referred to herein as the
"Claim Amount") and the nature of and basis for the claim, damage, liability or
expense ("Claim") giving rise to the exercise of the Indemnification Right;
(ii) In the event the Principal Shareholders do not pay the Claim
Amount to Summit in accordance with Section 3(d) below within 15 days of receipt
of the Indemnification Notice (a "Refusal"), Summit shall notify the Principal
Shareholders and the Escrow Agent of its selection of an arbitrator, giving name
and address and telephone number where the arbitrator can be reached during
normal business hours (the "Arbitrator Notice");
2
<PAGE>
(iii) Within 30 days of receipt of the Arbitrator Notice, the
Principal Shareholders shall notify Summit and the Escrow Agent of their
selection of an arbitrator, giving name and address and telephone where the
arbitrator can be reached during normal business hours (the "Second Arbitrator
Notice");
(iv) The arbitrators so designated shall meet within 10 days
after Summit's receipt of the Second Arbitrator Notice and shall designate a
third arbitrator who shall serve as chairman of the board of arbitrators. If for
any reason the two selected arbitrators fail to agree upon such third
arbitrator, either Summit or the Principal Shareholders may request such
appointment by the American Arbitration Association (or any successor
organization);
(v) Arbitration shall be conducted in Princeton, New Jersey, or
at another location mutually agreed to by all three arbitrators. All arbitration
shall be governed (except as expressly modified herein) in accordance with the
Rules of the American Arbitration Association (or any successor organization)
pertaining to commercial arbitration before three arbitrators. After such
hearings as the arbitrators determine to be useful in their consideration of the
dispute, the arbitrators shall resolve the dispute and make such award as the
arbitrators shall determine. The decision of the arbitrators shall be binding on
all parties and may be entered as a judgment in any court having jurisdiction;
and
(vi) Summit and the Principal Shareholders shall pay the fees and
expenses of the arbitrator appointed by or on behalf of it or them, as the case
may be, and Summit and the Principal Shareholders shall each (the Principal
Shareholders being considered a single entity for all purposes of this
Agreement) pay one-half of the fees and expenses of the third arbitrator, unless
(A) the board of arbitration in the certified final award in arbitration that it
shall issue ("Certified Arbitration Award") shall find that either the exercise
of the Indemnification Right by Summit or the Refusal by the Principal
Shareholders to have been frivolous or without merit, in which case the party
found to have acted frivolously or without merit shall be responsible for all
fees and expenses of all arbitrators, or (B) the board of arbitration shall find
otherwise in its Certified Arbitration Award, in which case the fees and
expenses of the arbitrators shall be the responsibility of the parties as
specified in the Certified Arbitration Award.
(b) Promptly upon receipt of a Certified Arbitration Award providing for
an award to a Summit Indemnitee, the Escrow Agent shall:
(i) disburse to Summit out of the Escrow Fund Cash Consideration
in an amount equal to the award specified in the Certified Arbitration Award
(the "Award Amount"); or
(ii) if there shall be insufficient Cash Consideration in the
Escrow Fund to pay an amount equal to the Award Amount, the Escrow Agent shall
sell Escrow Shares in sufficient number to produce, after all costs and expenses
of sale are deducted, sale proceeds which together with any other cash in the
Escrow Fund are at least equal to the Award Amount (an "Award Sale") and shall
disburse to Summit out of the Escrow Fund Cash Consideration equal to the Award
Amount.
3
<PAGE>
(c) Promptly upon a failure of the Principal Shareholders to provide the
Second Arbitrator Notice to both Summit and the Escrow Agent within the 30-day
period provided for such notice in Section 3(a)(iii) above, the Escrow Agent
shall:
(i) disburse to Summit out of the Escrow Fund Cash Consideration
in an amount equal to the Claim Amount; or
(ii) if there shall be insufficient Cash Consideration in the
Escrow Fund to pay an amount equal to the Claim Amount, the Escrow Agent shall
sell Escrow Shares in sufficient number to produce, after all costs and expenses
of sale are deducted, sale proceeds which together with any other Cash
Consideration in the Escrow Fund are at least equal to the Claim Amount (a
"Claim Sale") and shall disburse to Summit out of the Escrow Fund Cash
Consideration equal to the Claim Amount.
(d) The Principal Shareholders may pay the Claim Amount, as such action is
contemplated by Section 3(a)(ii) above, either by delivering a certified or bank
cashier's check, money order or wire transfer to Summit in an amount equal to
the Claim Amount within the 15 days provided for such prepayment by said Section
3(a)(ii) or by delivering written instructions within such 15 day period to the
Escrow Agent, with a copy simultaneously transmitted to Summit, directing the
Escrow Agent to satisfy the relevant Claim from the Escrow Fund ("Payment
Instructions") by (i) delivering to Summit Cash Consideration from the Escrow
Fund in an amount equal to the Claim Amount, (ii) by delivering to Summit a
number of whole Escrow Shares which have a Fair Market Value (as defined below)
as of the date of delivery as nearly equal to, but not less than, the Claim
Amount, or (iii) delivering to Summit Cash Consideration in such amount and
whole Escrow Shares having such Fair Market Value that when combined such amount
and such Fair Market Value equal the relevant Claim Amount, subject in all cases
to the following conditions:
(1) In the event Payment Instructions shall instruct the Escrow
Agent pursuant to clause (i) of this Section 3(d) to deliver to Summit Cash
Consideration equal to the Claim Amount and if there is insufficient Cash
Consideration in the Escrow Fund to satisfy the Claim, the Escrow Agent shall
sell as soon as practicable after receipt of the Payment Instructions a
sufficient number of Escrow Shares to produce, after all costs and expenses of
sale are deducted, sale proceeds which together with any other Cash
Consideration in the Escrow Fund are at least equal to the Claim Amount and
shall pay Cash Consideration equal to the Claim Amount to Summit.
(2) In the event Payment Instructions shall instruct the Escrow
Agent pursuant to clause (iii) of this Section 3(d) to deliver to Summit Cash
Consideration and whole Escrow Shares equal to the Claim Amount but there is
insufficient Cash Consideration in the Escrow Fund to carry out the Payment
Instructions, the Escrow Agent shall deliver to Summit a number of whole Escrow
Shares which have a Fair Market Value as of the date of delivery as nearly as
equal as possible to, but not less than, the Claim Amount.
(3) Upon its receipt of Payment Instructions, the Escrow Agent
shall pay to Summit as soon as practicable thereafter, subject to and in
accordance with this Section 3(d), such Cash Consideration, if any, and such
whole Escrow Shares, if any, as directed in the Payment Instructions.
4
<PAGE>
(e) In lieu of the disbursement of Escrow Shares to Summit from the Escrow
Fund pursuant to this Section 3, a Principal Shareholder may pay the Claim
Amount at any time prior to the disbursement of such Escrow Shares by delivering
a certified or bank cashier's check, money order or wire transfer to Summit in
an amount equal to the Claim Amount. In the event of such payment by a Principal
Shareholder pursuant to this Section 3(e), the Escrow Agent shall release to
such Principal Shareholder such number of Escrow Shares which have a Fair Market
Value as of the date of such payment as nearly as equal to, but not more than,
the Claim Amount. Such release shall be credited solely against such Principal
Shareholder's Subaccount (as defined in Section 4(g) below).
(f) "Fair Market Value" as of a particular date of delivery or other date
of determination thereof, for purposes of this Agreement, means the product
obtained by multiplying (Y) times (Z), where (Y) is the number of whole Escrow
Shares with respect to which the Fair Market Value determination is being made,
and (Z) is the closing sale price of a share of Summit Common Stock (as defined
in the Reorganization Agreement) as reported on the New York Stock Exchange
Composite Transactions List (the "NYSE List") on the last day immediately
preceding the date of delivery that a share of Summit Common Stock is reported
on the NYSE List as having been traded.
4. Certain Additional Rights and Duties.
------------------------------------
(a) During such period as the Principal Shareholders shall not have yet
exercised their Substitution Right or Sale Right, the Principal Shareholders may
collectively maintain cash in the Escrow Fund in an amount not to exceed $100 by
delivering to the Escrow Agent from time to time and at any time a certified or
bank cashier's check, money order or wire transfer (a "Cash Contribution"), and
the Escrow Agent shall credit each Subaccount (as defined in Section 4(g) below)
in accordance with any directions received with the Cash Contribution or, if no
directions are received, pursuant to the Principal Shareholders' respective
Percentage Interests; provided, however, that the Escrow Agent shall reject and
-------- -------
return to the Principal Shareholders in full any Cash Contribution which would
cause the amount of cash in the Escrow Fund to exceed $100 and any Cash
Contribution received when the amount of cash in the Escrow Fund already equals
or exceeds $100.
(b) Each Principal Shareholder shall be entitled to vote and to receive
direct payment of cash dividends from Summit's dividend disbursing agent for
Escrow Shares held by the Escrow Agent in certificated form and registered in
the name of such Principal Shareholder in accordance with the procedures in
effect for Summit's regular shareholders of record. The Principal Shareholders
shall not be entitled to vote or to receive direct payments of cash dividends
with respect to Escrow Shares held by the Escrow Agent in nominee name should
such occur pursuant to the terms of this Section 4(b). The Escrow Agent shall
hold the Escrow Shares in certificated, registered form until such time as a
sale of some or all of the Escrow Shares is required pursuant to this Agreement
whereupon following such sale the Escrow Agent shall hold all Escrow Shares
remaining after such sale in its own name or the name of a nominee and
thereafter cash dividends received by the Escrow Agent on account of the Escrow
Shares shall be forwarded by the Escrow Agent to the Principal Shareholders as
soon as practicable following such receipt, with the amount of such dividend
paid to each Principal Shareholder to be based on the number of Escrow Shares
held in the Subaccount of such
5
<PAGE>
Principal Shareholder, minus the Principal Shareholder's allocable portion of
any fees or charges imposed or expenses incurred by the Escrow Agent in
connection with the dividend distribution contemplated hereby; provided,
--------
however, that the Escrow Agent shall cause the Escrow Shares remaining in the
- -------
Escrow Account after the relevant sale to be reissued in certificated form and
registered appropriately in the name of particular Principal Shareholders if all
(but not less than all) Principal Shareholders deliver to the Escrow Agent
replacement stock powers duly signed in blank as follows: (i) prior to any Award
Sale occurring pursuant to Section 3(b) hereof or any Claim Sale occurring
pursuant to Section 3(c) hereof, or (ii) simultaneously with the delivery to the
Escrow Agent of Payment Instructions pursuant to Section 3(d) hereof pursuant to
which a sale of Escrow Shares must occur.
(c) In the event the Escrow Agent becomes required under any provision in
Section 3 to satisfy an obligation thereunder by delivering whole Escrow Shares
to Summit (a "Section 3 Obligation"):
(1) the Escrow Agent shall deliver to Summit's General Counsel at
the address listed in Section 8 the certificates representing each Principal
Shareholder's Escrow Shares with instructions indicating the number of whole
shares from each certificate intended to satisfy the particular Section 3
Obligation and, upon receipt of such, Summit shall cause new certificates for
the appropriate number of shares of Summit Common Stock remaining in the Escrow
Account, if any, as indicated in the Escrow Agent's instructions to be issued in
the name of particular Principal Shareholders and shall send such new
certificates to the Escrow Agent; and
(2) Each Principal Shareholder hereby directs First Chicago Trust
Company of New York (or any successor transfer agent or co-transfer agent of
Summit) ("Transfer Agent") to accept such certificates for Summit Common Stock
delivered to it in accordance with this Section 4(c) for transfer without an
endorsement thereto or signed stock powers covering such certificates without
liability of any nature whatsoever to the Principal Shareholders or anyone
claiming through a Principal Shareholder and each Principal Shareholder hereby
irrevocably waives any right he may have for the Transfer Agent to require an
endorsement on such certificates or signed stock powers covering such
certificates and each Principal Shareholder hereby indemnifies and holds
harmless Summit, Summit Bank and the Transfer Agent for any claims, losses,
costs, damages or expenses incurred in acting in accordance with the directions
contained in this Section 4(c)(2).
(d) On any day other than a Saturday or Sunday or a day designated as a
banking holiday under New Jersey law (a "Business Day"), the Principal
Shareholders may collectively (but not individually) substitute cash or Cash
Equivalents for all Escrow Shares by delivering (i) notice to the Escrow Agent
that they are exercising the right provided for in this Section 4(d)
("Substitution Right"), and (ii) either (Y) cash in an amount equal to the
product obtained by multiplying the number of Deposited Shares by $29.7563 (the
"Cash Substitution Amount"), or (Z) Cash Equivalents having a face value equal
to the Cash Substitution Amount. As soon as practicable after a delivery of
cash, or after a delivery of Cash Equivalents and after all operational
considerations required in the opinion of the Escrow Agent to take effective
possession of the Cash Equivalents have been satisfied in the judgement of the
Escrow Agent, the Escrow Agent shall deliver the Escrow Shares to the Principal
Shareholders as indicated by the Subaccounts.
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<PAGE>
(e) On any Business Day following the date which is the first anniversary
of this Agreement, the Principal Shareholders may collectively (but not
individually) cause the Escrow Agent to sell all Escrow Shares for the account
of the Escrow Fund by delivering notice to the Escrow Agent that they therewith
are exercising the right provided for in this Section 4(e), and the Escrow Agent
shall so sell the Escrow Shares but if and only if (i) in the opinion of the
Escrow Agent the cash proceeds of such a sale (after satisfaction of all fees,
charges, commissions and other expenses associated with the sale and
satisfaction of any other fees, reimbursements and indemnification that may be
due from the Principal Shareholders) together with any other cash that may be in
the Escrow Account will equal or exceed the Cash Substitution Amount, and (ii)
the sale occurs in compliance with all applicable securities laws ("Sale
Right"). The Escrow Agent shall hold an amount equal to the Cash Substitution
Amount from the proceeds of such sale in the Escrow Account and shall distribute
any proceeds in excess of such amount to the Principal Shareholders in
accordance with their respective entitlements as reflected in the Subaccounts.
(f) "Cash Equivalents" means U.S. Treasury Securities maturing 9 months or
less from the date the face amount thereof is to be determined for purposes of
this Agreement. The Escrow Agent shall be the record owner of all Cash
Equivalents held by it under Section 4(d) and shall, and shall have the
exclusive right to, collect and hold all interest and redemption payments made
with respect to Cash Equivalents for which it is the record owner.
(g) The Escrow Agent shall maintain one subaccount for the Escrow Account
for each Principal Shareholder (the "Subaccounts"). In each Subaccount, the
Escrow Agent shall provide an accounting for all transactions occurring pursuant
to this Agreement involving the Deposited Shares and other assets in the Escrow
Fund following the Closing Date.
(h) The Escrow Agent shall cause sales of Escrow Shares and disbursements
from the Escrow Fund where required or directed pursuant to this Agreement to be
made from each Subaccount as closely as practicable according to the respective
entitlements as reflected in the Subaccounts of the Principal Shareholders
unless with respect to individual Payment Instructions the Principal
Shareholders shall indicate a different percentage or allocation in such
instructions; provided, however, that only sales of whole shares shall occur
-------- -------
from the Subaccounts.
(i) The Escrow Agent shall disburse the entire remaining Escrow Fund, if
any, as soon as practicable after the later of (i) February __, 2003, or (ii) if
prior to February __, 2003, Summit shall have given an Indemnification Notice
with respect to a Claim which has not been satisfied in accordance with the
terms of this Agreement and which has not been the subject of a Certified
Arbitration Award denying the Claim in whole, then the date all such Claims
shall have been finally resolved. At such time, the Escrow Agent shall disburse
the Escrow Fund to the Principal Shareholders in accordance with their
respective entitlements as reflected in the Subaccounts.
(j) No notice or other communication from the Principal Shareholders
required or permitted pursuant to this Agreement shall be valid for any purpose
under this Agreement and may not be relied on by the Escrow Agent unless signed
by all Principal Shareholders or by Sellers Representatives (as defined in the
Reorganization Agreement).
7
<PAGE>
(k) During such period as the Principal Shareholders shall not have yet
exercised their Substitution Right or Sale Right, the Escrow Agent shall have no
obligation to invest any cash in the Escrow Account. After such time as the
Principal Shareholders may have exercised either the Substitution Right or the
Sale Right, the Principal Shareholders may from time to time instruct the Escrow
Agent to invest such cash as may be in the Escrow Account in "Permitted
Investments" in such amounts and in such proportions as they shall determine and
the Escrow Agent shall to the extent practicable and reasonable act upon the
instructions of the Principal Shareholders as their agent in purchasing the
"Permitted Investments" directed by them. "Permitted Investments" means money
market mutual funds registered with the U.S. Securities and Exchange Commission
and Cash Equivalents. After such time as the Principal Shareholders may have
exercised either the Substitution Right or the Sale Right, the Principal
Shareholders may request no more frequently than once every 90 days, provided on
the date of the request the value of Cash Consideration in the Escrow Account
exceeds an amount equal to the Cash Substitution Amount, that the Escrow Agent
distribute to the Principal Shareholders in accordance with their respective
entitlements as reflected in the Subaccounts any cash in the Escrow Account up
to the amount of such excess and provided further that all fees, charges,
commissions, expenses, reimbursements and indemnification due to the Escrow
Agent from the Principal Shareholders have been paid.
5. Limitation of Escrow Agent's Liability; Indemnification.
-------------------------------------------------------
(a) The Escrow Agent assumes no responsibility other than to perform this
Agreement in accordance with its terms. The Escrow Agent shall not be liable to
any party for any error in judgment or for any act or omission by the Escrow
Agent done in good faith.
(b) The Escrow Agent may rely upon any instrument or writing reasonably
believed by it to be genuine and sufficient and properly presented, and shall
not be liable for any action taken or omitted in good faith in accordance with
the provisions of any such instrument or writing except for its gross negligence
or willful misconduct.
(c) In case the Escrow Fund shall be attached, garnished or levied upon or
under any order of court, or the delivery of any portion of the Escrow Fund
shall be stayed or enjoined by any order of court, or any other order, judgment
or decree shall be made or entered by any court affecting the Escrow Fund or any
act of the Escrow Agent, then the Escrow Agent is expressly authorized, in its
sole discretion, to obey and comply with all writs, orders, judgments or decrees
so entered or issued, whether with or without jurisdiction, and the Escrow Agent
shall not be liable to any other party hereto for its compliance with any such
writ, order, judgment or decree notwithstanding the fact that the same is
subsequently reversed, modified, annulled, set aside or vacated.
(d) Summit and the Principal Shareholders hereby agree, jointly and
severally, to indemnify and hold harmless the Escrow Agent from and against any
and all expenses, losses, claims, damages or liabilities to which the Escrow
Agent may become subject insofar as such expenses, losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
act taken or omitted to be taken by the Escrow Agent pursuant to this Agreement
or pursuant to written notices or other communications provided for by this
Agreement given in accordance with this
8
<PAGE>
Agreement, except if such expenses, losses, claims, damages or liabilities
result from the gross negligence or willful misconduct of the Escrow Agent.
(e) In the event of any dispute or question arising hereunder, the Escrow
Agent shall not be liable to any party if it acts, or takes no action, in
accordance with the opinion of its independent legal counsel, and during the
pendency of any such dispute or question, the Escrow Agent shall be entitled to
continue in such action or inaction:
(i) Until all rights of adverse claimants have been finally
adjudicated by a court having jurisdiction over the parties and the matters
affected thereby, and there shall have been delivered to the parties hereto a
certified copy of a final order of such court together with the written opinion
of independent legal counsel to the Escrow Agent stating that no appeal may
lawfully be taken from said order or that the time to appeal said order has
passed and no appeal has been taken, after which time the Escrow Agent shall be
entitled to act in conformity with such adjudication; or
(ii) Until all differences shall have been adjusted by agreement
and the Escrow Agent shall have been notified thereof and shall have been
directed in writing jointly by Summit and the Principal Shareholders, at which
time the Escrow Agent shall be protected in acting in compliance therewith.
(f) The parties agree that the Escrow Agent may seek adjudication of any
adverse claim in either the Superior Court of the State of New Jersey or the
Federal District Court for the District of New Jersey and agree to the
jurisdiction of either of said courts over their persons as well as the Escrow
Fund, waive personal service of any process, and agree that service of process
by certified or registered mail, return receipt requested, to the address of
each party provided for notices under this Agreement shall constitute adequate
service.
(g) The Escrow Agent may employ independent accountants and attorneys as
reasonably necessary to advise it as to matters related to its duties,
responsibilities and obligations hereunder and the reasonable fees and expenses
of such independent accountants and attorneys shall be included within the
indemnifiable expenses of the Escrow Agent pursuant to Section 5(d).
(h) The Escrow Agent agrees that all information regarding this
transaction shall be kept confidential by the Escrow Agent and no such
information will be released outside the corporate trust division of the Escrow
Agent or used by the Escrow Agent for any purpose other than fulfilling its
obligations under this Agreement.
6. Fees.
----
(a) The annual maintenance fee of the Escrow Agent, any expenses incurred
by the Escrow Agent in performing its obligations under Section 4(c), all
reasonable fees and charges of independent accountants and attorneys incurred by
the Escrow Agent pursuant to Section 5(g) and all costs and expenses of
furnishing the Escrow Agent with the indemnification provided for in Section
5(d) shall be shared equally by Summit on one hand (i.e., fifty percent (50%) of
such amounts), and the Principal Shareholders as a group on the other hand
(i.e., fifty percent (50%) of
9
<PAGE>
such amounts). All fees and charges imposed or expenses incurred by the Escrow
Agent in performing its obligations under Sections 3(b), 3(c), 3(d), 4(a), 4(b),
4(d), 4(e) and 4(k) of this Agreement, in addition to the fees, charges, and
expenses expressly provided for therein, shall be the exclusive responsibility
of the Principal Shareholders.
(b) Summit and the Principal Shareholders shall pay to the Escrow Agent
all amounts that the Escrow Agent is entitled to receive from them pursuant to
their respective obligations under Section 6(a) within a reasonable period
following the receipt of a written invoice for same from the Escrow Agent which
itemizes in reasonable detail the fees, charges and expenses for which payment
is sought. The Escrow Agent shall have a lien on the Escrow Fund in the amount
of any fees, charges or expenses owed by the Principal Shareholders pursuant to
this Section 6 but not paid by the Principal Shareholders within 30 days of
receipt of the invoice for same and shall have the right, notwithstanding any
other provision of this Agreement, (i) to retain possession of a portion of the
Escrow Fund sufficient in value in the reasonable judgment of the Escrow Agent
to satisfy any such lien, (ii) to debit the Subaccounts (based on the Percentage
Interests) and credit its own account in satisfaction of some or all of the
payment obligation giving rise to any such lien, up to the amount of any cash in
the Escrow Fund, (iii) to sell a sufficient number of Escrow Shares to produce,
after all costs and expenses of sale are deducted, sale proceeds at least equal
to the payment obligation giving rise to any such lien and to pay to its own
account the amount which satisfies such lien in full. Summit and the Principal
Shareholders shall have the right to pursue any legal remedy available to it or
them at law, equity, contract or otherwise to recover from the other any fees,
costs or expenses paid by it or them to the Escrow Agent hereunder in excess of
any allocable portion provided for herein.
7. Amendment or Waiver. This Agreement may not be amended except by an
-------------------
instrument in writing signed on behalf of Summit, the Escrow Agent and each
Principal Shareholder (or the respective survivor) or one or both of the Sellers
Representatives and no term hereof may be waived, except by an instrument in
writing signed on behalf of the party or parties waiving compliance or such
party's or parties' authorized representative. The failure of any party at any
time or times to require performance of any provision hereof shall in no manner
affect the right to enforce the same. No waiver by any party of any breach of
any term of this Agreement, whether by conduct or otherwise, shall be deemed to
be a further or continuing waiver of any such breach or a waiver of any breach
of any other term of this Agreement.
8. Notices. Each notice, request, demand and other communication required or
-------
permitted hereunder shall not satisfy the requirements of the section of this
Agreement requiring or permitting such notice, request, demand or other
communication unless the notice, request, demand or other communication is in
writing. Such notices and other communications hereunder shall be given to the
parties at their respective addresses set forth below and shall be sent by (i)
hand delivery, (ii) certified mail, return receipt requested, postage prepaid,
(iii) a recognized overnight delivery service, or (iv) telecopy provided written
confirmation of receipt of the telecopy is received from the recipient (by
telecopy or as otherwise permitted herein) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice). Notices sent by hand delivery shall be deemed received when delivered
to the address and person set forth below; notices sent by certified mail shall
be deemed received when accepted; notices sent by overnight delivery service
10
<PAGE>
shall be deemed received when delivered and notices sent by telecopy shall be
deemed received upon receipt of the confirmation as required by this Section 8:
If to Summit, to: Richard F. Ober, Jr.
Executive Vice President and General Counsel
Summit Bancorp.
301 Carnegie Center - P.O. Box 2066
Princeton, New Jersey 08543-2066
Telecopy: 609-987-3435
with a copy to: Summit Bank
210 Main Street
Hackensack, New Jersey 07602
Telecopy: 201-489-6085
If to the Escrow Agent: William F. Bedle, Chairman and CEO
Manchester Trust Bank
P.O. Box 443
Lakehurst, New Jersey 08733
Attention: Corporate Trust Department
Telecopy: 732-657-2310
If to the Principal Shareholders:
Thomas J. Sharkey, Sr.
195 High Tor Drive
Watchung, New Jersey 07060
Thomas J. Sharkey, Jr.
#1 Starlite Drive
Clark, New Jersey 07066
with a copy to:
Paul R. Williams, Jr.
Garrubbo, Romankow & Rinaldo
53 Cardinal Drive
Westfield, New Jersey 07090
Kenneth F. Kunzman
Connell, Foley & Geiser, LLP
85 Livingston Avenue
Roseland, New Jersey 07068
11
<PAGE>
John A. Aiello
Giordano, Halleran & Ciesla, P.C.
125 Half Mile Road
P.O. Box 190
Middleton, New Jersey 07748
9. Miscellaneous. This Agreement (a) constitutes the entire agreement and
-------------
supersedes all other prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof,
(b) shall not confer upon any other person any rights or remedies hereunder, (c)
shall not be assigned by operation of law or otherwise, and (d) shall be
governed in all respects, including validity, interpretation and effect, by the
law of the state of New Jersey (regardless of the law which may be applicable
under principles of conflicts of law). This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective permitted
successors and assigns, heirs at law, next of kin, distributees, executors,
administrators, legatees and other legal representatives. This Agreement may be
executed in two or more counterparts which together shall constitute a single
agreement. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
[Remainder of Page Intentionally Blank]
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<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Escrow Agreement to be signed by their respective
officers thereunto duly authorized as of the date specified on the first page
hereof.
SUMMIT BANCORP. PRINCIPAL SHAREHOLDERS
_______________________________
By: ___________________________ Thomas J. Sharkey, Jr.
Name:______________________
Title:_____________________ _______________________________
William Dittman
MANCHESTER TRUST BANK _______________________________
James Manhardt
By: __________________________
Name:_____________________ _______________________________
Title:____________________ Edward D. Sharkey
BLOODY FORELAND, L.P.
By:____________________________
Thomas J. Sharkey, Sr.,
its General Partner
_______________________________
Ann McCormick
_______________________________
Ellen Del Mauro
_______________________________
Brian Leddy
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<PAGE>
EXHIBIT 5
[Letterhead of Thompson Coburn]
January 31, 2000
Summit Bancorp.
301 Carnegie Center
Princeton, New Jersey 08543-2066
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
We refer you to the Registration Statement on Form S-4 filed by Summit
Bancorp. (the "Company") on January 31, 2000 (the "Registration Statement") with
the Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended, pertaining to the proposed issuance by the Company of up to
1,344,256 shares of the Company's common stock, $0.80 par value (the "Shares"),
in connection with the acquisition by merger of MSFG, Inc. ("MSFG"), pursuant to
the Agreement and Plan of Reorganization, dated December 31, 1999 (the
"Agreement"), by and among the Company, Summit Bank, MSFG and the shareholders
of MSFG who are signatories to the Agreement, all as provided in the
Registration Statement. In rendering the opinions set forth herein, we have
examined such corporate records of the Company, such laws and such other
information as we have deemed relevant, including the Company's Restated
Certificate of Incorporation and Bylaws, as amended and currently in effect, the
resolutions adopted by the Company's Board of Directors relating to the
transaction, certificates received from state officials and statements we have
received from officers and representatives of the Company. In delivering this
opinion, the undersigned assumed the genuineness of all signatures; the
authenticity of all documents submitted to us as originals; the conformity to
the originals of all documents submitted to us as certified, photostatic or
conformed copies; the authenticity of the originals of all such latter
documents; and the correctness of statements submitted to us by officers and
representatives of the Company.
Based only on the foregoing, the undersigned is of the opinion that:
1. The Company has been duly incorporated and is validly existing
under the laws of the State of New Jersey; and
2. The Shares to be sold by the Company, when issued as provided in
the Agreement, will be validly issued, fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm in the section of the
Proxy Statement/Prospectus entitled "Legal Matters."
Very truly yours,
/s/ Thompson Coburn LLP
<PAGE>
EXHIBIT 8
January 4, 2000
MSFG, Inc.
Attn: Thomas P. Sharkey
14 Commerce Drive
Cranford, New Jersey 07016
Re: Summit Bancorp/MSFG, Inc. Merger
Dear Mr. Sharkey:
MSFG, Inc. has requested that our firm express an opinion as to the federal
income tax consequences arising from a planned merger of a wholly-owned
subsidiary ("Acquisitionco") of Summit Bancorp. into MSFG, Inc. ("MSFG"), with
MSFG as the surviving entity. Our opinion is based upon an examination of the
Agreement and Plan of Reorganization ("Merger Agreement") furnished to us, an
Escrow Agreement ("Escrow Agreement") between Summit Bancorp. and Manchester
Trust Bank, and various employment agreements between MSFG and certain
individuals. Our opinion is based upon the status of the law as of the date of
this letter. Any alteration or changes in the Agreement, Escrow Agreement or
employment agreements could change the opinions expressed herein.
Conclusions: The merger of Acquisitionco into MSFG whereby the MSFG stockholders
existing immediately prior to the merger will receive only voting stock of
Summit Bancorp. will be wholly free of federal income taxes to MSFG and to the
exchanging MSFG shareholders. Such transaction will qualify under Internal
Revenue Code ("IRC") (S)(S)368(a)(1)(A) and 368(a)(2)(E). Each MSFG shareholder
will have a tax basis in his Summit Bancorp. stock received equal to his tax
basis in his MSFG stock that is exchanged, and will include the period that he
held the MSFG stock in determining his holding period for his Summit Bancorp.
stock.
<PAGE>
Facts: The Merger Agreement provides that Summit Bancorp. shall establish a
wholly-owned subsidiary, "Acquisitionco." At the effective time of the merger
("Effective Time"), Acquisitionco shall be merged into MSFG under New Jersey law
and MSFG shall be the surviving corporation. At the Effective Time, each of the
outstanding shares of MSFG stock shall be converted to voting common stock of
Summit Bancorp. Each MSFG shareholder shall receive an amount of voting stock
in Summit Bancorp. based upon a conversion ratio stated in the Merger Agreement.
As to each stockholder of MSFG, 85% of the stock to be received by such
stockholder shall be delivered to that stockholder, 12% of the Summit Bancorp.
stock to be received by the Principal Shareholders (as that term is defined in
the Merger Agreement) shall be deposited with Manchester Trust Bank as escrow
agent pursuant to the Escrow Agreement, and Summit Bancorp. will hold back the
balance of such Summit Bancorp. stock to be received. The Summit Bancorp. stock
that is held back shall be used to pay any "shortfall" as defined in section
5.07(b) of the Merger Agreement. Payments made from the Escrow account are to
be made for certain breaches under Section 5.09 of the Merger Agreement, and to
the extent that the stock held back is insufficient to cover a shortfall, stock
in the Escrow Account can be used to satisfy the shortfall. Payments made from
either the hold back amount or Escrow account shall be valued at the fair market
value at the time transferred back to Summit Bancorp. Thus, increases and
decreases from the Effective Time shall accrue to the benefit or burden of the
MSFG shareholders.
Law and Analysis: IRC (S)1001 generally provides that gain or loss shall be
recognized upon the sale or exchange of property. IRC (S)354(a) provides an
exception to the general rule embodied in IRC (S)1001, and provides that no gain
or loss shall be recognized if stock or securities in a corporation a party to a
reorganization are, in pursuance of the plan of reorganization, exchanged solely
for stock or securities in another corporation a party to the reorganization.
IRC (S)368(a)(1)(A) provides that a reorganization includes a statutory merger.
IRC (S)368(a)(2)(E) provides that a transaction otherwise qualifying under IRC
(S)368(a)(1)(A) will not be disqualified by reason of the fact that stock of a
corporation in control of the merged corporation is used in the transaction if
after the transaction the surviving corporation holds substantially all of its
properties and all the properties of the merged corporation, and in the
transaction, former shareholders of the surviving corporation exchanged for an
amount of voting stock in the controlling corporation, an amount of stock
constituting control of such corporation. IRC (S)368(c) defines control as 80%
of the voting power of all classes of stock entitled to vote and 80% of all
other classes of stock. IRC (S)368(b) defines a "party to a reorganization" to
include in the case of a reorganization qualifying under IRC (S)368(a)(1)(A) by
reason of IRC (S)368(a)(2)(E) both corporations and the corporation controlling
the
2
<PAGE>
merged corporation. IRC (S)358(a) provides that an exchanging stockholder's
basis in the stock that he receives is equal to the basis of the stock
surrendered, reduced by any money or the fair market value of the other property
received, increased by any gain recognized on the transaction. IRC (S)1223(1)
provides that an exchanging shareholder's holding period for the stock received
in the exchange will include the period for which he held the stock exchanged if
the stock received has a basis in whole or in part determined by reference to
the basis of the stock surrendered.
We conclude that based upon the facts as presented, as applied to the law
enumerated above, the proposed transaction:
1. Will qualify as a reorganization under IRC (S)368(a)(1)(A) as a
statutory merger by reason of IRC (S)368(a)(2)(E);
2. The MSFG shareholders whose stock is converted/exchanged in the merger
to stock of Summit Bancorp. shall receive such stock free of federal income
taxes;
3. The basis of the Summit Bancorp. stock received by the respective MSFG
shareholders in the transaction shall have a basis equal to the basis of their
MSFG stock converted/exchanged;
4. The holding period for the Summit Bancorp. stock received by an MSFG
shareholder shall include the period that the MSFG stock converted/exchanged was
held by the MSFG shareholder.
5. To the extent that either Summit Bancorp. stock retained by Summit
Bancorp or held in Escrow under the Escrow Agreement is utilized to satisfy the
shortfall in Section 5.07 or the indemnification requirement in Section 5.09,
such stock shall be treated as sold under IRC (S)1001 by the respective
shareholder of MSFG and gain or loss will be recognized between the fair market
value of the stock on the date transferred to Summit Bancorp. and the
shareholder's basis for those shares. For purposes of the stock retained by
Summit Bancorp., such stock will be considered "transferred" when the
stockholder's rights to the stock are extinguished.
Please contact us after you have had an opportunity to review this opinion
letter if you have any additional questions or comments.
Very truly yours,
/s/ Charles Edward Falk
Charles Edward Falk, CPA
For the Firm
3
<PAGE>
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Summit Bancorp:
We consent to the use of our report dated January 19, 1999 relating to the
consolidated balance shets of Summit Bancorp and subsidiaries as of December 31,
1998 and 1997 and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1998, which report appears in the December 31, 1998
Annual Report on Form 10-K of Summit Bancorp, incorporated by reference in the
Registration Statement on Form S-4 of Summit Bancorp. We also consent to the
reference to our Firm under the caption "Experts".
/s/ KPMG LLP
Short Hills, New Jersey
January 27, 2000
<PAGE>
EXHIBIT 23(b)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the inclusion in this Joint Proxy Statement,
Prospectus and Registration Statement, pursuant to Schedule 14A, of our report
dated February 26, 1999, on our audits of the financial statements of MSFG, Inc.
We also consent to the references to us under the captions "Selected
Financial Data" and "Experts."
/s/ Moore Stephens, P.C.
MOORE STEPHENS, P.C.
Certified Public Accountants.
Cranford, New Jersey
January 27, 2000
