<PAGE> 1
Filed Pursuant to Rule 424(B)(3)
Registration No. 033-64079
[LETTERHEAD OF GARDEN STATE BANCSHARES, INC.]
Dear Garden State BancShares, Inc. Shareholder: December 11, 1995
You are cordially invited to attend the Special Meeting of Shareholders
(the "Meeting") of Garden State BancShares, Inc. ("Garden State"), which will be
held on Friday, January 12, 1996 at 10 a.m., local time, at the Corporate
Headquarters of Garden State, 2290 West County Line Road, Jackson, New Jersey.
On June 13, 1995, Garden State and The Summit Bancorporation ("Summit") entered
into a merger agreement which provides for the affiliation of the two companies
(the "Merger Agreement"). At the Meeting, you will be asked to consider and vote
upon a proposal to approve the Merger Agreement, pursuant to which Garden State
will merge with and into Summit (the "Merger"), and Garden State Bank will merge
with Summit Bank, a wholly-owned subsidiary of Summit.
The Merger Agreement provides that, upon consummation of the Merger, you
will receive, for each share of Garden State common stock which you own, 1.08
(the "Exchange Ratio") shares of Summit common stock, with a cash payment in
lieu of any fractional share of Summit common stock which you would otherwise be
entitled to receive.
The proposed Merger has been unanimously approved by the Boards of
Directors of both Garden State and Summit. Your Board unanimously recommends
that you vote FOR approval of the Merger Agreement. Your Board also unanimously
recommends that you vote FOR the proposed adjournment of the Meeting for the
purpose of soliciting additional proxies, if necessary.
Consummation of the Merger is subject to certain conditions, including the
approval of the Merger Agreement by the requisite vote of Garden State
shareholders, and the approval of the Merger by various regulatory agencies.
You will also be asked to consider and vote upon the advance approval of an
adjournment in the event there are insufficient shares present at the Meeting to
constitute a quorum or to approve the Merger Agreement.
Specific information regarding the Meeting is enclosed in the attached
formal Notice of Meeting and Proxy Statement-Prospectus. Please read these
materials carefully.
Subsequent to execution of the Merger Agreement, on September 10, 1995,
Summit entered into an Agreement and Plan of Merger with UJB Financial Corp.
("UJB") providing for the merger of Summit into UJB (the "Summit-UJB Merger")
under the name "Summit Bancorp." and the exchange of each share of Summit common
stock for 0.90 shares of UJB common stock. The enclosed Proxy
Statement-Prospectus also contains information concerning the Summit-UJB Merger.
If the conditions to the Summit-UJB Merger, including the approval of the
shareholders of Summit and UJB, are satisfied, it is currently expected that the
Summit-UJB Merger would be consummated in the first quarter of 1996 subsequent
to the Merger.
It is very important that your shares be represented at the Meeting,
whether or not you plan to attend in person. The affirmative vote of a majority
of the votes cast at the Meeting is required to approve the Merger Agreement.
Therefore, we urge you to execute, date and return the enclosed proxy card in
the enclosed postage paid envelope as soon as possible to assure that your
shares will be voted at the Meeting. YOU SHOULD NOT SEND IN CERTIFICATES FOR
YOUR SHARES OF GARDEN STATE COMMON STOCK AT THIS TIME.
On behalf of the Board of Directors, we thank you for your support and urge
you to vote FOR approval of the Merger Agreement and FOR the proposal to adjourn
the Meeting, if necessary.
Sincerely,
[Signature]
Theodore D. Bessler
President and Chief Executive Officer
[Signature]
Peter Boyarin
Chairman of the Board
<PAGE> 2
GARDEN STATE BANCSHARES, INC.
2290 WEST COUNTY LINE ROAD
JACKSON, NEW JERSEY 08527
(908) 905-2200
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 12, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of Garden State BancShares, Inc. ("Garden State") will be held at the
Corporate Headquarters of Garden State, 2290 West County Line Road, Jackson, New
Jersey, on Friday, January 12, 1996 at 10:00 a.m., local time.
A Proxy Card and a Proxy Statement-Prospectus for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The approval of the Agreement and Plan of Merger (the "Merger
Agreement") by and between The Summit Bancorporation ("Summit") and
Garden State which provides for the merger of Garden State and Summit
pursuant to which shareholders will receive for each share of Garden
State common stock, no par value per share ("Garden State Common
Stock"), 1.08 shares of Summit common stock, no par value ("Summit
Common Stock"). A copy of the Merger Agreement is included as Appendix A
to the Proxy Statement-Prospectus.
2. The adjournment of the Meeting to a later date, if necessary, to solicit
additional proxies in the event insufficient shares are present in
person or by proxy at the Meeting to constitute a quorum or to approve
the Merger Agreement (the "Adjournment Proposal").
3. The transaction of such other business as may properly come before the
Meeting or any adjournments thereof.
As of the date of this Proxy Statement-Prospectus the Board of Directors of
Garden State (the "Board of Directors") is not aware of any business to come
before the Meeting except the vote on the Merger Agreement and the Adjournment
Proposal.
Any action may be taken on any one of the foregoing proposals at the
Meeting on the date specified above, or on any date or dates to which, by one or
more adjournments, the Meeting may be adjourned. Pursuant to the Bylaws, the
Board of Directors has fixed the close of business on December 5, 1995, as the
record date for determination of the shareholders entitled to vote at the
Meeting and any adjournments thereof.
You are requested to fill in and sign the enclosed form of proxy (i.e., the
Proxy Card) which is solicited by the Board of Directors and to mail it promptly
in the enclosed envelope. The proxy will not be used if you timely send to the
Secretary of the Corporation, or deliver to the Secretary of the Meeting, a
later-dated proxy or written notice of revocation.
By Order of the Board of Directors
[Signature]
Lisa M. MacQuaide
Corporate Secretary
Jackson, New Jersey
December 11, 1995
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU INTEND TO
ATTEND THE MEETING, PLEASE EXECUTE THE ENCLOSED FORM OF PROXY TO ENSURE THAT
YOUR VOTE WILL BE COUNTED. THE PROMPT RETURN OF PROXIES WILL SAVE YOUR COMPANY
THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM. A
PRE-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
<PAGE> 3
[LOGO] [LOGO]
GARDEN STATE BANCSHARES, INC. THE SUMMIT BANCORPORATION
2290 WEST COUNTY LINE ROAD ONE MAIN STREET
JACKSON, NEW JERSEY 08527 CHATHAM, NEW JERSEY 07928
SPECIAL MEETING OF SHAREHOLDERS PROSPECTUS
PROXY STATEMENT
------------------------
This Proxy Statement-Prospectus is being furnished to the holders of
common stock, no par value ("Garden State Common Stock"), of Garden State
BancShares, Inc. ("Garden State") in connection with the solicitation of
proxies by the Garden State Board of Directors for use at the Special Meeting
of Garden State's shareholders to be held at 10:00 a.m., local time, on Friday,
January 12, 1996, at the Corporate Headquarters of Garden State, 2290 West
County Line Road, Jackson, New Jersey, and at any adjournments or postponements
thereof (the "Meeting").
At the Meeting, Garden State shareholders will consider and vote upon
proposals to approve the Agreement and Plan of Merger, dated as of June 13, 1995
(the "Merger Agreement"), by and between The Summit Bancorporation ("Summit")
and Garden State, pursuant to which Garden State will merge with and into Summit
(the "Merger") and, immediately thereafter, Garden State Bank ("GS Bank") will
merge with Summit Bank, a wholly-owned subsidiary of Summit (the "Subsidiary
Merger"); and (2) to approve in advance the adjournment of the meeting to a
later date, if necessary, to solicit additional proxies in the event
insufficient shares are present in person or by proxy to constitute a quorum or
to approve the Merger Agreement (the "Adjournment Proposal").
Upon consummation of the Merger, each outstanding share of common stock, no
par value, of Garden State (the "Garden State Common Stock") (except for
treasury shares or shares held directly or indirectly by Summit other than in a
fiduciary capacity or in satisfaction of a debt previously contracted) will be
converted into the right to receive 1.08 shares (the "Exchange Ratio") of common
stock, no par value, of Summit (the "Summit Common Stock"), subject to
adjustment under certain circumstances as more fully described elsewhere in the
Proxy Statement-Prospectus. Under the terms of the Merger Agreement, cash will
be paid in lieu of fractional shares of Summit Common Stock.
The Proxy Statement-Prospectus also constitutes a prospectus of Summit in
respect of up to 3,365,834 shares of Summit Common Stock to be issued in
exchange for shares of Garden State Common Stock upon consummation of the Merger
pursuant to the terms of the Merger Agreement (the "Merger Shares").
For a description of the Merger Agreement, which is included in its
entirety as Appendix A to this Proxy Statement-Prospectus, see "THE MERGER."
Subsequent to execution of the Merger Agreement, on September 10, 1995,
Summit entered into an Agreement and Plan of Merger with UJB Financial Corp.
("UJB"), amended as of December 1, 1995 (the "Summit-UJB Merger Agreement")
providing for the merger of Summit into UJB (the "Summit-UJB Merger") under the
name "Summit Bancorp." and the exchange of each share of Summit Common Stock for
0.90 shares of the common stock, $1.20 par value, of UJB ("UJB Common"). The
enclosed Proxy Statement-Prospectus also contains information concerning the
Summit-UJB Merger. If the conditions to the Summit-UJB Merger, including the
approval of the shareholders of Summit and UJB, are satisfied, it is currently
expected that the Summit-UJB Merger would be consummated in the first quarter of
1996 subsequent to the Merger of Garden State into Summit.
Summit Common Stock is currently traded, and the Merger Shares will be
traded, on the over-the-counter market and included for quotation on the NASDAQ
National Market System ("NASDAQ/NMS"), and Garden State Common Stock is included
for quotation on the NASDAQ Small-Cap Market. The last reported sale prices per
share of Summit Common Stock and Garden State Common Stock as reported on the
NASDAQ/NMS, as to Summit, and the NASDAQ Small-Cap Market, as to Garden State,
on December 6, 1995 were $29.375 and $31.50, respectively.
All information contained in this Proxy Statement-Prospectus with respect
to Summit has been supplied by Summit, all information with respect to Garden
State has been supplied by Garden State and all information with respect to UJB
has been supplied by UJB.
This Proxy Statement-Prospectus and the accompanying proxy card are first
being mailed to shareholders of Garden State on or about December 11, 1995.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF SUMMIT COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.
The date of this Proxy Statement-Prospectus is December 11, 1995.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................. 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 1
SUMMARY............................................................................... 3
Parties to the Merger............................................................... 3
The Meeting......................................................................... 4
Reasons for the Merger; Recommendation of the Garden State Board of Directors....... 5
Effect of the Merger; Effective Time; Closing....................................... 5
Merger Consideration................................................................ 6
The Proposed Summit-UJB Merger...................................................... 7
Opinion of Financial Advisor........................................................ 7
Interests of Certain Persons in the Merger.......................................... 8
Conditions; Regulatory Approvals.................................................... 8
Termination......................................................................... 8
Federal Income Tax Considerations................................................... 9
Accounting Treatment................................................................ 9
NASDAQ Listing...................................................................... 9
No Dissenters' Rights............................................................... 10
Equivalent Dividends................................................................ 10
Stock Option Agreement.............................................................. 10
Certain Differences in Shareholders' Rights......................................... 11
RECENT DEVELOPMENTS................................................................... 12
Summit-UJB Merger Agreement......................................................... 12
Summit Stock Repurchase Plan........................................................ 12
CERTAIN INFORMATION REGARDING THE SUMMIT-UJB MERGER................................... 13
Introduction........................................................................ 13
General............................................................................. 13
Effect of Summit-UJB Merger on Garden State and Garden State Shareholders........... 14
Board of Directors and Officers of UJB after the Summit-UJB Merger.................. 14
Summit and UJB Stock Option Agreements.............................................. 15
Certain Federal Income Tax Consequences of the Summit-UJB Merger.................... 16
Recent Developments Regarding UJB................................................... 17
COMPARATIVE STOCK PRICE AND DIVIDEND INFORMATION...................................... 18
SELECTED FINANCIAL DATA............................................................... 20
COMPARATIVE PER SHARE FINANCIAL INFORMATION........................................... 24
THE MEETING........................................................................... 25
PROPOSAL I -- APPROVAL OF THE MERGER AGREEMENT........................................ 26
THE MERGER............................................................................ 26
Parties to the Merger............................................................... 26
Effect of the Merger; Effective Time; Closing....................................... 27
Merger Consideration................................................................ 28
Background of and Reasons for the Merger............................................ 29
Opinion of Financial Advisor........................................................ 31
Surrender of Certificates........................................................... 34
Interests of Certain Persons in the Merger.......................................... 35
Regulatory Approvals................................................................ 37
Conditions to the Consummation of the Merger........................................ 38
</TABLE>
i
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Representations and Warranties...................................................... 39
Conduct of Business Pending the Merger.............................................. 40
No Solicitation..................................................................... 41
Amendment and Waiver................................................................ 42
Termination......................................................................... 42
Expenses............................................................................ 43
Federal Income Tax Considerations................................................... 43
Accounting Treatment................................................................ 43
No Dissenters' Rights............................................................... 43
CERTAIN RELATED TRANSACTIONS.......................................................... 44
Stock Option Agreement.............................................................. 44
Resales of Summit Common Stock...................................................... 46
PRO FORMA FINANCIAL INFORMATION....................................................... 47
Pro Forma Condensed Combined Balance Sheet.......................................... 48
Pro Forma Condensed Combined Statements of Income................................... 49
Notes to Pro Forma Financial Information............................................ 54
DESCRIPTION OF SUMMIT CAPITAL STOCK................................................... 55
General............................................................................. 55
Summit Common Stock................................................................. 55
Preferred Stock..................................................................... 55
Shareholder Rights Plan............................................................. 56
Dividend Reinvestment and Stock Purchase Plan....................................... 56
DESCRIPTION OF UJB CAPITAL STOCK...................................................... 57
General............................................................................. 57
UJB Common Stock.................................................................... 57
Preferred Stock..................................................................... 57
Shareholder Rights Plan............................................................. 58
COMPARISON OF RIGHTS OF SHAREHOLDERS.................................................. 58
Authorized Shares................................................................... 58
Voting.............................................................................. 59
Board of Directors.................................................................. 60
Indemnification..................................................................... 60
Limitation of Liability............................................................. 60
Special Meetings.................................................................... 61
Preemptive Rights................................................................... 61
Shareholder Rights Plans............................................................ 61
PROPOSAL II -- ADJOURNMENT OF THE MEETING............................................. 62
LEGAL MATTERS......................................................................... 63
EXPERTS............................................................................... 63
OTHER MATTERS......................................................................... 63
AGREEMENT AND PLAN OF MERGER................................................... Appendix A
STOCK OPTION AGREEMENT......................................................... Appendix B
OPINION OF ADVEST, INC......................................................... Appendix C
</TABLE>
ii
<PAGE> 6
AVAILABLE INFORMATION
Summit and Garden State are subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Copies of such
reports, proxy statements and other information can be obtained, upon payment of
prescribed fees, from the public reference facilities of the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In
addition, such reports, proxy statements and other information can be inspected
at the Commission's facilities referred to above and at the Commission's
Regional Offices at 7 World Trade Center (13th Floor), New York, New York 10048
and Northwestern Atrium Center, 500 West Madison, Suite 1400, Chicago, Illinois
60661. The Summit Common Stock is included for quotation in the NASDAQ/NMS and
the Garden State Common Stock is included for quotation in the NASDAQ Small Cap
Market, and such reports, proxy statements and other information concerning
Summit and Garden State should be available for inspection and copying at the
offices of the National Association of Securities Dealers, Inc., 1735 K Street,
N.W., Washington, D.C. 20006.
Summit has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Merger Shares. As permitted by the rules and regulations of the Commission, this
Proxy Statement-Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits thereto. Such additional information
may be obtained from the Commission's principal office in Washington, D.C..
Statements contained in this Proxy Statement-Prospectus or in any document
incorporated by reference in this Proxy Statement-Prospectus as to the contents
of any contract or other document referred to herein or therein are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement or
such other document, each such statement being qualified in all respects by such
reference.
All information contained in this Proxy Statement-Prospectus relating to
Summit and its subsidiaries has been supplied by Summit, all information
relating to Garden State and its subsidiaries has been supplied by Garden State
and all information relating to UJB and its subsidiaries has been supplied by
UJB.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE
UPON REQUEST, IN THE CASE OF DOCUMENTS RELATING TO SUMMIT AND UJB, FROM JOHN F.
KUNTZ, SENIOR VICE PRESIDENT, CORPORATE SECRETARY AND GENERAL COUNSEL, THE
SUMMIT BANCORPORATION, ONE MAIN STREET, CHATHAM, NEW JERSEY 07928, TELEPHONE
NUMBER (201) 701-2665, AND, IN THE CASE OF DOCUMENTS RELATING TO GARDEN STATE,
FROM LISA M. MACQUAIDE, CORPORATE SECRETARY, GARDEN STATE BANCSHARES, INC., 2290
WEST COUNTY LINE ROAD, JACKSON, NEW JERSEY 08527, TELEPHONE NUMBER (908)
905-2200. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY JANUARY 2, 1996.
The following documents filed with the Commission by Summit (File No.
0-8026), Garden State (File No. 0-13108) and UJB (File No. 1-6451) pursuant to
the Exchange Act are incorporated by reference in this Proxy
Statement-Prospectus:
1. Summit's Annual Report on Form 10-K for the year ended December 31,
1994, provided however, that the information referred to in Item 402(a)(8) of
Regulation S-K of the Commission shall not be deemed to be incorporated by
reference herein;
2. Summit's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1995, June 30, 1995, and September 30, 1995;
1
<PAGE> 7
3. Summit's Current Reports on Form 8-K filed May 16, 1995, July 7, 1995
and September 27, 1995.
4. The description of the Summit Shareholder Rights Plan contained in
Summit's Registration Statement on Form 8-A filed February 5, 1990 including all
amendments thereto and reports filed under the Exchange Act for the purpose of
updating such description.
5. Garden State's Annual Report on Form 10-K for the year ended December
31, 1994, provided, however, that the information referred to in Item 402(a)(8)
of Regulation S-K of the Commission shall not be deemed to be incorporated by
reference herein;
6. Garden State's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1995, June 30, 1995 and September 30, 1995;
7. Garden State's Current Reports on Form 8-K filed April 26, 1995 and
June 28, 1995.
8. Item 8 of UJB's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994.
9. Item 1 of UJB's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1995, June 30, 1995 and September 30, 1995;
10. UJB's Current Report on Form 8-K dated October 27, 1995.
All documents filed by Summit and Garden State, respectively, with the
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Proxy Statement-Prospectus and prior to the date
of the Meeting shall be deemed to be incorporated by reference in this Proxy
Statement-Prospectus and to be part hereof from the date of filing of such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement-Prospectus to the extent that a
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement-Prospectus.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS IN
CONNECTION WITH THE SOLICITATIONS OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY SUMMIT OR GARDEN STATE. THIS PROXY
STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROXY STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF
SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF SUMMIT OR GARDEN STATE SINCE THE
DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF THE TIME SUBSEQUENT
TO ITS DATE, SUBJECT TO SUMMIT'S UNDERTAKING TO FILE, DURING ANY PERIOD IN WHICH
OFFERS OR SALES ARE BEING MADE, A POST-EFFECTIVE AMENDMENT TO THIS REGISTRATION
STATEMENT 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.
2
<PAGE> 8
SUMMARY
The following summary is not intended to be a complete description of all
material facts regarding Summit, Garden State and the Merger and is qualified in
all respects by the information appearing elsewhere or incorporated by reference
in this Proxy Statement-Prospectus, the Appendices hereto and the documents
referred to herein.
PARTIES TO THE MERGER SUMMIT. Summit is a registered bank holding
company incorporated in 1973 under the laws of the
State of New Jersey and, as such, is subject to the
Bank Holding Company Act of 1956, as amended (the
"BHCA"). At September 30, 1995, Summit had
consolidated assets of $5.6 billion, consolidated
deposits of $4.6 billion and consolidated
stockholders' equity of $485 million. Based on
consolidated assets at September 30, 1995, Summit
was the fourth largest independent bank holding
company headquartered in New Jersey. At September
30, 1995, the total number of full-time equivalent
employees of Summit was 1,602.
On September 10, 1995 Summit entered into an
Agreement and Plan of Merger with UJB Financial
Corp. ("UJB"), as amended by Amendment No. 1
thereto dated as of December 1, 1995 (the "Summit-
UJB Merger Agreement"), providing for the merger of
Summit into UJB (the "Summit-UJB Merger") under the
name "Summit Bancorp." and the exchange of each
share of Summit Common Stock for 0.90 shares of UJB
Common. See "RECENT DEVELOPMENTS -- Summit-UJB
Merger Agreement."
Summit serves a market area that has a diverse base
of customers, including corporations, small
businesses and individuals. As of September 30,
1995, Summit provided through the 90 banking
offices of Summit Bank, its wholly-owned bank
subsidiary, a broad range of commercial banking,
retail banking, real estate lending, private
banking/ asset management and other financial
services throughout 11 counties in Central and
Northern New Jersey.
Summit is organized along the following functional
lines of business:
Retail Banking Group. The Retail Banking Group,
which includes the branch delivery system, offers a
full range of retail lending, deposit and other
financial products, including consumer and
residential mortgage credit; mutual funds and
tax-deferred annuities; and credit products and
services for smaller, local businesses. Summit is
part of the MAC automated teller machine network
that provides access to routine banking transaction
services to its customers at over 18,000 locations
on a 24-hour basis throughout the United States.
MAC cardholders can access over 98,500 locations in
the United States and over 179,000 locations
throughout the world through Summit's association
with the CIRRUS System.
Commercial Banking Group. The Commercial Banking
Group provides credit products and services, as
well as trade finance and cash management services
to middle-market corporate customers. In addition,
this Group provides specialized lending for
construction, commercial real estate and mortgage
banking companies.
Private Banking/Asset Management Group. The
Private Banking/ Asset Management Group provides
deposit and credit services to high net worth and
high income individuals and professionals, such as
doctors, dentists, lawyers and accountants. This
Group also provides traditional
3
<PAGE> 9
trust and investment services for the same markets
and for corporations and employee benefit plans.
Summit serves in the capacities of investment
manager, custodian and trustee for individuals, as
well as employee benefit plans, and also offers
estate planning services.
Summit's principal executive offices are located at
One Main Street, Chatham, New Jersey, 07928 and its
telephone number at that address is (201) 701-2666.
GARDEN STATE. Garden State is a registered bank
holding company incorporated in 1984 under the laws
of the State of New Jersey and, as such, is also
subject to the BHCA. At September 30, 1995, Garden
State had consolidated assets of $314 million,
consolidated deposits of $284 million and
consolidated shareholders' equity of $29 million.
Garden State's sole subsidiary is Garden State Bank
("GS Bank").
Garden State was organized under the laws of New
Jersey in 1984 by GS Bank for the purpose of
creating a bank holding company for GS Bank.
Effective January 16, 1985, Garden State acquired
all of the outstanding shares of GS Bank. GS Bank
was incorporated as a state-chartered New Jersey
bank in 1974 under the name Garden State Bank of
Ocean County. GS Bank maintains its corporate
headquarters and nine branches in Ocean and
Monmouth Counties, New Jersey. GS Bank offers a
broad range of banking, trust and related financial
services to small and mid-sized businesses,
consumers, institutions and governmental bodies.
GS Bank is a full service commercial bank and
offers the services generally performed by
commercial banks of similar size and character,
including checking, savings and time deposit
accounts, certificates of deposit, secured and
unsecured personal and commercial loans, and
residential and commercial real estate loans. GS
Bank offers a wide range of personal and corporate
trust services through its Trust Department. GS
Bank's deposit accounts are competitive in the
current environment. In the lending area, GS Bank
is engaged in commercial loans, Small Business
Administration ("SBA") loans, mortgage loans and
consumer lending.
Garden State and GS Bank had 170 full-time
equivalent employees as of September 30, 1995.
The executive offices of Garden State and GS Bank
are located at 2290 West County Line Road, Jackson,
New Jersey 08527, and the telephone number at that
address is (908) 905-2200.
See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE," "THE MERGER -- Parties to the Merger,"
"SELECTED FINANCIAL DATA," and "PRO FORMA FINANCIAL
INFORMATION."
THE MEETING The Meeting will be held at 10:00 a.m., local time,
on Friday, January 12, 1996 at the Corporate
Headquarters of Garden State, 2290 West County Line
Road, Jackson, New Jersey. The purpose of the
Meeting is to consider and vote upon (1) a proposal
to approve the Merger Agreement; (2) the approval
of the Adjournment Proposal; and (3) such other
matters as may properly be brought before the
Meeting and any adjournments or postponements
thereof.
4
<PAGE> 10
Only holders of record of Garden State Common Stock
at the close of business on December 5, 1995 (the
"Record Date") will be entitled to vote at the
Meeting. Assuming a quorum is present at the
Meeting, the affirmative vote of a majority of the
votes cast at the Meeting is required in order to
approve and adopt the Merger Agreement. As of the
Record Date, there were 3,114,953 shares of Garden
State Common Stock outstanding and entitled to be
voted at the Meeting.
The directors and executive officers of Garden
State and their affiliates beneficially owned, as
of the Record Date, 1,229,694 shares, or
approximately 39.5% of the outstanding shares, of
Garden State Common Stock and all such persons have
indicated a present intent to vote their shares in
favor of the Merger. Summit, by reason of the Stock
Option Agreement (as defined below), and its
ownership of the Option (as defined below) to
purchase up to an aggregate of 752,770 shares of
Garden State Common Stock granted by the Stock
Option Agreement, may be deemed under the rules of
the Commission to be the beneficial owner of
approximately 24.7% of the Garden State Common
Stock outstanding on the Record Date. Summit does
not, however, have the power to vote the shares of
Garden State Common Stock subject to the Option at
the Meeting. See "THE MEETING"; and "CERTAIN
RELATED TRANSACTIONS -- Stock Option Agreement."
REASONS FOR THE MERGER;
RECOMMENDATION OF THE
GARDEN STATE BOARD OF
DIRECTORS THE GARDEN STATE BOARD OF DIRECTORS (THE "GARDEN
STATE BOARD") HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT GARDEN
STATE'S SHAREHOLDERS VOTE FOR APPROVAL OF THE
MERGER AGREEMENT AND FOR APPROVAL OF THE
ADJOURNMENT PROPOSAL. See "THE
MEETING -- Recommendation of the Garden State Board
of Directors" and "THE MERGER -- Background of and
Reasons for the Merger -- The Garden State Board's
Considerations in Approving the Merger." In
considering the recommendation of the Garden State
Board, shareholders should be aware that certain
members of the Garden State Board have interests in
the Merger in addition to their interests as
shareholders of Garden State generally. See "THE
MERGER -- Interests of Certain Persons in the
Merger."
EFFECT OF THE MERGER;
EFFECTIVE TIME; CLOSING Pursuant to the Merger Agreement, at the Effective
Time (as defined below), Garden State will merge
with and into Summit, with Summit surviving the
Merger. Immediately thereafter, Summit Bank and GS
Bank will merge, with the survivor having the name,
certificate of incorporation and Bylaws of Summit
Bank (the "Subsidiary Merger"). See "THE
MERGER -- Effect of the Merger; Effective Date;
Closing."
The Effective Time of the Merger (the "Effective
Time") will be the date and time on which a
Certificate of Merger (the "Certificate of Merger")
is filed with the Secretary of State of the State
of New Jersey in accordance with the New Jersey
Business Corporation Act, as amended (the "NJBCA").
A closing (the "Closing") will take place prior to
the Effective Time at 10:00 a.m., local time, on a
date to be specified by the parties, which is at
least 10 business days (subject to earlier closing
by mutual agreement of Summit and Garden State),
but no more than 30 business days, following the
receipt of all necessary
5
<PAGE> 11
regulatory and governmental approvals and consents
and the expiration of all statutory waiting periods
in respect thereof and the satisfaction or waiver
of the conditions to the consummation of the Merger
specified in the Merger Agreement (other than the
delivery of certificates, opinions and other
instruments and documents to be delivered at the
Closing), at the office of Bourne, Noll & Kenyon,
counsel to Summit, or at such other place, time or
date as Summit and Garden State may mutually agree
upon. Immediately following the Closing, the
Certificate of Merger will be filed with the New
Jersey Secretary of State. See "THE
MERGER -- Effect of the Merger; Effective Time;
Closing."
If the Merger is approved by the shareholders of
Garden State, subject to the satisfaction or waiver
of certain other conditions described herein, the
Closing currently is expected to occur early in the
first quarter of 1996. For information on how
Garden State shareholders will be able to exchange
certificates representing shares of Garden State
Common Stock for new certificates representing the
shares of Summit Common Stock to be issued to them,
see "THE MERGER -- Surrender of Certificates."
MERGER CONSIDERATION Upon consummation of the Merger, subject to the
provisions in the Merger Agreement relating to
fractional shares discussed below, each share of
Garden State Common Stock outstanding immediately
prior to the Effective Time (other than treasury
shares and shares held directly or indirectly by
Summit other than in a fiduciary capacity or in
satisfaction of a debt previously contracted) will
be automatically converted into the right to
receive 1.08 shares of Summit Common Stock, subject
to adjustment under certain circumstances as more
fully described elsewhere in this Proxy
Statement-Prospectus. Cash will be paid in lieu of
fractional shares of Summit Common Stock.
The market price of Summit Common Stock can be
expected to fluctuate between the date of this
Proxy Statement-Prospectus and the Closing. Changes
in the market price of Summit Common Stock between
the date of this Proxy Statement-Prospectus and the
Closing could result in an increase or decrease in
the market price as of the Closing of the shares of
Summit Common Stock to be received by Garden State
shareholders in the Merger. On December 6, 1995,
the last practicable date prior to the mailing of
this Proxy Statement- Prospectus, the last reported
sale price per share of Summit Common Stock was
$29.375.
At the Effective Time, each outstanding option to
purchase Garden State Common Stock (a "Garden State
Option") granted under the stock option plans of
Garden State (the "Garden State Option Plans") will
be converted, at the election of the holder of such
Garden State Option (an "optionee"), as follows:
(i) into an option to purchase Summit
Common Stock, wherein (x) the right to purchase
shares of Garden State Common Stock pursuant to
the Garden State Option will be converted into
the right to purchase that same number of
shares of Summit Common Stock multiplied by the
Exchange Ratio, (y) the option exercise price
per share of Summit Common Stock will be the
previous option exercise price per share of the
Garden State Common Stock divided by the
Exchange Ratio and (z) in all other
6
<PAGE> 12
material respects the option will be subject to
the same terms and conditions as governed the
Garden State Option on which it was based,
including without limitation the remaining
length of time within which the option may be
exercised; or
(ii) if the Garden State Option is fully
exercisable at the Closing, into the right to
receive immediately after the Effective Time a
number of whole shares of Summit Common Stock
equal to the positive number (or zero, if the
result is negative) determined by (x)
subtracting (i) the aggregate exercise price
for the Garden State Option from (ii) the
product determined by multiplying (A) the
number of shares of Garden State Common Stock
covered by the Garden State Option, times (B)
the Exchange Ratio, times (C) the Average
Closing Price, and (y) dividing the resulting
number by the Average Closing Price. No
fractional shares of Summit Common Stock will
be issued, and in lieu thereof, each optionee
who would otherwise be entitled to a fractional
interest will receive an amount in cash
determined by multiplying such fractional
interest by the Average Closing Price.
Each outstanding share of Summit Common Stock at
the Effective Time will remain outstanding and
unchanged as a result of the Merger.
The Exchange Ratio was arrived at through
arms-length negotiations between Summit and Garden
State. See "THE MERGER -- Background of and Reasons
for the Merger" and "-- Opinion of Financial
Advisor." For certain information concerning the
historical market price of Garden State Common
Stock and Summit Common Stock, see "COMPARATIVE
STOCK PRICE AND DIVIDEND INFORMATION."
THE PROPOSED SUMMIT-UJB
MERGER Subsequent to execution of the Merger Agreement, on
September 10, 1995, Summit entered into the
Summit-UJB Merger Agreement providing for the
Summit-UJB Merger, under the name "Summit Bancorp."
and the exchange of each share of Summit Common
Stock for 0.90 shares of UJB Common. The enclosed
Proxy Statement-Prospectus also contains
information concerning the Summit-UJB Merger. If
the conditions to the Summit-UJB Merger, including
the approval of the shareholders of Summit and UJB,
are satisfied, it is currently expected that the
Summit-UJB Merger would be consummated in the first
quarter of 1996 subsequent to the Merger of Garden
State into Summit. THE MERGER WILL NOT BE
CONSUMMATED IN TIME FOR GARDEN STATE SHAREHOLDERS
TO BECOME SUMMIT SHAREHOLDERS AND HAVE AN
OPPORTUNITY TO VOTE AS SUMMIT SHAREHOLDERS ON THE
SUMMIT-UJB MERGER. See "RECENT DEVELOPMENTS -- The
Summit-UJB Merger" and "CERTAIN INFORMATION
REGARDING THE SUMMIT-UJB MERGER."
OPINION OF FINANCIAL
ADVISOR Advest, Inc. ("Advest"), Garden State's financial
advisor, has rendered its opinion to the Garden
State Board that the Exchange Ratio is fair to
Garden State's shareholders (other than Summit and
its affiliates) from a financial point of view. The
written opinion of Advest dated December 8, 1995,
which is attached as Appendix C to this Proxy
Statement-Prospectus, should be read in its
entirety with respect to the assumptions made,
matters considered and limits of the review
undertaken by Advest in rendering such opinion. See
"THE MERGER -- Opinion of Financial Advisor."
7
<PAGE> 13
INTERESTS OF CERTAIN
PERSONS IN THE MERGER Certain members of Garden State's management and
the Garden State Board have interests in the Merger
in addition to their interests as shareholders of
Garden State generally. These include, among other
things, provisions in the Merger Agreement relating
to indemnification and the continuation of
employment agreements and certain other employee
benefits. The Garden State Board was aware of these
interests and considered them, among other matters,
in unanimously approving (with all directors
voting) the Merger Agreement and the transactions
contemplated thereby. See "THE MERGER -- Interests
of Certain Persons in the Merger."
CONDITIONS; REGULATORY
APPROVALS Consummation of the Merger and the issuance of the
Merger Shares is subject to various conditions,
including receipt of the shareholder approval
solicited hereby, receipt of the necessary
regulatory approvals, receipt of opinions of
counsel regarding certain tax aspects of the Merger
and certain other matters, qualification of the
Merger for pooling of interests accounting
treatment, absence of any material adverse change
in the financial conditions of Garden State or
Summit and satisfaction of other customary closing
conditions.
The regulatory approvals and consents necessary to
consummate the Merger include the approval of the
Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"), the New Jersey State
Department of Banking (the "New Jersey Banking
Department") and the Federal Deposit Insurance
Corporation (the "FDIC"). THERE CAN BE NO ASSURANCE
THAT SUCH REGULATORY APPROVALS WILL BE OBTAINED, OR
AS TO THE DATE OF ANY SUCH APPROVALS. THERE CAN
ALSO BE NO ASSURANCE THAT ANY SUCH APPROVALS WILL
NOT CONTAIN A CONDITION OR REQUIREMENT WHICH CAUSES
SUCH APPROVALS TO FAIL TO SATISFY THE CONDITIONS
SET FORTH IN THE MERGER AGREEMENT AND DESCRIBED
UNDER "THE MERGER -- CONDITIONS TO THE CONSUMMATION
OF THE MERGER" AND "-- REGULATORY APPROVALS."
TERMINATION The Merger Agreement may be terminated (i) by
Garden State, if the Average Closing Price per
share of Summit Common Stock (the "Average Closing
Price" as defined below) is less than $16.00, or
(ii) by Garden State, if (A) the Average Closing
Price is less than $17.00 but greater than or equal
to $16.00 and (B) Summit has not delivered a
written notice to Garden State unilaterally
agreeing to increase the Exchange Ratio such that
the value (measured by the Average Closing Price)
of the number of shares of Summit Common Stock to
be exchanged for one share of Garden State Common
Stock in the Merger, based on the new Exchange
Ratio, is at least as high as the value would have
been if the Exchange Ratio were unchanged and the
Average Closing Price were $17.00. The Average
Closing Price (the "Average Closing Price") is
defined in the Merger Agreement as the average
closing sale price per share of Summit Common Stock
as reported on the NASDAQ/NMS (as reported in The
Wall Street Journal) for the first 20 of the 25
consecutive NASDAQ/NMS trading days immediately
preceding the Closing. In addition, the Merger
Agreement may be terminated at any time prior to
the Effective Time, whether before or after
approval by the shareholders of Garden State (i) by
the mutual consent of Summit and Garden State or
(ii) by either of them individually under certain
specified circumstances, including generally (a)
if the
8
<PAGE> 14
Merger has not become effective by June 30, 1996,
(b) if the shareholders of Garden State fail to
approve the Merger Agreement at the Meeting,
unless, in the case of both (a) and (b) above, the
failure to consummate the Merger or the failure of
the shareholders of Garden State to approve the
Merger Agreement by such time is due to the failure
of the party seeking to terminate the Merger
Agreement to perform or observe the covenants and
agreements of such party set forth in the Merger
Agreement, (c) if any required regulatory or
governmental approval is denied or withdrawn, or by
Summit if any required regulatory of governmental
approval is granted with conditions which
materially impair the value to Summit of Garden
State and GS Bank, taken as a whole, (d) if there
is a failure of any condition to the obligation of
such party to close the Merger, unless such failure
is caused by the breach of such party, (iii) by
Summit, if there shall have occurred a material
adverse change in the business, operations, assets,
or financial condition of Garden State or GS Bank
from that disclosed by Garden State on the date of
the Merger Agreement, (iv) by Garden State, if
there shall have occurred a material adverse change
in the business, operations, assets or financial
condition of Summit or Summit Bank from that
disclosed by Summit on the date of the Merger
Agreement, or (v) by Summit or Garden State, if any
condition to Closing specified in the Merger
Agreement applicable to such party cannot
reasonably be met after giving the other party a
reasonable opportunity to cure any such condition.
See "THE MERGER -- Termination."
FEDERAL INCOME TAX
CONSIDERATIONS It is intended that the Merger will be treated as a
reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended
(the "Code"). Consummation of the Merger is
conditioned upon the receipt by Summit and Garden
State of an opinion of Bourne, Noll & Kenyon,
counsel to Summit, substantially to the effect that
for federal income tax purposes: (i) the Merger
will qualify as a tax-free reorganization under
Section 368(a) of the Code; and (ii) no gain or
loss will be recognized by holders of Garden State
Common Stock upon the receipt of Summit Common
Stock solely in exchange for all of their Garden
State Common Stock pursuant to the Merger, except
with respect to cash received in lieu of a
fractional share interest in Summit Common Stock.
In addition, the opinion of Bourne, Noll & Kenyon
must state that no gain or loss will be recognized
by Summit, Summit Bank, Garden State or GS Bank as
a result of the Merger or the Subsidiary Merger.
See "THE MERGER -- Federal Income Tax
Considerations."
ACCOUNTING TREATMENT Consummation of the Merger is conditioned upon the
Merger qualifying for pooling of interests
accounting treatment. Summit and Garden State
believe that the Merger qualifies for such
accounting treatment. However, if it is determined
that the Merger does not qualify for pooling of
interests accounting treatment, this Proxy
Statement-Prospectus will be amended, and the
shareholders of Garden State will be resolicited,
as required by applicable law, should Summit and
Garden State mutually agree to proceed with the
Merger. See "THE MERGER -- Accounting Treatment."
NASDAQ LISTING The Summit Common Stock is currently included for
quotation on the NASDAQ/NMS. The Garden State
Common Stock is currently in-
9
<PAGE> 15
cluded for quotation on the NASDAQ Small-Cap
Market. It is a condition to consummation of the
Merger that the Summit Common Stock to be issued to
the shareholders of Garden State pursuant to the
Merger Agreement will be included for quotation on
the NASDAQ/NMS or other national exchange, if the
Summit Common Stock is then listed on such
exchange.
NO DISSENTERS' RIGHTS Garden State shareholders are not entitled to
dissenters' rights in connection with, or as a
result of, the Merger. See "THE MERGER -- No
Dissenters' Rights."
EQUIVALENT DIVIDENDS The Merger Agreement provides that Garden State may
declare and pay dividends to its shareholders in
amounts equivalent to that which they would have
received had the Merger closed on June 13, 1995. On
August 9, 1995, Garden State declared a dividend of
$.227 per share of Garden State Common Stock,
payable on September 15, 1995 to shareholders of
record on August 23, 1995, and on October 19, 1995
Garden State declared a dividend of $.227 per share
of Garden State Common Stock, payable on December
15, 1995 to shareholders of record on November 22,
1995, all in accordance with this provision.
STOCK OPTION AGREEMENT As a condition to Summit's entering into the Merger
Agreement, Summit required that Garden State also
enter into a Stock Option Agreement, dated as of
June 13, 1995 (the "Stock Option Agreement"),
pursuant to which Garden State granted Summit an
option (the "Option"), exercisable upon the
occurrence of certain events (none of which has
occurred, to the best of Summit's and Garden
State's knowledge, as of the date hereof), to
purchase up to 752,770 shares of Garden State
Common Stock (representing approximately 24.7% of
the outstanding shares of Garden State Common Stock
on June 13, 1995), at an exercise price of $15.75
per share, subject to adjustment in certain
circumstances and subject to termination within
certain periods.
The Stock Option Agreement is intended to increase
the likelihood that the Merger will be consummated
in accordance with the terms of the Merger
Agreement. Certain aspects of the Stock Option
Agreement may have the effect of discouraging
persons who might now or prior to the consummation
of the Merger be interested in acquiring all of or
a significant interest in Garden State from
considering or proposing such an acquisition, even
if such persons were prepared to pay a higher price
per share for the Garden State Common Stock than
the value per share contemplated by the Merger
Agreement. The acquisition of Garden State or an
interest in Garden State, or an agreement to do
either, could cause the Option to become
exercisable. The existence of the Option could
significantly increase the cost to a potential
acquiror of acquiring Garden State compared to its
costs had the Stock Option Agreement not been
entered into. Such increased costs might discourage
a potential acquiror from considering or proposing
an acquisition or might result in a potential
acquiror proposing to pay a lower per share price
to acquire Garden State than it might otherwise
have proposed to pay.
A copy of the Stock Option Agreement is attached as
Appendix B to this Proxy Statement-Prospectus. A
description of the Stock Option Agreement,
including a description of the events which will
result in the Option becoming exercisable, is set
forth under "CERTAIN RE-
10
<PAGE> 16
LATED TRANSACTIONS -- Stock Option
Agreement -- Terms of Stock Option Agreement."
CERTAIN DIFFERENCES IN
SHAREHOLDERS' RIGHTS At the Effective Time, shareholders of Garden State
automatically will become shareholders of Summit
and their rights as shareholders of Summit will be
determined by the NJBCA and by Summit's Restated
Certificate of Incorporation and Bylaws. The rights
of Garden State shareholders are currently governed
by the NJBCA and by Garden State's Certificate of
Incorporation and Bylaws. The rights of
shareholders of Summit differ from rights of the
shareholders of Garden State with respect to
certain matters, including provisions in Summit's
Restated Certificate of Incorporation requiring a
two-thirds majority shareholder vote (excluding
shares owned by 5% shareholders and their
affiliates) to approve certain mergers,
consolidations or similar transactions, differences
with respect to the indemnification of directors,
officers and employees, and rights arising under
Summit's Shareholder Rights Plan. For a summary of
these differences, see "COMPARISON OF RIGHTS OF
SHAREHOLDERS."
11
<PAGE> 17
RECENT DEVELOPMENTS
SUMMIT-UJB MERGER AGREEMENT
On September 10, 1995 Summit and UJB entered into the Summit-UJB Merger
Agreement providing for the Summit-UJB Merger under the name "Summit Bancorp."
Upon consummation of the Summit-UJB Merger, each share of Summit Common Stock
would be converted into and exchangeable for 0.90 shares of the common stock,
par value $1.20, of UJB ("UJB Common") and cash in lieu of fractional shares,
and each share of Summit's $25 Stated Value Adjustable Rate Cumulative Preferred
Stock ("Summit Adjustable Preferred") would be converted into one share of an
adjustable rate cumulative preferred stock of UJB having the same relative
rights, preferences and limitations as the Summit Adjustable Preferred.
Summit's execution of the Summit-UJB Merger Agreement has necessitated the
dissemination to the Garden State shareholders of the information contained
herein for their consideration in connection with their vote regarding the
Merger Agreement. Assuming (i) the Garden State shareholders approve the Merger
Agreement at the Meeting, (ii) the Merger is consummated and (iii) the Merger is
consummated prior to the consummation of the Summit-UJB Merger, each outstanding
share of Garden State Common Stock, with certain exceptions, will be converted
into and exchangeable for 1.08 shares of Summit Common Stock.
In addition, assuming the Summit-UJB Merger is consummated after
consummation of the Merger, each outstanding share of Summit Common Stock
(including each share of Summit Common Stock that will have been issued to
Garden State stockholders pursuant to the Merger), will be converted into 0.90
share of UJB Common ("the Summit-UJB Exchange Ratio"), pursuant to the terms of
the Summit-UJB Merger Agreement. If both the Merger and the Summit-UJB Merger
are consummated, each share of Garden State Common Stock ultimately would be
converted into 0.972 share of UJB Common (the product of the Summit-UJB Exchange
Ratio and the Exchange Ratio) except that cash will be paid in lieu of
fractional shares of Summit Common Stock, in the case of Garden State, and UJB
Common, in the case of Summit.
Summit and UJB have set January 12, 1996 as the date for their respective
Special Meetings at which the holders of their Common Stock are to vote on the
Summit-UJB Merger Agreement. In addition, Summit has set December 5, 1995, and
UJB has set December 5, 1995, as their respective record dates for shareholders
entitled to vote at such meetings. AS A RESULT, THE MERGER WILL NOT BE
CONSUMMATED IN TIME FOR GARDEN STATE SHAREHOLDERS TO BECOME SUMMIT SHAREHOLDERS
AND HAVE AN OPPORTUNITY TO VOTE AS SUMMIT SHAREHOLDERS ON THE SUMMIT-UJB MERGER.
Garden State shareholders should understand that at the Meeting they are
voting solely on the Merger, and that there is no assurance that the Summit-UJB
Merger will be consummated. If Garden State shareholders vote to approve the
Merger, such shareholders must be willing to accept their ownership interest in
Summit Common Stock without regard to whether the Summit-UJB Merger is
consummated. See "PRO FORMA FINANCIAL INFORMATION".
Subject to the conditions described below under the captions "CERTAIN
INFORMATION REGARDING THE SUMMIT-UJB MERGER -- Conditions to the Summit-UJB
Merger" and "THE MERGER -- Conditions to Consummation of the Merger", the Merger
is currently expected to close early in the first quarter of 1996 and the
Summit-UJB Merger is currently expected to close later in the first quarter of
1996.
SUMMIT STOCK REPURCHASE PLAN
On May 9, 1995 Summit announced that the Summit Board authorized the
repurchase of up to 7% of the total of the Summit Common Stock issued and
outstanding, or approximately 2.3 million shares. Summit announced that it
expected to repurchase the common shares from time to time in the open market or
through privately negotiated transactions subject to market conditions. As of
September 10, 1995, the date of the Summit-UJB Merger Agreement, Summit had
repurchased 84,485 shares of Summit Common Stock pursuant to such repurchase
program. Summit agreed in the Summit-UJB Merger Agreement not to engage in any
further repurchases of Summit Common Stock during the term of the Summit-UJB
Merger Agreement.
12
<PAGE> 18
CERTAIN INFORMATION REGARDING THE SUMMIT-UJB MERGER
INTRODUCTION
The following summary of the pending Summit-UJB Merger is included to
provide certain information regarding that transaction to Garden State
shareholders. INFORMATION PROVIDED WITH RESPECT TO UJB AND THE SUMMIT-UJB MERGER
WILL BE APPLICABLE TO GARDEN STATE SHAREHOLDERS ONLY IF BOTH THE MERGER AND THE
SUMMIT-UJB MERGER ARE CONSUMMATED. See "-- Effect of Summit-UJB Merger on Garden
State and Garden State Shareholders." This summary is necessarily incomplete and
qualified in its entirety by reference to the Summit-UJB Merger Agreement, which
is filed as an exhibit to Summit's Current Report on Form 8-K filed September
27, 1995.
GENERAL
The Summit-UJB Merger Agreement. On September 10, 1995, Summit and UJB
entered into the Summit-UJB Merger Agreement which provides for the Summit-UJB
Merger. Upon consummation of the Summit-UJB Merger: (i) Summit will be merged
with and into UJB, with UJB as the surviving corporation, under the name "Summit
Bancorp."; (ii) outstanding shares of Summit Common Stock, other than shares of
Summit Common Stock beneficially owned by UJB or a subsidiary of UJB, if any,
and shares of Summit Common Stock held in the treasury of Summit, if any, will
be converted into and represent the right to receive shares of UJB Common at the
exchange ratio of 0.90 shares of UJB Common for each share of Summit Common
Stock with cash being paid in lieu of issuance of fractional shares of UJB
Common; (iii) each outstanding share of Summit Adjustable Preferred, other than
shares of Summit Adjustable Preferred beneficially owned by UJB or a subsidiary
of UJB, if any, and shares held in the treasury of Summit, if any, will be
converted into and represent the right to receive one share of UJB Series C
Preferred; and (iv) outstanding options to purchase Summit Common Stock will be
converted into options to purchase UJB Common on the terms and conditions set
forth in the Summit-UJB Merger Agreement.
Conditions to the Summit-UJB Merger; Termination. The obligations of
Summit and UJB to consummate the Summit-UJB Merger are subject to the
satisfaction of certain conditions including, among other things: (1) approval
of the Summit-UJB Merger Agreement by the requisite vote of the holders of UJB
Common and Summit Common Stock; (2) receipt of all required regulatory approvals
by UJB and Summit without such approvals containing restrictions or limitations,
which, in the reasonable opinion of UJB or Summit, would materially adversely
affect the financial condition of UJB following the consummation of the
Summit-UJB Merger; (3) Summit and UJB's receipt of opinions of counsel as to
certain federal income tax consequences of the Summit-UJB Merger; (4) receipt of
a letter from KPMG Peat Marwick LLP to the effect that the Summit-UJB Merger
will qualify for pooling-of-interests accounting treatment; (5) the UJB Common
and the UJB Series C Preferred to be issued in the Summit-UJB Merger having been
approved for listing on the New York Stock Exchange (the "NYSE"), subject to
official notice of issuance; (6) neither Summit nor UJB nor their bank
subsidiaries is party to any agreement or memorandum of understanding or is
subject to any order, directive or, supervisory letter from, any governmental or
regulatory authority which restricts materially the conduct of its respective
business or has a material adverse affect upon the Summit-UJB Merger or upon the
financial condition of Summit or UJB or their banking subsidiaries, and neither
party has been advised that any such authority is contemplating issuing or
requesting, or considering the appropriateness of issuing or requesting, any of
the foregoing; (7) UJB and Robert G. Cox, President and Chief Executive Officer
of Summit, executing Mr. Cox's employment agreement contemplated by the Summit-
UJB Merger Agreement; and (8) other customary conditions described in the
Summit-UJB Merger Agreement. Any of such conditions may be waived by the party
for whose benefit the condition was included.
Either Summit or UJB may terminate the Summit-UJB Merger Agreement if (1)
the other party's shareholders fail to approve the Summit-UJB Merger Agreement
by the requisite vote, (2) the other party materially breaches a warranty,
representation or covenant and such breach is not cured or capable of being
cured within 30 days of the giving of written notice thereof, (3) on the closing
date, all the conditions precedent to such party's obligation to close are not
met, or (4) the Summit-UJB Merger has not been closed by August 31, 1996 unless
the failure of such occurrence is due solely to the failure of the party seeking
to terminate the Summit-UJB Merger Agreement to perform or observe its
agreements set forth in the Summit-
13
<PAGE> 19
UJB Merger Agreement required to be performed or observed by such party on or
before the closing date. In addition, Summit and UJB may terminate the
Summit-UJB Merger Agreement at any time by mutual agreement.
UJB. UJB Financial Corp., a New Jersey corporation and registered bank
holding company with principal executive offices at 301 Carnegie Center,
Princeton, New Jersey 08543-2066, telephone number (609) 987-3200, through its
wholly owned subsidiary banks, United Jersey Bank ("UJBank") and First Valley
Bank, operated, as of September 30, 1995, 290 banking offices located in New
Jersey and eastern Pennsylvania. The subsidiary banks of UJB are engaged in a
general banking business. They offer demand and interest bearing deposit
accounts, make business, real estate, personal and installment loans, and
provide lease financing and trust and fiduciary services. In addition, UJB owns
eight active nonbank subsidiaries that are engaged primarily in discount
brokerage, venture capital investment, commerical finance lending, lease
financing and reinsuring credit life and disability insurance policies related
to consumer loans made by the bank subsidiaries.
EFFECT OF SUMMIT-UJB MERGER ON GARDEN STATE AND GARDEN STATE SHAREHOLDERS
If both the Merger and the Summit-UJB Merger are consummated, each share of
Garden State Common Stock ultimately would be converted into 0.972 shares of UJB
Common (the product of Summit-UJB Exchange Ratio and the Exchange Ratio), except
that cash will be paid in lieu of fractional shares of Summit Common Stock, in
the case of Garden State, and UJB Common, in the case of Summit.
Currently it is expected that the Merger, if approved by Garden State's
stockholders, will close early in the first quarter of 1996, although there can
be no assurance that all conditions to the Merger will be met or as to the
timing of such conditions being met and, accordingly, there can be no assurance
as to the timing or occurrence of the Merger. See "THE MERGER -- Conditions to
the Merger." The Summit-UJB Merger is subject to the conditions described above
under "-- Conditions to the Summit-UJB Merger." The Summit-UJB Merger currently
is expected to close later in the first quarter of 1996, but there can be no
assurance that all conditions to the Summit-UJB Merger will be met, or as to the
timing of such conditions being met and, accordingly, there can be no assurance
as to the timing or occurrence of the Summit-UJB Merger.
BOARD OF DIRECTORS AND OFFICERS OF UJB AFTER THE SUMMIT-UJB MERGER
The Summit-UJB Merger Agreement provides that the Board of Directors of UJB
as the surviving corporation will consist of the thirteen members of the Board
of Directors of UJB at the Effective Time of the Summit-UJB Merger and six
additional members selected by the Summit Board from among those persons serving
as directors of Summit both at the time the Summit-UJB Merger Agreement is
executed and at the Effective Time of the Summit-UJB Merger. The Summit-UJB
Merger Agreement provides for the six additional members selected from the
Summit Board to be allocated evenly among the three classes of directors of
UJB's classified Board of Directors, and for the six additional members, subject
to director qualification requirements, to be nominated to serve at least one
full three-year term following any portion of a term they may serve by virtue of
their becoming a UJB director other than at an annual meeting of UJB
shareholders (except with respect to Thomas D. Sayles, Jr., Chairman of Summit,
who, UJB and Summit have agreed, if selected, would serve a term ending at the
1997 annual meeting of shareholders of UJB as the surviving corporation). UJB
has agreed that, prior to the effective time of the Summit-UJB Merger, it will
not increase above thirteen the number or directorships on the UJB Board, but
UJB is permitted to fill any vacancies occurring prior to the Effective Time of
the Summit-UJB Merger. The Summit-UJB Merger Agreement further provides that
Robert G. Cox, Director and President of Summit, will be one of the six nominees
to the Board of UJB as the surviving corporation from the Summit Board.
The Summit-UJB Merger Agreement also provides that the officers of UJB as
the surviving corporation at the Effective Time of the Summit-UJB Merger shall
consist of the persons serving as officers of UJB at the Effective Time of the
Summit-UJB Merger except for the office of President, which shall be filled by
Robert G. Cox, plus such other persons serving as officers of Summit as UJB and
Summit shall mutually designate.
14
<PAGE> 20
SUMMIT AND UJB STOCK OPTION AGREEMENTS
As an inducement and condition to UJB's willingness to enter into the
Summit-UJB Merger Agreement, Summit (as issuer) entered into a stock option
agreement with UJB (as grantee) (the "Summit Stock Option Agreement") and as an
inducement and condition to Summit's willingness to enter into the Summit-UJB
Merger Agreement, UJB (as issuer) entered into a stock option agreement with
Summit (as grantee) (the "UJB Stock Option Agreement"). Pursuant to the Summit
and UJB Stock Option Agreements, Summit granted the Summit Option to UJB and UJB
granted the UJB Option to Summit. The UJB Option is an option to purchase
11,450,000 shares of UJB Common at $36.625 per share, and the Summit Option is
an option to purchase 6,730,000 shares of Summit Common Stock at $26.75 per
share both exercisable as described below. The purchase of any shares of Summit
Common Stock or UJB Common pursuant to the Summit and UJB Options is subject to
compliance with applicable law.
For purposes of the following summary of the material provisions of the
Summit and UJB Stock Option Agreements, the term (i) "Issuer" means UJB with
respect to the UJB Stock Option Agreement and Summit with respect to the Summit
Stock Option Agreement, and (ii) "Grantee" means Summit with respect to the UJB
Stock Option Agreement and UJB with respect to the Summit Stock Option
Agreement. The material terms of the UJB Option and the Summit Option (other
than the number of shares and exercise price of the Summit and UJB Options) are
identical.
Unless Grantee is in breach of any covenant or obligation contained in the
Summit-UJB Merger Agreement and, if the Summit-UJB Merger Agreement has not
terminated prior thereto, such breach would entitle Issuer to terminate the
Summit-UJB Merger Agreement, Grantee may exercise the related option, in whole
or in part, at any time and from time to time following the occurrence of a
Purchase Event (as defined below); provided that the related option will
terminate upon the earliest to occur of certain events, including:
(1) the time immediately prior to the Effective Time of the Summit-UJB
Merger;
(2) termination of the Summit-UJB Merger Agreement prior to the
occurrence of an Extension Event (as defined below) (other than a
termination by Grantee resulting from a volitional breach thereof by
Issuer) or
(3) 15 months after the termination of the Summit-UJB Merger Agreement
following the occurrence of an Extension Event (as defined below), or the
termination of the Summit-UJB Merger Agreement by Grantee (unless the
breach by Issuer giving rise to such right of termination is non-
volitional).
The term "Extension Event" shall mean the occurrence of certain events
without the Grantee's prior written consent, including:
(1) Issuer, its Board of Directors or any of its subsidiaries taking
certain actions (each an "Acquisition Transaction"), including recommending
or entering into an agreement with any third party to effect (a) a merger,
consolidation or similar transaction involving Issuer or any of its banking
subsidiaries, (b) the purchase, lease, or other acquisition of 10 percent
or more of the aggregate value of the assets or deposits of Issuer or any
of its banking subsidiaries, (c) the purchase or other acquisition of 10
percent or more of the voting power of Issuer or any of its banking
subsidiaries or (d) any substantially similar transaction, in each case
except as otherwise permitted by the Summit and UJB Stock Option
Agreements;
(2) any third party acquiring beneficial ownership or the right to
acquire beneficial ownership of 10 percent or more of the aggregate voting
power of Issuer or any of its banking subsidiaries;
(3) any third party making a bona fide proposal to Issuer or its
shareholders, by public announcement or written communication that is or
becomes publicly disclosed, to engage in an Acquisition Transaction
(including the commencement of a tender offer or exchange offer to purchase
10 percent or more of the aggregate voting power of Issuer or any of its
banking subsidiaries);
(4) after a proposal by a third party to Issuer or its shareholders to
engage in an Acquisition Transaction, Issuer breaches any representation or
covenant in the Summit-UJB Merger Agreement which would entitle Grantee to
terminate the Summit-UJB Merger Agreement;
15
<PAGE> 21
(5) any third party filing an application with any federal or state
bank regulatory authority for approval to engage in an Acquisition
Transaction;
(6) failure of the shareholders of Issuer to approve the Summit-UJB
Merger Agreement or Issuer's Board of Directors shall have withdrawn or
modified in a manner adverse to the consummation of the Summit-UJB Merger,
the recommendation of the Issuer's Board with respect to the Summit-UJB
Merger Agreement, in each case after an Extension Event; or
(7) any Purchase Event (as defined below).
The term "Purchase Event" shall mean either of the following events or
transaction:
(1) any third party acquiring beneficial ownership of 25 percent or
more of the aggregate voting power of Issuer or any of its banking
subsidiaries, except as otherwise permitted by the Summit and UJB Stock
Option Agreements; or
(2) the occurrence of an Extension Event described in subparagraph (1)
above under the definition of Extension Event, except that the percentage
referred to in clauses (b) and (c) thereof shall be 25 percent.
Upon the occurrence of certain events set forth in the Summit and UJB Stock
Option Agreements, at the election of Grantee, the related option (or shares
issued pursuant to the exercise thereof) must be repurchased by Issuer(the
"Repurchase") or converted into, or exchanged for, an option of another
corporation or Issuer (the "Substitute Option"). In addition, the Summit and UJB
Stock Option Agreements grant certain registration rights ("Registration
Rights") to Grantee with respect to the shares represented by the related
option. The terms of such Repurchase, Substitute Option and Registration Rights
are set forth in the Summit and UJB Stock Option Agreements.
The Summit and UJB Stock Option Agreements and the Summit and UJB Options
are intended to increase the likelihood that the Summit-UJB Merger will be
consummated according to the terms set forth in the Summit-UJB Merger Agreement,
and may be expected to discourage offers by third parties to acquire Summit or
UJB prior to the Summit-UJB Merger.
To the knowledge of Summit, no event giving rise to the right to exercise
of either of the Summit or UJB Options has occurred as of the date of this Proxy
Statement-Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE SUMMIT-UJB MERGER
Consummation of the Summit-UJB Merger is conditioned upon each of Summit
and UJB receiving from its respective tax counsel an opinion generally to the
effect that the Summit-UJB Merger will constitute a "reorganization" within the
meaning of Section 368(a)(1) of the Code. In addition, the tax opinion to be
received by Summit will cover certain additional matters relating generally to
Summit shareholders, as follows:
(1) except with respect to cash in lieu amounts received respecting fractional
share interests, holders of Summit Common Stock who receive solely UJB
Common in the Summit-UJB Merger will not recognize gain or loss for federal
income tax purposes;
(2) holders of Summit Adjustable Preferred who receive solely UJB Series C
Preferred in the Summit-UJB Merger will not recognize gain or loss for
federal income tax purposes;
(3) the basis of UJB Common received in the Summit-UJB Merger (including any
fractional share for which cash is received) will equal the basis of the
Summit Common Stock for which it is exchanged;
(4) the basis of UJB Series C Preferred received in the Summit-UJB Merger will
equal the basis of the Summit Adjustable Preferred for which it is
exchanged;
(5) the holding period of UJB Common received in the Summit-UJB Merger
(including any fractional share for which cash is received) will include the
holding period of the Summit Common Stock for which it is exchanged,
assuming that such Summit Common Stock is a capital asset in the hands of
the holder thereof at the Effective Time of the Summit-UJB Merger; and
(6) the holding period of UJB Series C Preferred received in the Summit-UJB
Merger will include the holding period of the Summit Adjustable Preferred
for which it is exchanged, assuming that such Summit Adjustable Preferred is
a capital asset in the hands of the holder thereof at the Effective Time of
the Summit-UJB Merger;
16
<PAGE> 22
RECENT DEVELOPMENTS REGARDING UJB
On July 11, 1995, UJB completed the acquisition of Bancorp New Jersey, Inc.
("Bancorp"), a New Jersey-headquartered bank holding company, which has been
accounted for on a purchase accounting basis (the "Bancorp Acquisition"). At
July 11, 1995, Bancorp had assets of $506 million and deposits of $451 million.
In the transaction, 60 percent of the outstanding Bancorp common stock was
exchanged for UJB Common at the exchange ratio of 1.5441 shares of UJB Common
for each share of Bancorp common stock, resulting in a total of 1,948,153 shares
of UJB Common being issued, and the remaining 40 percent of outstanding Bancorp
common stock was exchanged for cash at the rate of $43.10 per share, for an
aggregate cash payment of $36,273,463.
As of July 11, 1995, Bancorp, through its wholly owned subsidiary bank, New
Jersey Savings Bank ("NJSB"), operated nine banking offices located in Basking
Ridge, Bedminster, Bridgewater, Flemington, Hillsborough, Princeton, Somerville,
Somerset and Whitehouse, New Jersey. NJSB's primary business consisted of
attracting deposits from the general public and originating loans that are
secured by residential properties, as well as originating commercial and
consumer loans.
On August 1, 1995, UJB entered into an Agreement and Plan of Merger with
The Flemington National Bank ("Flemington"), a national banking association,
providing for the merger of Flemington with and into UJBank (the "Flemington
Acquisition") and for the issuance of UJB Common to the shareholders of
Flemington at an exchange ratio ("exchange ratio" for purposes of this
discussion) which will be determined in accordance with a formula set forth in
the Agreement and Plan of Merger and which will depend primarily on the average
closing price ("average price" for purpose of this discussion) of UJB Common
over a ten trading day period ending on a date ("determination date" for
purposes of this discussion) on or shortly before the closing of the
transaction. As of September 30, 1995, Flemington operated eight banking offices
located in Clinton Township, Delaware Township, East Amwell, Township,
Flemington (2), Lambertville, Raritan Township and Three Bridges, New Jersey. At
August 1, 1995, Flemington had assets of $288 million and 958,476 shares of
common stock outstanding. The transaction is expected to be accounted for as a
pooling-of-interests. The exchange ratio will be based upon the following
criteria, subject to certain anti-dilution adjustments:
<TABLE>
<CAPTION>
"AVERAGE PRICE" OF UJB COMMON ON
THE "DETERMINATION DATE" EXCHANGE RATIO
- --------------------------------------------- ---------------------------------------------
<S> <C>
Greater than $37.00.......................... 1.3514
Equal to or greater than $29.00 and equal to
or less than $37.00........................ $50.00 / average price
Less than $29.00 and greater than or equal to
$26.10..................................... 1.7241
Less than $26.10............................. Flemington may terminate the merger
agreement unless UJB agrees to an exchange
ratio equal to $45.00 / average price.
</TABLE>
The Flemington Acquisition and the Summit-UJB Merger are together referred
to elsewhere in this Proxy Statement-Prospectus as the "Pooling Acquisitions."
The Pooling Acquisitions are reflected in the pro forma financial
information, unless otherwise indicated. See "SELECTED FINANCIAL DATA" and "PRO
FORMA FINANCIAL INFORMATION."
17
<PAGE> 23
COMPARATIVE STOCK PRICE AND DIVIDEND INFORMATION
Summit Common Stock is included for quotation in the NASDAQ/NMS (Symbol:
SUBN). Garden State Common Stock is currently included for quotation on the
NASDAQ Small-Cap Market (Symbol: GRDN). UJB Common is listed and traded on the
New York Stock Exchange ("NYSE") (Symbol: UJB). Prior to March 22, 1994, the
Garden State Common Stock traded on the over-the-counter market. The following
table sets forth (a) for Summit Common Stock, the high and low sale prices of
shares as reported in the NASDAQ/NMS; (b) for Garden State Common Stock, for the
period prior to March 22, 1994, the high and low bid prices for each quarter as
reported by The Asbury Park Press, and the high and low reported sale prices on
the NASDAQ Small-Cap Market for the period beginning on March 22, 1994; (c) for
UJB Common, the high and low sale prices of UJB Common on the NYSE as reported
in published financial sources; and (d) for each corporation, the quarterly cash
dividends per share declared, for the periods indicated. The pre-NASDAQ
quotations for Garden State reflect interdealer prices, without retail markup,
markdown or commission and do not necessarily reflect actual transactions.
<TABLE>
<CAPTION>
SUMMIT GARDEN STATE UJB
COMMON STOCK COMMON STOCK COMMON STOCK
----------------------------- ----------------------------- -----------------------------
YEAR CALENDAR QUARTER HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
- ---- --------------------- ------- ------- --------- ------- ------- --------- ------- ------- ---------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992
First Quarter........ $15.625 $11.125 $ 0.182 $ 6.500 $ 6.000 $ -- $18.750 $14.000 $ 0.150
Second Quarter....... 16.125 13.125 0.182 6.000 6.000 -- 20.375 14.625 0.150
Third Quarter........ 15.875 13.875 0.182 6.500 6.000 -- 20.750 16.500 0.150
Fourth Quarter....... 19.250 14.125 0.182 6.500 4.500 -- 24.500 16.125 0.150
1993
First Quarter........ 21.375 18.625 0.182 5.000 4.500 -- 29.375 22.500 0.160
Second Quarter....... 20.250 16.875 0.182 5.000 4.500 -- 29.250 21.625 0.160
Third Quarter........ 22.500 18.625 0.182 5.750 4.500 -- 33.250 24.250 0.160
Fourth Quarter....... 22.250 18.000 0.191 5.125 4.750 -- 30.250 23.375 0.210
1994
First Quarter........ 20.000 17.750 0.191 6.500 5.000 -- 28.625 23.500 0.210
Second Quarter....... 20.875 17.250 0.191 5.500 5.500 -- 29.250 25.500 0.210
Third Quarter........ 21.750 18.875 0.191 10.750 5.500 -- 29.125 26.125 0.260
Fourth Quarter....... 19.875 18.000 0.210 11.500 10.750 -- 27.125 22.500 0.260
1995
First Quarter........ 20.000 18.750 0.210 17.000 11.000 -- 28.750 24.125 0.290
Second Quarter....... 21.625 18.750 0.210 22.250 14.750 -- 30.750 27.125 0.290
Third Quarter........ 29.125 21.250 0.210 30.500 21.750 0.227 37.250 30.000 0.290
Fourth Quarter
(through December 6,
1995)................ 30.000 27.500 -- 31.500 29.500 -- 34.250 31.500 --
</TABLE>
The following table sets forth the last reported sale price per share of
Summit Common Stock, Garden State Common Stock and UJB Common and the equivalent
per share price for Garden State Common Stock giving effect to (x) the Merger
and (y) the Merger and the Summit-UJB Merger on (i) June 13, 1995, the last
business day preceding public announcement of the signing of the Merger
Agreement; and (ii) December 6, 1995, the last practicable date prior to the
mailing of this Proxy Statement-Prospectus:
<TABLE>
<CAPTION>
UJB AND
SUMMIT
EQUIVALENT PRICE EQUIVALENT PRICE
SUMMIT GARDEN STATE PER GARDEN PER GARDEN
COMMON STOCK COMMON STOCK STATE SHARE* UJB STATE SHARE**
------------ ------------ -------------------- ------- --------------------
<S> <C> <C> <C> <C> <C>
June 13, 1995....... $ 20.750 $ 16.750 $ 22.410 $29.625 $ 28.796
December 6, 1995.... 29.375 31.500 31.725 33.500 32.562
</TABLE>
- ---------------
* Determined by multiplying the last reported sale price of a share of Summit
Common Stock on each specified date by the Exchange Ratio.
** Determined by multiplying the last reported sale price of a share of UJB
Common on each specified date by the product of the Summit-UJB Exchange Ratio
and the Exchange Ratio.
18
<PAGE> 24
THE MARKET PRICE OF SUMMIT COMMON STOCK CAN BE EXPECTED TO FLUCTUATE BETWEEN THE
DATE OF THIS PROXY STATEMENT-PROSPECTUS AND THE EFFECTIVE TIME. THE MARKET PRICE
OF UJB COMMON CAN BE EXPECTED TO FLUCTUATE BETWEEN THE DATE OF THIS PROXY
STATEMENT-PROSPECTUS AND THE EFFECTIVE DATE OF THE SUMMIT-UJB MERGER.
FLUCTUATIONS IN MARKET PRICE COULD RESULT IN AN INCREASE OR DECREASE IN THE
MARKET PRICE AS OF THE EFFECTIVE DATE OF THE SHARES OF SUMMIT COMMON STOCK TO BE
RECEIVED BY GARDEN STATE SHAREHOLDERS IN THE MERGER AND THE MARKET PRICE AS OF
THE EFFECTIVE DATE OF THE SUMMIT-UJB MERGER OF THE SHARES OF UJB COMMON TO BE
RECEIVED BY SUMMIT SHAREHOLDERS IN THE SUMMIT-UJB MERGER. NO ASSURANCE CAN BE
GIVEN CONCERNING THE MARKET PRICE OF SUMMIT COMMON STOCK OR UJB COMMON AT ANY
TIME. IN ADDITION, PAST DIVIDENDS PAID IN RESPECT OF SUMMIT COMMON STOCK OR UJB
COMMON ARE NOT NECESSARILY INDICATIVE OF FUTURE DIVIDENDS WHICH MAY BE DECLARED
AND PAID. NO ASSURANCE CAN BE GIVEN CONCERNING DIVIDENDS TO BE DECLARED AND PAID
IN RESPECT OF SUMMIT COMMON STOCK OR UJB COMMON AT ANY TIME.
19
<PAGE> 25
SELECTED FINANCIAL DATA
The tables below set forth selected historical financial information for
Summit, Garden State and UJB for each of the five years in the period ended
December 31, 1994 and the nine month periods ended September 30, 1995 and 1994.
Such information has been derived from and should be read in conjunction with
the consolidated financial statements of Summit, Garden State and UJB, including
the respective notes thereto and management's discussions and analysis of
financial condition and results of operations contained in the respective Form
10-K's and Form 10-Q's of Summit, Garden State and UJB, which are incorporated
by reference in this Proxy Statement-Prospectus. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE." The selected historical financial information for
Summit, Garden State and UJB for the nine-month periods ended September 30, 1995
and 1994 reflect, in the opinion of the managements of Summit, Garden State and
UJB, respectively, all adjustments (comprising only normal recurring accruals)
necessary for a fair presentation of the consolidated operating results and
financial position of Summit, Garden State and UJB for such interim periods.
Results for the interim periods are not necessarily indicative of results for
the full year or any other period.
The tables setting forth selected unaudited pro forma combined financial
information give effect to the Merger and the Merger and the Pooling
Acquisitions under the pooling-of-interests method of accounting. For a
description of the pooling-of-interests accounting method with respect to the
Merger, see "THE MERGER -- Accounting Treatment." This information is derived
from the unaudited pro forma condensed combined financial statements appearing
elsewhere herein and should be read in conjunction with those statements. See
"PRO FORMA FINANCIAL INFORMATION." The unaudited pro forma financial information
is prepared based on (i) the Exchange Ratio in the Merger of 1.08 shares of
Summit Common Stock for each share of Garden State Common Stock, (ii) the
Summit-UJB Exchange Ratio of 0.90 shares of UJB Common for each share of Summit
Common Stock, (iii) an exchange ratio for the Flemington Acquisition of 1.7241
shares of UJB Common for each share of Flemington common stock (the highest and
most dilutive of the fixed exchange ratios, see "CERTAIN INFORMATION REGARDING
THE SUMMIT-UJB MERGER -- Recent Developments Regarding UJB"). The pro forma
condensed combined financial statements do not purport to be indicative of the
combined financial position or results of operations for future periods or
indicative of the results that actually would have been realized had the
entities been a single entity during the periods reflected in the tables.
SELECTED HISTORICAL FINANCIAL INFORMATION OF SUMMIT
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income.......... $ 296,565 $ 250,643 $ 341,827 $ 329,030 $ 362,496 $ 427,769 $ 487,713
Interest expense......... 134,159 93,910 131,104 125,077 165,032 248,173 312,573
Net interest income...... 162,406 156,733 210,723 203,953 197,464 179,596 175,140
Provision for loan
losses................. 3,600 6,795 7,995 17,200 25,998 24,767 83,528
Investment securities
gains (losses)......... 1,610 180 344 702 710 (553) (2,818)
Net income (loss)(1)..... 53,352 7,857 24,400 50,724 33,487 22,244 (12,196)
Net income (loss)
per share.............. 1.56 0.21 0.70 1.54 1.07 0.78 (0.50)
Cash dividends declared
per share.............. 0.63 0.57 0.78 0.74 0.73 0.73 0.73
Average common shares
outstanding............ 33,658 32,997 33,090 32,102 30,220 27,015 26,842
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............. $5,619,300 $5,465,190 $5,467,465 $5,351,949 $5,091,270 $4,910,431 $5,004,114
Securities............... 1,690,028 1,673,008 1,632,770 1,624,440 1,508,134 1,161,160 1,111,922
Loans.................... 3,503,775 3,352,897 3,448,605 3,137,718 3,043,473 3,207,316 3,419,985
Total deposits........... 4,641,492 4,461,092 4,409,318 4,412,727 4,374,761 4,170,240 4,079,241
Long-term debt........... 270,402 255,742 338,763 251,800 140,986 194,319 311,341
Shareholders' equity..... 484,583 429,522 431,570 439,360 398,946 323,981 306,235
Book value per common
share.................. 13.92 12.31 12.31 12.98 11.91 11.05 10.66
</TABLE>
20
<PAGE> 26
SELECTED HISTORICAL FINANCIAL INFORMATION OF GARDEN STATE
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(2):
Interest income........ $ 18,509 $ 15,353 $ 21,085 $ 20,812 $ 23,561 $ 26,426 $ 27,381
Interest expense....... 7,222 5,334 7,333 7,942 10,955 15,229 16,168
Net interest income.... 11,287 10,019 13,752 12,870 12,606 11,197 11,213
Provision for loan
losses............... 87 467 975 1,117 5,501 1,400 5,510
Investment securities
gains................ -- 125 121 258 915 -- --
Net income (loss)...... 2,496 1,293 2,057 (537) (1,385) 679 (1,528)
Net income (loss) per
share................ 0.82 0.59 0.89 (0.31) (0.80) 0.40 (0.90)
Cash dividends declared
per share............ 0.23 -- -- -- -- -- --
Average common shares
outstanding.......... 3,054 2,205 2,308 1,724 1,724 1,710 1,700
BALANCE SHEET DATA(2):
Total assets........... $313,904 $300,987 $306,398 $301,366 $326,697 $305,997 $289,535
Securities............. 68,450 70,344 68,691 78,874 74,022 58,280 46,903
Loans.................. 210,538 195,395 210,274 184,980 209,216 213,442 200,568
Total deposits......... 283,856 278,550 270,175 283,094 307,160 284,859 268,865
Shareholders' equity... 28,626 21,399 25,687 17,176 17,469 18,853 18,080
Book value per common
share................ 9.19 8.99 8.48 9.96 10.13 10.94 10.57
</TABLE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF UJB
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income....... $ 817,999 $ 700,202 $ 960,973 $ 907,628 $ 979,008 $ 1,134,624 $ 1,217,082
Interest expense...... 333,725 244,898 344,869 331,720 429,725 634,432 723,064
Net interest income... 484,274 455,304 616,104 575,908 549,283 500,192 494,018
Provision for loan
losses.............. 48,750 55,500 84,000 95,685 139,555 167,650 251,888
Investment securities
gains (losses)...... 5,205 1,846 1,888 8,877 18,485 13,919 (596)
Net income (loss)..... 124,362 95,827 130,150 82,418 56,788 24,252 (11,416)
Net income (loss) per
share............... 2.20 1.73 2.35 1.50 1.09 0.46 (0.29)
Cash dividends
declared per
share............... 0.87 0.68 0.94 0.69 0.60 0.60 1.02
Average common shares
outstanding......... 55,946 54,604 54,697 53,917 50,398 48,279 47,230
BALANCE SHEET DATA:
Total assets.......... $15,533,070 $15,517,860 $15,429,472 $13,789,641 $14,114,550 $13,727,539 $13,156,273
Securities............ 4,027,611 4,475,756 4,327,716 3,877,473 3,713,506 3,538,905 3,077,065
Loans................. 10,226,745 9,599,558 9,656,574 8,743,708 8,928,580 8,937,873 8,860,622
Total deposits........ 12,871,632 12,167,335 12,567,791 11,751,499 12,087,328 11,620,247 10,912,739
Long-term debt........ 204,338 206,252 204,754 208,654 216,945 65,152 72,960
Shareholders'
equity.............. 1,263,997 1,084,991 1,104,260 1,019,252 959,492 850,873 845,551
Book value per common
share............... 21.43 19.21 19.53 18.23 17.38 16.92 17.09
</TABLE>
21
<PAGE> 27
SELECTED SUMMIT AND GARDEN STATE PRO FORMA COMBINED FINANCIAL INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income.............. $ 315,074 $ 265,996 $ 362,912 $ 349,842 $ 386,057 $ 454,195 $ 515,094
Interest expense............. 141,381 99,244 138,437 133,019 175,987 263,402 328,741
Net interest income.......... 173,693 166,752 224,475 216,823 210,070 190,793 186,353
Provision for loan losses.... 3,687 7,262 8,970 18,317 31,499 26,167 89,038
Investment securities gains
(losses)................... 1,610 305 465 960 1,625 (553) (2,818)
Net income (loss)............ 55,848 9,150 26,457 50,187 32,102 22,923 (13,724)
Net income (loss) per
share(3)................... 1.49 0.23 0.71 1.44 0.96 0.75 (0.52)
Cash dividends declared per
share(4)................... 0.63 0.57 0.78 0.74 0.73 0.73 0.73
Average common shares
outstanding................ 36,956 35,378 35,583 33,964 32,082 28,862 28,678
BALANCE SHEET DATA(5):
Total assets................. $5,936,203 $5,766,177 $5,773,863 $5,653,315 $5,417,967 $5,216,428 $5,293,649
Securities................... 1,758,478 1,743,352 1,701,461 1,703,314 1,582,156 1,219,440 1,158,825
Loans........................ 3,714,313 3,548,292 3,658,879 3,322,698 3,252,689 3,420,758 3,620,553
Total deposits............... 4,925,348 4,739,642 4,679,493 4,695,821 4,681,921 4,455,099 4,348,106
Long-term debt............... 270,402 255,742 338,763 251,800 140,986 194,319 311,341
Shareholders' equity......... 508,817 450,921 457,257 456,536 416,415 342,834 324,315
Book value per common
share...................... 13.32 12.03 11.91 12.77 11.77 10.99 10.61
</TABLE>
SELECTED ALL TRANSACTIONS PRO FORMA COMBINED FINANCIAL INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income....... $ 1,148,238 $ 979,636 $ 1,342,303 $ 1,274,846 $ 1,383,798 $ 1,609,195 $ 1,752,692
Interest expense...... 481,043 348,421 489,273 470,817 613,998 909,492 1,063,433
Net interest income... 667,195 631,215 853,030 804,029 769,800 699,703 689,259
Provision for loan
losses.............. 52,437 62,762 92,348 114,442 171,824 197,595 344,200
Investment securities
gains (losses)...... 6,815 2,201 2,025 11,349 20,318 13,713 (3,284)
Net income (loss)..... 181,793 106,587 158,787 133,514 90,121 45,682 (24,925)
Net income (loss) per
share(3)(6)......... 1.98 1.19 1.77 1.52 1.08 0.56 (0.38)
Cash dividends
declared
per share(4)........ 0.87 0.68 0.94 0.69 0.60 0.60 1.02
Average common shares
outstanding(6)...... 90,720 87,961 88,238 86,005 80,792 75,775 74,561
BALANCE SHEET
DATA(5)(7):
Total assets.......... $21,787,946 $21,562,122 $21,469,008 $19,701,150 $19,788,121 $19,188,578 $18,674,645
Securities(6)......... 5,864,021 6,313,320 6,108,010 5,676,222 5,397,584 4,836,393 4,293,129
Loans................. 14,131,444 13,316,969 13,487,735 12,212,782 12,311,917 12,497,197 12,619,884
Total deposits........ 18,054,705 17,151,093 17,488,564 16,688,145 17,001,373 16,302,678 15,466,449
Long-term debt........ 474,740 461,994 543,517 460,454 357,931 259,471 384,301
Shareholders'
equity(6)........... 1,732,188 1,550,366 1,576,421 1,490,399 1,390,101 1,206,635 1,184,559
Book value per common
share(6)............ 18.24 16.92 17.04 16.64 15.70 15.12 15.11
</TABLE>
22
<PAGE> 28
- ---------------
(1) Summit incurred charges of $49.0 million, $33.9 million after related tax
effects, in the third quarter of 1994, which consisted of both a loss on the
sale of certain assets of Crestmont Financial Corp. ("Crestmont") and the
accrual of one-time charges for certain restructuring costs and other
transaction-related expenses associated with the acquisitions of Crestmont
and Lancaster Financial Ltd.
(2) Certain reclassifications have been made to historical amounts to conform to
Summit's method of presentation.
(3) Pro forma combined net income per common share was computed based on pro
forma combined net income less preferred dividends divided by the weighted
average number of shares outstanding during the period.
(4) Pro forma amounts assume that Summit and UJB would have declared cash
dividends per common share equal to their respective historical cash
dividends per common share declared.
(5) Balance sheet data as of September 30, 1995 give effect for anticipated
expenses and nonrecurring charges relating to the Merger.
(6) Includes the elimination of shares of UJB Common and Flemington common stock
owned by Summit.
(7) Balance sheet data as of September 30, 1995 give effect for anticipated
expenses and nonrecurring charges relating to the Summit-UJB Merger and the
merger of Flemington into UJB.
23
<PAGE> 29
COMPARATIVE PER SHARE FINANCIAL INFORMATION
(UNAUDITED)
The following summary presents, for the periods indicated, selected
comparative per share financial data: (i) on a historical basis for each of
Summit, Garden State and UJB; (ii) on a pro forma combined basis for Summit,
giving effect to the Merger, assuming that the Merger had been effective at the
beginning of the periods presented; (iii) on a pro forma combined basis for UJB
giving effect to the Merger and the Pooling Acquisitions, assuming that the
Merger and the Pooling Acquisitions had been effective at the beginning of the
periods presented; and (iv) on a pro forma equivalent basis with respect to a
share of Garden State Common Stock by multiplying the pro forma combined Summit
and Garden State amount by the Exchange Ratio of 1.08 (giving effect to the
Merger) provided for in the Merger Agreement and multiplying the all
transactions pro forma combined amount by an equivalent exchange ratio of 0.972
(giving effect to both the Merger and the Summit-UJB Merger). The pro forma
consolidated statements of income do not give effect to anticipated expenses and
nonrecurring charges related to the Merger or the Summit-UJB Merger or the
estimated effect of revenue enhancements and expense savings associated with
either the consolidation of the operations of Summit and Garden State or the
consolidations arising from the Summit-UJB Merger. See "SELECTED FINANCIAL DATA"
and "PRO FORMA FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------- ---------------------------
NET INCOME PER SHARE(1) 1995 1994 1994 1993 1992
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Historical:
Summit............................................... $1.56 $0.21 $0.70 $ 1.54 $ 1.07
Garden State......................................... 0.82 0.59 0.89 (0.31) (0.80)
UJB.................................................. 2.20 1.73 2.35 1.50 1.09
Pro Forma Combined:
Summit and Garden State(2)........................... 1.49 0.23 0.71 1.44 0.96
All Transactions Pro Forma Combined(2)............... 1.98 1.19 1.77 1.52 1.08
Pro Forma Garden State Equivalent of:
Summit and Garden State(3)........................... 1.61 0.25 0.77 1.56 1.04
All Transactions Pro Forma Combined(4)............... 1.92 1.16 1.72 1.48 1.05
DIVIDENDS PER SHARE(1)
Historical:
Summit............................................... 0.63 0.57 0.78 0.74 0.73
Garden State......................................... 0.23 -- -- -- --
UJB.................................................. 0.87 0.68 0.94 0.69 0.60
Pro Forma Combined:
Summit and Garden State(5)........................... 0.63 0.57 0.78 0.74 0.73
All Transactions Pro Forma Combined(5)............... 0.87 0.68 0.94 0.69 0.60
Pro Forma Garden State Equivalent of:
Summit and Garden State(3)........................... 0.68 0.62 0.84 0.80 0.79
All Transactions Pro Forma Combined(4)............... 0.85 0.66 0.91 0.67 0.58
</TABLE>
<TABLE>
<CAPTION>
BOOK VALUE PER SHARE(1) SEPTEMBER 30, 1995 DECEMBER 31, 1994
------------------ -----------------
<S> <C> <C>
Historical:
Summit............................................................. $13.92 $ 12.31
Garden State....................................................... 9.19 8.48
UJB................................................................ 21.43 19.53
Pro Forma Combined:
Summit and Garden State(6)......................................... 13.32 11.91
All Transactions Pro Forma Combined(6)(7)(8)....................... 18.24 17.04
Pro Forma Garden State Equivalent of:
Summit and Garden State(4)(6)...................................... 14.39 12.86
All Transactions Pro Forma Combined(4)(6)(7)(8).................... 17.73 16.56
</TABLE>
- ---------------
(1) The financial information for Summit and all transactions pro forma combined
has been restated to reflect all stock dividends and all stock splits and
reflects the elimination of UJB Common and Flemington common stock owned by
Summit.
(2) Pro forma combined net income per common share was computed based on pro
forma combined net income less preferred dividends divided by the weighted
average number of shares outstanding during the periods presented.
(3) Pro forma Garden State equivalent per share data for Summit and Garden State
is computed by multiplying Summit's pro forma per share data (giving effect
to the Merger) by the Exchange Ratio.
(4) Pro forma Garden State equivalent per share data for all transactions pro
forma combined is computed by multiplying all transactions pro forma per
share data (giving effect to the Merger and the Summit-UJB Merger) by an
equivalent exchange ratio of 0.972.
(5) Pro forma amounts assume that Summit and UJB would have declared cash
dividends per common share equal to their respective historical cash
dividends per common share declared.
(6) Gives effect to the Merger as if it occurred at the end of the period. The
September 30, 1995 pro forma book value per share also includes the
anticipated $7.4 million of merger-related charges ($4.4 million after the
related tax effects), but does not reflect the estimated expense savings and
revenue enhancements anticipated to result from the Merger.
(7) Gives effect to the Summit-UJB Merger as if it occurred at the end of the
period. The September 30, 1995 pro forma book value per share also includes
the anticipated $85 million of merger-related charges ($54 million after the
related tax effects).
(8) Gives effect to the merger of Flemington into UJB as if it had occurred at
the end of the period. The September 30, 1995 pro forma book value per share
also includes the anticipated $3.9 million of merger-related charges ($2.3
million after the related tax effects).
24
<PAGE> 30
THE MEETING
General. The proxy card accompanying this Proxy Statement-Prospectus is
solicited by and on behalf of the Board of Directors of Garden State to be used
at the Meeting which will be held at the Corporate Headquarters of Garden State,
2290 West County Line Road, Jackson, New Jersey on Friday, January 12, 1996, at
10:00 a.m., local time. The Meeting has been called for the purpose of
considering and voting upon: (1) approval of the Merger Agreement; (2) approval
of the Adjournment Proposal; and (3) transacting such other business as may
properly come before the Meeting. The accompanying Notice of Special Meeting and
form of proxy and this Proxy-Statement Prospectus are being first mailed to
shareholders on or about December 11, 1995.
HOLDERS OF GARDEN STATE COMMON STOCK ARE REQUESTED TO PROMPTLY COMPLETE,
SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY TO GARDEN STATE
IN THE ENCLOSED POSTAGE-PAID, ADDRESSED ENVELOPE.
GARDEN STATE SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH
THEIR PROXY CARDS.
Recommendation of the Garden State Board of Directors. THE GARDEN STATE
BOARD HAS APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT GARDEN
STATE'S SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND FOR APPROVAL
OF THE ADJOURNMENT PROPOSAL.
Record Date. The Board of Directors of Garden State has fixed the close of
business on December 5, 1995 as the Record Date for the determination of holders
of Garden State Common Stock entitled to receive notice of and to vote at the
Meeting. Only holders of record of Garden State Common Stock at the close of
business on the Record Date are entitled to receive notice of and to vote at the
Meeting and at any adjournment or postponement thereof.
Voting and Solicitation of Proxies. Garden State shareholders will be
entitled to one vote for each share of Garden State Common Stock held of record
as of the close of business on the Record Date on each matter to be voted upon
at the Meeting or at any adjournment or postponement thereof. The presence in
person or by proxy of the holders of at least a majority of the total number of
shares of Garden State Common Stock outstanding on the Record Date is necessary
to constitute a quorum at the Meeting.
The shares of Garden State Common Stock represented by properly executed
proxies received at or prior to the Meeting and not subsequently revoked prior
to the vote at the Meeting will be voted as directed in such proxies. IF
INSTRUCTIONS ARE NOT GIVEN, SHARES REPRESENTED BY PROPERLY EXECUTED PROXIES WILL
BE VOTED FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT, AND FOR APPROVAL OF
THE ADJOURNMENT PROPOSAL. If any other matters are properly presented at the
Meeting for consideration, the persons named in the Garden State proxy card
enclosed herewith will have discretionary authority to vote on such matters in
accordance with their best judgment, provided, however, that such discretionary
authority will only be exercised to the extent permissible under applicable
federal and state securities and corporation laws. As of the date of this Proxy
Statement-Prospectus, Garden State is unaware of any other matter to be
presented at the Meeting. Proxies marked as abstentions will not be counted as
votes cast. In addition, shares held in street name which have been designated
by brokers on proxy cards as not voted will not be counted as votes cast and
will not be treated as shares present for purposes of determining whether a
quorum is present. Proxies marked as abstentions will be treated as shares
present for purposes of determining whether a quorum is present.
Any holder of Garden State Common Stock who has executed and delivered a
proxy may revoke it at any time before it is voted. A proxy may be revoked prior
to the Meeting by a later-dated proxy or a written revocation sent to the
Corporate Secretary of Garden State, Lisa M. MacQuaide, at the Corporate
Headquarters of Garden State, 2290 West County Line Road, Jackson, New Jersey
08527, and received by her prior to the Meeting. A proxy may be revoked at the
Meeting by filing a later-dated proxy or a written notice of such revocation
with the Secretary of the Meeting prior to the voting of such proxy. A proxy
will not be revoked by the death or supervening incapacity of the shareholder
executing the proxy unless, before the
25
<PAGE> 31
vote, notice of such death or incapacity is filed with the Corporate Secretary
or other person responsible for tabulating votes on behalf of Garden State.
The cost of soliciting proxies from holders of Garden State Common Stock in
the form enclosed herewith will be borne by Garden State. Such solicitation will
be made by mail but also may be made by telephone or in person by the directors,
officers and employees of Garden State (who will receive no additional
compensation for doing so). In addition, Garden State will make arrangements
with brokerage firms and other custodians, nominees and fiduciaries to send
proxy materials to their principals and will reimburse such parties for their
expenses in doing so.
Vote Required. Assuming a quorum is present at the Meeting, the
affirmative vote of a majority of the votes cast at the Meeting is required in
order to approve and adopt the Merger Agreement. A failure to return a properly
executed proxy card or to vote in person at the Meeting may increase the
likelihood that business cannot be transacted due to a lack of quorum, but if a
quorum is present such failure to return a proxy card or vote in person will not
have the effect of a vote either for or against the Merger Agreement. An
abstention from voting will have no effect on the vote. The affirmative vote of
a majority of the votes cast at the Meeting is required to approve the
Adjournment Proposal. As of the Record Date, there were 3,114,953 shares of
Garden State Common Stock outstanding and entitled to be voted at the Meeting.
The directors and executive officers of Garden State and their affiliates
beneficially owned, as of the Record Date, 1,229,694 shares, or approximately
39.5% of the outstanding shares of Garden State Common Stock. Summit, by reason
of the Stock Option Agreement (as defined below), and its ownership of the
Option (as defined below) to purchase up to an aggregate of 752,770 shares of
Garden State Common Stock granted by the Stock Option Agreement, may be deemed
under the rules of the Commission to be the beneficial owner of approximately
24.7% of the Garden State Common Stock outstanding on the Record Date. However,
Summit does not have the power to vote the shares of Garden State Common Stock
which are subject to the Option at the Meeting.
PROPOSAL I -- APPROVAL OF THE MERGER AGREEMENT
THE MERGER
The following information, insofar as it relates to matters contained in
the Merger Agreement or the Stock Option Agreement, is qualified in its entirety
by reference to the Merger Agreement and the Stock Option Agreement, copies of
which are attached hereto as Appendix A and Appendix B, respectively, and which
are incorporated herein by reference. Garden State shareholders are urged to
read the Merger Agreement and the Stock Option Agreement in their entirety.
PARTIES TO THE MERGER
Summit. Summit is a registered bank holding company incorporated in 1973
under the laws of the State of New Jersey and, as such, is subject to the BHCA.
A predecessor of Summit Bank, Summit's sole commercial banking subsidiary, began
its operations in 1891. At September 30, 1995, Summit had consolidated assets of
$5.6 billion, consolidated deposits of $4.6 billion, and consolidated
stockholders' equity of $485 million. Based on consolidated assets at September
30, 1995, Summit was the fourth largest independent bank holding company
headquartered in New Jersey.
Summit conducts its principal operations through its wholly owned
commercial bank subsidiary, Summit Bank, a New Jersey chartered commercial bank.
As of September 30, 1995, Summit Bank had total assets of $5.6 billion. Summit
Bank provides a broad range of commercial banking, retail banking, real estate,
trust and other financial services through 90 branches located in 11 counties in
Northern and Central New Jersey.
Summit's market area has a diverse base of customers including
corporations, small businesses, professional firms and individuals. Summit Bank
directs its commercial lending efforts toward small and middle-market customers
which it defines as businesses with annual sales of less than $50 million. A
wide variety of retail banking services is also provided by Summit through
Summit Bank.
26
<PAGE> 32
Summit Bank provides trust services to individual and corporate customers.
Trust assets totaled $3.5 billion at year-end 1994 and fee income from trust
services increased 7% in 1994 to $11.9 million. Summit also originates
residential mortgage loans through its mortgage banking division, The Summit
Mortgage Company. In 1994, origination and servicing income from mortgage
banking activities totaled $9.8 million, unchanged from 1993. The comparison of
mortgage banking revenue for 1994 with 1993 was affected by the inclusion of
such revenues for Lancaster Financial Ltd., Inc. ("Lancaster") in 1994 only. If
Lancaster revenues had been included in the results for 1993, mortgage banking
revenue would have decreased $9.5 million or 49% in 1994 from 1993.
Garden State. Garden State was organized under the laws of New Jersey in
1984 by GS Bank for the purpose of creating a bank holding company for GS Bank.
Effective January 16, 1985, Garden State acquired all of the outstanding shares
of GS Bank. GS Bank was incorporated as a state-chartered New Jersey bank in
1974 under the name Garden State Bank of Ocean County. GS Bank maintains its
corporate headquarters and nine branches in Ocean and Monmouth Counties, New
Jersey. GS Bank offers a broad range of banking, trust and related financial
services to small and mid-sized businesses, consumers, institutions and
governmental bodies.
GS Bank is a full service commercial bank and offers the services generally
performed by commercial banks of similar size and character, including checking,
savings and time deposit accounts, certificates of deposit, secured and
unsecured personal and commercial loans, and residential and commercial real
estate loans. GS Bank offers a wide range of personal and corporate trust
services through its Trust Department. GS Bank's deposit accounts are
competitive in the current environment. In the lending area, GS Bank is engaged
in commercial loans, Small Business Administration ("SBA") loans, mortgage loans
and consumer lending.
Garden State and GS Bank had 170 full-time equivalent employees as of
September 30, 1995.
Additional information about Summit and Garden State and their respective
subsidiaries is included in documents incorporated by reference in this Proxy
Statement-Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
EFFECT OF THE MERGER; EFFECTIVE TIME; CLOSING
Pursuant to the Merger Agreement, at the Effective Time, Garden State will
merge with and into Summit, with Summit surviving the Merger. Immediately
following the Merger, GS Bank will be merged with Summit Bank, with the survivor
having the name, certificate of incorporation and Bylaws of Summit Bank (the
"Subsidiary Merger").
The Effective Time of the Merger (the "Effective Time") will be the date
and time on which a Certificate of Merger (the "Certificate of Merger") is filed
with the Secretary of State of the State of New Jersey in accordance with the
New Jersey Business Corporation Act, as amended (the "NJBCA"). A closing (the
"Closing") will take place prior to the Effective Time at 10:00 a.m., local
time, on a date to be specified by the parties, which is at least 10 business
days (subject to earlier closing by mutual agreement of Summit and Garden
State), but no more than 30 business days, following the receipt of all
necessary regulatory and governmental approvals and consents and the expiration
of all statutory waiting periods in respect thereof and the satisfaction or
waiver of the conditions to the consummation of the Merger specified in the
Merger Agreement (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing), at the office of
Bourne, Noll & Kenyon, counsel to Summit, or at such other place, time or date
as Summit and Garden State may mutually agree upon. Immediately following the
Closing, the Certificate of Merger will be filed with the New Jersey Secretary
of State.
If the Merger is approved by the shareholders of Garden State, subject to
the satisfaction or waiver of certain other conditions described herein, the
Closing currently is expected to occur early in the first quarter of 1996.
27
<PAGE> 33
MERGER CONSIDERATION
Upon consummation of the Merger, subject to the provisions in the Merger
Agreement relating to fractional shares discussed below, each share of Garden
State Common Stock outstanding immediately prior to the Effective Time (other
than treasury shares and shares held directly or indirectly by Summit other than
in fiduciary capacity or in satisfaction of a debt previously contracted) will
be automatically converted into the right to receive 1.08 shares of Summit
Common Stock (the "Exchange Ratio"). The Exchange Ratio was arrived at through
arms-length negotiations between Summit and Garden State. No fractional shares
of Summit Common Stock will be issued in connection with the Merger. In lieu of
the issuance of fractional shares, Summit will make a cash payment to each
Garden State shareholder who otherwise would be entitled to receive a fractional
share equal to the product of (i) the fractional interest which a Garden State
shareholder would otherwise receive and (ii) the Average Closing Price.
On December 6, 1995, the last practicable date prior to the mailing of this
Proxy Statement-Prospectus, the last reported sale price per share of Summit
Common Stock was $29.375.
THE MARKET PRICE OF SUMMIT COMMON STOCK CAN BE EXPECTED TO FLUCTUATE
BETWEEN THE DATE OF THIS PROXY STATEMENT-PROSPECTUS AND THE EFFECTIVE TIME.
FLUCTUATIONS IN SUCH MARKET PRICE PRIOR TO THE EFFECTIVE TIME COULD RESULT IN AN
INCREASE OR DECREASE IN THE MARKET PRICE ON THE EFFECTIVE TIME OF THE SHARES OF
SUMMIT COMMON STOCK TO BE RECEIVED BY GARDEN STATE SHAREHOLDERS IN THE MERGER.
NO ASSURANCE CAN BE GIVEN CONCERNING THE MARKET PRICE OF SUMMIT COMMON STOCK
BEFORE OR AFTER THE EFFECTIVE TIME.
Upon consummation of the Merger, any shares of Garden State Common Stock
that are owned by Garden State as treasury stock or that are held directly or
indirectly by Summit other than in a fiduciary capacity or in satisfaction of a
debt previously contracted will be canceled and retired and no payment will be
made with respect thereto.
At the Effective Time, each outstanding option to purchase Garden State
Common Stock (a "Garden State Option") granted under the stock option plans of
Garden State (the "Garden State Option Plans") will be converted, at the
election of the holder of such Garden State Option (an "optionee"), as follows:
(i) into an option to purchase Summit Common Stock, wherein (x) the
right to purchase shares of Garden State Common Stock pursuant to the
Garden State Option will be converted into the right to purchase that same
number of shares of Summit Common Stock multiplied by the Exchange Ratio,
(y) the option exercise price per share of Summit Common Stock will be the
previous option exercise price per share of the Garden State Common Stock
divided by the Exchange Ratio and (z) in all other material respects the
option will be subject to the same terms and conditions as governed the
Garden State Option on which it was based, including, without limitation,
the remaining length of time within which the option may be exercised; or
(ii) if the Garden State Option is fully exercisable at the Closing,
into the right to receive immediately after the Effective Time a number of
whole shares of Summit Common Stock equal to the positive number (or zero,
if the result is negative) determined by (x) subtracting (i) the aggregate
exercise price for the Garden State Option from (ii) the product determined
by multiplying (A) the number of shares of Garden State Common Stock
covered by the Garden State Option, times (B) the Exchange Ratio, times (C)
the Average Closing Price, and (y) dividing the resulting number by the
Average Closing Price. No fractional shares of Summit Common Stock will be
issued, and in lieu thereof, each optionee who would otherwise be entitled
to a fractional interest will receive an amount in cash determined by
multiplying such fractional interest by the Average Closing Price.
Summit has agreed to reserve for issuance the number of shares of Summit
Common Stock necessary to satisfy Summit's obligations under such options, and
to register such shares, if they are not previously registered under the
Securities Act.
28
<PAGE> 34
If the Average Closing Price is less than $17.00 but greater than or equal
to $16.00, Garden State has the right to terminate the Merger Agreement unless
Summit agrees, at Summit's option, to adjust the Exchange Ratio such that the
value (measured by the Average Closing Price) of the number of shares of Summit
Common Stock to be exchanged for one share of Garden State Common Stock in the
Merger, based on the new Exchange Ratio, is at least as high as the value which
would have been if the Exchange Ratio were unchanged and the Average Closing
Price were $17.00. Garden State has the right to unilaterally terminate the
Merger Agreement if the Average Closing Price is less than $16.00.
If Summit effects a stock dividend, reclassification, recapitalization,
split-up, combination, exchange of shares or similar transaction prior to the
Effective Time, an appropriate adjustment to the Exchange Ratio will be made.
Based on the capitalization of Summit and Garden State as of September 30,
1995, upon consummation of the Merger, the shareholders of Garden State will own
Summit Common Stock representing approximately 9% of the outstanding Summit
Common Stock following the Merger. Such percentage would remain the same if
shares of Summit Common Stock and Garden State Common Stock issuable upon
exercise of outstanding Summit and Garden State stock options (vested and
unvested) are issued. For purposes of these calculations, except as set forth
above, it is assumed that no other shares of Summit Common Stock and Garden
State Common Stock are issued and that the Exchange Ratio is 1.08.
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger
In the early 1990's, Garden State experienced significant problems in its
commercial loan portfolio, the bulk of which were attributable to real estate
development loans. These problems led to GS Bank's entry into a consent
agreement with the New Jersey Banking Department and the FDIC in February 1993.
The Consent Agreement, among other things, contained requirements designed to
address GS Bank's problem loans and nonperforming assets, and required GS Bank
to increase its leverage capital ratio to 6%.
During 1994, Garden State raised over $7 million in new capital through the
sale of common stock and warrants, and the exercise of warrants, raising GS
Bank's capital above all regulatory minimums. In addition, as the local real
estate market and interest rate conditions improved in the last few years,
Garden State has been able to contain and reduce its problem loans and
nonperforming assets and return to profitability. The Consent Agreement was
replaced by a less formal memorandum of understanding in June 1994, and lifted
entirely on May 23, 1995.
While Garden State's Board of Directors is encouraged by the institution's
turnaround in recent years, that same period of time has seen numerous changes
occur in the business environment for commercial banks and the financial
services industry generally. In particular, the movement toward regional
interstate banking and consolidation in the banking industry led the Garden
State Board of Directors to investigate opportunities for the affiliation of
Garden State with another financial institution. The Garden State Board of
Directors retained Advest, Inc. ("Advest") to act as its financial advisor and
to assist in this process.
With the advice of its financial advisor, the Garden State Board considered
some of the advantages which could be derived from a business combination,
including greater shareholder liquidity, increased market recognition,
additional product offerings and consolidation of administrative functions. The
Board also reviewed Garden State management's internal business plan and the
merger premiums then being obtained for bank stocks in other transactions, and
considered the possibility that Garden State's shareholders could receive more
value through a merger than they would receive if Garden State remained as an
independent institution, even if management were able to meet its goals for
operating the company independently.
In the first quarter of 1995, the Garden State Board directed Advest to
initiate discussions with a number of larger financial institutions, including
Summit. Several of these institutions, including Summit, informally indicated an
interest in pursuing a transaction and indicated potential prices or exchange
ratios at which such a transaction might be accomplished. Through its financial
advisor, Garden State negotiated extensively with Summit during the second
quarter of 1995. Prior to entering into a definitive agreement with Summit,
Garden
29
<PAGE> 35
State, through its financial advisor, negotiated increases in the consideration
proposed by Summit and by other potential bidders. In June 1995, the market
value of the consideration proposed by Summit was the highest value
consideration offered by any of the prospective bidders.
These matters were all reported to the Garden State Board in a series of
meetings, culminating with a meeting of the Board on June 7, 1995. At that
meeting, the Garden State Board reviewed the terms and conditions being proposed
by Summit, the history and current status of Garden State's contacts with Summit
and with other potential acquirors, the financial condition and prospects of
Summit, and the historical trends and future prospects for the business of
Garden State on a stand-alone basis. Representatives of Advest presented advice
on the Summit proposal and the contacts with other bidders, along with an
analysis of Garden State's strategic options. Garden State's legal counsel
presented advice on the terms and conditions which Summit had proposed to
include in a definitive merger agreement and stock option agreement. After
review and consideration of these matters, the Board authorized Garden State's
Merger and Acquisition Committee, with the assistance of Garden State's
financial advisor and legal counsel, to negotiate a definitive agreement with
Summit, and to present such agreement to the Board for its consideration.
Negotiation of the definitive agreements took place during the following
week and a meeting of the Garden State Board of Directors was held on June 13,
1995 to consider and vote upon the Merger Agreement and the Stock Option
Agreement. At the June 13, 1995 meeting, the issues addressed at the June 7,
1995 meeting were again discussed. Following extended discussion, the Board
unanimously voted to approve both agreements and on June 13, 1995, the Merger
Agreement and Stock Option Agreement were executed and delivered by Garden State
and Summit.
The Garden State Board's Considerations in Approving the Merger
The Garden State Board of Directors considered numerous factors in
approving the Merger Agreement. The Board considered not only the Exchange
Ratio, but also all other factors the Board deemed relevant, including the
financial and managerial resources and future prospects of Summit, the possible
effects of the Merger on the business of Garden State, and the possible effects
of the Merger on other constituencies such as the employees, customers,
suppliers and creditors of Garden State and the communities in which Garden
State operates.
The reasons the Garden State Board approved the Merger Agreement included
the following: (i) the immediate and potential long-term financial benefits to
Garden State shareholders inherent in the terms of the Merger, including the
Exchange Ratio and the anticipated post-acquisition dividend rate for Summit
Common Stock; (ii) Advest's opinion that the financial consideration offered in
the proposed Merger was fair to the Garden State shareholders from a financial
point of view; (iii) a conclusion that further consolidation in the financial
services industry was inevitable, that Garden State could be at a competitive
disadvantage in such an environment, and that market conditions were favorable
for a business combination transaction in the current time frame; (iv) the
ability of the combined entity to achieve efficiencies and economies of scale
which would ultimately benefit Garden State's shareholders; (v) the ability of
the combined entity to offer Garden State's customers and the communities in
which Garden State operates a broader range of products and services than Garden
State presently offers as an independent entity; (vi) the enhanced liquidity
that Garden State shareholders are likely to obtain from the conversion of their
Garden State Common Stock into Summit Common Stock, which has a significantly
greater average trading volume; (vii) the prospects for future growth and
increased market recognition of the combined entity; and (viii) the relative
value being offered to Garden State shareholders in the Merger compared with the
value which such shareholders were likely to receive if Garden State management
met its financial goals in operating the company independently.
In approving the Merger, the Garden State Board did not specifically
identify any one factor or group of factors as being more significant than any
other factor in the decision making process, although individual directors may
have given one or more factors more weight than other factors. The emphasis of
the Board's discussion in considering the Merger, however, was on the financial
aspects of the Merger, particularly the value of the consideration being offered
by Summit in exchange for each share of Garden State Common Stock.
30
<PAGE> 36
Summit's Reasons for the Merger. The Summit Board of Directors (the
"Summit Board") has unanimously approved the Merger Agreement and has determined
that the Merger and the issuance of the Merger Shares is in the best interests
of Summit and its shareholders. The Merger expands Summit's retail franchise and
competitive position in key market areas and increases Summit's operating and
marketing scale. The in-market nature of the Merger will enable Summit to
achieve greater operating efficiencies through branch consolidations while
providing Summit an opportunity to fill in its existing franchise with access to
new communities.
OPINION OF FINANCIAL ADVISOR
By letter dated March 31, 1995, Garden State's Board of Directors retained
the services of Advest as Garden State's financial advisor in connection with a
possible acquisition transaction and, if an acquisition transaction eventuated,
requested that Advest render a fairness opinion regarding the consideration to
be received by the shareholders of Garden State, from a financial point of view.
Advest is a nationally recognized investment banking firm and, as part of
its investment banking business, is regularly engaged in the valuation of bank,
bank holding company and thrift institution securities in connection with
mergers, acquisitions, and other securities transactions. As financial advisor
to Garden State, Advest was involved in every stage of the discussions with
various financial institutions that resulted in the offer by Summit, as well as
the negotiations with Summit that resulted in the Merger Agreement.
Advest has delivered a written opinion to the Garden State Board of
Directors, dated as of June 13, 1995, and updated as of December 8, 1995 in
light of subsequent events including the proposed Summit-UJB Merger, to the
effect that the consideration to be received by Garden State shareholders,
pursuant to the Merger Agreement, is fair, from a financial point of view. There
were no limitations imposed by Garden State on Advest in connection with its
rendering of the fairness opinion. Advest is not a market maker in either Garden
State or Summit stock.
THE FULL TEXT OF ADVEST'S FAIRNESS OPINION, WHICH SETS FORTH ASSUMPTIONS
MADE AND MATTERS CONSIDERED, IS ATTACHED AS APPENDIX C TO THIS PROXY
STATEMENT-PROSPECTUS. GARDEN STATE'S SHAREHOLDERS ARE URGED TO READ SUCH OPINION
IN ITS ENTIRETY. ADVEST'S OPINION IS DIRECTED ONLY TO THE CONSIDERATION OFFERED
IN THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY GARDEN STATE
SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE MEETING. THE SUMMARY
INFORMATION REGARDING ADVEST'S OPINION AND THE PROCEDURES FOLLOWED IN RENDERING
SUCH OPINION SET FORTH IN THIS PROXY STATEMENT-PROSPECTUS IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In arriving at its opinion, Advest reviewed, among other things: (i) the
Merger Agreement; (ii) the audited consolidated financial statements and
management's discussion and analysis of the financial condition and results of
operations of each of Garden State and Summit for the three fiscal years ended
December 31, 1994; (iii) the unaudited consolidated financial statements and
management's discussion and analysis of the financial condition and results of
operations for the interim periods ending March 31, 1995, June 30, 1995 and
September 30, 1995 of each of Garden State and Summit; (iv) certain financial
information as filed with federal banking agencies for the three years ended
December 31, 1994, as well as the nine months ended September 30, 1995, for both
Garden State and Summit; (v) financial analyses and forecasts of Garden State
prepared by and/or reviewed with management of Garden State; (vi) the views of
senior management of each of Garden State and Summit of their respective past
and current business operations, results thereof, financial condition and future
prospects; (vii) the reported price and trading activity for Garden State and
Summit Common Stock, including a comparison of certain financial and stock
market information for Garden State and Summit with similar information for
certain other companies the securities of which are publicly traded; (viii)
comparative financial and operating data on the banking industry and certain
institutions which were deemed to be reasonably similar to both companies; (ix)
certain bank mergers and acquisitions on a state, regional and nationwide basis
for institutions which were deemed to be reasonably similar to Garden State and
a comparison of the proposed financial consideration with the consideration in
the Merger paid in other relevant mergers and acquisitions; (x) the pro forma
impact of the Merger on Summit and Garden State; and
31
<PAGE> 37
(xi) other financial information, studies and analyses. Advest performed such
other investigations and took into account such other matters as Advest deemed
appropriate.
In performing its review, Advest assumed and relied upon, without
independent verification, the accuracy and completeness of all the financial
information, analyses and other information reviewed by and discussed with
Advest. Advest did not make any independent evaluation or appraisal of specific
assets or liabilities, the collateral securing assets or the liabilities of
Garden State or Summit or any of their subsidiaries, or the collectibility of
any such assets (relying, where relevant, on the analyses and estimates of
Garden State and Summit). With respect to the financial projections reviewed
with management, Advest assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
respective managements of the respective future financial performances of each
of Garden State and Summit. Advest also assumed that there has been no material
change in Garden State's or Summit's assets, financial condition, results of
operations, business or prospects since the date of the last financial
statements made available to Advest.
In connection with rendering its fairness opinion to the Garden State Board
of Directors, Advest performed a variety of financial analyses. The following is
a summary of such analyses, but does not purport to be a complete description of
the Advest analyses. The preparation of a fairness opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analyses or summary description. Advest believes that its analyses must be
considered as a whole and that selecting portions of such analyses and the
factors considered therein, without considering all factors and analyses, could
create an incomplete view of the analyses and the processes underlying Advest's
opinion.
In performing its analyses, Advest made numerous assumptions with respect
to industry performance, business and economic conditions and various other
matters, many of which cannot be predicted and are beyond the control of Garden
State, Summit or Advest. Any estimates contained in Advest's analyses are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than such estimates. Estimates of values of companies do
not purport to be appraisals or necessarily reflect the prices at which
companies or their securities may actually be sold. No company or transaction
utilized in Advest's analyses was identical to Garden State or Summit or the
Merger. Because such estimates are inherently subject to uncertainty, Advest
assumes no responsibility for their accuracy.
Stock Trading History
Advest examined the history of trading prices for both Garden State Common
Stock and Summit Common Stock for the periods from July 1985 through November
1995. Advest also examined the relationship between movements of the market
prices for Garden State and Summit to movements in the NASDAQ bank stock index
during the period from July 1994 through June 1995, during which Garden State
Common Stock was listed on the NASDAQ Small-Cap Market.
Since its listing on the NASDAQ Small-Cap Market in June 1994, but prior to
September 1994, Garden State Common Stock has primarily traded in the $5.50 to
$9.00 range. In September there was significant price appreciation and the stock
began trading in the $11.00 to $12.75 range. From March 1995 through June 13,
1995 (the last business day preceding public announcement of the signing of the
Merger Agreement) the stock traded in the $13.00 to $17.00 range. During the
week prior to the announcement of the Merger, Garden State Common Stock traded
at prices between $14.75 and $16.75 per share. From the date of announcement of
the Merger through November 30, 1995, Garden State Common Stock traded between
$19.50 and $31.75.
Contribution Analysis
Advest prepared a contribution analysis showing the percentage contributed
by Garden State to the combined company on a pro forma basis of assets,
deposits, common equity and tangible common equity at September 30, 1995, and
net income for the twelve months ended September 30, 1995. Advest then compared
these percentages to the Garden State shareholder's pro forma ownership of
Summit. This analysis showed that Garden State, as of September 30, 1995, would
contribute 5.3% of pro forma consolidated assets, 5.8% of
32
<PAGE> 38
pro forma consolidated deposits, 5.6% of pro forma consolidated equity and 4.5%
of pro forma consolidated net income for the twelve months ended September 30,
1995. Garden State shareholders would hold 8.8% of the pro forma ownership of
the combined company.
Comparable Company Analysis
In undertaking its analysis, Advest compared the financial condition and
financial operating performance of Garden State with a peer group of 13
commercial banks in New Jersey with between $250 to $500 million in assets. The
review considered asset size, return on average assets and equity, the equity to
assets ratio and the ratio of nonperforming assets to total assets, among other
information. Compared to Garden State, which had a return on average assets of
0.92% and return on average equity of 11.08% based on annualized June 30, 1995
operating results, and an equity to assets ratio of 8.72% and a nonperforming
assets to total assets ratio of 3.21% at June 30, 1995, the peer group had a
median return on average assets of 1.13% and return on average equity of 15.63%
based on annualized June 30, 1995 operating results, and an equity to average
assets ratio of 7.62% and a nonperforming assets to total assets ratio of 1.21%
at June 30, 1995. In sum, the peer group reported somewhat stronger operating
performance than Garden State, a lower level of nonperforming assets and a
comparable equity to assets ratio.
Discounted Cash Flow Analysis
Advest performed an analysis which estimated the future cash flows of
Garden State over four years under various circumstances, assuming Garden State
performed in accordance with the earnings forecasts of its management and
certain variations thereof (including variations with respect to the growth rate
of assets, net interest spread, non-interest income, noninterest expenses and
dividend payout ratio). To approximate the terminal value of Garden State Common
Stock at the end of the four-year period Advest applied price to earnings
multiples ranging from 12.0x to 18.0x and applied multiples of book value
ranging from 1.50x to 2.00x. The terminal values were then discounted to present
values using different discount rates (ranging from 15% to 18%) chosen to
reflect different assumptions regarding the required rates of return of holders
or prospective buyers of Garden State Common Stock. This analysis indicated a
range of value per share of Garden State Common Stock of $11.04 to $20.09.
Analysis of Selected Merger Transactions
Advest reviewed certain financial data related to 217 acquisitions of
commercial banks and thrift institutions, nationwide, with assets between $200
and $750 million announced since January 1, 1993, 52 of which were announced
since January 1, 1995. Advest also reviewed selected regional acquisitions
including the following transactions which were the most recent in the Mid
Atlantic region (identified by acquiror/acquiree): Hubco Inc./Urban National
Bank, Valley National Bancorp./Lakeland First Financial, UJB Financial
Corp./Bancorp New Jersey, Staten Island Savings Bank/Gateway Bancorp., and
Midlantic Corporation/Old York Road Bancorp.
Advest calculated average price as a multiple of the target's earnings for
the last four quarters (trailing 12 months), and as a percentage of stated book
value and tangible book value, and Advest calculated premium as a percentage of
core deposits. For nationwide transactions announced since January 1, 1995, the
calculations yielded, as of the date of announcement of these transactions, the
following averages: (i) price offered as a multiple of earnings of 17.97 times
(19.5 times for regional transactions), compared with a multiple of 27.5 times
associated with the Summit proposal; (ii) price offered as a percentage of book
value of 182% (185% for regional transactions), compared with 335% associated
with the Summit proposal; (iii) price offered as a percentage of tangible book
value of 188% (187% for regional transactions), compared with 355% associated
with the Summit proposal; and (iv) premium as a percentage of core deposits of
9.50% (10.42% for regional transactions), compared to 22.77% associated with the
Summit proposal.
No company or transaction used as a comparison in the above analysis is
identical to Garden State, Summit or the Merger. Accordingly, an analysis of the
results of the foregoing is not mathematical, rather it involves complex
considerations and judgments concerning differences in financial and operating
characteris-
33
<PAGE> 39
tics of the companies and other factors that could affect the acquisition value
of the companies to which they are being compared.
Impact Analysis
Advest analyzed the changes in the amount of fully diluted earnings per
share and book value represented by the issuance of 1.08 shares of Summit Common
Stock for each share of Garden State Common Stock. The analysis evaluated, among
other things, possible dilution or accretion in fully diluted earnings per share
and book value per share for Summit. The analysis was based upon (i) September
30, 1995 balance sheet data for Garden State; (ii) September 30, 1995 balance
sheet data for Summit; (iii) latest twelve months earnings for the period ended
September 30, 1995 for Garden State; and (iv) latest twelve months earnings for
the period ended September 30, 1995 for Summit.
As of the time performed, these pro forma analyses indicated that the
Merger would be approximately 4.5% dilutive to Summit's fully diluted earnings
per share, and approximately 4.3% dilutive to Summit's book value per share.
Advest also analyzed the impact of the Merger on certain Summit values per
Garden State share based on the Exchange Ratio of 1.08 shares of Summit Common
Stock for one share of Garden State Common Stock. That analysis, which was based
on certain assumptions made by Advest, found that, based on the proposed
Exchange Ratio, Summit's equivalent earnings per share would be $2.13 per share
or 90.2% greater than existing Garden State earnings per share; that Summit's
equivalent book value per share would be $14.39 or 56.6% greater than existing
Garden State book value per share, and that Summit's equivalent dividend income
would be $0.91 per share. Garden State shareholders did not receive regular cash
dividends prior to execution of the Merger Agreement.
Advest's retainer agreement provides that Garden State will pay Advest a
transaction fee in connection with the Merger, a substantial portion of which is
contingent upon consummation of the Merger. Under the terms of the agreement,
Garden State has agreed to pay Advest a fee equal to 1% of the aggregate
consideration paid to shareholders and option holders in the Merger, or
approximately $990,000 (based on the number of shares of Garden State Common
Stock outstanding on the Record Date, assuming a market price of $29.375 for
Summit Common Stock), net of $200,000 in fees already paid to Advest in relation
to the Merger (including $25,000 upon acceptance of the retainer agreement with
Advest, $75,000 upon execution of the Merger Agreement and $100,000 upon
delivery of the initial written fairness opinion) so that the total fees for
Advest's engagement by Garden State, excluding reimbursement for out-of-pocket
expenses, will not exceed 1% of the market value of the total consideration in
the Merger. While the payment of all or a significant portion of fees related to
financial advisory services provided in connection with arms-length merger and
other business combination transactions upon consummation of such transactions,
as is the case with the Merger, might be viewed as giving such financial
advisors a financial interest in the successful completion of such transactions,
such compensation arrangements are standard and customary for transactions of
the size and type of the Merger.
SURRENDER OF CERTIFICATES
As soon as practicable after the Effective Time, Summit will cause Summit
Bank's Trust Department (or Summit's then existing stock transfer agent), acting
in the capacity of exchange agent for Summit (the "Exchange Agent"), to mail to
each former holder of record of Garden State Common Stock a form of letter of
transmittal, together with instructions for the exchange of such holder's
certificates representing shares of Garden State Common Stock for certificates
representing shares of Summit Common Stock and cash in lieu of fractional
shares.
HOLDERS OF GARDEN STATE COMMON STOCK SHOULD NOT SEND IN ANY STOCK
CERTIFICATES UNTIL THEY RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS FROM
THE EXCHANGE AGENT, AND SHOULD NOT RETURN SUCH STOCK CERTIFICATES WITH THE
ENCLOSED PROXY.
34
<PAGE> 40
Upon surrender to the Exchange Agent of one or more certificates for Garden
State Common Stock, together with a properly completed letter of transmittal,
there will be issued and mailed to the holder of Garden State Common Stock
surrendering such items a certificate or certificates representing the number of
whole shares of Summit Common Stock to which such holder is entitled, if any,
and, where applicable, a check for the amount to be paid in lieu of any
fractional share interest determined in the manner described herein, without
interest.
No dividend or other distribution payable after the Effective Time with
respect to Summit Common Stock will be paid to the holder of any unsurrendered
certificate until the holder duly surrenders such certificate. Following such
surrender of any such certificate, there will be paid to the holder of the
certificates representing whole shares of Summit Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of
dividends or other distributions having a record date after the Effective Time
theretofore payable with respect to such whole shares of Summit Common Stock and
not yet paid, and (ii) at the appropriate payment date, the amount of dividends
or other distributions having (x) a record date after the Effective Time but
prior to surrender and (y) a payment date subsequent to surrender payable with
respect to such whole shares of Summit Common Stock.
Holders of Garden State Options will be contacted separately by Summit
after the mailing of this Proxy Statement-Prospectus but prior to the Effective
Time with respect to their Garden State Options. HOLDERS OF GARDEN STATE OPTIONS
SHOULD NOT SEND IN ANY GARDEN STATE OPTIONS UNTIL THEY RECEIVE INSTRUCTIONS FROM
SUMMIT AND SHOULD NOT RETURN SUCH GARDEN STATE OPTIONS WITH THE ENCLOSED PROXY.
After the Effective Time, there will be no transfers on Garden State's
stock transfer books of shares of Garden State Common Stock issued and
outstanding immediately prior to the Effective Time. If certificates
representing shares of Garden State Common Stock are presented for transfer
after the Effective Time, they will be cancelled and exchanged for shares of
Summit Common Stock and cash in lieu of fractional shares, if any, deliverable
in respect thereof, without interest.
If outstanding certificates of Garden State Common Stock are not
surrendered or payment is not claimed prior to the date on which such payments
would otherwise escheat to or become the property of any governmental unit or
agency, the unclaimed items will, to the extent permitted by law, become the
property of Summit, free and clear of any claims or interests of any other
person.
If a certificate for Garden State Common Stock has been lost, stolen or
destroyed, the Exchange Agent will issue the consideration properly payable in
accordance with the Merger Agreement upon receipt of an affidavit as to such
loss, theft or destruction, and appropriate and customary indemnification.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Garden State's management and the Garden State Board may
be deemed to have certain interests in the Merger that are in addition to their
interests as shareholders of Garden State generally. The Garden State Board was
aware of these interests and considered them, among other matters, in
unanimously approving (with all directors voting) the Merger Agreement and the
transactions contemplated thereby.
Indemnification; Insurance. In the Merger Agreement, Summit has agreed
that from and after the Effective Time, it will indemnify, defend and hold
harmless, and advance costs and expenses (including reasonable attorney's fees,
costs and expenses) to, each person who is, has been or becomes prior to the
Effective Time, an officer or director of Garden State or any of its
subsidiaries (the "Indemnified Parties") against all costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, settlements (to which Summit has consented) or liabilities incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising after the Effective
Time and out of or pertaining to matters existing or occurring at or prior to
the Effective Time, including, without limitation, the authorization of the
Merger Agreement and the transactions contemplated thereby, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent that
Garden State
35
<PAGE> 41
would have been permitted under New Jersey law and its Certificate of
Incorporation or Bylaws in effect on the date of the Merger Agreement to
indemnify such person (and also advance expenses as incurred to the fullest
extent permitted under applicable law provided the person to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such person is not entitled to indemnification); provided that
any determination required by law to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth under New
Jersey law and Garden State's Certificate of Incorporation and Bylaws shall be
made by independent counsel selected jointly by Summit and the Indemnified
Party.
For a period of six years following the Effective Time, Summit will provide
to the persons who served as directors or officers of Garden State or any Garden
State subsidiary, including GS Bank, on or before the Effective Time, insurance
against liabilities and claims (and related expenses) made against them
resulting from their service as such prior to the Effective Time. Such coverage
may be provided by means of an extended reporting period endorsement to the
policy presently issued to Garden State by the present carrier for Garden State,
or by such other means which shall provide substantially equivalent coverage to
such persons.
Employee Benefit Plans, Programs and Arrangements. The employee benefit
plans, arrangements and related policies of Garden State and GS Bank will
initially be unaffected by the Merger. Following the Merger, Summit will review
such plans, arrangements and policies with a view towards consolidating the same
to the extent feasible and economical. To the extent former employees of Garden
State or GS Bank become participants in a plan of Summit or Summit Bank, they
will be given past service credit for eligibility, participation, and vesting
purposes, but not for benefit accrual purposes. For purposes of benefit accrual,
credited service under each Summit plan will commence within twelve months
following the Merger. Employees of Garden State or GS Bank immediately prior to
the Effective Time, who will become employees of Summit or the Bank, will
receive compensation and benefit packages no less favorable, in the aggregate,
than the compensation and benefit packages to which they were entitled
immediately prior to the Effective Time. Notwithstanding the foregoing, the
benefits under pension benefit plans to which such employees are entitled after
the Effective Time shall be limited to those benefits accruing under the
applicable Summit plans.
Change of Control Agreements. Garden State has entered into change of
control agreements with certain executive officers of Garden State which provide
for certain payments and benefits to the executive in the event the executive's
employment is terminated following a change of control as defined in the
agreements (the "Change of Control Events"). The payments and benefits provided
are subject to reduction if they exceed levels specified under the golden
parachute provisions of the Code and for the two highest paid officers such
reductions are expected to occur. The Merger will constitute a Change of Control
Event for purposes of these agreements. If, pursuant to the provisions described
above, payments were required to be made to Messrs. Bessler, Lubow and
Courtright (the most highly compensated Garden State executive officers named in
Garden State's most recent annual meeting proxy statement), the estimated amount
of such payments and benefits, taking into account the necessary reductions
would be $469,000, $396,000 and $308,000, respectively. The estimated amount of
payments and benefits to all the executive officers with change of control
agreements as a group would be $1,348,000.
After the announcement of the Merger, Summit and Mr. Bessler entered into
an informal written agreement pursuant to which Mr. Bessler would continue to be
employed after the Closing for six months until approximately May 31, 1996, at
an annual compensation of approximately $200,000 per year and his benefits would
be continued throughout that period.
Severance Payments. Unless an employee is entitled to a larger payment
under an employment or severance agreement, employees of Garden State and GS
Bank immediately prior to the Effective Time who become employees of Summit or
Summit Bank and are involuntarily terminated within one year thereafter, will
receive severance benefits at least as favorable as those provided in the
severance plan of Garden State and GS Bank in effect on the date of the Merger
Agreement.
Stock Options. At the Effective Time, each outstanding Garden State Option
shall be converted, at the election of the optionee, as follows:
(i) into an option to purchase Summit Common Stock, wherein (x) the
right to purchase shares of Garden State Common Stock pursuant to the
Garden State Option will be converted into the right to purchase that same
number of shares of Summit Common Stock multiplied by the Exchange Ratio,
36
<PAGE> 42
(y) the option exercise price per share of Summit Common Stock will be the
previous option exercise price per share of the Garden State Common Stock
divided by the Exchange Ratio and (z) in all other material respects the
option will be subject to the same terms and conditions as governed the
Garden State Option on which it was based, including without limitation the
remaining length of time within which the option may be exercised; or
(ii) if the Garden State Option is fully exercisable at the Closing,
into the right to receive immediately after the Effective Time a number of
whole shares of Summit Common Stock equal to the positive number (or zero,
if the result is negative) determined by (x) subtracting (i) the aggregate
exercise price for the Garden State Option from (ii) the product determined
by multiplying (A) the number of shares of Garden State Common Stock
covered by the Garden State Option, times (B) the Exchange Ratio, times (C)
the Average Closing Price, and (y) dividing the resulting number by the
Average Closing Price. No fractional shares of Summit Common Stock will be
issued, and in lieu thereof, each optionee who would otherwise be entitled
to a fractional interest will receive an amount in cash determined by
multiplying such fractional interest by the Average Closing Price.
As of November 30, 1995, no directors of Garden State had outstanding
Garden State Options. The sole executive officer of Garden State who owned
Garden State Options was Robert T. English, who owned 1,560 Garden State Options
as of such date.
REGULATORY APPROVALS
The Merger generally is subject to prior approval by the Federal Reserve
Board under Sections 3 and 4 of the BHCA. However, the Federal Reserve Board has
adopted a rule exempting from this prior approval requirement certain bank
holding company mergers where (as in the Merger and the Subsidiary Merger) there
will be a merger of two holding companies and the simultaneous merger of the
bank subsidiary of the acquired holding company with the bank subsidiary of the
acquiror, provided (1) the transaction requires the prior approval of a Federal
supervisory agency under the Bank Merger Act (12 U.S.C. sec.1828(c)); and (2)
certain other conditions are met. Summit filed an application for such exemption
with the Federal Reserve Board. On October 20, 1995 the Federal Reserve Board
approved Summit's application for an exemption under this provision.
The Subsidiary Merger is expected to occur immediately after the merger of
Garden State into Summit. The prior approval of the New Jersey Commissioner of
Banking (the "Commissioner") is required for the Subsidiary Merger. The
Commissioner may disapprove the Subsidiary Merger if the merged bank will not
meet applicable capital requirements, the Merger Agreement contains provisions
not conforming to applicable law, or the Commissioner finds that the Subsidiary
Merger will not be in the public interest.
Approval of the FDIC of the Subsidiary Merger is also required under
Section 18 of the Federal Deposit Insurance Act. The FDIC may deny approval of
the Subsidiary Merger if it finds that the Subsidiary Merger may result in a
monopoly or have significant anti-competitive effects, unless such
anti-competitive effects are clearly outweighed by the public interest in the
probable effect of the Subsidiary Merger in meeting the convenience and needs of
the community to be served.
Summit and Garden State are not aware of any material governmental waivers,
approvals or actions that are required for consummation of the Merger, except as
described above. Should any such additional approval or action be required, it
is presently contemplated that such approval or action would be sought.
As discussed above, the Federal Reserve Board has approved Summit's
applications for a waiver with respect to the Merger, and applications have been
submitted seeking the approvals of the Commissioner and the FDIC as described
above. The Merger cannot proceed in the absence of the requisite regulatory
approvals. See "THE MERGER -- Conditions to the Consummation of the Merger" and
"-- Termination." There can be no assurance that such regulatory approvals will
be obtained, and if obtained, there can be no assurance as to the date of any
such approval. There can also be no assurance that any such approvals will not
contain a condition or requirement which causes such approvals to fail to
satisfy the conditions set forth in the Merger Agreement and described below
under "THE MERGER -- Conditions to the Consummation of the
37
<PAGE> 43
Merger." There can likewise be no assurance that the United States Department of
Justice or the New Jersey Attorney General will not challenge the Merger on
antitrust grounds, or, if such a challenge is made, as to the result thereof.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Each of Summit's and Garden State's obligation to effect the Merger is
subject to the satisfaction or, where permissible by applicable law, waiver of
the following conditions:
(a) The Merger Agreement and the transactions contemplated thereby
shall have been approved by the requisite vote of the shareholders of
Garden State. The Registration Statement of which this Proxy
Statement-Prospectus is a part shall have been declared effective by the
Commission and shall not be subject to a stop order or any threatened stop
order, and the issuance of the Summit Common Stock shall have been
qualified in every state where such qualification is required under the
applicable state securities laws. The Summit Common Stock to be issued in
connection with the Merger, including Summit Common Stock to be issued for
the exercise of Garden State Options, shall have been included for
quotation on the NASDAQ/NMS or, if the outstanding Summit Common Stock is
then listed on a national securities exchange, shall have been approved for
listing on such exchange.
(b) All necessary regulatory or governmental approvals and consents
(including without limitation any required approval of the FDIC or the
Commissioner and any approval or waiver required by the Federal Reserve
Board) required to consummate the transactions contemplated by the Merger
Agreement shall have been obtained without any Burdensome Condition, which
is defined as a condition which materially impairs the value of Garden
State and GS Bank, taken as a whole, to Summit. All conditions required to
be satisfied prior to the Effective Time by the terms of such approvals and
consents shall have been satisfied; and all statutory waiting periods in
respect thereof shall have expired.
(c) No order, judgment or decree shall be outstanding against a party
to the Merger Agreement or a third party that would have the effect of
preventing completion of the Merger; no suit, action or other proceeding
shall be pending or threatened by any governmental body in which it is
sought to restrain or prohibit the Merger or the Subsidiary Merger; and no
suit, action or other proceeding shall be pending before any court or
governmental agency in which it is sought to restrain or prohibit the
Merger or the Subsidiary Merger or obtain other substantial monetary or
other relief against one or more parties to the Merger Agreement in
connection with the Merger Agreement and which Summit or Garden State
determines in good faith, based upon the advice of their respective
counsel, makes it inadvisable to proceed with the Merger because any such
suit, action or proceeding has a significant potential to be resolved in
such a way as to deprive the party electing not to proceed of any of the
material benefits to it of the Merger or the Subsidiary Merger.
(d) Summit and Garden State shall have received an opinion,
satisfactory to Summit and Garden State, of Bourne, Noll & Kenyon, counsel
to Summit, to the effect that the transactions contemplated by the Merger
Agreement will result in a reorganization (as defined in Section 368(a) of
the Code), and accordingly no gain or loss will be recognized for federal
income tax purposes to Summit, Garden State, Summit Bank or GS Bank or to
the shareholders of Garden State who exchange their shares of Garden State
for Summit Common Stock (except to the extent that cash is received in lieu
of fractional shares of Summit Common Stock).
(e) The Merger shall qualify to be treated by Summit as a pooling of
interests for accounting purposes.
The obligation of Summit to effect the Merger is also subject to the
satisfaction or waiver by Summit prior to the Effective Time of the following
conditions:
(a) The representations and warranties of Garden State contained in
the Merger Agreement shall be true and correct in all material respects on
the Closing Date as though made on and as of the Closing. Garden State
shall have performed in all material respects the agreements, covenants and
obligations necessary to be performed by it prior to the Closing.
38
<PAGE> 44
(b) Summit shall have received the written consents of any person
whose consent to the transactions contemplated by the Merger Agreement is
required under the applicable instrument.
(c) Summit shall have received an opinion of Pitney, Hardin, Kipp &
Szuch, counsel to Garden State, dated the date of the Closing, in form and
substance reasonably satisfactory to Summit, covering the matters set forth
in the Merger Agreement, all of which are matters of the type customarily
covered in connection with transactions of the type contemplated by the
Merger Agreement, and any other matters reasonably requested by Summit.
(d) GS Bank shall have taken all necessary corporate action to
effectuate the Subsidiary Merger immediately following the Effective Time.
(e) Garden State shall have furnished Summit with such certificates of
its officers or other documents to evidence fulfillment of the conditions
set forth in the Merger Agreement as Summit may reasonably request.
The obligation of Garden State to effect the Merger is also subject to the
satisfaction or waiver by Garden State prior to the Effective Time of the
following conditions:
(a) The representations and warranties of Summit contained in the
Merger Agreement shall be true and correct in all material respects on the
Closing as though made on and as of the Closing. Summit shall have
performed in all material respects, the agreements, covenants and
obligations to be performed by it prior to the Closing.
(b) Garden State shall have received an opinion of Bourne, Noll &
Kenyon, counsel to Summit, dated the date of the Closing, in form and
substance reasonably satisfactory to Garden State, covering the matters set
forth in the Merger Agreement, all of which are customarily covered in
connection with transactions of the type contemplated by the Merger
Agreement.
(c) Garden State shall have received an update of the opinion from
Advest rendered at the time of execution of the Merger Agreement to the
effect that, in its opinion, the consideration to be paid to shareholders
of Garden State in the Merger is fair to such shareholders from a financial
point of view, without adverse change to such opinion, (i) as of the date
not more than three days prior to the date the Proxy Statement/Prospectus
is mailed to Garden State's shareholders, and (ii) as of the Closing. The
first such updated opinion, dated December 8, 1995 has been received by
Garden State and is attached to this Proxy Statement-Prospectus as Appendix
C.
(d) Summit shall have taken all action necessary to assume in writing
and to honor the written employment agreements between Garden State and
certain of its executive officers.
(e) Garden State shall have received evidence, reasonably satisfactory
to it, that Summit shall have obtained the insurance referred to in the
Merger Agreement with respect to the former officers and directors of
Garden State.
(f) Summit shall have furnished Garden State with such certificates of
its officers or others and such other documents to evidence fulfillment of
the conditions set forth in the Merger Agreement as Garden State may
reasonably request.
REPRESENTATIONS AND WARRANTIES
In the Merger Agreement, each of Summit and Garden State have made certain
customary representations and warranties relating to, among other things (i)
each of Summit's and Garden State's and their respective subsidiaries'
organization and similar corporate matters; (ii) each of Summit's and Garden
State's capital structure; (iii) authorization, execution, delivery, performance
and enforceability of the Merger Agreement and related matters; (iv) financial
statements of each of Summit and Garden State, the accuracy of the information
set forth therein, and the absence of any liabilities except as incurred in the
ordinary course of business since the date of the most recent such statement,
(v) brokers and finders; (vi) the absence of certain changes in the business,
financial condition or results of operations of Summit and Garden State; (vii)
the absence of pending or threatened litigation except as disclosed by the
parties prior to the date of the Merger Agreement; (viii) filing of tax returns
and payment of taxes; (ix) retirement and other employee plans and matters
relating to the Employee Retirement Income Security Act of 1974, as amended
("ERISA");
39
<PAGE> 45
(x) documents filed by each of Summit and Garden State with the Commission and
the accuracy of information contained therein; (xi) the accuracy of information
supplied by each of Summit and Garden State in connection with this Proxy
Statement-Prospectus and the Registration Statement of which this Proxy
Statement-Prospectus forms a part; (xii) compliance with applicable law,
including, without limitation, the Community Reinvestment Act of 1977; (xiii) in
the case of Garden State, certain contracts relating to certain employment,
consulting and benefits matters; (xiv) title representations as to its
properties and representations as to insurance coverage; (xv) the accuracy of
corporate minute books; (xvi) certain environmental matters; (xvii) certain
representations regarding its loan portfolio, including the completeness and
accuracy of loan files and the adequacy of reserves for loan and lease losses;
(xviii) in the case of Garden State, the absence of any obligation to make any
"excess" parachute payment; as defined in Section 280G of the Code and the
regulations promulgated thereunder, to any present or former officer, director,
employee or agent; (xix) the absence of any material non-disclosure in
connection with the Merger Agreement and the accuracy of the representations and
warranties set forth therein; (xx) in the case of Garden State, absence of
agreements with bank regulators; (xxi) in the case of Garden State, ownership of
Summit's Common Stock; (xxii) in the case of Garden State, certain information
as to its investment securities owned; (xxiii) in the case of Garden State, the
absence of engagement in certain derivative transactions; and (xxiv) in the case
of Garden State, the receipt of the fairness opinion of Advest.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, Garden State has agreed to carry on its
business in the usual, regular and ordinary course in substantially the same
manner as conducted prior to the execution of the Merger Agreement. In addition,
Garden State has agreed that neither it nor any of its subsidiaries may, without
the written consent of Summit, among other things: (i) change its Certificate of
Incorporation or Bylaws or any similar governing documents in any manner; (ii)
except for the issuance of Garden State Common Stock pursuant to the present
terms of the outstanding Garden State Options and the Summit Stock Option,
change the number of shares of its authorized or issued common or preferred
stock or issue or grant any option, warrant, call, commitment, subscription,
right to purchase or agreement of any character relating to the authorized or
issued capital stock of Garden State or any Garden State subsidiary or any
securities convertible into shares of such stock, or split, combine or
reclassify any shares of its capital stock, or declare, set aside or pay any
dividend, or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, or redeem or otherwise
acquire any shares of such capital stock; provided, however, from the date of
the Merger Agreement to the Effective Time, Garden State may declare, set aside
or pay cash dividends per share of Garden State Common Stock equivalent to the
cash dividends per share declared, set aside or paid by Summit during such
period multiplied by the Exchange Ratio; (iii) grant any severance or
termination pay (other than pursuant to policies of Garden State in effect on
the date of the Merger Agreement and disclosed to Summit or as agreed to by
Summit in writing) to, or enter into or amend any employment agreement with, any
of its directors, officers or employees; adopt any new employee benefit plan or
arrangement of any type or amend any such existing benefit plan or arrangement;
or award any increase in an existing benefit plan or arrangement; or award any
increase in compensation or benefits to its directors, officers or employees
except with respect to salary increases in the ordinary course of business and
consistent with past practices and policies and except that Garden State may pay
bonuses to its officers in the fourth quarter of 1995 or the first quarter of
1996 in an amount not to exceed an amount disclosed to Summit as the maximum
amount which will be accrued for bonuses with respect to 1995 following accrual
practices consistent with those currently in effect; (iv) sell or dispose of any
substantial amount of assets or incur any significant liabilities other than in
the ordinary course of business consistent with past practices and policies; (v)
make any capital expenditures outside of the ordinary course of business other
than pursuant to binding commitments existing on the date of the Merger
Agreement and other than expenditures necessary to maintain existing assets in
good repair; (vi) file any applications or make any contract with respect to
branching or site location or relocation; (vii) agree to acquire in any manner
whatsoever (other than to realize upon collateral for a defaulted loan) any
business or entity or a substantial amount of the assets of any business or
entity; (viii) make any material change in its accounting methods or practices,
other than changes required in accordance with generally accepted accounting
principles; (ix) take any action that is intended or
40
<PAGE> 46
may reasonably be expected to result in any of its representations and
warranties set forth in the Merger Agreement being or becoming untrue in any
material respect, or in any of the conditions to the Merger set forth in the
Merger Agreement not being satisfied, or in violation of any provision of the
Merger Agreement, except, in every case, as may be required by applicable law;
(x) take or cause to be taken any action which is intended, or may reasonably be
expected, to result in disqualification of the Merger as a "pooling of
interests" for accounting purposes, provided, however, that this requirement
does not limit the ability of Summit to exercise its rights under the Option
Agreement; (xi) take any action to grant "dissenters" rights except as required
by applicable law; (xii) incur any indebtedness otherwise than in the ordinary
course of business; (xiii) except pursuant to commitments in effect on the date
of the Merger Agreement, make any loan (other than an extension of, renewal of,
or substitution for, an existing loan which extension, substitution or renewal
does not increase the aggregate amount of credit extended) (a "new loan") or any
commitment to make a new loan, to any of its officers, directors, or
shareholders owning more than 5% of the issued and outstanding Garden State
Common Stock (or any person or business entity controlled by or affiliated with
such officers, directors, or shareholders) other than in the ordinary course of
business; (xiv) make any new loan, or increase the aggregate amount of credit
extended, to a borrower or group of affiliated borrowers, or purchase any
security, or make any other investment, or commitment to do any of the
foregoing, in an amount in excess of $500,000, other than (A) pursuant to
commitments in effect on the date of the Merger Agreement and disclosed to
Summit, (B) in connection with liquidity management transactions entered into in
the ordinary course of business, or (C) with respect to the purchase of
securities or other obligations issued (or fully guaranteed as to principal and
interest) by the United States of America or any agency thereof or which are
rated "AAA" (or rating equivalent thereto) by a nationally recognized bond
rating agency (as to (C) above, in each case securities purchased shall not have
unexpired terms as of the date of purchase in excess of five years, except with
respect to fixed-rate mortgage-backed securities covered by (C) above, as to
which average maturities shall not exceed six years); (xv) sell or otherwise
dispose of or encumber any shares of capital stock of any Garden State
subsidiary; (xvi) fail to keep in full force and effect insurance and bonds at
least equal in scope and amount of coverage of insurance and bonds now carried;
(xvii) fail to notify Summit promptly of its receipt of any letter, notice or
other communication, whether written or oral, from any governmental entity
advising Garden State that it is contemplating issuing, requiring, or requesting
any agreement, memorandum of understanding, or similar undertaking, order or
directive; (xviii) fail to use its best efforts to remain in compliance with any
capital or other operating requirement of any regulatory agency to which it is
subject; (xix) fail to promptly notify Summit of (A) the commencement or threat
of any audit, action, or proceeding involving any material amount of taxes
against either Garden State or any Garden State subsidiary, or (B) the receipt
of Garden State or any Garden State subsidiary of any deficiency or audit
notices or reports in respect of any material deficiencies asserted by any
Federal, state, local or other tax authorities; (xxi) fail to use reasonable
efforts to maintain and keep its properties in as good repair and condition as
at present, except for depreciation due to ordinary wear and tear; (xxii) fail
to perform in all material respects all obligations required to be performed by
each of Garden State and any Garden State subsidiary under all material
contracts, leases, and business, except where such failure to perform,
individually and in the aggregate, would not have a material adverse effect on
Garden State and its subsidiaries, taken as a whole; or (xxiii) agree to do any
of the foregoing.
NO SOLICITATION
Garden State and GS Bank have agreed in the Merger Agreement not to,
directly or indirectly, encourage or solicit or hold discussions or negotiations
with, or provide any information to, any person, entity or group (other than
Summit) concerning any merger or sale of shares of capital stock or sale of
substantial assets or liabilities not in the ordinary course of business, or
similar transactions involving Garden State or GS Bank (an "Acquisition
Transaction"). Notwithstanding the foregoing, Garden State may enter into
discussions or negotiations or provide information in connection with an
unsolicited possible Acquisition Transaction if the Board of Directors of Garden
State, after consulting with counsel, determines that such discussions or
negotiations should be commenced in the exercise of its fiduciary
responsibilities or such information should be furnished in the exercise of its
fiduciary responsibilities. Garden State is required to promptly communicate to
Summit the terms of any proposal, whether written or oral, which it may receive
in respect of any
41
<PAGE> 47
Acquisition Transaction and the fact that it is having discussions or
negotiations with, or supplying information to, a third party in connection with
a possible Acquisition Transaction.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by mutual action taken by Summit and
Garden State at any time before or after approval of the Merger Agreement by the
shareholders of Garden State but, after any such approval, no amendment shall be
made which reduces or changes the amount or form of the consideration to be
delivered to the shareholders of Garden State without the approval of such
shareholders. The parties may extend the time for performance of the obligations
or other acts of the other party to the Merger Agreement, may waive any
inaccuracies in the representations and warranties contained in the Merger
Agreement or in any document delivered pursuant thereto and may waive compliance
with any agreements or conditions for their respective benefit contained in the
Merger Agreement. Any amendments, extensions or waivers must be in writing.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the shareholders of Garden State of
the matters presented in connection with the Merger: (i) by mutual written
consent of Summit and Garden State; (ii) by Summit or Garden State (a) if the
Effective Time shall not have occurred on or prior to June 30, 1996 or (b) if
such a vote of the shareholders of Garden State is taken and such shareholders
fail to approve this Agreement at the meeting (or any adjournment thereof) held
for such purpose, unless in each case the failure of such occurrence shall be
due to the failure of the party seeking to terminate the Merger Agreement to
perform or observe its agreements set forth therein to be performed or observed
by such party (or the directors of Garden State) at or before the Effective
Time; (iii) by Summit or Garden State upon written notice to the other if any
application for regulatory or governmental approval necessary to consummate the
Merger and the other transactions contemplated by the Merger Agreement shall
have been denied or withdrawn at the request or recommendation of the applicable
regulatory agency or governmental authority or by Summit upon written notice to
Garden State if any such application is approved with conditions which
materially impair the value of Garden State and GS Bank, taken as a whole, to
Summit; (iv) by Summit if there shall have occurred a material adverse change in
the business, operations, assets, or financial condition of Garden State or GS
Bank from that disclosed by Garden State on the date of the Merger Agreement;
(v) by Garden State, if there shall have occurred a material adverse change in
the business, operations, assets or financial condition of Summit or Summit Bank
from that disclosed by Summit on the date of the Merger Agreement; (vi) by
Summit or Garden State if any condition to Closing specified in the Merger
Agreement applicable to such party cannot reasonably be met after giving the
other party a reasonable opportunity to cure any such condition; (vii) by Garden
State if the Average Closing Price is less than $16.00; or (viii) by Garden
State if (A) the Average Closing Price is less than $17.00 but greater than or
equal to $16.00 and (B) Summit has not delivered a written notice to Garden
State unilaterally agreeing to increase the Exchange Ratio such that the value
(measured by the Average Closing Price) of the number of shares of Summit Common
Stock to be exchanged for one share of Garden State Common Stock in the Merger,
based on the new Exchange Ratio, is at least as high as the value would have
been if the Exchange Ratio were unchanged and the Average Closing Price were
$17.00.
In the event of termination of the Merger Agreement, the Merger Agreement
will become void and have no effect except (i) for certain specified provisions
of the Merger Agreement dealing with confidentiality and expenses, (ii) that the
Stock Option Agreement will be governed by its terms and (iii) that neither
party will be relieved or released from any liabilities or damages arising out
of the breach by the other party of any provisions of the Merger Agreement.
42
<PAGE> 48
EXPENSES
Whether or not the Merger is consummated, all costs and expenses incurred
in connection with the Merger Agreement and the transactions contemplated
thereby will be paid by the party incurring such expense, except for liabilities
and damages arising out of the willful breach of the Merger Agreement.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the principal federal income tax consequences
of the Merger to Garden State shareholders. The federal income tax discussion
set forth below may not be applicable to certain classes of taxpayers, including
insurance companies, securities dealers, financial institutions, foreign persons
and persons who acquired shares of Garden State Common Stock pursuant to the
exercise of employee stock options or rights or otherwise as compensation.
Garden State shareholders are urged to consult their own tax advisers as to
their own personal tax situation, including the applicability and effect of
state, local and other tax laws.
General. It is intended that the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code. It is a
condition of consummating the Merger that Summit and Garden State receive an
opinion, satisfactory to Summit and Garden State, of Bourne, Noll & Kenyon,
counsel to Summit, to the effect that the Merger will be treated as a
reorganization (as defined in Section 368(a) of the Code), and accordingly no
gain or loss will be recognized for federal income tax purposes to Summit,
Garden State, Summit Bank or GS Bank or to the shareholders of Garden State who
exchange their shares of Garden State for Summit Common Stock (except to the
extent that cash is received in lieu of fractional shares of Summit Common
Stock).
Consequences of Receipt of Cash in Lieu of Fractional Shares. A holder of
shares of Garden State Common Stock who receives cash in the Merger in lieu of a
fractional share interest in Summit Common Stock will be treated for federal
income tax purposes as having received cash in redemption of such fractional
share interest of Summit Common Stock. The receipt of such cash generally should
result in gain or loss in an amount equal to the difference between the amount
of cash received and the portion of such shareholder's adjusted tax basis in the
shares of Garden State Common Stock allocable to the fractional share interest.
Such gain or loss will be a capital gain or loss if the shares of Garden State
Common Stock are held by the holder as a capital asset at the Effective Time,
and such capital gain or loss will be long-term capital gain or loss if the
holding period for such shares of Garden State Common Stock is more than one
year.
ACCOUNTING TREATMENT
Consummation of the Merger is conditioned upon the qualification of the
Merger for pooling of interests accounting treatment if consummated in
accordance with the terms of the Merger Agreement. Under the pooling of
interests method of accounting, the historical basis of the assets and
liabilities of Summit and Garden State will be combined at the Effective Time
and carried forward at their previously recorded amounts and the shareholders'
equity accounts of Garden State and Summit will be combined on Summit's
consolidated balance sheet. Summit and Garden State believe that the Merger
qualifies for such accounting treatment. However, if it is determined that the
Merger does not qualify for pooling of interests accounting treatment, this
Proxy Statement-Prospectus will be amended, and the shareholders of Garden State
will be resolicited, as required by applicable law, should Summit and Garden
State mutually agree to proceed with the Merger.
All unaudited pro forma financial information contained in this Proxy
Statement-Prospectus has been prepared using the pooling of interests method to
account for the Merger. See "PRO FORMA FINANCIAL INFORMATION."
NO DISSENTERS' RIGHTS
Under New Jersey law, holders of Garden State Common Stock are not entitled
to dissenters' rights with respect to the Merger.
43
<PAGE> 49
CERTAIN RELATED TRANSACTIONS
STOCK OPTION AGREEMENT
General. As a condition to entering into the Merger Agreement, Summit
required that Garden State enter into the Stock Option Agreement, which allows
Summit to purchase Garden State Common Stock under certain circumstances.
Pursuant to the Stock Option Agreement, Garden State granted to Summit the
Option to purchase 752,770 shares (subject to adjustment) (the "Option Shares")
of Garden State Common Stock (representing approximately 24.7% of the issued and
outstanding shares of Garden State Common Stock on June 13, 1995) at an exercise
price of $15.75 per share (subject to adjustment). The Option may only be
exercised upon the occurrence of certain Triggering Events which are described
below (none of which has occurred to the best of Summit's or Garden State's
knowledge as of the date of this Proxy Statement-Prospectus).
Effect of Stock Option Agreement. The Stock Option Agreement is intended
to increase the likelihood that the Merger will be consummated in accordance
with the terms of the Merger Agreement. Consequently, certain aspects of the
Stock Option Agreement may have the effect of discouraging persons who might now
or prior to the consummation of the Merger be interested in acquiring all of or
a significant interest in Garden State from considering or proposing such an
acquisition, even if such persons were prepared to pay a higher price per share
for the Garden State Common Stock than the value per share contemplated by the
Merger Agreement. The acquisition of Garden State or an interest in Garden
State, or an agreement to do either, could cause the Option to become
exercisable. The existence of such Option could significantly increase the cost
to a potential acquiror of acquiring Garden State compared to its cost had the
Stock Option Agreement not been entered into. Such increased costs might
discourage a potential acquiror from considering or proposing an acquisition or
might result in a potential acquiror proposing to pay a lower per share price to
acquire Garden State than it might otherwise have proposed to pay.
Terms of Stock Option Agreement. The following is a brief summary of
certain provisions of the Stock Option Agreement, which is attached hereto as
Appendix B. The following summary is qualified in its entirety by reference to
the Stock Option Agreement.
Subject to applicable law and Summit not being in breach of its covenants
and agreements under the Merger Agreement, the Option is exercisable or
transferable only upon the occurrence of one of the following Triggering Events:
a person or group (as such terms are defined in the Exchange Act, and the rules
and regulations thereunder), other than Summit, or an affiliate of Summit, (i)
acquires beneficial ownership (as defined in Rule 13d-3 promulgated under the
Exchange Act) of at least 20 percent of the outstanding shares of Garden State
Common Stock, or (ii) enters into a written letter of intent or an agreement
with Garden State pursuant to which such person or any affiliate of such person
would (a) merge or consolidate or enter into any similar transaction with Garden
State, (b) acquire all or a significant portion of the assets or liabilities of
Garden State or (c) acquire beneficial ownership of securities representing, or
the right to acquire beneficial ownership or to vote securities representing,
20% or more of the then outstanding shares of Garden State Common Stock; or
(iii) makes a filing with any bank or thrift regulatory authority or publicly
announces a bona fide proposal (a "Proposal") for (a) any merger, consolidation
or acquisition of all or a significant portion of all the assets or liabilities
of Garden State or any other business combination involving Garden State, or (b)
a transaction involving the transfer of beneficial ownership of securities
representing, or the right to acquire beneficial ownership or to vote securities
representing, 20% or more of the outstanding shares of Garden State Common
Stock, and thereafter, if such Proposal has not been Publicly Withdrawn (as such
term is hereinafter defined) at least 15 days prior to the meeting of
shareholders of Garden State called to vote on the Merger and Garden State
shareholders fail to approve the Merger by the vote required by applicable law
at the meeting of shareholders called for such purpose; or (iv) makes a bona
fide Proposal and thereafter, but before such Proposal has been Publicly
Withdrawn, Garden State willfully take any such action in any manner which would
materially interfere with its desire or ability to consummate the Merger or
would materially reduce the value of the Merger to Summit.
44
<PAGE> 50
The term "Triggering Event" also means the taking of any direct or indirect
action by Garden State or any of its directors, officers or agents to invite,
encourage or solicit any proposal which has as its purpose a tender offer for
the shares of Garden State Common Stock, a merger, consolidation, plan of
exchange, plan of acquisition or reorganization of Garden State, or a sale of
shares of Garden State Common Stock or any significant portion of Garden State's
assets or liabilities.
The term "significant portion" means 25% of the assets or liabilities of
Garden State.
"Publicly Withdrawn" is defined in the Stock Option Agreement as an
unconditional bona fide withdrawal of the Proposal coupled with a public
announcement of no further interest in pursuing such Proposal or in acquiring
any controlling influence over Garden State or in soliciting or inducing any
other person (other than Summit or any affiliate) to do so.
Notwithstanding the foregoing, the Option may not be exercised at any time
(i) in the absence of any required governmental or regulatory approval or
consent necessary for Garden State to issue the Option Shares or Summit to
exercise the Option or prior to the expiration or termination of any waiting
period required by law, or (ii) so long as any injunction or other order, decree
or ruling issued by any federal or state court of competent jurisdiction is in
effect which prohibits the sale or delivery of the Option Shares.
The Option, to the extent not previously exercised, will terminate upon the
earliest of (i) 12 months after the first occurrence of a Triggering Event, (ii)
consummation of the Merger, (iii) the termination of the Merger Agreement in
accordance with the terms thereof prior to the occurrence of a Triggering Event
(other than if terminated by Summit due to a breach by Garden State of its
covenants, agreement or obligations contained in the Merger Agreement, or the
failure of Garden State's representations and warranties set forth in the Merger
Agreement to be true and correct in all material respects, (iv) 12 months after
the termination of the Merger Agreement for any reason, provided that the Option
will not terminate pursuant to this clause (iv) in the event that a Triggering
Event shall have occurred prior to the expiration of such 12-month period and
instead will terminate in accordance with clause (i) above.
The number and type of securities subject to the Option and the purchase
price of shares will be adjusted appropriately for any change in the Garden
State Common Stock by reason of a stock dividend, split-up, recapitalization,
combination, exchange of shares or similar transaction.
In the event Garden State (i) merges or consolidates with any person other
than Summit or one of its affiliates and Garden State is not the surviving
corporation, (ii) permits any person, other than Summit or one of its
subsidiaries, to merge into Garden State and Garden State is the surviving
corporation, but, in connection with such merger, the outstanding shares of
Garden State Common Stock are changed into or exchanged for stock or other
securities of Garden State or any other person or cash or any other property or
the outstanding shares of the issuer's common stock prior to such merger shall
after such merger represent less than 50% of the outstanding shares and share
equivalents of the merged company, or (iii) sells or otherwise transfers all or
substantially all of its assets to any person other than Garden State or one of
its subsidiaries, then, and in each such case, the agreement governing the
transaction must provide that, upon consummation of the transaction, the Option
will be converted into or exchanged for an option to purchase securities of
either the acquiring person, a person that controls the acquiring person or
Garden State (if Garden State is the surviving entity), in all cases at the
option of Summit.
Garden State has granted Summit certain registration rights with respect to
shares of Garden State Common Stock acquired by Summit upon exercise of the
option. These rights include that Garden State will file a registration
statement under the Securities Act if requested by Summit, after occurrence of a
Triggering Event provided that Summit shall in no event have the right to have
more than one such registration statement become effective and Garden State
shall not be required to maintain the effectiveness of such registration
statement for more than 180 days. Any such registration statement, and any sale
covered thereby, will be at the issuer's expense other than underwriting
discounts or commissions, brokers' fees and the fees and disbursements of
Summit's counsel related thereto. In connection with any registration described
above, Garden State and Summit will provide to each other and any underwriter of
the offering customary representations, warranties, covenants, indemnifications
and contributions.
45
<PAGE> 51
RESALES OF SUMMIT COMMON STOCK
The shares of Summit Common Stock issued pursuant to the Merger Agreement
will be freely transferable under the Securities Act except for shares issued to
any shareholder who may be deemed to be an "affiliate" of Garden State for
purposes of Rule 145 under the Securities Act as of the date of the Meeting.
Affiliates 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 such shares or in compliance with
Rule 145 under the Securities Act or another applicable exemption from the
registration requirements of the Securities Act. Persons who may be deemed to be
affiliates of Garden State generally include individuals or entities that
control, are controlled by or are under common control with Garden State and may
include certain officers and directors of Garden State as well as principal
shareholders of Garden State.
Summit and Garden State agreed in the Merger Agreement to cause each
director, executive officer and other person who is an affiliate of Summit or
Garden State to enter into an agreement with Summit providing that such persons
agree to be bound by the rules which permit the Merger to be treated as a
pooling of interests for accounting purposes, and in the case of the Garden
State affiliates, agreeing to be bound by the restrictions of Rule 145. See "THE
MERGER -- Accounting Treatment." The rules regarding pooling of interests
accounting treatment includes restrictions on sales or other dispositions of
Summit Common Stock or Garden State Common Stock by affiliates of either Summit
or Garden State during the period commencing 30 days prior to the Merger and
ending at the time of the publication of financial results covering at least 30
days of combined operations of Summit and Garden State.
46
<PAGE> 52
PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
The following unaudited pro forma condensed combined financial statements
reflect the Merger and the Pooling Acquisitions under the application of the
pooling-of-interests method of accounting. For a description of
pooling-of-interests accounting, see "THE MERGER -- Accounting Treatment." This
pro forma financial information is based on the estimates and assumptions set
forth in the notes to such statements. The pro forma adjustments made in
connection with the development of the pro forma information are preliminary and
have been made solely for purposes of developing such pro forma information as
necessary to comply with the disclosure requirements of the Commission. The pro
forma financial information has been prepared using the historical financial
statements and notes thereto appearing in Summit's Form 10-K, Garden State's
Form 10-K, UJB's Form 10-K and Flemington's Form 10-KSB each for the fiscal year
ended December 31, 1994. The unaudited pro forma condensed combined financial
statements do not purport to be indicative of the combined financial position or
results of operations of future periods or indicative of the results that
actually would have been realized had the entities been a single entity during
these periods.
The Pro Forma Condensed Combined Statements of Income give effect to the
proposed Merger by combining the respective statements of income of Summit,
Garden State, UJB and Flemington for the nine months ended September 30, 1995
and 1994 and for each of the three years in the period ended December 31, 1994.
The Pro Forma Condensed Combined Statements of Income do not give effect to
anticipated expenses and nonrecurring charges related to the Merger and the
Pooling Acquisitions and the estimated effect of revenue enhancements and
expense savings associated with the consolidation of the operations of Summit
and Garden State or those associated with the Pooling Acquisitions. Had these
expenses and nonrecurring charges been reflected in the Pro Forma Condensed
Combined Statements of Income for the nine months ended September 30, 1995,
Summit and Garden State Pro Forma net income would decrease by $4.4 million or
$0.12 per share and All Transactions Pro Forma net income would decrease by $61
million or $0.67 per share.
Earnings per common share amounts for Summit, Garden State, UJB and
Flemington are based on the historical weighted average number of common shares
outstanding for each company during the period. With respect to the pro forma
earnings per share computation, shares of Summit and Garden State have been
adjusted to the equivalent shares of Summit for the Summit and Garden State Pro
Forma computation and then subsequently adjusted with the shares of Flemington
to the equivalent shares of UJB for the All Transactions Pro Forma computation
for each period.
The pro forma financial information uses the Exchange Ratio of 1.08 shares
of Summit Common Stock for each share of Garden State Common Stock (resulting in
an effective exchange ratio of 0.972 shares of UJB Common for each share of
Garden State Common Stock), the Summit-UJB exchange ratio of 0.90 shares of UJB
Common for each share of Summit Common Stock, and the Exchange Ratio of 1.7241
shares of UJB Common for each share of Flemington common stock (the highest and
most dilutive of the fixed exchange ratios, see "CERTAIN INFORMATION REGARDING
THE SUMMIT-UJB MERGER -- Recent Developments Regarding UJB").
47
<PAGE> 53
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1995
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENT SUMMIT AND
GARDEN INCREASE GARDEN STATE
SUMMIT STATE (DECREASE) PRO FORMA UJB
---------- -------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks............ $ 259,414 $ 8,630 $ 268,044 $ 807,173
Interest bearing deposits
with banks....................... 13 77 90 15,938
Short-term investment securities... 68,870 14,500 83,370 2,000
Investment securities.............. 1,690,028 68,450 1,758,478 4,027,611
Loans.............................. 3,503,775 210,538 3,714,313 10,226,745
Less: Allowance for loan losses.. 90,819 4,110 94,929 200,337
---------- -------- ---------- -----------
Net loans.................... 3,412,956 206,428 3,619,384 10,026,408
Premises and equipment............. 43,667 8,071 51,738 163,774
Other real estate owned, net....... 13,401 3,347 16,748 27,082
Other assets....................... 130,951 4,401 $ 2,999(1) 138,351 463,084
---------- -------- ------- ---------- -----------
Total Assets....................... $5,619,300 $313,904 $ 2,999 $5,936,203 $15,533,070
========== ======== ======= ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits........................... $4,641,492 $283,856 $4,925,348 $12,871,632
Other borrowed funds............... 157,367 -- 157,367 936,043
Other liabilities.................. 65,456 1,422 $ 7,391(1) 74,269 257,060
Long-term debt..................... 270,402 -- 270,402 204,338
---------- -------- ------- ---------- -----------
Total liabilities.................. 5,134,717 285,278 7,391 5,427,386 14,269,073
Shareholders' Equity
Preferred stock.................. 12,612 -- 12,612 30,008
Common Stock..................... 50,172 12,302 62,474 69,098
Surplus............................ 314,068 9,900 323,968 490,781
Retained Earnings... 105,088 6,380 (4,392)(1) 107,076 677,631
Net unrealized gain (loss) on
securities, net of tax........... 2,643 44 2,687 (3,521)
---------- -------- ------- ---------- ----------
Total Shareholders' equity......... 484,583 28,626 (4,392) 508,817 1,263,997
---------- -------- ------- ---------- ----------
Total Liabilities and
Shareholders' Equity............. $5,619,300 $313,904 $ 2,999 $5,936,203 $15,533,070
========== ======== ======= ========== ===========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENT ALL
INCREASE TRANSACTIONS
FLEMINGTON (DECREASE) PRO FORMA
---------- ---------- ---------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks............ $ 10,591 $ 1,085,808
Interest bearing deposits
with banks....................... -- 16,028
Short-term investment securities... 850 86,220
Investment securities.............. 82,140 $ (4,208)(2) 5,864,021
Loans.............................. 190,386 14,131,444
Less: Allowance for loan losses.. 2,429 297,695
-------- -------- -----------
Net loans.................... 187,957 13,833,749
Premises and equipment............. 3,657 219,169
Other real estate owned, net....... 342 44,172
Other assets....................... 4,036 33,308(2)(4)(5) 638,779
-------- ------- -----------
Total Assets....................... $289,573 $ 29,100 $21,787,946
======== ======== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits........................... $257,725 $18,054,705
Other borrowed funds............... 8,640 1,102,050
Other liabilities.................. 4,034 $ 88,900(4)(5) 424,263
Long-term debt..................... -- 474,740
-------- -------- ----------
Total liabilities.................. 270,399 88,900 20,055,758
Shareholders' Equity
Preferred stock.................. -- 42,6200
Common Stock..................... 2,396 (22,808)(3) 111,160
Surplus............................ 10,237 20,650(2)(3) 845,636
Retained Earnings.................. 7,301 (56,340)(4)(5) 735,668
Net unrealized gain (loss) on
securities, net of tax........... (760) (1,302)(2) (2,896)
-------- -------- ----------
Total Shareholders' equity......... 19,174 (59,800) 1,732,188
-------- -------- ----------
Total Liabilities and
Shareholders' Equity............. $289,573 $ 29,100 $21,787,946
======== ======== ===========
</TABLE>
See Notes to Pro Forma Financial Information on page 54.
48
<PAGE> 54
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SUMMIT AND ALL
GARDEN GARDEN STATE TRANSACTIONS
SUMMIT STATE PRO FORMA UJB FLEMINGTON PRO FORMA
-------- ------- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Interest and fees on loans............ $216,902 $15,076 $231,978 $623,270 $ 11,387 $ 866,635
Interest on securities................ 76,253 2,984 79,237 190,296 3,756 273,289
Interest on federal funds sold and
securities purchased under agreements
to resell............................. 3,125 441 3,566 2,603 22 6,191
Interest on trading account
securities.......................... 37 -- 37 1,320 -- 1,357
Interest on bank balances............. 248 8 256 510 -- 766
-------- ------- -------- -------- ------- ----------
Total interest income.......... 296,565 18,509 315,074 817,999 15,165 1,148,238
Interest Expense
Interest on savings and time
deposits............................ 98,379 6,246 104,625 239,057 4,787 348,469
Interest on commercial certificates of
deposit $100,000 and over........... 11,900 902 12,802 18,860 703 32,365
Interest on borrowed funds............ 23,880 74 23,954 75,808 447 100,209
-------- ------- -------- -------- ------- ----------
Total interest expense......... 134,159 7,222 141,381 333,725 5,937 481,043
-------- ------- -------- -------- ------- ----------
Net interest income............ 162,406 11,287 173,693 484,274 9,228 667,195
Provision for loan losses............. 3,600 87 3,687 48,750 -- 52,437
-------- ------- -------- -------- ------- ----------
Net interest income after provision
for loan losses................... 158,806 11,200 170,006 435,524 9,228 614,758
Non-Interest Income
Service charges on deposit accounts... 15,112 1,137 16,249 49,665 731 66,645
Service and loan fee income........... 6,601 411 7,012 20,707 213 27,932
Trust income.......................... 8,740 462 9,202 16,421 134 25,757
Investment securities gains........... 1,610 -- 1,610 5,205 -- 6,815
Trading account gains................. 175 -- 175 777 -- 952
Other................................. 5,611 228 5,839 37,399 89 43,327
-------- ------- -------- -------- ------- ----------
Total non-interest income...... 37,849 2,238 40,087 130,174 1,167 171,428
Non-Interest Expenses
Salaries.............................. 45,670 4,082 49,752 146,639 3,413 199,804
Pension and other employee benefits... 14,955 1,146 16,101 47,072 1,057 64,230
Occupancy, net........................ 12,995 923 13,918 39,329 862 54,109
Furniture and equipment............... 7,032 582 7,614 37,965 575 46,154
Other real estate owned expenses...... 1,998 439 2,437 5,779 (84) 8,132
FDIC assessment....................... 5,176 332 5,508 13,710 255 19,473
Advertising and public relations...... 4,199 362 4,561 8,585 161 13,307
Other................................. 21,754 1,893 23,647 72,139 1,742 97,528
-------- ------- -------- -------- ------- ----------
Total non-interest expenses.... 113,779 9,759 123,538 371,218 7,981 502,737
-------- ------- -------- -------- ------- ----------
Income before income taxes.............. 82,876 3,679 86,555 194,480 2,414 283,449
Federal and state income taxes........ 29,524 1,183 30,707 70,118 831 101,656
-------- ------- -------- -------- ------- ----------
Net Income.............................. $ 53,352 $ 2,496 $ 55,848 $124,362 $ 1,583 $ 181,793
======== ======= ======== ======== ======= ==========
Net Income Per Common Share............. $ 1.56 $ 0.82 $ 1.49 $ 2.20 $ 1.65 $ 1.98
======== ======= ======== ======== ======= ==========
Average Common Shares Outstanding(2).... 33,658 3,054 36,956 55,946 958 90,720
======== ======= ======== ======== ======= ==========
</TABLE>
See Notes to Pro Forma Financial Information on page 54.
49
<PAGE> 55
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SUMMIT AND ALL
GARDEN GARDEN STATE TRANSACTIONS
SUMMIT STATE PRO FORMA UJB FLEMINGTON PRO FORMA
-------- ------- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Interest and fees on loans............ $178,040 $11,901 $189,941 $510,472 $ 9,130 $709,543
Interest on securities................ 69,461 3,259 72,720 188,484 4,268 265,472
Interest on federal funds sold and
securities purchased under agreements
to resell............................. 2,833 88 2,921 255 40 3,216
Interest on trading account
securities.......................... 59 -- 59 557 -- 616
Interest on bank balances............. 250 105 355 434 -- 789
-------- ------- -------- -------- ------ --------
Total interest income.......... 250,643 15,353 265,996 700,202 13,438 979,636
Interest Expense
Interest on savings and time
deposits............................ 72,375 4,818 77,193 173,752 3,833 254,778
Interest on commercial certificates of
deposit $100,000 and over........... 3,686 505 4,191 8,256 219 12,666
Interest on borrowed funds............ 17,849 11 17,860 62,890 227 80,977
-------- ------- -------- -------- ------ --------
Total interest expense......... 93,910 5,334 99,244 244,898 4,279 348,421
-------- ------- -------- -------- ------ --------
Net interest income............ 156,733 10,019 166,752 455,304 9,159 631,215
-------- ------- -------- -------- ------ --------
Provision for loan losses............. 6,795 467 7,262 55,500 -- 62,762
-------- ------- -------- -------- ------ --------
Net interest income after
provision for loan losses.... 149,938 9,552 159,490 399,804 9,159 568,453
Non-Interest Income
Service charges on deposit accounts... 13,378 915 14,293 48,474 631 63,398
Service and loan fee income........... 10,367 658 11,025 20,082 322 31,429
Trust income.......................... 8,501 397 8,898 16,410 118 25,426
Investment securities gains........... 180 125 305 1,846 50 2,201
Trading account gains................. 129 -- 129 522 -- 651
Other................................. 7,425 181 7,606 33,109 80 40,795
-------- ------- -------- -------- ------ --------
Total non-interest income...... 39,980 2,276 42,256 120,443 1,201 163,900
Non-Interest Expenses
Salaries.............................. 51,404 4,060 55,464 135,521 3,050 194,035
Pension and other employee benefits... 14,824 969 15,793 41,721 1,135 58,649
Occupancy, net........................ 14,444 908 15,352 38,492 891 54,735
Furniture and equipment............... 6,880 724 7,604 36,170 574 44,348
Other real estate owned expenses...... 2,760 1,215 3,975 14,467 76 18,518
FDIC assessment....................... 7,555 609 8,164 20,815 437 29,416
Advertising and public relations...... 2,991 310 3,301 8,039 178 11,518
Restructuring charges................. 13,565 -- 13,565 -- -- 13,565
Loss on sale of assets................ 35,390 -- 35,390 -- -- 35,390
Other................................. 24,897 1,665 26,562 70,925 1,457 98,944
-------- ------- -------- -------- ------ --------
Total non-interest expenses.... 174,710 10,460 185,170 366,150 7,798 559,118
-------- ------- -------- -------- ------ --------
Income before income taxes.............. 15,208 1,368 16,576 154,097 2,562 173,235
Federal and state income taxes ....... 7,351 75 7,426 56,539 952 64,917
-------- ------- -------- -------- ------ --------
Income before cumulative effect of a
change in accounting principle........ 7,857 1,293 9,150 97,558 1,610 108,318
Cumulative effect of a change in
accounting principle................ -- -- -- (1,731) -- (1,731)
-------- ------- -------- -------- ------ --------
Net Income.............................. $ 7,857 $ 1,293 $ 9,150 $ 95,827 $ 1,610 $106,587
======== ======= ======== ======== ====== ========
Net Income Per Common Share:
Income before cumulative effect of a
change in accounting principle...... $ 0.21 $ 0.59 $ 0.23 $ 1.76 $ 1.68 $ 1.21
Cumulative effect of a change in
accounting principle.................. -- -- -- (0.03) -- (0.02)
-------- ------- -------- -------- ------ --------
Net Income.............................. $ 0.21 $ 0.59 $ 0.23 $ 1.73 $ 1.68 $ 1.19
======== ======= ======== ======== ====== ========
Average Common Shares Outstanding(2).... 32,997 2,205 35,378 54,604 958 87,961
======== ======= ======== ======== ====== ========
</TABLE>
See Notes to Pro Forma Financial Information on page 54.
50
<PAGE> 56
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SUMMIT AND ALL
GARDEN GARDEN STATE TRANSACTIONS
SUMMIT STATE PRO FORMA UJB FLEMINGTON PRO FORMA
-------- ------- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Interest and fees on loans............ $244,980 $16,534 $261,514 $706,049 $ 12,733 $ 980,296
Interest on securities................ 93,525 4,274 97,799 253,027 5,641 356,467
Interest on federal funds sold and
securities purchased under agreements
to resell............................. 2,918 140 3,058 600 44 3,702
Interest on trading account
securities.......................... 79 -- 79 668 -- 747
Interest on bank balances............. 325 137 462 629 -- 1,091
-------- ------- -------- -------- ------- ----------
Total interest income.......... 341,827 21,085 362,912 960,973 18,418 1,342,303
Interest Expense
Interest on savings and time
deposits............................ 98,433 6,513 104,946 239,714 5,154 349,814
Interest on commercial certificates of
deposit $100,000 and over........... 7,066 766 7,832 13,639 346 21,817
Interest on borrowed funds............ 25,605 54 25,659 91,516 467 117,642
-------- ------- -------- -------- ------- ----------
Total interest expense......... 131,104 7,333 138,437 344,869 5,967 489,273
-------- ------- -------- -------- ------- ----------
Net interest income............ 210,723 13,752 224,475 616,104 12,451 853,030
Provision for loan losses............. 7,995 975 8,970 84,000 (622) 92,348
-------- ------- -------- -------- ------- ----------
Net interest income after
provision for loan losses.... 202,728 12,777 215,505 532,104 13,073 760,682
Non-Interest Income
Service charges on deposit accounts... 18,523 1,230 19,753 64,474 854 85,081
Service and loan fee income........... 11,468 773 12,241 27,531 408 40,180
Trust income.......................... 11,875 532 12,407 21,792 155 34,354
Investment securities gains
(losses)............................ 344 121 465 1,888 (328) 2,025
Trading account gains................. 177 -- 177 670 -- 847
Other................................. 9,611 257 9,868 43,933 85 53,886
-------- ------- -------- -------- ------- ----------
Total non-interest income...... 51,998 2,913 54,911 160,288 1,174 216,373
Non-Interest Expenses
Salaries.............................. 66,868 5,467 72,335 183,339 4,324 259,998
Pension and other employee benefits... 19,219 1,320 20,539 53,386 1,421 75,346
Occupancy, net........................ 18,868 1,198 20,066 50,749 1,197 72,012
Furniture and equipment............... 9,496 918 10,414 49,065 759 60,238
Other real estate owned expenses...... 3,053 1,404 4,457 18,287 158 22,902
FDIC assessment....................... 10,050 805 10,855 27,933 572 39,360
Advertising and public relations...... 4,761 474 5,235 10,843 252 16,330
Restructuring charges................. 13,565 -- 13,565 -- -- 13,565
Loss on sale of assets................ 35,390 -- 35,390 -- -- 35,390
Other................................. 32,416 2,556 34,972 94,597 2,096 131,665
-------- ------- -------- -------- ------- ----------
Total non-interest expenses.... 213,686 14,142 227,828 488,199 10,779 726,806
-------- ------- -------- -------- ------- ----------
Income before income taxes.............. 41,040 1,548 42,588 204,193 3,468 250,249
Federal and state income taxes
(benefit)........................... 16,640 (509) 16,131 72,312 1,288 89,731
-------- ------- -------- -------- ------- ----------
Income before cumulative effect of a
change in accounting principle........ 24,400 2,057 26,457 131,881 2,180 160,518
Cumulative effect of a change in
accounting principle................ -- -- -- (1,731) -- (1,731)
-------- ------- -------- -------- ------- ----------
Net Income.............................. $ 24,400 $ 2,057 $ 26,457 $130,150 $ 2,180 $ 158,787
======== ======= ======== ======== ======= ==========
Net Income Per Common Share:
Income before cumulative effect of a
change in accounting principle...... $ 0.70 $ 0.89 $ 0.71 $ 2.38 $ 2.28 $ 1.79
Cumulative effect of a change in
accounting principle.................. -- -- -- (0.03) -- (0.02)
-------- ------- -------- -------- ------- ----------
Net Income.............................. $ 0.70 $ 0.89 $ 0.71 $ 2.35 $ 2.28 $ 1.77
======== ======= ======== ======== ======= ==========
Average Common Shares Outstanding (2)... 33,090 2,308 35,583 54,697 958 88,238
======== ======= ======== ======== ======= ==========
</TABLE>
See Notes to Pro Forma Financial Information on page 54.
51
<PAGE> 57
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SUMMIT AND ALL
GARDEN GARDEN STATE TRANSACTIONS
SUMMIT STATE PRO FORMA UJB FLEMINGTON PRO FORMA
-------- ------- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Interest and fees on loans............ $232,981 $15,751 $248,732 $670,705 $ 10,952 $ 930,389
Interest on securities................ 89,793 4,898 94,691 234,020 6,268 334,979
Interest on federal funds sold and
securities purchased under agreements
to resell............................. 5,175 102 5,277 955 156 6,388
Interest on trading account
securities.......................... 68 -- 68 1,297 -- 1,365
Interest on bank balances............. 1,013 61 1,074 651 -- 1,725
-------- ------- -------- -------- ------- ----------
Total interest income.......... 329,030 20,812 349,842 907,628 17,376 1,274,846
Interest Expense
Interest on savings and time
deposits............................ 108,452 7,409 115,861 271,345 5,758 392,964
Interest on commercial certificates of
deposit $100,000 and over........... 2,065 528 2,593 7,319 231 10,143
Interest on borrowed funds............ 14,560 5 14,565 53,056 89 67,710
-------- ------- -------- -------- ------- ----------
Total interest expense......... 125,077 7,942 133,019 331,720 6,078 470,817
-------- ------- -------- -------- ------- ----------
Net interest income............ 203,953 12,870 216,823 575,908 11,298 804,029
Provision for loan losses............. 17,200 1,117 18,317 95,685 440 114,442
-------- ------- -------- -------- ------- ----------
Net interest income after
provision for loan losses.... 186,753 11,753 198,506 480,223 10,858 689,587
Non-Interest Income
Service charges on deposit accounts... 16,936 1,211 18,147 60,474 800 79,421
Service and loan fee income........... 11,751 1,065 12,816 21,063 355 34,234
Trust income.......................... 11,125 473 11,598 21,852 125 33,575
Investment securities gains
(losses)............................ 702 258 960 8,877 1,512 11,349
Trading account gains................. 331 -- 331 1,884 -- 2,215
Other................................. 10,472 217 10,689 49,151 160 60,000
-------- ------- -------- -------- ------- ----------
Total non-interest income...... 51,317 3,224 54,541 163,301 2,952 220,794
Non-Interest Expenses
Salaries.............................. 67,030 4,892 71,922 185,570 3,982 261,474
Pension and other employee benefits... 17,594 1,009 18,603 58,601 1,041 78,245
Occupancy, net........................ 18,619 1,138 19,757 48,487 992 69,236
Furniture and equipment............... 8,927 887 9,814 45,592 692 56,098
Other real estate owned expenses...... 6,849 4,319 11,168 40,925 1,387 53,480
FDIC assessment....................... 10,487 854 11,341 29,244 581 41,166
Advertising and public relations...... 4,443 293 4,736 10,517 227 15,480
Restructuring charges................. -- -- -- 21,500 -- 21,500
Other................................. 36,728 2,168 38,896 97,533 3,549 139,978
-------- ------- -------- -------- ------- ----------
Total non-interest expenses.... 170,677 15,560 186,237 537,969 12,451 736,657
-------- ------- -------- -------- ------- ----------
Income before income taxes.............. 67,393 (583) 66,810 105,555 1,359 173,724
Federal and state income taxes
(benefit)........................... 21,972 (46) 21,926 26,953 450 49,329
-------- ------- -------- -------- ------- ----------
Income before cumulative effect of a
change in accounting principle........ 45,421 (537) 44,884 78,602 909 124,395
Cumulative effect of a change in
accounting principle................ 5,303 -- 5,303 3,816 -- 9,119
-------- ------- -------- -------- ------- ----------
Net Income.............................. $ 50,724 $ (537) $ 50,187 $ 82,418 $ 909 $ 133,514
======== ======= ======== ======== ======= ==========
Net Income Per Common Share:
Income before cumulative effect of a
change in accounting principle...... $ 1.37 $ (0.31) $ 1.29 $ 1.43 $ 0.95 $ 1.41
Cumulative effect of a change in
accounting principle.................. 0.17 -- 0.15 0.07 -- 0.11
-------- ------- -------- -------- ------- ----------
Net Income.............................. $ 1.54 $ (0.31) $ 1.44 $ 1.50 $ 0.95 $ 1.52
======== ======= ======== ======== ======= ==========
Average Common Shares Outstanding(2).... 32,102 1,724 33,964 53,917 958 86,005
======== ======= ======== ======== ======= ==========
</TABLE>
See Notes to Pro Forma Financial Information on page 54.
52
<PAGE> 58
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1992
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SUMMIT AND ALL
GARDEN GARDEN STATE TRANSACTIONS
SUMMIT STATE PRO FORMA UJB FLEMINGTON PRO FORMA
-------- ------- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Interest and fees on loans............ $260,765 $18,176 $278,941 $713,987 $ 11,988 $1,004,916
Interest on securities................ 95,165 5,270 100,435 258,371 6,609 365,415
Interest on federal funds sold and
securities purchased under agreements
to resell............................. 4,997 96 5,093 4,615 136 9,844
Interest on trading account
securities.......................... 66 -- 66 1,367 -- 1,433
Interest on bank balances............. 1,503 19 1,522 668 -- 2,190
-------- ------- -------- -------- ------- ----------
Total interest income.......... 362,496 23,561 386,057 979,008 18,733 1,383,798
Interest Expense
Interest on savings and time
deposits............................ 140,546 10,167 150,713 366,023 7,874 524,610
Interest on commercial certificates of
deposit $100,000 and over........... 3,900 782 4,682 16,320 309 21,311
Interest on borrowed funds............ 20,586 6 20,592 47,382 103 68,077
-------- ------- -------- -------- ------- ----------
Total interest expense......... 165,032 10,955 175,987 429,725 8,286 613,998
-------- ------- -------- -------- ------- ----------
Net interest income............ 197,464 12,606 210,070 549,283 10,447 769,800
Provision for loan losses............. 25,998 5,501 31,499 139,555 770 171,824
-------- ------- -------- -------- ------- ----------
Net interest income after
provision for loan losses.... 171,466 7,105 178,571 409,728 9,677 597,976
Non-Interest Income
Service charges on deposit accounts... 16,233 1,137 17,370 54,356 757 72,483
Service and loan fee income........... 4,555 1,371 5,926 21,261 238 27,425
Trust income.......................... 10,899 314 11,213 19,837 87 31,137
Investment securities gains........... 710 915 1,625 18,485 208 20,318
Trading account gains................. 525 -- 525 1,804 -- 2,329
Other................................. 8,783 215 8,998 47,610 301 56,909
-------- ------- -------- -------- ------- ----------
Total non-interest income...... 41,705 3,952 45,657 163,353 1,591 210,601
Non-Interest Expenses
Salaries.............................. 63,007 4,585 67,592 179,457 3,651 250,700
Pension and other employee benefits... 15,429 737 16,166 51,209 971 68,346
Occupancy, net........................ 18,890 1,091 19,981 47,872 952 68,805
Furniture and equipment............... 8,908 858 9,766 42,404 698 52,868
Other real estate owned expenses...... 9,258 2,293 11,551 38,092 496 50,139
FDIC assessment....................... 9,349 637 9,986 26,047 505 36,538
Advertising and public relations...... 2,940 273 3,213 10,578 106 13,897
Other................................. 35,563 2,225 37,788 101,204 2,003 140,995
-------- ------- -------- -------- ------- ----------
Total non-interest expenses.... 163,344 12,699 176,043 496,863 9,382 682,288
-------- ------- -------- -------- ------- ----------
Income before income taxes.............. 49,827 (1,642) 48,185 76,218 1,886 126,289
Federal and state income taxes........ 16,340 (257) 16,083 19,430 655 36,168
-------- ------- -------- -------- ------- ----------
Net Income.............................. $ 33,487 $(1,385) $ 32,102 $ 56,788 $ 1,231 $ 90,121
======== ======= ======== ======== ======= ==========
Net Income Per Common Share............. $ 1.07 $ (0.80) $ 0.96 $ 1.09 $ 1.28 $ 1.08
======== ======= ======== ======== ======= ==========
Average Common Shares Outstanding(2).... 30,220 1,724 32,082 50,398 958 80,792
======== ======= ======== ======== ======= ==========
</TABLE>
See Notes to Pro Forma Financial Information on page 54.
53
<PAGE> 59
NOTES TO PRO FORMA FINANCIAL INFORMATION
(1) Reflects charges of approximately $7.4 million, $4.4 million after the
related tax effects, which includes estimated severance and outplacement
costs, expenses related to facilities closures, and consolidation costs
directly attributable to the Merger.
(2) Reflects the elimination of shares of UJB Common and shares of Flemington
common stock owned by Summit.
(3) The Pro Forma Condensed Combined Balance Sheet gives effect to the Merger
and the Pooling Acquisitions by combining the respective balance sheets of
Summit, Garden State, UJB and Flemington at September 30, 1995 on a
pooling-of-interests basis. The capital accounts have been adjusted to
reflect the issuance of 35.3 million shares of UJB Common, par value $1.20,
in exchange for all the outstanding shares of Summit, Garden State and
Flemington.
(4) Reflects charges of approximately $85 million, $54 million after the related
tax effects, which includes estimated severance and outplacement costs,
expenses related to facilities closures, and consolidation costs directly
attributable to the Summit-UJB Merger.
(5) Reflects the charges of approximately $3.9 million, $2.3 million after the
related tax effects, which includes estimated severance and outplacement
costs, expenses related to facilities closures, and consolidation costs
directly attributable to the merger of Flemington into UJB.
54
<PAGE> 60
DESCRIPTION OF SUMMIT CAPITAL STOCK
GENERAL
Summit's authorized capital stock consists of 50,000,000 shares of Common
Stock and 12,000,000 shares of Preferred Stock, no par value ("Preferred
Stock"), issuable in one or more series and with such terms as of Summit's Board
of Directors (the "Board") determines. As of September 30, 1995, there were
33,897,869 shares of Summit Common Stock outstanding and 504,481 shares of
Cumulative Adjustable Rate Preferred Stock outstanding. As of September 30,
1995, there were 2,017,568 shares of Common Stock reserved for issuance under
various stock incentive plans, 2,415,382 shares of Summit Common Stock reserved
for issuance under the Dividend Reinvestment and Stock Purchase Plan (described
below) and 250,000 shares of Series B Junior Participating Preferred Stock
reserved for issuance under the Summit Shareholder Rights Plan (described
below).
The following summary does not purport to be complete and is subject in all
respects to the applicable provisions of the NJBCA, Summit's Restated
Certificate of Incorporation, including Certificates of Designation pursuant to
which the outstanding series of Preferred Stock were issued, and Summit's
Shareholder Rights Plan and Dividend Reinvestment and Stock Purchase Plan.
SUMMIT COMMON STOCK
Holders of Summit Common Stock are entitled to receive dividends when and
as declared by the Board out of funds legally available therefor, provided that,
so long as any shares of Preferred Stock are outstanding, no dividends (other
than dividends payable in Summit Common Stock) or other distributions (including
redemptions and purchases) may be made with respect to the Summit Common Stock
unless full dividends on the shares of Preferred Stock, including accumulations,
have been paid.
In the event of liquidation of Summit, holders of Summit Common Stock would
be entitled to receive pro rata any assets legally available for distribution to
holders of Summit Common Stock with respect to shares held by them, subject to
any prior rights of any Preferred Stock then outstanding.
The Summit Common Stock does not have any preemptive rights, redemption
privileges, sinking fund privileges, or conversion rights. All the outstanding
shares of such Summit Common Stock are, and all of the Summit Common Stock
offered hereby will be, validly issued, fully paid and nonassessable.
Subject to the rights of the Preferred Stock under certain circumstances,
the holders of outstanding Summit Common Stock are entitled to one vote per
share with no cumulative voting.
Summit's Restated Certificate of Incorporation and Bylaws provide for a
classified Board by dividing the Board into three classes of approximately equal
size. Directors are generally elected for three-year terms which have been
established so that the terms of office of approximately one-third of the
members of the Board expire each year.
First Chicago Trust Company of New York is the transfer agent, dividend
disbursing agent and registrar for the Summit Common Stock.
Summit's Restated Certificate of Incorporation also provides that no merger
or consolidation or similar transaction involving Summit may be effected without
the approval of voting securities representing at least two-thirds of the votes
entitled to be cast (excluding share owned by 5% shareholders and their
affiliates) unless the Board has previously approved the transaction or unless
certain fair price tests, meant to ensure equal price treatment for all
shareholders, are met. The effect of this provision, together with the
provisions for the classified Board of Directors and Shareholder Rights Plan
(described below) may make it difficult for any person to acquire control of
Summit and remove management by means of a hostile takeover.
PREFERRED STOCK
Summit's only issued and outstanding series of Preferred Stock is the
Summit Adjustable Preferred. The holders of the Summit Adjustable Preferred
shares are entitled to receive, when and as declared by the Board, cumulative
preferred dividends payable quarterly in cash at the Applicable Rate (as defined
below) in effect
55
<PAGE> 61
at the time of declaration. The Applicable Rate for any dividend period is 2.75%
below the highest of the three-month Treasury Bill Rate, the Ten-Year Constant
Maturity Rate and the Twenty-Year Constant Maturity Rate, which are average
yields on certain U.S. Treasury fixed rate securities, as published by the
Federal Reserve Board, determined in advance of the dividend period. However,
the Applicable Rate for any dividend period will not be less than 6% per annum
nor greater that 12% per annum. Shares of the Summit Adjustable Preferred are
redeemable, in whole or in part, at $25.00 per share.
No shares of Summit's Series B Junior Participating Preferred stock are
outstanding. See "Shareholder Rights Plan" below.
First Chicago Trust Company of New York is the transfer agent, dividend
disbursing agent and registrar for the Summit Adjustable Preferred.
SHAREHOLDER RIGHTS PLAN
Summit's Shareholder Rights Plan (the "Rights Plan") is intended to protect
shareholders in the event of certain unsolicited offers or attempts to acquire
Summit. The Plan provides that attached to each share of Summit Common Stock is
one Right which, when exercisable, entitles the holder of the Right to purchase
one-hundredth of a share of Series B Junior Participating Preferred Stock at a
Purchase Price of $70, subject to adjustment. In certain events (such as a
person or group acquiring or announcing an intent to acquire 15% or more of the
Summit Common Stock or the Board of Directors determining that 10% or more of
the Common Stock has been acquired by an "Adverse Person" as defined in the
Shareholder Rights Plan), exercise of the Rights would entitle the holder of
Summit Rights to purchase Summit Common Stock or common stock in a surviving
corporation with a market value of two times the exercise purchase price, as
defined in the Rights Plan. Accordingly, exercise of the Rights may cause
substantial dilution to a person that attempts to acquire Summit. The Rights
automatically attach to each outstanding share of Summit Common Stock including
the shares offered hereby. There is no monetary value presently assigned to the
Rights, and they do not trade separately from the shares of Summit Common Stock
unless and until they become exercisable. The Rights expire on January 15, 2000.
The Rights Plan may have certain antitakeover effects, although it is not
intended to preclude any prospective offer for all outstanding shares of Summit
Common Stock at a fair price and otherwise in the best interests of Summit and
its shareholders as determined by the Summit Board. However, a shareholder could
potentially disagree with the Summit Board's determination of what constitutes a
fair price or the best interests of Summit and its shareholders. In connection
with its approval of the Summit-UJB Merger Agreement, the Summit Board amended
the Rights Plan to provide that the Summit-UJB Merger Agreement, the Summit
Stock Option, the UJB Stock Option, and the transactions contemplated thereby
would not constitute an event which would entitle holders of Rights to exercise
such Rights.
The foregoing description of the Rights Plan does not purport to be
complete and is qualified in its entirety by reference to the terms of the
Rights Plan, which is more fully described in Summit's Registration Statement on
Form 8-A filed on February 5, 1990, including all amendments thereto and reports
filed under the Exchange Act for the purpose of updating such description.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Summit's Dividend Reinvestment and Stock Purchase Plan, as amended, (the
"DRP Plan") permits Summit's shareholders to purchase newly issued Common Stock
at up to a 3.5% discount from the Current Market Price (as defined in the DRP
Plan). As long as Summit continues to issue Common Stock under the DRP Plan,
Summit anticipates that proceeds from sales under DRP Plan will increase its
equity capital and the number of shares of Common Stock outstanding on a
systematic and continuing basis.
56
<PAGE> 62
DESCRIPTION OF UJB CAPITAL STOCK
GENERAL
UJB is presently authorized to issue 130,000,000 shares of Common Stock,
par value $1.20 per share, and 4,000,000 shares of Preferred Stock. As of
September 30, 1995, there were 57,581,872 shares of UJB Common and 600,166
shares of UJB Series B Preferred Stock outstanding and 600,000 shares of UJB
Series R Preferred Stock reserved for issuance in UJB's Restated Certificate of
Incorporation under UJB's Shareholder Rights Plan (the "UJB Rights Plan").
Pursuant to the NJBCA, the UJB Board has authority to set the terms and
conditions of the authorized but unissued UJB Preferred Stock. UJB may issue any
authorized UJB Common and UJB Preferred Stock without further shareholder vote,
unless required for a particular transaction by applicable law or stock exchange
rules, including rules of the NYSE, on which UJB Common and UJB Series B
Preferred Stock are presently listed. The issuance of additional UJB Common or
UJB Preferred Stock, including UJB Preferred Stock that might be convertible
into UJB Common, may, among other things, affect the earnings per share
applicable to existing UJB Common and the equity and voting rights of existing
holders of UJB Common.
The following summary does not purport to be complete and is subject in all
respects to the applicable provisions of the NJBCA, UJB's Restated Certificate
of Incorporation, including Certificates of Designation pursuant to which the
UJB Series B Preferred Stock was issued the UJB Rights Plan.
UJB COMMON STOCK
The rights of holders of UJB Common are subject to the preferences of
holders of the Series B Preferred Stock described below and the preferences as
to dividends and liquidation rights and other prior rights, if any, of any other
class or series of UJB Preferred Stock that may be issued. The holders of UJB
Common are entitled to one vote for each share with respect to all matters voted
upon by shareholders, including the election of directors, and are entitled to
receive dividends when, as and if declared by the UJB Board out of funds of UJB
legally available therefor. Shares of UJB Common do not have cumulative voting
rights; accordingly, at any Annual Meeting of UJB shareholders (or at any
special meeting of shareholders where an election of directors is conducted) the
holders of 50 percent plus 1 of the shares presented at the Annual Meeting
(provided a quorum is present) can fill all positions of the UJB Board that are
up for election at such Annual Meeting if they so choose and, in such event, the
holders of the remaining less than 50 percent of the shares will not be able to
fill any of such positions. UJB 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 UJB, holders of UJB Common are entitled to share pro rata in
the distribution of UJB's assets available for such purpose. All shares of UJB
Common are fully paid and nonassessable. No preemptive rights attach to the
ownership of UJB Common and no personal liability is imposed on the holders
thereof by reason of the ownership of such shares. First Chicago Trust Company
of New York is the transfer agent, dividend disbursing agent and registrar for
the UJB Common. UJBank is the co-transfer agent. Preferred stock purchase rights
attached to the UJB Common which became exercisable only under certain
circumstances are described below. See "-- Shareholder Rights Plan."
PREFERRED STOCK
The UJB Series B Preferred is entitled to cumulative dividends that are
payable quarterly on February 1, May 1, August 1 and November 1 of each year.
For each quarterly period, the dividend rate will be determined in advance of
such period, and will be 1.5 percent less than the highest of the 3-month U.S.
Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year
Constant Maturity Rate, which are average yields on certain U.S. Treasury fixed
rate securities, as published by the Federal Reserve Board. However, the
dividend rate for any dividend period will not be less than 6 percent per annum
nor greater than 11 percent per annum. The UJB Series B Preferred Stock is
redeemable at the option of UJB, in whole or in part, at $50 per share, plus
accrued and unpaid dividends. Holders of UJB Series B Preferred Stock have the
right to vote as a class on certain amendments to the Restated Certificate of
Incorporation of UJB that may affect the UJB Series B Preferred Stock and to
elect two directors in the event of a failure to pay full
57
<PAGE> 63
cumulative dividends for six quarters. They have no other voting rights. The UJB
Series B Preferred Stock is not convertible into shares of UJB Common and has no
preemptive rights. The UJB Series B Preferred Stock is not subject to any
sinking fund or other repurchase or retirement obligation of UJB. First Chicago
Trust Company of New York is the transfer agent, dividend disbursing agent and
registrar for shares of the UJB Series B Preferred Stock.
SHAREHOLDER RIGHTS PLAN
The UJB Rights Plan is similar to Summit's Rights Plan. Pursuant to the UJB
Rights Plan holders of shares of UJB Common possess one preferred stock purchase
right for each share of UJB Common held by them. Each preferred stock purchase
right entitles the holder to buy, as of the close of business on the tenth day
following the occurrence of certain takeover-related events, one-hundredth of a
share of a new series of Preferred Stock, designated the Series R Preferred
Stock, at $90 one-hundredth share, with full shares having rights per share
equal to 100 times the rights of UJB Common with respect to voting, dividends
and distributions upon liquidation or merger as well as entitling the holder to
an additional preferential dividend. Upon the occurrence of certain subsequently
occurring events, holders of the preferred stock purchase rights become entitled
to purchase either shares of the Series R Preferred Stock of UJB (if not already
purchased) or a number of shares of the "acquiring person" (as defined in the
UJB Rights Plan) equal in market value to twice the exercise price of the
preferred stock purchase right. The UJB Board has the power to redeem the
preferred stock purchase rights at any time but, after the preferred stock
purchase rights become exercisable, it may do so only upon the majority vote of
non-management directors in connection with a business combination it has
approved.
The combination of prohibitive dilution of the "acquiring person's" share
values and the power of the UJB Board to redeem the UJB rights is intended to
encourage potential acquiring persons to negotiate with the UJB Board with
respect to the terms of any acquisition or business combination and, to the
extent possible, discourage or defeat partial or two-tiered acquisition
proposals.
COMPARISON OF RIGHTS OF SHAREHOLDERS
NOTE: THE INFORMATION BELOW RELATING TO UJB WILL BE APPLICABLE TO GARDEN
STATE SHAREHOLDERS ONLY IF THE SUMMIT-UJB MERGER IS CONSUMMATED.
AUTHORIZED SHARES
Summit. Summit's authorized capital stock consists of 50,000,000 shares of
Summit Common Stock and 12,000,000 shares of Preferred Stock, no par value
("Preferred Stock"), issuable in one or more series and with such terms as of
Summit's Board of Directors (the "Board") determines. As of September 30, 1995,
there were 33,897,869 shares of Summit Common Stock outstanding and 504,481
shares of Cumulative Adjustable Rate Preferred Stock outstanding. Summit's Board
is authorized by Summit's Restated Certificate of Incorporation, as amended, to
issue shares of Preferred Stock in series and classes and to fix, from time to
time, the number of shares to be included in any class and series and the par
value, dividend rights, voting rights, redemption rights, designation, relative
rights, preferences and limitations, and all other characteristics and rights of
the shares of each class and series.
UJB. The Restated Certificate of Incorporation of UJB authorizes the
issuance of 130,000,000, shares of UJB Common and 4,000,000 shares of preferred
stock, no par value. As of September 30, 1995, there were 57,581,872 shares of
UJB Common and 600,166 shares of the Adjustable Rate Cumulative Preferred Stock
of UJB, Series B ($50 stated value) ("UJB Series B Preferred") outstanding and
600,000 shares of UJB Series R Preferred reserved in UJB's Restated Certificate
of Incorporation for issuance under the UJB Rights Plan. The Restated
Certificate of Incorporation of UJB and the NJBCA authorize the UJB Board to
amend the Restated Certificate of Incorporation without shareholder concurrence
to divide the authorized shares of preferred stock into series, to determine the
designations and the number of any such series, and to determine the relative
voting, dividend, conversion, redemption, liquidation and other rights,
preferences and limitations of the authorized shares of preferred stock.
58
<PAGE> 64
Garden State. The authorized capital stock of Garden State consists of
4,088,091 shares of Garden State Common Stock, no par value per share of which
3,114,953 shares are issued and outstanding as of September 30, 1995 and
1,000,000 shares of preferred stock with no shares issued and outstanding as of
September 30, 1995. Garden State's Certificate of Incorporation permits the
Garden State Board to issue shares of preferred stock and to fix and state the
powers, designations, preferences and relative participations thereof. Each
share of each series of preferred stock has the same relative powers,
preferences and rights as and is identical in all respects with all the other
shares of Garden State of the same series.
VOTING
Summit. Subject to the rights of the Preferred Stock under certain
circumstances, the holders of outstanding Summit Common Stock are entitled to
one vote with no cumulative voting. The affirmative vote of a plurality of votes
cast by the shares entitled to vote at a meeting at which a quorum is present is
required to elect directors. Summit's Restated Certificate of Incorporation also
provides that no merger or consolidation or similar transaction involving Summit
may be effected without the approval of voting securities representing at least
two-thirds of the votes entitled to be cast (excluding shares owned by 5%
shareholders and their affiliates) unless the Board has previously approved the
transaction or unless certain fair price tests, meant to ensure equal price
treatment for all shareholders, are met. The effect of this provision, together
with the provisions for the classified Board of Directors and the Rights Plan
may make it difficult for any person to acquire control of Summit and remove
management by means of a hostile takeover.
UJB. By virtue of the NJBCA, the affirmative vote of a plurality of the
votes cast by shares entitled to vote at a meeting at which a quorum is present
is required to elect UJB directors. In addition, the Restated Certificate of
Incorporation of UJB requires that resolutions increasing the number of
directors be approved by 80% of, as the case may be, directors holding office or
shares of capital stock of UJB entitled to vote generally in the election of
directors, voting as a single class. The Restated Certificate of Incorporation
of UJB further provides that the affirmative vote of the holders of 80% or more
of the combined voting shares of UJB, 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. Similar to the Summit voting provisions discussed
above, the effect of these provisions is to make it difficult for persons other
than those negotiating directly with the UJB Board to acquire seats on the UJB
Board and obtain control of UJB.
Garden State. Each share of Garden State Common Stock is entitled to one
vote. The affirmative vote of a plurality of votes cast by the shares entitled
to vote at a meeting at which a quorum is present is required to elect directors
and approve certain actions which require shareholder approval. Garden State's
Certificate of Incorporation, as amended, also provides that certain merger,
consolidation or similar business combinations with an Interested Shareholder
(defined generally as the direct or indirect beneficial owner of more than 10%
of Garden State's Common Stock) or an affiliate of an Interested Shareholder,
requires the affirmative vote of 80% of the then outstanding shares of Garden
State capital stock then entitled to vote as to such business combination,
voting as a class. Such higher vote is not required if the business combination
either (i) is approved by a majority of the Garden State directors who are not
affiliated with the Interested Shareholder, or (ii) meets certain fair pricing
and procedure tests meant to insure equal treatment of all shareholders. In
addition, Garden State's Certificate of Incorporation, as amended, provides that
the Garden Sate Board, when evaluating any offer of another party to (i)
purchase or exchange any securities or property for any outstanding equity
securities of Garden State, (ii) merge or consolidate Garden State with another
corporation, or (iii) purchase or otherwise acquire all or substantially all of
the properties and assets of Garden State (each of the foregoing, an
"Acquisition Proposal") shall, in connection with the exercise of its judgment
in determining what is in the best interests of Garden State and its
shareholders, give due consideration not only to the price or other
consideration being offered but also to all other relevant factors, including
without limitation the financial and managerial resources and future prospects
of the other party, and the possible effects of the Acquisition Proposal on the
business of Garden State and its subsidiaries and on the employees, customers,
suppliers and creditors of Garden State and its subsidiaries and the effects of
the Acquisition Proposal on the communities in which Garden State's facilities
are located. In so evaluating any Acquisition Proposal, the
59
<PAGE> 65
Board shall de deemed to be performing their duly authorized duties and acting
in good faith and in the best interests of Garden State within the meaning of
the NJBCA.
The effect of these provisions together with the provisions for a
classified Board of Directors, may make it difficult for any person to acquire
control of Garden State by means of a hostile takeover.
BOARD OF DIRECTORS
Summit. Summit's Restated Certificate of Incorporation provides that
shareholders are not entitled to cumulate their votes in the election of
directors. Summit's Restated Certificate of Incorporation and Bylaws provide for
a classified Board by dividing the Board into three class of approximately equal
size. Directors are generally elected for three-year terms which have been
established so that the terms of office of approximately one-third of the
members of the Board expire each year.
UJB. The Restated Certificate of Incorporation of UJB divides the UJB
Board into three classes, with each class of directors serving a staggered term
of three years. Each class of directors must consist, as nearly as possible, of
one third of the number of directors constituting the entire UJB Board.
Presently there are four directors in Class I, five directors in Class II and
four directors in Class III.
Garden State. Garden State's Certificate of Incorporation provides that
shareholders are not entitled to cumulate their votes in the election of
directors. Garden State's Certificate of Incorporation provides that the Garden
State Board is divided into three classes as nearly equal in number as possible.
The directors in each class serve for terms of three years and until their
successors are elected and qualified. A director of Garden State may be removed
only at a special meeting called expressly for that purpose, for cause and only
by the vote of 80% of the shares entitled to vote at an election of directors.
INDEMNIFICATION
Summit. Article X of Summit's Bylaws provides that Summit shall indemnify
each director, officer or employee to the full extent permitted by law. Summit
may, in a specific case, indemnify any other corporate agent to any extent
permitted by law.
UJB. Section 5 of UJB's By-Laws provides that corporate agents of UJB
shall be indemnified and held harmless by UJB to the fullest extent authorized
by the laws of the State of New Jersey against expenses and liabilities arising
in connection with actions performed by the corporate agent on behalf of UJB.
Garden State. Garden State's Certificate of Incorporation provides that
Garden State shall indemnify all present and former officers, directors,
employees or agents (each a "Covered Person") to the full extent permitted by
law.
Garden State's Certificate of Incorporation also permits the Board of
Directors to purchase and maintain insurance on behalf of any Covered Person
against any liability asserted against him and incurred by him arising out of
his status as a Covered Person, whether or not Garden State would have the power
to provide indemnification otherwise under its Certificate of Incorporation.
LIMITATION OF LIABILITY
Summit. Summit's Restated Certificate of Incorporation provides that no
director or officer of Summit shall be personally liable to Summit or its
shareholders for damages for breach of any duty owed to Summit or its
shareholders, except that such provisions shall not relieve a director or
officer from liability for any breach of duty based upon an act or omission (i)
in breach of such person's duty of loyalty to Summit or its shareholders, (ii)
not in good faith or involving a knowing violation of law or (iii) resulting in
receipt by such person of an improper personal benefit.
UJB. UJB's Restated Certificate of Incorporation contains provisions
substantially similar to those in Summit's Restated Certificate of Incorporation
respecting the personal liability of directors.
60
<PAGE> 66
Garden State. Garden State's Certificate of Incorporation provides that
directors and officers of Garden State have not personal liability to Garden
State or its shareholders for damages for breach of any duty owed to Garden
State or its shareholders except for liability for any breach of any duty based
upon an act or omission (i) in breach of such person's duty of loyalty to Garden
State or its shareholders; (ii) not in good faith or involving a knowing
violation of the law; or (iii) resulting in the receipt by such person of an
improper personal benefit.
SPECIAL MEETINGS
Summit. Article I of Summit's Bylaws provides that a special meeting of
shareholders may be called for any purpose, at any time, by the Chairman, the
President or the Board, and shall be called by the President upon the written
report of shareholders holding 10% or more of Summit's outstanding shares of
capital stock eligible to vote at a shareholders meeting.
UJB. The Restated Certificate of Incorporation of UJB requires that all
actions by the shareholders of UJB be taken at a duly called annual or special
meeting of UJB's shareholders or by unanimous, but not less than unanimous,
written consent of the shareholders. An additional provision in the Restated
Certificate of Incorporation of UJB provides that the affirmative vote of the
holders of 80% or more of the combined voting shares of UJB, voting as a single
class, is required to amend, alter, repeal or take any action inconsistent with
this requirement.
Garden State. Article II of Garden State's Bylaws provides that a special
meeting of shareholders may be called at any time by the Chairman, President or
by the Board, and such meetings may be called by shareholders only as prescribed
at the time by the laws of the State of New Jersey.
PREEMPTIVE RIGHTS
Summit. Summit's Restated Certificate of Incorporation provides that
shareholders are not entitled to preemptive rights with respect to unissued
shares.
UJB. UJB's Restated Certificate of Incorporation provides that
shareholders are not entitled to preemptive rights with respect to unissued
shares.
Garden State. Garden State's Certificate of Incorporation provides that
shareholders are not entitled to preemptive rights with respect to unissued
shares.
SHAREHOLDER RIGHTS PLANS
Summit. For a description of Summit's Shareholder Rights Plan see
"DESCRIPTION OF SUMMIT CAPITAL STOCK -- Shareholder Rights Plan."
UJB. For a description of UJB's Shareholder Rights Plan see "DESCRIPTION
OF UJB CAPITAL STOCK -- Shareholder Rights Plan."
Garden State. Garden State has no Shareholder Rights Plan or other similar
plan.
61
<PAGE> 67
PROPOSAL II -- ADJOURNMENT OF THE MEETING
In the event there are not sufficient votes to constitute a quorum or to
approve the Merger Agreement at the time of the Meeting, the Merger Agreement
could not be approved unless the Meeting were adjourned in order to permit
further solicitation of proxies. In order to allow proxies that have been
received by Garden State at the time of the Meeting to be voted for such
adjournment, if necessary, Garden State has submitted the question of
adjournment under such circumstances to its stockholders as a separate matter
for their consideration. A majority of the shares represented and voting at the
Meeting is required in order to approve any such adjournment. The Board of
Directors of Garden State recommends that shareholders vote their proxies in
favor of such adjournment so that their proxies may be used for such purposes in
the event it should become necessary. Properly executed proxies will be voted in
favor of any such adjournment unless otherwise indicated thereon. If it is
necessary to adjourn the Meeting, no notice of the time and place of the
adjourned meeting is required to be given to shareholders other than an
announcement of such time and place at the Meeting.
62
<PAGE> 68
LEGAL MATTERS
The validity of the Merger Shares will be passed upon for Summit by Bourne,
Noll & Kenyon. As of December 6, 1995, that firm and attorneys employed there,
beneficially owned, in the aggregate, 32,000 shares of Summit Common Stock.
EXPERTS
The consolidated financial statements of The Summit Bancorporation and
Subsidiaries as of December 31, 1994 and 1993 and for each of the years in the
three-year period ended December 31, 1994, included in Summit's Annual Report on
Form 10-K, incorporated by reference into this Proxy Statement-Prospectus, have
been incorporated by reference herein and in the Registration Statement of which
this Proxy Statement-Prospectus is a part, in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, included in Summit's
1994 Annual Report on Form 10-K and incorporated by reference herein, and upon
the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Garden State BancShares, Inc. and
Subsidiary as of December 31, 1994 and 1993 and for each of the years in the
three-year period ended December 31, 1994, included in Garden State's Annual
Report on Form 10-K, incorporated by reference into this Proxy
Statement-Prospectus, have been incorporated by reference herein and in the
Registration Statement of which this Proxy Statement-Prospectus is a part, in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, included in Garden State's 1994 Annual Report on Form 10-K and
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing. The report of KPMG Peat Marwick LLP contains an
explanatory paragraph that states that Garden State changed its methods of
accounting for income taxes and certain investments in debt and equity
securities in 1993.
The consolidated financial statements of UJB Financial Corp. and
subsidiaries as of December 31, 1994 and 1993 and for each of the years in the
three-year period ended December 31, 1994, included in UJB's Annual Report on
Form 10-K, incorporated by reference herein and in the Registration Statement,
have been incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP with respect to UJB Financial Corp. and
subsidiaries for the year ended December 31, 1994 refers to a change in the
method of accounting for certain investments and post employment benefits in
1994 and to a change in the method of accounting for income taxes in 1993.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Meeting, and are expected to be available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors of Garden State is not aware of any business to come
before the Meeting other than the matters described above in this Proxy
Statement-Prospectus. However, if any other matters should properly come before
the Meeting, including matters incident to the conduct of the Meeting, it is
intended that proxies in the accompanying form will be voted in respect thereof
in accordance with the judgment of the person or persons voting the proxies.
63
<PAGE> 69
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 13, 1995 ("Agreement"),
is among THE SUMMIT BANCORPORATION, a New Jersey corporation and registered bank
holding company ("Summit"), SUMMIT BANK, a bank chartered under the laws of the
State of New Jersey ("Summit Bank"), GARDEN STATE BANCSHARES, INC., a New Jersey
corporation and registered bank holding company ("Garden State") and GARDEN
STATE BANK, a bank chartered under the laws of the State of New Jersey (the
"Bank").
Summit desires to acquire Garden State and Garden State's Board of
Directors has determined, based upon the terms and conditions hereinafter set
forth, that the acquisition is in the best interests of Garden State and its
stockholders. The acquisition will be accomplished by merging Garden State into
Summit with Summit as the surviving corporation and, at the same time, merging
Summit Bank into the Bank with the Bank as the surviving bank, and Garden State
shareholders receiving the consideration hereinafter set forth. The Boards of
Directors of Garden State, Summit, the Bank and Summit Bank have duly adopted
and approved this Agreement and the Board of Directors of Garden State has
directed that it be submitted to its shareholders for approval.
As a condition precedent to entering into this Agreement, Summit has
required that Garden State grant it an option on 752,770 shares of Garden
State's authorized but unissued shares and, as a consequence, Garden State and
Summit have simultaneously entered into a Stock Option Agreement, dated the date
hereof (the "Summit Stock Option").
Accordingly, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as hereafter defined), Garden State shall be merged with
and into Summit (the "Merger") in accordance with the New Jersey Business
Corporation Act and Summit shall be the surviving corporation (the "Surviving
Corporation"). Immediately following the Effective Time, Summit Bank shall be
merged with and into the Bank as provided in Section 1.7 hereof.
1.2. Effect of the Merger. At the Effective Time (as hereafter defined),
the Surviving Corporation shall be considered the same business and corporate
entity as each of Garden State and Summit and thereupon and thereafter, all the
property, rights, powers and franchises of each of Garden State and Summit shall
vest in the Surviving Corporation and the Surviving Corporation shall be subject
to and be deemed to have assumed all of the debts, liabilities, obligations and
duties of each of Garden State and Summit and shall have succeeded to all of
each of their relationships, fiduciary or otherwise, as fully and to the same
extent as if such property rights, privileges, powers, franchises, debts,
obligations, duties and relationships had been originally acquired, incurred or
entered into by the Surviving Corporation.
1.3. Certificate of Incorporation. The certificate of incorporation of
Summit as it exists immediately prior to the Effective Time shall not be amended
by the Merger, but shall continue as the certificate of incorporation of the
Surviving Corporation until otherwise amended as provided by law.
1.4. Bylaws. The bylaws of Summit as they exist immediately prior to the
Effective Date shall continue as the bylaws of the Surviving Corporation until
otherwise amended as provided by law.
1.5. Directors and Officers. The directors and officers of Summit as of
the Effective Time shall continue as the directors and officers of the Surviving
Corporation until changed as provided by Summit's certificate of incorporation
and bylaws.
A-1
<PAGE> 70
1.6. Effective Time and Closing. The Merger shall become effective (and
be consummated) upon the filing of a certificate of merger with the Secretary of
State of the State of New Jersey. The term "Effective Time" shall mean the date
and time when the Certificate of Merger is so filed. A closing (the "Closing")
shall take place prior to the Effective Time at 10:00 a.m., on a date to be
specified by the parties, which is at least 10 business days, but no more than
30 business days, following the receipt of all necessary regulatory and
governmental approvals and consents and the expiration of all statutory waiting
periods in respect thereof and the satisfaction or waiver of the conditions to
the consummation of the Merger specified in Article VI hereof (other than the
delivery of certificates, opinions and other instruments and documents to be
delivered at the Closing), at the office of Bourne, Noll & Kenyon, or at such
other place, time or date as Summit and Garden State may mutually agree upon.
Immediately following the Closing, a Certificate of Merger shall be filed with
the New Jersey Secretary of State.
1.7. The Bank Merger. Immediately following the Effective Time, Summit
Bank shall be merged with and into the Bank (the "Bank Merger") in accordance
with the provisions of the New Jersey Banking Act of 1948, as amended, and the
Bank shall be the surviving bank (the "Surviving Bank"). Upon the consummation
of the Bank Merger, the separate existence of Summit Bank shall cease and the
Surviving Bank shall be considered the same business and corporate entity as
each of the Bank and Summit Bank and all of the property, rights, powers and
franchises of each of the Bank and Summit Bank shall vest in the Surviving Bank
and the Surviving Bank shall be deemed to have assumed all of the debts,
liabilities, obligations and duties of each of the Bank and Summit Bank and
shall have succeeded to all of each of their relationships, fiduciary or
otherwise, as fully and to the same extent as if such property rights,
privileges, powers, franchises, debts, obligations, duties and relationships had
been originally acquired, incurred or entered into by the Surviving Bank. Upon
the consummation of the Bank Merger, the articles of association and by-laws of
Summit Bank shall become the articles of association and by-laws of the
Surviving Bank and the officers and directors of Summit Bank shall be the
officers and directors of the Surviving Bank with such additions from the
officers of the Bank as Summit Bank's Board of Directors shall specify. In
connection with the execution of this Agreement, the Bank and Summit Bank shall
execute and deliver a separate merger agreement (the "Bank Merger Agreement") in
the form of Appendix A, annexed hereto, for delivery to the FDIC (as hereafter
defined) and the Commissioner (as hereafter defined) for approval of the Bank
Merger.
ARTICLE II
CONVERSION OF GARDEN STATE SHARES
2.1. Conversion of Garden State Shares and Options. Each share of common
stock, no par value, of Garden State ("Garden State Common Stock"), issued and
outstanding immediately prior to the Effective Time, and each validly
outstanding option to purchase Garden State Common Stock, shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted, paid or cancelled as follows:
(a) Garden State Common Stock. Each share of Garden State Common
Stock shall be converted into and represent the right to receive 1.08 (the
"Exchange Ratio") shares of Summit's common stock, no par value ("Summit
Common Stock"), subject to adjustments as set forth in this subsection
2.1(a).
(i) The Exchange Ratio and the Average Closing Price (as hereafter
defined) shall be appropriately adjusted for any stock split, stock
dividend, stock combination, reclassification or similar transaction
("Capital Change") effected by Summit with respect to Summit Common
Stock between the date hereof and the Effective Date. The parties shall
mutually agree upon such adjustment in writing or, if unable to agree,
shall arbitrate the dispute, using a mutually agreed upon arbitrator
whose decision shall be final and non-appealable.
(ii) No fractional shares of Summit Common Stock will be issued,
and in lieu thereof, each holder of Garden State Common Stock who would
otherwise be entitled to a fractional interest will receive an amount in
cash determined by multiplying such fractional interest by the Average
Closing Price (as hereafter defined).
A-2
<PAGE> 71
(iii) The "Average Closing Price" shall mean the average price of
Summit Common Stock calculated based upon the closing price during the
first 20 of the 25 consecutive trading days immediately preceding the
Closing. The Average Closing Price shall be determined by (x) first,
recording the closing price (the "Daily Price") of Summit Common Stock
reported on the NASDAQ National Market System and published in The Wall
Street Journal during the first 20 of the 25 consecutive trading days
immediately preceding the Closing; and (y) second, computing the average
of the Daily Prices in the 20 day period.
(iv) The Exchange Ratio may be adjusted upward by Summit as
specified in Section 7.1(h) of this Agreement.
(b) Garden State Stock Options. At the Effective Time, each
outstanding option to purchase Garden State Common Stock (a "Garden State
Option") granted under the Stock Option Plans of Garden State (the "Garden
State Option Plans") shall be converted, at the election of the holder of
such Garden State Option (an "optionee"), as follows:
(i) into an option to purchase Summit Common Stock, wherein (x) the
right to purchase shares of Garden State Common Stock pursuant to the
Garden State Option shall be converted into the right to purchase that
same number of shares of Summit Common Stock multiplied by the Exchange
Ratio, (y) the option exercise price per share of Summit Common Stock
shall be the previous option exercise price per share of the Garden
State Common Stock divided by the Exchange Ratio and (z) in all other
material respects the option shall be subject to the same terms and
conditions as governed the Garden State Option on which it was based,
including without limitation the remaining length of time within which
the option may be exercised; or
(ii) if the Garden State Option is fully exercisable at the
Closing, into the right to receive immediately after the Effective Time
a number of whole shares of Summit Common Stock equal to the positive
number (or zero, if the result is negative) determined by (x)
subtracting (i) the aggregate exercise price for the Garden State Option
from (ii) the product determined by multiplying (A) the number of shares
of Garden State Common Stock covered by the Garden State Option, times
(B) the Exchange Ratio, times (C) the Average Closing Price, and (y)
dividing the resulting number by the Average Closing Price. No
fractional shares of Summit Common Stock shall be issued pursuant to
this Section 2.1(b)(ii), and in lieu thereof, each optionee who would
otherwise be entitled to a fractional interest will receive an amount in
cash determined by multiplying such fractional interest by the Average
Closing Price.
2.2. Exchange of Shares.
(a) Garden State and Summit shall appoint, at Summit's option, either
Summit Bank's Trust Department, or Summit's then existing transfer agent as the
exchange agent (the "Exchange Agent") for purposes of effecting the conversion
of Garden State Common Stock and the Garden State Options. As soon as
practicable after the Effective Time, the Exchange Agent shall mail to each
holder of record (a "Record Holder") of a certificate or certificates which,
immediately prior to the Effective Time represented outstanding shares of Garden
State Common Stock (the "Certificates"), a mutually agreed upon letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent), and instructions for use in effecting the
surrender of the Certificates in exchange for Summit Common Stock (and cash in
lieu of fractional shares) as provided in Section 2.1. Upon surrender of a
Certificate for exchange and cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed, the Record Holder shall be entitled
to promptly receive in exchange for such Certificate the consideration as
provided in Section 2.1 hereof and the Certificates so surrendered shall be
cancelled. The Exchange Agent shall not be obligated to deliver or cause to be
delivered to any Record Holder the consideration to which such Record Holder
would otherwise be entitled until such Record Holder surrenders the Certificate
for exchange or, in default thereof, an appropriate Affidavit of Loss and
Indemnity Agreement and/or a bond as may be reasonably required in each case by
Summit. Notwithstanding the time of surrender of the Certificates, Record
Holders shall be deemed shareholders of Summit for all purposes from the
Effective Time, except that Summit shall withhold the payment of dividends from
any Record Holder until such Record Holder effects the exchange of Certificates
for Summit Common
A-3
<PAGE> 72
Stock. (Such Record Holder shall receive such withheld dividends, without
interest, upon effecting the share exchange.) Ten days prior to Closing, Summit
shall distribute option election forms to each optionee with respect to
outstanding Garden State Options and, upon receipt from the optionee of a
properly completed option election, shall after the Effective Time distribute to
the optionee Summit Common Stock or an amendment to the option grant evidencing
the conversion of the grant to an option to purchase Summit Common Stock in
accordance with Section 2.1 hereof.
(b) After the Effective Time, there shall be no transfers on the stock
transfer books of Garden State of the shares of Garden State Common Stock which
were outstanding immediately prior to the Effective Time and, if any
Certificates representing such shares are presented for transfer, they shall be
cancelled and exchanged for the Merger consideration.
(c) If payment of the consideration pursuant to Section 2.1 hereof is to be
made in a name other than that in which the Certificate surrendered in exchange
therefor is registered, it shall be a condition of such payment that the
Certificate so surrendered shall be properly endorsed (or accompanied by an
appropriate instrument of transfer) and otherwise in proper form for transfer,
and that the person requesting such payment shall pay to the Exchange Agent in
advance any transfer or other taxes required by reason of the payment to a
person other than that of the registered holder of the Certificate surrendered,
or required for any other reason, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
2.3. Summit Shares. The shares of Summit Common Stock outstanding at the
Effective Time shall not be affected by the Merger, but along with the
additional shares of Summit Common Stock to be issued as provided in Section 2.1
hereof, shall become the outstanding common stock of the Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GARDEN STATE
References herein to "Garden State Disclosure Schedule" shall mean all of
the disclosure schedules required by this Article III, dated as of the date
hereof and referenced to the specific sections and subsections of Article III of
this Agreement, which have been delivered on the date hereof by Garden State to
Summit. Garden State hereby represents and warrants to Summit as follows:
3.1. Corporate Organization.
(a) Garden State is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey. Garden State has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted and is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not have a material adverse effect on the business,
operations, assets or financial condition of Garden State on a consolidated
basis. Garden State is registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended ("BHCA").
(b) Each of the Subsidiaries of Garden State are listed in the Garden State
Disclosure Schedule. The term "Subsidiary", when used in this Agreement with
respect to Garden State, means any corporation, joint venture, association,
partnership, trust or other entity in which Garden State has, directly or
indirectly, at least a 25% beneficial interest, acts as a general partner or
otherwise has a beneficial controlling interest. Each Subsidiary of Garden State
is duly organized, validly existing and in good standing under the laws of its
state of incorporation. The Bank is a New Jersey bank whose deposits are insured
by the Bank Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC")
to the fullest extent permitted by law. Each Subsidiary of Garden State has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted and is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where
A-4
<PAGE> 73
the failure to be so licensed, qualified or in good standing would not have a
material adverse effect on the business, operations, assets or financial
condition of Garden State and its Subsidiaries. The Garden State Disclosure
Schedule sets forth true and complete copies of the Certificate of Incorporation
and Bylaws of Garden State and each Garden State Subsidiary as in effect on the
date hereof. Except as set forth in the Disclosure Schedule, Garden State does
not own or control, directly or indirectly, any equity interest in any
corporation, company, association, partnership, joint venture or other entity
and owns no real estate, except real estate used for its banking premises.
3.2. Capitalization. The authorized capital stock of Garden State
consists of 4,088,091 shares of Garden State Common Stock and 1,000,000 shares
of preferred stock ("Garden State Preferred Stock"). As of May 31, 1995, there
were 3,043,658 shares of Garden State Common Stock issued and outstanding and no
shares issued and held in the treasury. There are no shares of Garden State
Preferred Stock issued or outstanding. As of May 31, 1995, there were 72,855
shares of Garden State Common Stock issuable upon exercise of outstanding Garden
State Options granted to officers and employees of the Bank pursuant to the
Garden State Option Plan. The Garden State Disclosure Schedule sets forth true
and complete copies of the Garden State Option Plans and of each outstanding
Garden State Option. All issued and outstanding shares of Garden State Common
Stock, and all issued and outstanding shares of capital stock of each Garden
State Subsidiary, have been duly authorized and validly issued, are fully paid,
and nonassessable. The authorized capital stock of the Bank consists of
1,000,000 shares of common stock, $5.00 par value. All of the outstanding shares
of capital stock of each Garden State Subsidiary are owned by Garden State and
are free and clear of any liens, encumbrances, charges, restrictions or rights
of third parties. Except for the Garden State Options and the Summit Stock
Option, neither Garden State nor any Garden State Subsidiary has or is bound by
any outstanding subscriptions, options, warrants, calls, rights, commitments or
agreements of any character calling for the transfer, purchase or issuance of
any shares of capital stock of Garden State or any Garden State Subsidiary or
any securities representing the right to purchase or otherwise receive any
shares of such capital stock or any securities convertible into or representing
the right to purchase or subscribe for any such shares, and there are no
agreements or understandings with respect to voting of any such shares.
3.3. Authority; No Violation.
(a) Subject to the approval of this Agreement and the transactions
contemplated hereby by the stockholders of Garden State, and subject to the
parties obtaining all necessary regulatory approvals, Garden State and the Bank
have full corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby in accordance with the
terms hereof. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly approved by
the Boards of Directors of Garden State and the Bank in accordance with their
respective Certificates of Incorporation and applicable laws and regulations.
The execution and delivery of the Bank Merger Agreement has been duly and
validly approved by the Board of Directors of the Bank in accordance with the
Certificate of Incorporation of the Bank and applicable laws and regulations.
Except for the approvals described in paragraph (b) below, no other corporate
proceedings on the part of Garden State or the Bank are necessary to consummate
the transactions contemplated hereby (except for the approval by Garden State of
the Bank Merger Agreement). This Agreement has been duly and validly executed
and delivered by Garden State and the Bank, and constitutes valid and binding
obligations of Garden State and the Bank, enforceable against Garden State and
the Bank in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by Garden State
and the Bank, nor the consummation by Garden State and the Bank of the
transactions contemplated hereby in accordance with the terms hereof, or
compliance by Garden State and the Bank with any of the terms or provisions
hereof, will (i) violate any provision of Garden State's or the Bank's
Certificate of Incorporation or other governing instrument or Bylaws, (ii)
assuming that the consents and approvals set forth below are duly obtained,
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to Garden State or the Bank or any of their
respective properties or assets, or (iii) except as set forth in the Garden
State Disclosure Schedule, violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or
A-5
<PAGE> 74
other encumbrance upon any of the respective properties or assets of Garden
State or the Bank under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Garden State or the Bank is a party, or by
which either or both of them or any of their respective properties or assets may
be bound or affected except, with respect to (ii) and (iii) above, such as
individually and in the aggregate will not have a material adverse effect on the
business, operations, assets or financial condition of Garden State and its
Subsidiaries on a consolidated basis, and which will not prevent or delay the
consummation of the transactions contemplated hereby. Except for consents and
approvals of or filings or registrations with or notices to the FDIC, the
Commissioner of Banking of the State of New Jersey (the "Commissioner"), the
Board of Governors of the Federal Reserve System ("FRB"), the Securities and
Exchange Commission ("SEC"), applicable state securities commissions, the
Secretary of State of the State of New Jersey, and the stockholders of Garden
State, no consents or approvals of or filings or registrations with or notices
to any third party or any public body or authority are necessary on behalf of
Garden State or the Bank in connection with (x) the execution and delivery by
Garden State and the Bank of this Agreement and (y) the consummation by Garden
State and the Bank of transactions contemplated hereby and (z) the execution and
delivery by the Bank of the Bank Merger Agreement and the consummation by the
Bank of the transactions contemplated thereby.
3.4. Financial Statements.
(a) The Garden State Disclosure Schedule sets forth copies of the
consolidated statements of condition of Garden State as of December 31, 1990,
1991, 1992, 1993 and 1994, and the related consolidated statements of income,
stockholders' equity and cash flows for the periods ended December 31 in each of
the five years 1990 through 1994, in each case accompanied by the audit report
of KPMG Peat Marwick LLP, independent public accountants with respect to Garden
State, and the unaudited consolidated statements of condition and related
consolidated statements of income, stockholders' equity and cash flows of Garden
State for the periods ended March 31, 1994 and March 31, 1995, as filed with the
SEC on Form 10-Q (collectively, the "Garden State Financial Statements"). The
Garden State Financial Statements (including the related notes) have been
prepared in accordance with generally accepted accounting principles
consistently applied during the periods involved, and fairly present the
consolidated financial condition of Garden State and its Subsidiaries as of the
respective dates set forth therein, and the related consolidated statements of
income, stockholders' equity and cash flows fairly present the results of the
consolidated operations, stockholders' equity and cash flows of Garden State and
its Subsidiaries for the respective periods set forth therein.
(b) The books and records of Garden State and its Subsidiaries have been
and are being maintained in material compliance with applicable legal and
accounting requirements, and reflect only actual transactions.
(c) Except as and to the extent reflected, disclosed or reserved against in
the Garden State Financial Statements (including the notes thereto), as of March
31, 1995 neither Garden State nor any of its Subsidiaries had any liabilities,
whether absolute, accrued, contingent or otherwise material to the business,
operations, assets or financial condition of Garden State or any of its
Subsidiaries. Since March 31, 1995 and to the date hereof, neither Garden State
nor any of its Subsidiaries have incurred any liabilities except in the ordinary
course of business and consistent with prudent banking practice, except as
specifically contemplated by this Agreement.
3.5. Broker's and Other Fees. Neither Garden State nor any of its
Subsidiaries nor any of their respective directors or officers has employed any
broker or finder or incurred any liability for any broker's or finder's fees or
commissions in connection with any of the transactions contemplated by this
Agreement, except for Advest, Inc. ("Advest"). There are no fees (other than
time charges billed at usual and customary rates) payable to any consultants,
including lawyers and accountants, in connection with this transaction or which
would be triggered by consummation of this transaction or the termination of the
services of such consultants by Garden State or any of its Subsidiaries other
than fees which will be payable by Garden State to Advest for its fairness
opinion. Copies of the agreements with Advest are set forth in the Garden State
Disclosure Schedule.
A-6
<PAGE> 75
3.6. Absence of Certain Changes or Events.
(a) There has not been any material adverse change in the business,
operations, assets or financial condition of Garden State and its Subsidiaries
on a consolidated basis since March 31, 1995 and to the best of Garden State's
knowledge, no facts or conditions exist which Garden State believes will cause
or is likely to cause such a material adverse change in the future.
(b) Except as set forth in the Garden State Disclosure Schedule, neither
Garden State nor any of its Subsidiaries has taken or permitted any of the
actions set forth in Section 5.2 hereof between March 31, 1995 and the date
hereof and Garden State and the Garden State Subsidiaries have conducted their
business only in the ordinary course, consistent with past practice.
3.7. Legal Proceedings. Except as disclosed in the Garden State
Disclosure Schedule, neither Garden State nor any of its Subsidiaries nor any of
the directors or officers of Garden State or of its Subsidiaries, in such
person's capacity as a director or officer, is a party to any, and there are no
pending or, to the best of Garden State's knowledge, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
investigations of any nature against Garden State, any of its Subsidiaries or
any director or officer of any such entity in such person's capacity as a
director or officer. Except as disclosed in the Garden State Disclosure
Schedule, neither Garden State nor any of its Subsidiaries nor any of the
directors or officers of Garden State or of its Subsidiaries, in such person's
capacity as a director or officer, is a party to any order, judgment or decree
entered against Garden State or any Garden State Subsidiary or any of the
directors or officers of Garden State or of its Subsidiaries, in such person's
capacity as a director or officer, in any lawsuit or proceeding.
3.8. Taxes and Tax Returns.
(a) Garden State and each Garden State Subsidiary have timely filed (and
until the Effective Time will so file) all returns, declarations, reports,
information returns and statements ("Returns") required to be filed by them in
respect of any federal, state and local taxes (including withholding taxes,
penalties or other payments required) and each has duly paid (and until the
Effective Time will so pay) all such taxes due and payable, other than taxes or
other charges which are being contested in good faith (and disclosed to Summit
in writing). Garden State and each Garden State Subsidiary have established (and
until the Effective Time will establish) on their books and records reserves
that are adequate for the payment of all federal, state and local taxes not yet
due and payable, but are incurred in respect of Garden State or any Garden State
Subsidiary through such date. The federal income tax returns of Garden State and
its Subsidiaries have not been examined by the Internal Revenue Service (the
"IRS"). The federal income tax returns of Garden State and its Subsidiaries for
those years as to which the applicable statute of limitations has expired are
closed to examination due to the expiration of the applicable statute of
limitations. Except as set forth in the Garden State Disclosure Schedule, the
applicable state income tax returns of Garden State and its Subsidiaries have
been examined by the applicable authorities (or are closed to examination due to
the expiration of the statute of limitations) and no deficiencies were asserted
as a result of such examinations which have not been resolved and paid in full.
To the best knowledge of Garden State, there are no audits or other
administrative or court proceedings presently pending nor any other disputes
pending, or claims asserted for, taxes or assessments upon Garden State or any
of its Subsidiaries, nor has Garden State or any of its Subsidiaries given any
currently outstanding waivers or comparable consents regarding the application
of the statute of limitations with respect to any taxes or tax Returns.
(b) Except as set forth in the Garden State Disclosure Schedule, neither
Garden State nor any of its Subsidiaries (i) has requested any extension of time
within which to file any tax Return which Return has not since been filed, (ii)
is a party to any agreement providing for the allocation or sharing of taxes,
(iii) is required to include in income any adjustment pursuant to Section 481(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), by reason of a
voluntary change in accounting method initiated by Garden State or any Garden
State Subsidiary (nor does Garden State have any knowledge that the IRS has
proposed any such adjustment or change of accounting method) or (iv) has filed a
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply.
A-7
<PAGE> 76
3.9. Employee Benefit Plans.
(a) Except as disclosed in the Garden State Disclosure Schedule, neither
Garden State nor any of its Subsidiaries maintains or contributes to any
"employee pension benefit plan", within the meaning of Section 3(2)(A) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (the
"Garden State Pension Plans"), "employee welfare benefit plan", within the
meaning of Section 3(1) of ERISA (the "Garden State Welfare Plans"), stock
option plan, stock purchase plan, deferred compensation plan, severance plan,
bonus plan, employment agreement or other similar plan, program or arrangement.
Neither Garden State nor any of its Subsidiaries has, since September 2, 1974,
contributed to any "Multiemployer Plan", within the meaning of Sections 3(37)
and 4001(a)(3) of ERISA.
(b) Garden State has delivered to Summit a complete and accurate copy of
each of the following with respect to each of the Garden State Pension Plans and
Garden State Welfare Plans: (1) plan document, summary plan description, and
summary of material modifications (if not available, a detailed description of
the foregoing); (ii) trust agreement or insurance contract, if any; (iii) most
recent IRS determination letter, if any; (iv) most recent actuarial report, if
any; and (v) most recent annual report on Form 5500.
(c) The present value of all accrued benefits under each of the Garden
State Pension Plans subject to Title IV of ERISA, based upon the actuarial
assumptions used for purposes of the most recent actuarial valuation prepared by
such Pension Plan's actuary, did not exceed the then current value of the assets
of such plans allocable to such accrued benefits.
(d) During the last five years, the Pension Benefit Guaranty Corporation
has not asserted any claim for liability against Garden State or any of its
Subsidiaries which has not been paid in full.
(e) All premiums (and interest charges and penalties for late payment, if
applicable) due to the Pension Benefit Guaranty Corporation (the "PBGC") with
respect to each Garden State Pension Plan have been paid. All contributions
required to be made to each Garden State Pension Plan under the terms thereof,
ERISA or other applicable law have been timely made, and all amounts properly
accrued to date as liabilities of Garden State and its Subsidiaries which have
not been paid have been properly recorded on the books of Garden State and its
Subsidiaries.
(f) Each of the Garden State Pension Plans, the Garden State Welfare Plans
and each other plan and arrangement identified on the Garden State Disclosure
Schedule has been operated in compliance in all material respects with the
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder, and all other applicable governmental laws and
regulations. Furthermore, the IRS has issued a favorable determination letter
with respect to each of the Garden State Pension Plans and, except as disclosed
in the Garden State Disclosure Schedule, Garden State is not aware of any fact
or circumstance which would disqualify either plan, that could not be
retroactively corrected (in accordance with the procedures of the IRS).
(g) To the best knowledge of Garden State, no non-exempt prohibited
transaction, within the meaning of Section 4975 of the Code or 406 of ERISA, has
occurred with respect to any of the Garden State Welfare Plans or Garden State
Pension Plans.
(h) No Garden State Pension Plan or any trust created thereunder has been
terminated, nor have there been any "reportable events", within the meaning of
Section 4034(b) of ERISA, with respect to any of the Garden State Pension Plans.
(i) No "accumulated funding deficiency", within the meaning of Section 412
of the Code, has been incurred with respect to any of the Garden State Pension
Plans.
(j) Except as disclosed in the Garden State Disclosure Schedule, there are
no pending, or, to the best knowledge of Garden State, threatened or anticipated
claims (other than routine claims for benefits) by, on behalf of or against any
of the Garden State Pension Plans or the Garden State Welfare Plans, any trusts
related thereto or any other plan or arrangement identified in the Garden State
Disclosure Schedule.
(k) Except as disclosed in the Garden State Disclosure Schedule, no Garden
State Pension or Welfare Plan provides medical or death benefits (whether or not
insured) beyond an employee's retirement or other
A-8
<PAGE> 77
termination of service, other than (i) coverage mandated by law, or (ii) death
benefits under any Garden State Pension Plan.
(l) Except as disclosed in the Garden State Disclosure Schedule, there are
no material unfunded benefits obligations which are not covered by insurance or
accounted for by reserves shown on the financial statements and established
under generally accepted accounting principles, or otherwise noted on such
financial statements.
(m) With respect to each Garden State Pension and Welfare Plan that is
funded wholly or partially through an insurance policy, there will be no
liability of Garden State or any Garden State Subsidiary as of the Effective
Time under any such insurance policy or ancillary agreement with respect to such
insurance policy in the nature of a retroactive rate adjustment, loss sharing
arrangement or other actual or contingent liability arising wholly or partially
out of events occurring prior to the Effective Time.
(n) Except as set forth in the employment agreements and the severance plan
contained in the Garden State Disclosure Schedule or hereafter agreed to by
Summit in writing, the consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee of Garden State or
any Garden State Subsidiary to severance pay or any similar payment, or (ii)
accelerate the time of payment, vesting, or increase the amount, of any
compensation due to any current employee or former employee under any Garden
State Pension or Welfare Plan.
3.10. Reports.
(a) Garden State has made available to Summit (or, with respect to
documents filed subsequent to the date of this Agreement, will make available to
Summit) a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by Garden State with the SEC
since January 1, 1990 (such documents, as amended since the time of their
filing, being referred to herein as the "Garden State SEC Documents"), which are
all the documents (other than preliminary material) that Garden State was
required to file with the SEC since such date. As of their respective dates, the
Garden State SEC Documents complied or will comply in all material respects with
the requirements of the Securities Act of 1933, as amended (the "Securities
Act") or the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Garden State SEC Documents, and none of the Garden State SEC
Documents contained or will contain any untrue statement of a material fact or
omitted or will omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided that disclosures as of a later
date shall be deemed to modify disclosures as of an earlier date. The financial
statements of Garden State included in the Garden State SEC Documents filed and
to be filed subsequent to March 31, 1995 comply and will comply in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been and will be prepared
in accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC) and fairly present and will fairly present (subject, in the case of
the unaudited statements, to recurring audit adjustments normal in nature and
amount) the consolidated financial position of Garden State as at the dates
thereof and the consolidated results of its operations and cash flows or changes
in financial position for the periods then ended.
(b) Garden State and the Bank have, since January 1, 1990, duly filed with
the FDIC and the FRB in correct form the monthly, quarterly and annual reports
required to be filed under applicable laws and regulations, and Garden State
promptly will deliver or make available to Summit accurate and complete copies
of such reports. The Garden State Disclosure Schedule lists all examinations of
Garden State or the Bank conducted by either the New Jersey Department of
Banking, FDIC or the FRB since January 1, 1990 and the dates of any responses
thereto submitted by Garden State or the Bank.
3.11. Garden State and Bank Information. The information relating to
Garden State and the Bank to be contained in the Proxy Statement/Prospectus (as
defined in Section 5.6(a) hereof) to be delivered to stockholders of Garden
State in connection with the solicitation of their approval of this Agreement
and the
A-9
<PAGE> 78
transactions contemplated hereby, as of the date the Proxy Statement/Prospectus
is mailed to stockholders of Garden State, and up to and including the date of
the meeting of stockholders to which such Proxy Statement/Prospectus relates,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.12. Compliance with Applicable Law.
(a) General. Except as set forth in the Garden State Disclosure Schedule,
each of Garden State and the Garden State Subsidiaries hold all material
licenses, franchises, permits and authorizations necessary for the lawful
conduct of its business under and pursuant to each, and has complied with and is
not in default in any respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any federal, state or local governmental
authority relating to Garden State or the Bank (other than where such defaults
or non-compliances will not, alone or in the aggregate, result in a material
adverse effect on the business, operations, assets or financial condition of
Garden State and its Subsidiaries on a consolidated basis) and Garden State has
not received notice of violation of, and does not know of any violations of, any
of the above.
(b) CRA. Except as disclosed in the Garden State Disclosure Schedule,
neither Garden State nor the Bank has (i) received within the preceding 24
months a rating pursuant to the requirements of the Federal Community
Reinvestment Act of 1977, as amended (12 U.S.C. sec.sec. 2901-2907) of either
"needs to improve" or "substantial noncompliance" pursuant to 12 U.S.C. sec.sec.
2906(b)(2)(C) and (D), nor has either of them been advised that such a rating is
forthcoming, respectively, indicating that the Bank does not have an acceptable
record of meeting the credit needs of its entire community, including low- and
moderate-income neighborhoods, consistent with the safe and sound operation of
such institution, nor (ii) has an application submitted by Garden State or the
Bank to the appropriate federal regulatory agency, which application involves an
assessment of the performance of Garden State or the Bank in meeting the credit
needs of its community or communities, not been approved or has been delayed
because of an unacceptable record in meeting such credit needs.
3.13. Certain Contracts.
(a) Except as disclosed in the Garden State Disclosure Schedule under this
Section or Section 3.5, (i) neither Garden State nor any Garden State Subsidiary
is a party to or bound by any contract or understanding (whether written or
oral) with respect to the employment or termination of any present or former
officers, employees, directors or consultants. The Garden State Disclosure
Schedule sets forth true and correct copies of all employment agreements or
termination agreements with officers, employees, directors, or consultants to
which Garden State or any Garden State Subsidiary is a party.
(b) Except as disclosed in the Garden State Disclosure Schedule, (i) as of
the date of this Agreement, neither Garden State nor any Garden State Subsidiary
is a party to or bound by any commitment, agreement or other instrument which is
material to the business operations, assets or financial condition of Garden
State and its Subsidiaries on a consolidated basis, (ii) no commitment,
agreement or other instrument to which Garden State or any Garden State
Subsidiary is a party or by which any of them is bound limits the freedom of
Garden State or any Garden State Subsidiary to compete in any line of business
or with any person, and (iii) neither Garden State nor any Garden State
Subsidiary is a party to any collective bargaining agreement.
(c) Except as disclosed in the Garden State Disclosure Schedule, neither
Garden State nor any Garden State Subsidiary nor, to the best knowledge of
Garden State, any other party thereto, is in default in any material respect
under any material lease, contract, mortgage, promissory note, deed of trust,
loan or other commitment or arrangement.
3.14. Properties and Insurance.
(a) Garden State and its Subsidiaries have good and, as to owned real
property, marketable title to all material assets and properties, whether real
or personal, tangible or intangible, reflected in Garden State's consolidated
balance sheet as of March 31, 1995, or owned and acquired subsequent thereto
(except to the extent that such assets and properties have been disposed of for
fair value in the ordinary course of business
A-10
<PAGE> 79
since March 31, 1995), subject to no encumbrances, liens, mortgages, security
interests or pledges, except (i) those items that secure liabilities that are
reflected in such balance sheet or the notes thereto or incurred in the ordinary
course of business after the date of such balance sheet, (ii) statutory liens
for amounts not yet delinquent or which are being contested in good faith, (iii)
such encumbrances, liens, mortgages, security interests, pledges and title
imperfections that are not in the aggregate material to the business,
operations, assets, and financial condition of Garden State and its Subsidiaries
taken as a whole and (iv) with respect to owned real property, title
imperfections noted in title reports. Garden State and its Subsidiaries as
lessees have the right under valid and subsisting leases to occupy, use, possess
and control all property leased by them in all material respects as presently
occupied, used, possessed and controlled by them.
(b) The Garden State Disclosure Schedule lists all policies of insurance
covering business operations and all insurable properties and assets of Garden
State and its Subsidiaries showing all risks insured against, in each case under
valid, binding and enforceable policies or bonds, with such amounts and such
deductibles as are specified. As of the date hereof, neither Garden State nor
any of its Subsidiaries has received any notice of cancellation or notice of a
material amendment of any such insurance policy or bond or is in default under
such policy or bond, no coverage thereunder is being disputed and all material
claims thereunder have been filed in a timely fashion. All pending material
claims under such policies or bonds are disclosed in the Garden State Disclosure
Schedule.
3.15. Minute Books. The minute books of Garden State and its Subsidiaries
contain accurate records of all meetings and other corporate action held of
their respective stockholders and Boards of Directors (including committees of
their respective Boards of Directors).
3.16. Environmental Matters. Except as disclosed in the Garden State
Disclosure Schedule, neither Garden State nor any of its Subsidiaries has
received any written notice, citation, claim, assessment, proposed assessment or
demand for abatement alleging that Garden State or any of its Subsidiaries
(either directly or as a successor-in-interest in connection with the
enforcement of remedies to realize the value of properties serving as collateral
for outstanding loans) is responsible for the correction or clean-up of any
condition material to the business, operations, assets or financial condition of
Garden State or its Subsidiaries. Except as disclosed in the Garden State
Disclosure Schedule, Garden State has no knowledge that any toxic or hazardous
substances or materials have been emitted, generated, disposed of or stored on
any property owned or leased by Garden State or any of its Subsidiaries in any
manner that violates or, after the lapse of time may violate, any presently
existing federal, state or local law or regulation governing or pertaining to
such substances and materials.
3.17. Loan Portfolio; Reserves. With respect to each loan owned by Garden
State or its Subsidiaries in whole or in part, the files maintained by Garden
State or such Subsidiary with respect to such loan completely and accurately
reflect the transactions relating to such loan in all material respects. As of
the date hereof, the reserve for loan and lease losses in the Garden State
Financial Statements for the period ending March 31, 1995 in the opinion of
management of Garden State is adequate based upon past loan loss experiences and
potential losses in the current portfolio to cover all known or anticipated loan
losses.
3.18. No Parachute Payments. No officer, director, employee or agent (or
former officer, director, employee or agent) of Garden State or any Garden State
Subsidiary is entitled now, or will or may be entitled to as a consequence of
this Agreement or the Merger, to any payment or benefit from Garden State, a
Garden State Subsidiary, Summit or Summit Bank which if paid or provided would
constitute an "excess parachute payment", as defined in Section 280G of the Code
or regulations promulgated thereunder.
3.19 Disclosure. There are no facts concerning the business, operations,
assets or financial condition of Garden State or its Subsidiaries which have not
been disclosed to Summit which could have a material adverse effect on the
business, operations or financial condition of Garden State or its Subsidiaries
on a consolidated basis. No representation or warranty contained in Article III
of this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements herein not misleading.
A-11
<PAGE> 80
3.20 Agreements with Bank Regulators. Except as set forth in the Garden
State Disclosure Schedule, neither Garden State nor any of its Subsidiaries is a
party (or has been a party) to any written agreement or memorandum of
understanding with, or party to any commitment letter or similar undertaking to,
or is subject to any order or directive by, any Federal or state Governmental
Entity charged with the supervision or regulation of savings and loan
associations, savings banks, banks, savings and loan holding companies or bank
holding companies or engaged in insurance of savings bank or bank deposits
("Bank Regulators"), nor has Garden State or any of its subsidiaries been
advised by any Bank Regulator that it is contemplating issuing or requesting (or
is considering the appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of understanding, commitment letter or
similar undertakings. Garden State knows of no reason why any regulatory
approvals required for the consummation of the Merger or the Bank Merger should
not be obtained without the imposition of any pre- or post-Merger condition or
restriction upon Summit, Garden State or any of their respective Subsidiaries
which would materially adversely impact the economic, business or financial
benefits of the transactions contemplated by this Agreement so as to render
inadvisable, in the reasonable judgment of the Board of Directors of Summit, the
consummation of the Merger (a "Burdensome Condition").
3.21 Ownership of Summit Common Stock. Except as set forth in the Garden
State Disclosure Schedule, as of the date hereof, neither Garden State nor any
of its Subsidiaries beneficially owns, directly or indirectly, or are parties to
any agreement, arrangement or understanding for the purpose of beneficially
acquiring, holding, voting or disposing of, any of the outstanding shares of the
capital stock of Summit entitled to vote generally in the election of directors.
3.22 Investment Securities. The Garden State Disclosure Schedule sets
forth the book and market value as of May 31, 1995 of the investment securities,
mortgage-backed securities and securities held for sale of Garden State and its
Subsidiaries as of such date. The Garden State Disclosure Schedule sets forth an
investment securities report which includes security descriptions, CUSIP or
Agency Pool numbers, current pool face values, book values, coupon rates, market
values, book yields and weighted average coupons, in each case as of May 31,
1995.
3.23 Derivative Transactions. Since December 31, 1991, neither Garden
State nor any of its Subsidiaries has engaged in transactions in or involving
forwards, futures, options on futures, swaps or other similar derivative
instruments except (i) as agent on the order and for the account of others, or
(ii) as principal for purposes of hedging interest rate risk on U.S.
dollar-denominated securities and other financial instruments. None of the
counterparties to any contract or agreement with respect to any such instrument
is in default with respect to such contract or agreement and no such contract or
agreement, were it to be a loan or other extension of credit by Garden State or
any of its Subsidiaries, would be classified as "Other Loans Specially
Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Credit Risk Assets", "Concerned Loans", or words of similar
import. As of the date hereof, the financial position of Garden State and its
Subsidiaries on a consolidated basis under or with respect to each such
instrument has been reflected in the books and records of Garden State and its
Subsidiaries in accordance with generally accepted accounting principles
consistently applied.
3.24 Fairness Opinion. Garden State has received an opinion from Advest
to the effect that, in its opinion, the consideration to be paid to stockholders
of Garden State hereunder is fair to such stockholders from a financial point of
view.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SUMMIT
References herein to the "Summit Disclosure Schedule" shall mean all of the
disclosure schedules required by this Article IV, dated as of the date hereof
and referenced to the specific sections and subsections
A-12
<PAGE> 81
of Article IV of this Agreement, which have been delivered on the date hereof by
Summit to Garden State. Summit hereby represents and warrants to Garden State as
follows:
4.1. Corporate Organization.
(a) Summit is a corporation duly organized and validly existing and in good
standing under the laws of the State of New Jersey. Summit has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not have a material adverse effect on the business,
operations, assets or financial condition of Summit or its Subsidiaries (defined
below). Summit is registered as a bank holding company under the BHCA.
(b) Each of the Subsidiaries of Summit are listed in the Summit Disclosure
Schedule. The term "Subsidiary" when used in this Agreement with reference to
Summit, means any corporation, joint venture, association, partnership, trust or
other entity in which Summit has, directly or indirectly, at least a 50%
interest or acts as a general partner. Each Subsidiary of Summit is duly
organized and validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Summit Bank is a bank chartered under the
laws of New Jersey whose deposits are insured by the Bank Insurance Fund of the
FDIC to the fullest extent permitted by law. Each Subsidiary of Summit has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted and is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not have a material adverse effect on the business,
operations, assets or financial condition of Summit and its Subsidiaries.
4.2. Capitalization. (a) The authorized capital stock of Summit consists
of 50,000,000 shares of Summit Common Stock and 12,000,000 shares, no par value,
of preferred stock (the "Summit Preferred Stock"). As of May 31, 1995, (A)
33,642,538 shares of Summit Common Stock were issued and outstanding, and
504,000 shares of Adjustable Rate Cumulative Preferred Stock, no par value (the
"Cumulative Preferred Stock"), were issued and outstanding, (B) no shares of
Summit Common Stock were reserved for issuance except that 1,879,648 shares of
Summit Common Stock were reserved for issuance pursuant to Summit's Employee
Stock Purchase Plan dated March 21, 1989 and its Stock Incentive Plans, as
amended, and its obligations under the Crestmont Financial Corp. Stock
Compensation Plan and 2,655,265 shares of Summit Common Stock were reserved for
issuance pursuant to Summit's Dividend Reinvestment and Stock Purchase Plan (the
"Summit Stock Plans"), (C) no shares of Summit Preferred Stock were reserved for
issuance except that 250,000 shares of Summit Series B Junior Participating
Preferred Stock, no par value (the "Summit Series B Preferred Stock"), were
reserved for issuance upon exercise of the rights (the "Summit Rights")
distributed to the holders of Summit Common Stock pursuant to the Summit Rights
Agreement, dated as of January 16, 1990, (the "Summit Rights Agreement") and (D)
no shares of Summit Common Stock were held by Summit in its treasury or by its
Subsidiaries except as set forth below. In May, 1995 Summit's Board of Directors
authorized the purchase of up to 7% of the outstanding shares of Summit Common
Stock, or approximately 2.3 million shares of Summit Common Stock (the
"Repurchase Authorization"). As of May 31, 1995, Summit had acquired
approximately 84,000 shares of Summit Common Stock pursuant to the Repurchase
Authorization, which shares are held in treasury by Summit.
(b) As of the date hereof, except for the Cumulative Preferred Stock and
except as set forth in this Agreement, the Summit Stock Plans, the Summit Rights
Agreement, the Summit 1995 Stock Incentive Plan and 1995 Directors Stock Option
Plan, and except in accordance with the Agreement and Plan of Merger between
Summit and Crestmont Financial Corp dated as of February 22, 1994, neither
Summit nor any of its Subsidiaries has or is bound by any outstanding options,
warrants, calls, rights, convertible securities, commitments or agreements of
any character obligating Summit or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, any additional shares of capital
stock of Summit or of any of its
A-13
<PAGE> 82
Subsidiaries or obligating Summit or any of its Subsidiaries to grant, extend or
enter into any such option, warrant, call, right, convertible security,
commitment or agreement. As of the date hereof, except for the Repurchase
Authorization, there are no outstanding contractual obligations of Summit or any
of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of Summit or any of its Subsidiaries.
(c) Since May 31, 1995, to and including the date of this Agreement, no
additional shares of Summit Common Stock have been issued except in connection
with exercises of options granted under the Summit Stock Plans, the Summit 1995
Stock Incentive Plan and 1995 Directors Stock Option Plan. All issued and
outstanding shares of Summit Common Stock, and all issued and outstanding shares
of capital stock of Summit's Subsidiaries, have been duly authorized and validly
issued, are fully paid, nonassessable and free of preemptive rights, and are
free and clear of all liens, encumbrances, charges, restrictions or rights of
third parties. All of the outstanding shares of capital stock of Summit's
Subsidiaries are owned by Summit free and clear of any liens, encumbrances,
charges, restrictions or rights of third parties.
4.3. Authority; No Violation.
(a) Summit and Summit Bank have full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby in accordance with the terms hereof. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly approved by the Board of Directors of Summit
and Summit Bank. No other corporate proceedings on the part of Summit and Summit
Bank are necessary to consummate the transactions contemplated hereby (except
for the approval by Summit of the Bank Merger Agreement). This Agreement has
been duly and validly executed and delivered by Summit and Summit Bank and
constitutes a valid and binding obligation of Summit and Summit Bank,
enforceable against Summit and Summit Bank in accordance with its terms.
(b) Neither the execution or delivery of this Agreement nor the
consummation by Summit and Summit Bank of the transactions contemplated hereby
in accordance with the terms hereof, will (i) violate any provision of the
Certificate of Incorporation or Bylaws of Summit or Summit Bank, (ii) assuming
that the consents and approvals set forth below are duly obtained, violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Summit or Summit Bank or any of their respective
properties or assets, or (iii) violate, conflict with, result in a breach of any
provision of, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or other encumbrance upon any of the properties or
assets of Summit or Summit Bank under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Summit or Summit
Bank is a party, or by which Summit or Summit Bank or any of their properties or
assets may be bound or affected, except, with respect to (ii) and (iii) above,
such as in the aggregate will not have a material adverse effect on the
business, operations, assets or financial condition of Summit and Summit's
Subsidiaries on a consolidated basis, or the ability of Summit and Summit Bank
to consummate the transactions contemplated hereby. Except for consents and
approvals of or filings or registrations with or notices to the FDIC, the
Commissioner, the FRB, the Secretary of State of New Jersey, the SEC, or
applicable state securities bureaus or commissions, no consents or approvals of
or filings or registrations with or notices to any third party or any public
body or authority are necessary on behalf of Summit or Summit Bank in connection
with (a) the execution and delivery by Summit or Summit Bank of this Agreement,
(b) the consummation by Summit of the Merger and the other transactions
contemplated hereby and (c) the execution and delivery by Summit Bank of the
Bank Merger Agreement and the consummation by Summit Bank of the Bank Merger and
other transactions contemplated thereby. To the best of Summit's knowledge, no
fact or condition exists which Summit has reason to believe will prevent it or
Summit Bank from obtaining the aforementioned consents and approvals.
4.4. Financial Statements.
(a) Summit has previously delivered to Garden State copies of the
consolidated statements of financial condition of Summit as of December 31,
1990, 1991, 1992, 1993 and 1994, the related consolidated statements
A-14
<PAGE> 83
of income, changes in stockholders' equity and of cash flows for the periods
ended December 31 in each of the three fiscal years 1990 through 1994, in each
case accompanied by the audit report of KPMG Peat Marwick LLP, independent
public accountants with respect to Summit, and the unaudited consolidated
statements of condition of Summit as of March 31, 1995 and the related
unaudited consolidated statements of income, changes in stockholders' equity
and cash flows for the three months then ended as reported in Summit's
Quarterly Reports on Form 10-Q, filed with the SEC under the Exchange Act
(collectively, the "Summit Financial Statements"). The Summit Financial
Statements (including the related notes), have been prepared in accordance
with generally accepted accounting principles consistently applied during the
periods involved, and fairly present the consolidated financial position of
Summit as of the respective dates set forth therein, and the related
consolidated statements of income, changes in stockholders' equity and of cash
flows (including the related notes, where applicable) fairly present the
results of the consolidated operations and changes in stockholders' equity and
of cash flows of Summit for the respective fiscal periods set forth therein.
(b) The books and records of Summit have been and are being maintained in
material compliance with applicable legal and accounting requirements, and
reflect only actual transactions.
(c) Except as and to the extent reflected, disclosed or reserved against in
the Summit Financial Statements (including the notes thereto), as of March 31,
1995 neither Summit nor any of its Subsidiaries had or has, as the case may be,
any obligation or liability, whether absolute, accrued, contingent or otherwise,
material to the business, operations, assets or financial condition of Summit or
any of its Subsidiaries. Since March 31, 1995, neither Summit nor any of its
Subsidiaries have incurred any liabilities, except in the ordinary course of
business and consistent with prudent banking practice.
4.5. Brokerage Fees. Except for fees to be paid to Keefe, Bruyette &
Woods, Inc., neither Summit nor Summit Bank nor any of their respective
directors or officers has employed any broker or finder or incurred any
liability for any broker's or finder's fees or commissions in connection with
any of the transactions contemplated by this Agreement.
4.6. Absence of Certain Changes or Events. There has not been any
material adverse change in the business, operations, assets or financial
condition of Summit and Summit's Subsidiaries on a consolidated basis since
March 31, 1995 and to the best of Summit's knowledge, no fact or condition
exists which Summit believes will cause or is likely to cause such a material
adverse change in the future.
4.7. Summit Information. The information relating to Summit, this
Agreement and the transactions contemplated hereby in the Registration Statement
and Proxy Statement/Prospectus (as defined in Section 5.6(a) hereof), as of the
date of the mailing of the Proxy Statement/Prospectus, and up to and including
the date of the meeting of stockholders of Garden State to which such Proxy
Statement/Prospectus relates, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.8. Summit Common Stock. At the Effective Time, the Summit Common Stock
to be issued pursuant to the terms of Section 2.1, when so issued, shall be duly
authorized, validly issued, fully paid, and non-assessable, free of preemptive
rights and free and clear of all liens, encumbrances or restrictions created by
or through Summit, with no personal liability attaching to the ownership
thereof.
4.9. Legal Proceedings. Except as disclosed in the Summit Disclosure
Schedule, neither Summit nor its Subsidiaries is a party to any, and there are
no material pending or, to the best of Summit's knowledge, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
investigations of any nature against Summit or any of its Subsidiaries which, if
decided adversely to Summit, or any of its Subsidiaries, would have a material
adverse effect on the business, operations, assets or financial condition of
Summit and its Subsidiaries on a consolidated basis. Except as disclosed in the
Summit Disclosure Schedule, neither Summit nor any of Summit's Subsidiaries is a
party to any order, judgment or decree entered against Summit or any such
Subsidiary in any lawsuit or proceeding which would have a material adverse
effect on the business, operations, assets or financial condition of Summit and
its Subsidiaries on a consolidated basis.
4.10. Taxes and Tax Returns. Summit and its Subsidiaries have duly filed
(and until the Effective Time will so file) all Returns required to be filed by
them in respect of any federal, state and local taxes
A-15
<PAGE> 84
(including withholding taxes, penalties or other payments required) and have
duly paid (and until the Effective Time will so pay) all such taxes due and
payable, other than taxes or other charges which are being contested in good
faith. Summit and its Subsidiaries have established (and until the Effective
Time will establish) on their books and records reserves that are adequate for
the payment of all federal, state and local taxes not yet due and payable, but
are incurred in respect of Summit and its Subsidiaries through such date. No
deficiencies exist or have been asserted based upon the federal income tax
returns of Summit and Summit Bank.
4.11. Employee Benefit Plans.
(a) Summit and its Subsidiaries maintain or contribute to certain "employee
pension benefit plans" (the "Summit Pension Plans"), as such term is defined in
Section 3 of ERISA, and "employee welfare benefit plans" (the "Summit Welfare
Plans"), as such term is defined in Section 3 of ERISA. Since September 2, 1974,
neither Summit nor its Subsidiaries have contributed to any "Multiemployer
Plan", as such term is defined in Section 3(37) of ERISA.
(b) Each of the Summit Pension Plans and each of the Summit Welfare Plans
has been operated in compliance in all material respects with the provisions of
ERISA, the Code, all regulations, rulings and announcements promulgated or
issued thereunder, and all other applicable governmental laws and regulations.
4.12. Reports.
(a) Each communication mailed by Summit to its stockholders since January
1, 1990, and each annual, quarterly or special report, proxy statement or
communication, as of its date, complied in all material respects with all
applicable statutes, rules and regulations enforced or promulgated by the
applicable regulatory agency and did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading; provided that
disclosures as of a later date shall be deemed to modify disclosures as of an
earlier date.
(b) Summit and Summit Bank have, since January 1, 1990, duly filed with the
FDIC and the FRB in correct form the monthly, quarterly and annual reports
required to be filed under applicable laws and regulations, and Summit, upon
written request from Garden State, promptly will deliver or make available to
Garden State accurate and complete copies of such reports.
4.13. Compliance with Applicable Law. Summit and its Subsidiaries hold
all material licenses, franchises, permits and authorizations necessary for the
lawful conduct of their respective businesses under and pursuant to each, and
has complied with and is not in default in any respect under any, applicable
law, statute, order, rule, regulation, policy and/or guideline of any federal,
state or local governmental authority relating to Summit and its Subsidiaries
(other than where such default or non-compliance will not result in a material
adverse effect on the business, operations, assets or financial condition of
Summit and its Subsidiaries on a consolidated basis).
4.14. Properties and Insurance.
(a) Summit and its Subsidiaries have good and, as to owned real property,
marketable title to all material assets and properties, whether real or
personal, tangible or intangible, reflected in Summit's consolidated balance
sheet as of December 31, 1994, or owned and acquired subsequent thereto (except
to the extent that such assets and properties have been disposed of for fair
value in the ordinary course of business since December 31, 1994). Summit and
its Subsidiaries as lessees have the right under valid and subsisting leases to
occupy, use, possess and control all property leased by them in all material
respects as presently occupied, used, possessed and controlled by them.
(b) The business operations and all insurable properties and assets of
Summit and its Subsidiaries are insured for their benefit against all risks
which, in the reasonable judgment of the management of Summit should be insured
against, in each case under valid, binding and enforceable policies or bonds,
with such deductibles and against such risks and losses as are in the opinion of
the management of Summit adequate for the business engaged in by Summit and its
Subsidiaries.
A-16
<PAGE> 85
4.15. Minute Books. The minute books of Summit and its Subsidiaries
contain accurate records of all meetings and other corporate action held of
their respective stockholders and Boards of Directors (including committees of
their respective Boards of Directors).
4.16. Environmental Matters. Except as disclosed in the Summit Disclosure
Schedule, neither Summit nor any of its Subsidiaries has received any written
notice, citation, claim, assessment, proposed assessment or demand for abatement
alleging that Summit or any of its Subsidiaries (either directly or as a
successor-in-interest in connection with the enforcement of remedies to realize
the value of properties serving as collateral for outstanding loans) is
responsible for the correction or clean-up of any condition material to the
business, operations, assets or financial condition of Summit or its
Subsidiaries. Except as disclosed in the Summit Disclosure Schedule, Summit has
no knowledge that any toxic or hazardous substances or materials have been
emitted, generated, disposed of or stored on any property owned or leased by
Summit or any of its Subsidiaries in any manner that violates or, after the
lapse of time may violate, any presently existing federal, state or local law or
regulation governing or pertaining to such substances and materials, the
violation of which would have a material adverse effect on the business,
operations, assets or financial condition of Summit and its Subsidiaries on a
consolidated basis.
4.17. Loan Portfolio; Reserves. With respect to each loan owned by Summit
or its Subsidiaries in whole or in part, the files maintained by Summit or such
Subsidiary with respect to such loan completely and accurately reflect the
transactions relating to such loan in all material respects. As of the date
hereof, the reserve for loan and lease losses in the Summit Financial Statements
for the period ending March 31, 1995, in the opinion of management of Summit is
adequate based upon past loan loss experiences and potential losses in the
current portfolio to cover all known or anticipated loan losses.
4.18. Disclosures. Except for other acquisition transactions which Summit
may not yet have publicly disclosed, there are no material facts concerning the
business, operations, assets or financial condition of Summit which could have a
material adverse effect on the business, operations or financial condition of
Summit which have not been disclosed to Garden State directly or indirectly by
access to any filing by Summit under the Exchange Act. No representation or
warranty contained in Article IV of this Agreement contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements herein not misleading.
ARTICLE V
COVENANTS OF THE PARTIES
5.1. Conduct of the Business of Garden State. During the period from the
date of this Agreement to the Effective Time, Garden State shall, and shall
cause each of its Subsidiaries to, conduct its respective business and engage in
transactions permitted hereunder only in the ordinary course and consistent with
prudent banking practice and past business practices of Garden State, except
with the prior written consent of Summit, which consent will not be unreasonably
withheld. Garden State also shall use its best efforts to (i) preserve its
business organization and that of each Garden State Subsidiary intact, (ii) keep
available to itself the present services of its employees and those of its
Subsidiaries, provided that neither Garden State nor any of its Subsidiaries
shall be required to take any unreasonable or extraordinary act or any action
which would conflict with any other term of this Agreement, and (iii) preserve
for itself and Summit the goodwill of its customers and those of its
Subsidiaries and others with whom business relationships exist.
5.2. Negative Covenants and Dividend Covenants.
(a) Garden State agrees that from the date hereof to the Effective Time,
except as otherwise approved by Summit in writing or as permitted or required by
this Agreement, it will not, nor will it permit any of its Subsidiaries to:
(i) change its Certificate of Incorporation or Bylaws or any similar
governing documents in any manner;
A-17
<PAGE> 86
(ii) except for the issuance of Garden State Common Stock pursuant to
the present terms of the outstanding Garden State Options and the Summit
Stock Option, change the number of shares of its authorized or issued
common or preferred stock or issue or grant any option, warrant, call,
commitment, subscription, right to purchase or agreement of any character
relating to the authorized or issued capital stock of Garden State or any
Garden State Subsidiary or any securities convertible into shares of such
stock, or split, combine or reclassify any shares of its capital stock, or
declare, set aside or pay any dividend, or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, or redeem or otherwise acquire any shares of such capital
stock; provided, however, from the date hereof to the Effective Time,
Garden State may declare, set aside or pay cash dividends per share of
Garden State Common Stock equivalent to the cash dividends per share
declared, set aside or paid by Summit during such period multiplied by the
Exchange Ratio.
(iii) grant any severance or termination pay (other than pursuant to
policies of Garden State in effect on the date hereof and disclosed to
Summit in the Garden State Disclosure Schedule or as agreed to by Summit in
writing) to, or enter into or amend any employment agreement with, any of
its directors, officers or employees; adopt any new employee benefit plan
or arrangement of any type or amend any such existing benefit plan or
arrangement; or award any increase in compensation or benefits to its
directors, officers or employees except with respect to salary increases in
the ordinary course of business and consistent with past practices and
policies and except that Garden State may pay bonuses to its officers in
the fourth quarter of 1995 or the first quarter of 1996 in an amount not to
exceed the amount set forth in the Garden State Disclosure Schedule as the
maximum amount which will be accrued for bonuses with respect to 1995
following accrual practices consistent with those currently in effect (the
"Annual Bonus Maximum").
(iv) sell or dispose of any substantial amount of assets; incur any
significant liabilities other than in the ordinary course of business
consistent with past practices and policies;
(v) make any capital expenditures outside of the ordinary course of
business other than pursuant to binding commitments existing on the date
hereof and other than expenditures necessary to maintain existing assets in
good repair;
(vi) file any applications or make any contract with respect to
branching or site location or relocation;
(vii) agree to acquire in any manner whatsoever (other than to realize
upon collateral for a defaulted loan) any business or entity or a
substantial amount of the assets of any business or entity;
(viii) make any material change in its accounting methods or
practices, other than changes required in accordance with generally
accepted accounting principles;
(ix) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, or in any of
the conditions to the Merger set forth in Article VI not being satisfied,
or in violation of any provision of this Agreement, except, in every case,
as may be required by applicable law;
(x) take or cause to be taken any action which is intended, or may
reasonably be expected, to result in disqualification of the Merger as a
"pooling of interests" for accounting purposes, provided, however, that
nothing in this paragraph (x) shall limit the ability of Summit to exercise
its rights under the Option Agreement;
(xi) take any action to grant "dissenters" rights except as required
by applicable law;
(xii) incur any indebtedness otherwise than in the ordinary course of
business;
(xiii) except pursuant to commitments in effect on the date hereof,
make any loan (other than an extension of, renewal of, or substitution for,
an existing loan which extension, substitution or renewal does not increase
the aggregate amount of credit extended) (a "new loan") or any commitment
to make a new loan, to any of its officers, directors, or stockholders
owning more than 5% of the issued and outstanding
A-18
<PAGE> 87
Garden State Common Stock (or any person or business entity controlled by
or affiliated with such officers, directors, or stockholders) other than in
the ordinary course of business;
(xiv) make any new loan, or increase the aggregate amount of credit
extended, to a borrower or group of affiliated borrowers, or purchase any
security, or make any other investment, or commitment to do any of the
foregoing, in an amount in excess of $500,000, other than (A) pursuant to
commitments in effect on the date hereof and described in the Garden State
Disclosure Schedule, (B) in connection with liquidity management
transactions entered into in the ordinary course of business, or (C) with
respect to the purchase of securities or other obligations issued (or fully
guaranteed as to principal and interest) by the United States of America or
any agency thereof or which are rated "AAA" (or rating equivalent thereto)
by a nationally recognized bond rating agency (as to (C) above, in each
case securities purchased shall not have unexpired terms as of the date of
purchase in excess of five years, except with respect to fixed rate
mortgage-backed securities covered by (C) above, as to which average
maturities shall not exceed four years, and adjustable rate securities
covered by (C) above, as to which average maturities shall not exceed six
years);
(xv) sell or otherwise dispose of or encumber any shares of capital
stock of any Garden State Subsidiary;
(xvi) fail to keep in full force and effect insurance and bonds at
least equal in scope and amount of coverage of insurance and bonds now
carried;
(xvii) fail to notify Summit promptly of its receipt of any letter,
notice or other communication, whether written or oral, from any
governmental entity advising Garden State that it is contemplating issuing,
requiring, or requesting any agreement, memorandum of understanding, or
similar undertaking, order or directive of the type referenced in Section
3.20 hereof;
(xviii) fail to use its best efforts to remain in compliance with any
capital or other operating requirement of any regulatory agency to which it
is subject;
(xix) fail to promptly notify Summit of (A) the commencement or threat
of any audit, action, or proceeding involving any material amount of taxes
against either Garden State or any Subsidiary, or (B) the receipt of Garden
State or any Subsidiary of any deficiency or audit notices or reports in
respect of any material deficiencies asserted by any Federal, state, local
or other tax authorities.
(xx) agree to the extension of any statute or limitations for making
any assessments with respect to taxes, except for extension granted in good
faith in connection with attempts to resolve existing disputes with taxing
authorities;
(xxi) fail to use reasonable efforts to maintain and keep its
properties in as good repair and condition as at present, except for
depreciation due to ordinary wear and tear;
(xxii) fail to perform in all material respects all obligations
required to be performed by each of Garden State and any Subsidiary under
all material contracts, leases, and documents relating to or affecting its
assets, properties, and business, except where such failure to perform,
individually and in the aggregate, would not have a material adverse effect
on Garden State and its Subsidiaries, taken as a whole; or
(xxiii) agree to do any of the foregoing.
5.3. No Solicitation. Garden State and the Bank shall not, directly or
indirectly, encourage or solicit or hold discussions or negotiations with, or
provide any information to, any person, entity or group (other than Summit)
concerning any merger or sale of shares of capital stock or sale of substantial
assets or liabilities not in the ordinary course of business, or similar
transactions involving Garden State or the Bank (an "Acquisition Transaction").
Notwithstanding the foregoing, Garden State may enter into discussions or
negotiations or provide information in connection with an unsolicited possible
Acquisition Transaction if the Board of Directors of Garden State, after
consulting with counsel, determines that such discussions or negotiations should
be commenced in the exercise of its fiduciary responsibilities or such
information should be furnished
A-19
<PAGE> 88
in the exercise of its fiduciary responsibilities. Garden State will promptly
communicate to Summit the terms of any proposal, whether written or oral, which
it may receive in respect of any Acquisition Transaction and the fact that it is
having discussions or negotiations with, or supplying information to, a third
party in connection with a possible Acquisition Transaction.
5.4. Current Information. During the period from the date of this
Agreement to the Effective Time, Garden State will cause one or more of its
designated representatives to confer on a monthly or more frequent basis with
representatives of Summit regarding Garden State's business, operations,
properties, assets and financial condition and matters relating to the
completion of the transactions contemplated herein. Without limiting the
foregoing, and also subject to the restrictions set forth in paragraphs (xiii)
and (xiv) of Section 5.2, prior to granting any loan or extension of credit by
renewal or otherwise, Garden State will send to Summit a description (i.e., a
copy of the loan offering) for each new loan or extension of credit, and each
renewal of an existing loan or extension of credit, in excess of $500,000. As
soon as reasonably available, but in no event more than 45 days after the end of
each fiscal quarter (other than the last fiscal quarter of each fiscal year)
ending after the date of this Agreement, Garden State will deliver to Summit,
and Summit will deliver to Garden State, their respective bank call reports
filed with the FDIC and Garden State's quarterly reports on Form 10-Q as filed
with the SEC under the Exchange Act, and Summit will deliver to Garden State
Summit's quarterly reports on Form 10-Q, as filed with the SEC under the
Exchange Act. As soon as reasonably available, but in no event more than 90 days
after the end of each fiscal year, Garden State will deliver to Summit and
Summit will deliver to Garden State their respective audited Annual Reports, in
each case as filed on Form 10-K with the SEC under the Exchange Act.
5.5. Access to Properties and Records; Confidentiality.
(a) Garden State and the Bank shall permit Summit and its representatives,
and Summit and Summit Bank shall permit Garden State and its representatives,
reasonable access to their respective properties, and shall disclose and make
available to Summit and its representatives or Garden State and its
representatives as the case may be, all books, papers and records relating to
their respective assets, stock ownership, properties, operations, obligations
and liabilities, including, but not limited to, all books of account (including
the general ledger), tax records, minute books of directors' and stockholders'
meetings, organizational documents, bylaws, material contracts and agreements,
filings with any regulatory authority, independent auditors' work papers
(subject to the receipt by such auditors of a standard access representation
letter), litigation files, plans affecting employees, and any other business
activities or prospects in which Summit and its representatives or Garden State
and its representatives may have a reasonable interest. Neither party shall be
required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of any customer or would
contravene any law, rule, regulation, order or judgment. The parties will use
their best efforts to obtain waivers of any such restriction and in any event
make appropriate substitute disclosure arrangements under circumstances in which
the restrictions of the preceding sentence apply.
(b) All information furnished by the parties hereto previously in
connection with transactions contemplated by this Agreement or pursuant hereto
shall be used solely for the purpose of evaluating the Merger contemplated
hereby and shall be treated as the sole property of the party delivering the
information until consummation of the Merger contemplated hereby and, if such
Merger shall not occur, each party and each party's advisors shall return to the
other party all documents or other materials containing, reflecting or referring
to such information, will not retain any copies of such information, shall use
its best efforts to keep confidential all such information, and shall not
directly or indirectly use such information for any competitive or other
commercial purposes. In the event that the Merger contemplated hereby does not
occur, all documents, notes and other writings prepared by a party hereto or its
advisors based on information furnished by the other party shall be promptly
destroyed. The obligation to keep such information confidential shall continue
for five years from the date the proposed Merger is abandoned but shall not
apply to (i) any information which (A) the party receiving the information can
establish by convincing evidence was already in its possession prior to the
disclosure thereof to it by the other party; (B) was then generally known to the
public; (C) became known to the public through no fault of the party receiving
such information; or (D) was disclosed to the party receiving such information
by a third party not bound by an obligation of confidentiality;
A-20
<PAGE> 89
or (ii) disclosures pursuant to a legal requirement or in accordance with an
order of a court of competent jurisdiction.
5.6. Regulatory Matters.
(a) For the purposes of holding the meeting of Garden State stockholders
referred to in Section 5.7 hereof and registering or otherwise qualifying under
applicable federal and state securities laws Summit Common Stock to be issued to
Record Holders and optionees in connection with the Merger, the parties hereto
shall cooperate in the preparation and filing by Summit of a Registration
Statement with the SEC which shall include an appropriate proxy statement and
prospectus satisfying all applicable requirements of applicable state and
federal laws, including the Securities Act, the Exchange Act and applicable
state securities laws and the rules and regulations thereunder. (Such proxy
statement and prospectus in the form mailed by Garden State to the Garden State
shareholders and optionees together with any and all amendments or supplements
thereto, is herein referred to as the "Proxy Statement/Prospectus" and the
various documents to be filed by Summit under the Securities Act with the SEC to
register for sale the Summit Common Stock to be issued to Record Holders and
optionees, including the Proxy Statement/Prospectus, are referred to herein as
the "Registration Statement").
(b) Summit shall furnish information concerning Summit as is necessary in
order to cause the Proxy Statement/Prospectus, insofar as it relates to Summit,
to comply with Section 5.6(a) hereof. Summit agrees promptly to advise Garden
State if at any time prior to the Garden State shareholder meeting referred to
in Section 5.7 hereof, any information provided by Summit in the Proxy
Statement/Prospectus becomes incorrect or incomplete in any material respect and
to provide Garden State with the information needed to correct such inaccuracy
or omission. Summit shall furnish Garden State with such supplemental
information as may be necessary in order to cause the Proxy
Statement/Prospectus, insofar as it relates to Summit, to comply with Section
5.6(a) after the mailing thereof to Garden State shareholders.
(c) Garden State shall furnish Summit with such information concerning
Garden State and the Bank as is necessary in order to cause the Proxy
Statement/Prospectus, insofar as it relates to such corporations, to comply with
Section 5.6(a) hereof. Garden State agrees promptly to advise Summit if, at any
time prior to the Garden State shareholder's meeting referred to in Section
5.6(a) hereof, information provided by Garden State in the Proxy
Statement/Prospectus becomes incorrect or incomplete in any material respect and
to provide Summit with the information needed to correct such inaccuracy or
omission. Garden State shall furnish Summit with such supplemental information
as may be necessary in order to cause the Proxy Statement/Prospectus, insofar as
it relates to Garden State and the Bank, to comply with Section 5.6(a) after the
mailing thereof to Garden State shareholders.
(d) Summit shall as promptly as practicable make such filings as are
necessary in connection with the offering of the Summit Common Stock with
applicable state securities agencies and shall use all reasonable efforts to
qualify the offering of the Summit Common Stock under applicable state
securities laws at the earliest practicable date. Garden State shall promptly
furnish Summit with such information regarding the Garden State shareholders as
Summit requires to enable it to determine what filings are required hereunder.
Garden State authorizes Summit to utilize in such filings the information
concerning Garden State and the Bank provided to Summit in connection with, or
contained in, the Proxy Statement/Prospectus. Summit shall furnish Garden State
with copies of all such filings and keep Garden State advised of the status
thereof. Summit and Garden State shall as promptly as practicable file the
Registration Statement containing the Proxy Statement/Prospectus with the SEC,
and each of Summit and Garden State shall promptly notify the other of all
communications, oral or written, with the SEC concerning the Registration
Statement and the Proxy Statement/Prospectus.
(e) Summit shall cause the Summit Common Stock to be issued in connection
with the Merger to be included for quotation on the NASDAQ -- National Market
System or, if the outstanding Summit Common Stock is then listed on a national
securities exchange, to be approved for listing on such exchange.
(f) The parties hereto will cooperate with each other and use their best
efforts to prepare all necessary documentation, to effect all necessary filings
and to obtain all necessary permits, consents, waivers, approvals
A-21
<PAGE> 90
and authorizations of all third parties and governmental bodies necessary to
consummate the transactions contemplated by this Agreement as soon as possible,
including, without limitation, those required by the FDIC and the Commissioner
and the FRB. The parties shall each have the right to review in advance all
information relating to the other, as the case may be, and any of their
respective subsidiaries, which appears in any filing made with, or written
material submitted to, any third party or governmental body in connection with
the transactions contemplated by this Agreement. Summit and Summit Bank shall
cause at least a draft of their respective applications to the FRB and an actual
application to the FDIC and the Commissioner to be filed within 60 days of the
date hereof, so long as Garden State and the Bank provide all information
necessary to complete the application within 30 days of the date hereof.
(g) Each of the parties will promptly furnish each other with copies of
written communications received by them or any of their respective subsidiaries
from, or delivered by any of the foregoing to, any governmental body in respect
of the transactions contemplated hereby.
5.7. Approval of Stockholders. Garden State will (a) take all steps
necessary duly to call, give notice of, convene and hold a meeting of the
stockholders of Garden State as soon as reasonably practicable for the purpose
of securing the approval by such stockholders of this Agreement, (b) subject to
the fiduciary obligations of its directors and officers, recommend to the
stockholders of Garden State the approval of this Agreement and the transactions
contemplated hereby and use its best efforts to obtain, as promptly as
practicable, such approvals, and (c) cooperate and consult with Summit with
respect to each of the foregoing matters.
5.8. Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to satisfy
the conditions to Closing and to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, using reasonable
efforts to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated by this Agreement and using its best efforts to prevent the breach
of any representation, warranty, covenant or agreement of such party contained
or referred to in this Agreement and to promptly remedy the same. Nothing in
this section shall be construed to require any party to participate in any
threatened or actual legal, administrative or other proceedings (other than
proceedings, actions or investigations to which it is otherwise a party or
subject or threatened to be made a party or subject) in connection with
consummation of the transactions contemplated by this Agreement unless such
party shall consent in advance and in writing to such participation and the
other party agrees to reimburse and indemnify such party for and against any and
all costs and damages related thereto.
5.9. Public Announcements. The parties hereto shall cooperate with each
other in the development and distribution of all news releases and other public
disclosures with respect to this Agreement or any of the transactions
contemplated hereby, except as may be otherwise required by law or regulation or
as to which the party releasing such information has used its best efforts to
discuss with the other party in advance.
5.10. Failure to Fulfill Conditions. In the event that Summit or Garden
State determines that a material condition to its obligation to consummate the
transactions contemplated hereby cannot be fulfilled on or prior to June 30,
1996 and that it will not waive that condition, it will promptly notify the
other party. Except for any acquisition or merger discussions Summit may enter
into with other parties, Garden State and Summit will promptly inform the other
of any facts applicable to Garden State or Summit, respectively, or their
respective directors or officers, that would be likely to prevent or materially
delay approval of the Merger by any governmental authority or which would
otherwise prevent or materially delay completion of the Merger.
5.11. Disclosure Supplements. From time to time prior to the Effective
Time, each party hereto will promptly supplement or amend (by written notice to
the other) its respective Disclosure Schedules delivered pursuant hereto with
respect to any matter hereafter arising which, if existing, occurring or known
at the date of this Agreement, would have been required to be set forth or
described in such Schedules or which is necessary to correct any information in
such Schedules which has been rendered materially inaccurate
A-22
<PAGE> 91
thereby. For the purpose of determining satisfaction of the conditions set forth
in Article VI, no supplement or amendment to such Schedules shall correct or
cure any warranty which was untrue when made, but supplements or amendments may
be used to disclose subsequent facts or events to maintain the truthfulness of
any warranty.
5.12. Indemnification.
(a) Indemnification. From and after the Effective Time, Summit agrees to
indemnify and advance costs and expenses (including reasonable attorney's fees,
disbursements and expenses) and hold harmless each present and former director
and officer of Garden State or its Subsidiaries determined as of the Effective
Time (the "Indemnified Parties"), against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages,
settlements or liabilities (collectively, "Costs") incurred in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising after the Effective Time and out of or
pertaining to matters existing or occurring at or prior to the Effective Time,
including without limitation, the authorization of this Agreement and the
transactions contemplated hereby, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that Garden State would have
been permitted under New Jersey law and its certificate of incorporation or
by-laws in effect on the date hereof to indemnify such person (and also advance
expenses as incurred to the fullest extent permitted under applicable law
provided the person to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately determined that such person is not
entitled to indemnification); provided that any determination required by law to
be made with respect to whether an officer's or director's conduct complies with
the standards set forth under New Jersey law and Garden State's certificate of
incorporation and by-laws shall be made by independent counsel selected jointly
by Summit and the Indemnified Party.
(b) Procedure. In the event of any claim, action, suit, proceeding or
investigation in which indemnification pursuant to Section 5.12 (a) is sought
(whether arising before or after the Effective Time) other than such as is
described in the Garden State Disclosure Schedule, (i) Summit shall have the
right to assume the defense thereof and Summit shall not be liable to any
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if Summit elects not to assume such defense or
counsel for the Indemnified Parties advises that there are issues which raise
conflicts of interest between Summit and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and Summit shall
pay the reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements there for are received; provided, however, that Summit
shall be obligated pursuant to this paragraph (b) to pay for only one firm of
counsel for all Indemnified Parties in any jurisdiction unless the use of one
counsel for such Indemnified Parties would present such counsel with a conflict
of interest, (ii) the Indemnified Parties will cooperate in the defense of any
such matter unless counsel for the Indemnified Parties advises that there are
issues which raise conflicts of interest making such cooperation inadvisable and
(iii) Summit shall not be liable for any settlement effected without its prior
written consent which shall not be unreasonably withheld; and provided further
that Summit shall not have any obligation hereunder to any Indemnified Party
when and if a court of competent jurisdiction shall ultimately determine, and
such determination shall have become final and nonappealable, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law. If a court of competent jurisdiction determines
that the indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable law, then Summit shall provide
indemnification to the maximum extent and in such manner as is permissible under
applicable law. If such indemnity is completely unavailable with respect to any
Indemnified Party, Summit and the Indemnified Party shall contribute to the
amount payable in such proportion as is appropriate to reflect relative faults
and benefits.
(c) Insurance. For a period of six years following the Effective Time,
Summit will provide to the persons who served as directors or officers of Garden
State or any Garden State Subsidiary, including the Bank, on or before the
Effective Time, insurance against liabilities and claims (and related expenses)
made against them resulting from their service as such prior to the Effective
Time. Such coverage may be provided by means of an extended reporting period
endorsement to the policy presently issued to Garden State by the
A-23
<PAGE> 92
present carrier for Garden State, or by such other means which shall provide
substantially equivalent coverage to such persons.
5.13. Officer Contracts; Employment Matters.
(a) Officer's Contracts. As of the Effective Time, Summit and Summit
Bank, jointly and severally, shall specifically acknowledge, accept and assume
the employment contracts contained in the Garden State Disclosure Schedule and
agree to a calculation prepared by Garden State specifying the amount of the
benefits payable under such contracts; provided, however, that nothing contained
herein shall obligate Summit to continue the employment of any party to any such
employment contract.
(b) Employee Benefits. The employee benefit plans, arrangements and
related policies of Garden State and the Bank shall initially be unaffected by
the Merger. Following the Merger, Summit will review such plans, arrangements
and policies with a view towards consolidating the same to the extent feasible
and economical. To the extent former employees of Garden State or the Bank
become participants in a plan of Summit or Summit Bank, they will be given past
service credit for eligibility, participation, and vesting purposes, but not for
benefit accrual purposes. For purposes of benefit accrual, credited service
under each Summit plan will commence within twelve months following the Merger.
Employees of Garden State or the Bank immediately prior to the Effective Time,
who will become employees of Summit or Summit Bank, will receive compensation
and benefit packages no less favorable, in the aggregate, than the compensation
and benefit packages to which they were entitled immediately prior to the
Effective Time. Notwithstanding the foregoing, the benefits under pension
benefit plans to which such employees are entitled after the Effective Time
shall be limited to those benefits accruing under the applicable Summit plans.
Employees of Garden State and the Bank immediately prior to the Effective Time
who will become employees of Summit or Summit Bank and are involuntarily
terminated within one year thereafter, will receive severance benefits at least
as favorable as those provided in the severance plan contained in the Garden
State Disclosure Schedule.
5.14. Pooling and Tax-Free Reorganization Treatment. Neither Summit nor
Garden State shall intentionally take, fail to take or cause to be taken or not
be taken, any action within its control, whether before or after the Effective
Time, which would disqualify the Merger as a "pooling of interests" for
accounting purposes or as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code of 1968, as amended.
5.15 Garden State Option Plan. From and after the Effective Time, each
Garden State Option which is converted to an option to purchase Summit Common
Stock under Section 2.1(b)(i) shall be administered, operated and interpreted by
a committee comprised of members of the Board of Directors of Summit appointed
by the Board of Directors of Summit. Summit shall reserve for issuance the
number of shares of Summit Common Stock necessary to satisfy Summit's
obligations. As soon as practicable following the Effective Time, but in no
event more than 30 days following the Effective Time, Summit shall also register
under the Securities Act on Form S-8 all of the shares authorized for issuance
under the Garden State Options so converted.
5.16. Affiliates.
(a) Promptly, but in any event within two weeks, after the execution and
delivery of this Agreement, (i) Garden State shall deliver to Summit (x) a
letter identifying all persons who, to the knowledge of Garden State, may be
deemed to be affiliates of Garden State under Rule 145 of the Securities Act,
including without limitation all directors and executive officers of Garden
State and (y) a letter identifying all persons who, to the knowledge of Garden
State, may be deemed to be affiliates of Garden State as that term (affiliate)
is used for purposes of qualifying for "pooling of interests" accounting
treatment; and (ii) Summit shall identify to Garden State all persons who, to
the knowledge of Summit, may be deemed affiliates of Summit as that term
(affiliates) is used for purposes of qualifying for "pooling of interests"
accounting treatment.
(b) Each person who may be deemed an affiliate of Garden State (under
either Rule 415 of the Securities Act or the accounting treatment rules) shall
execute a letter substantially in the form of Exhibit 5.16-1 hereto agreeing to
be bound by the restrictions of Rule 145, as set forth in Exhibit 5.16-1 and
agreeing to be bound by the rules which permit the Merger to be treated as a
pooling of interests for accounting purposes. In addition, Summit shall cause
its affiliates (as that term is used for purposes of
A-24
<PAGE> 93
qualifying for pooling of interests) to execute a letter within two weeks of the
date hereof, in the form of Exhibit 5.16-2, in which such persons agree to be
bound by the rules which permit the Merger to be treated as a pooling of
interests for accounting treatment.
(c) Summit agrees to publish financial results covering at least 30 days of
combined operations of Summit and Garden State as soon as practicable after
consummation of the Merger.
5.17. Compliance with the Industrial Site Recovery Act. Garden State, at
its sole cost and expense, shall obtain prior to the Effective Time, either:
(a) a Letter of Non-Applicability ("LNA") from the New Jersey Department of
Environmental Protection ("NJDEP") stating that none of the facilities located
in New Jersey owned or operated by Garden State or any Garden State Subsidiary
(each, a "Facility") is an "industrial establishment," as such term is defined
under the Industrial Site Recovery Act ("ISRA"); (b) a Remediation Agreement
issued by the NJDEP pursuant to ISRA authorizing the consummation of the
transactions contemplated by this Agreement; or (c) a Negative Declaration
approval, Remedial Action Workplan approval, No Further Action letter or other
document or documents issued by the NJDEP advising that the requirements of
ISRA have been satisfied with respect to each Facility subject to ISRA. In the
event Garden State obtains a Remediation Agreement, Garden State will post
or have posted an appropriate Remediation Funding Source or will have obtained
the NJDEP's approval to self-guaranty any Remediation Funding Source required
under any such Remediation Agreement.
ARTICLE VI
CLOSING CONDITIONS
6.1. Conditions of Each Party's Obligations Under this Agreement. The
respective obligations of each party under this Agreement to consummate the
Merger shall be subject to the satisfaction, or, where permissible under
applicable law, waiver at or prior to the Effective Time of the following
conditions:
(a) Approval of Garden State Stockholders; SEC Registration; NASDAQ or
National Securities Exchange. This Agreement and the transactions contemplated
hereby shall have been approved by the requisite vote of the stockholders of
Garden State. The Registration Statement shall have been declared effective by
the SEC and shall not be subject to a stop order or any threatened stop order,
and the issuance of the Summit Common Stock shall have been qualified in every
state where such qualification is required under the applicable state securities
laws. The Summit Common Stock to be issued in connection with the Merger,
including Summit Common Stock to be issued for the Garden State Options, shall
have been included for quotation on the NASDAQ -- National Market System or, if
the outstanding Summit Common Stock is then listed on a national securities
exchange, shall have been approved for listing on such exchange.
(b) Regulatory Filings. All necessary regulatory or governmental
approvals and consents (including without limitation any required approval of
the FDIC or the Commissioner and any approval or waiver required by the FRB)
required to consummate the transactions contemplated hereby shall have been
obtained without any Burdensome Condition. All conditions required to be
satisfied prior to the Effective Time by the terms of such approvals and
consents shall have been satisfied; and all statutory waiting periods in respect
thereof shall have expired.
(c) Suits and Proceedings. No order, judgment or decree shall be
outstanding against a party hereto or a third party that would have the effect
of preventing completion of the Merger; no suit, action or other proceeding
shall be pending or threatened by any governmental body in which it is sought to
restrain or prohibit the Merger or the Bank Merger; and no suit, action or other
proceeding shall be pending before any court or governmental agency in which it
is sought to restrain or prohibit the Merger or the Bank Merger or obtain other
substantial monetary or other relief against one or more parties hereto in
connection with this Agreement and which Summit or Garden State determines in
good faith, based upon the advice of their respective counsel, makes it
inadvisable to proceed with the Merger because any such suit, action or
proceeding has a significant potential to be resolved in such a way as to
deprive the party electing not to proceed of any of the material benefits to it
of the Merger or the Bank Merger.
A-25
<PAGE> 94
(d) Tax Free Exchange. Summit and Garden State shall have received an
opinion, satisfactory to Summit and Garden State, of Bourne, Noll & Kenyon,
counsel for Summit, to the effect that the transactions contemplated hereby will
result in a reorganization (as defined in Section 368(a) of the Code), and
accordingly no gain or loss will be recognized for federal income tax purposes
to Summit, Garden State, Summit Bank or the Bank or to the shareholders of
Garden State who exchange their shares of Garden State for Summit Common Stock
(except to the extent that cash is received in lieu of fractional shares of
Summit Common Stock).
(e) Pooling of Interests. The Merger shall be qualified to be treated by
Summit as a pooling-of-interests for accounting purposes.
6.2. Conditions to the Obligations of Summit Under this Agreement. The
obligations of Summit under this Agreement shall be further subject to the
satisfaction or waiver, at or prior to the Effective Time, of the following
conditions:
(a) Representations and Warranties; Performance of Obligations of
Garden State and Bank. The representations and warranties of Garden State
contained in this Agreement shall be true and correct in all material
respects on the Closing Date as though made on and as of the Closing Date.
Garden State shall have performed in all material respects the agreements,
covenants and obligations necessary to be performed by it prior to the
Closing Date. With respect to any representation or warranty which as of
the Closing Date has required a supplement or amendment to the Garden State
Disclosure Schedule to render such representation or warranty true and
correct as of the Closing Date, the representation and warranty shall be
deemed true and correct as of the Closing Date only if (i) the information
contained in the supplement or amendment to the Disclosure Schedule related
to events occurring following the execution of this Agreement and (ii) the
facts disclosed in such supplement or amendment would not either alone, or
together with any other supplements or amendments to the Garden State
Disclosure Schedule, materially adversely affect the representation as to
which the supplement or amendment relates.
(b) Consents. Summit shall have received the written consents of any
person whose consent to the transactions contemplated hereby is required
under the applicable instrument.
(c) Opinion of Counsel. Summit shall have received an opinion of
counsel to Garden State, dated the date of the Closing, in form and
substance reasonably satisfactory to Summit, covering the matters set forth
on Schedule 6.2 hereto and any other matters reasonably requested by
Summit.
(d) Bank Action. The Bank shall have taken all necessary corporate
action to effectuate the Bank Merger immediately following the Effective
Time.
(e) Certificates. Garden State shall have furnished Summit with such
certificates of its officers or other documents to evidence fulfillment of
the conditions set forth in this Section 6.2 as Summit may reasonably
request.
6.3. Conditions to the Obligations of Garden State Under this
Agreement. The obligations of Garden State under this Agreement shall be
further subject to the satisfaction or waiver, at or prior to the Effective
Time, of the following conditions:
(a) Representations and Warranties; Performance of Obligations of
Summit. The representations and warranties of Summit contained in this
Agreement shall be true and correct in all material respects on the Closing
Date as though made on and as of the Closing Date. Summit shall have
performed in all material respects, the agreements, covenants and
obligations to be performed by it prior to the Closing Date. With respect
to any representation or warranty which as of the Closing Date has required
a supplement or amendment to the Summit Disclosure Schedule to render such
representation or warranty true and correct as of the Closing Date, the
representation and warranty shall be deemed true and correct as of the
Closing Date only if (i) the information contained in the supplement or
amendment to the Disclosure Schedule related to events occurring following
the execution of this Agreement and (ii) the facts disclosed in such
supplement or amendment would not either alone, or together with any
A-26
<PAGE> 95
other supplements or amendments to the Summit Disclosure Schedule,
materially adversely affect the representation as to which the supplement
or amendment relates.
(b) Opinion of Counsel to Summit. Garden State shall have received
an opinion of counsel to Summit, dated the date of the Closing, in form and
substance reasonably satisfactory to Garden State, covering the matters set
forth on Schedule 6.3 hereto.
(c) Fairness Opinion. Garden State shall have received an update of
the opinion from Advest referred to in Section 3.24, to the effect that, in
its opinion, the consideration to be paid to stockholders of Garden State
hereunder is fair to such stockholders from a financial point of view,
without adverse change to such opinion, (i) as of a date not more than
three days prior to the date the Proxy Statement/Prospectus is mailed to
Garden State's stockholders, and (ii) as of the Closing.
(d) Employment Agreements. Summit shall have taken all action
necessary under Section 5.13 (a) to assume in writing and to honor the
employment agreements of Garden State set forth in the Disclosure Schedule.
(e) Insurance. Garden State shall have received evidence, reasonably
satisfactory to it, that Summit shall have obtained the insurance referred
to in Section 5.12 (c).
(f) Certificates. Summit shall have furnished Garden State with such
certificates of its officers or others and such other documents to evidence
fulfillment of the conditions set forth in this Section 6.3 as Garden State
may reasonably request.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1. Termination. This Agreement may be terminated prior to the Effective
Time, whether before or after approval of this Agreement by the stockholders of
Garden State:
(a) By mutual written consent of the parties hereto.
(b) By Summit or Garden State (i) if the Effective Time shall not have
occurred on or prior to June 30, 1996 or (ii) if a vote of the stockholders
of Garden State is taken and such stockholders fail to approve this
Agreement at the meeting (or any adjournment thereof) held for such
purpose, unless in each case the failure of such occurrence shall be due to
the failure of the party seeking to terminate this Agreement to perform or
observe its agreements set forth herein to be performed or observed by such
party (or the directors of Garden State) at or before the Effective Time.
(c) By Summit or Garden State upon written notice to the other if any
application for regulatory or governmental approval necessary to consummate
the Merger and the other transactions contemplated hereby shall have been
denied or withdrawn at the request or recommendation of the applicable
regulatory agency or governmental authority or by Summit upon written
notice to Garden State if any such application is approved with conditions
which materially impair the value of Garden State and the Bank, taken as a
whole, to Summit.
(d) By Summit if there shall have occurred a material adverse change
in the business, operations, assets, or financial condition of Garden State
or the Bank from that disclosed by Garden State on the date of this
Agreement.
(e) By Garden State, if there shall have occurred a material adverse
change in the business, operations, assets or financial condition of Summit
or Summit Bank from that disclosed by Summit on the date of this Agreement.
(f) By Summit or Garden State if any condition to Closing specified
under Article VI hereof applicable to such party cannot reasonably be met
after giving the other party a reasonable opportunity to cure any such
condition.
A-27
<PAGE> 96
(g) By Garden State if the Average Closing Price is less than $16.00.
(h) By Garden State if (A) the Average Closing Price is less than
$17.00 and (B) Summit has not delivered a written notice to Garden State
unilaterally agreeing to increase the Exchange Ratio such that the value
(measured by the Average Closing Price) of the number of shares of Summit
Common Stock to be exchanged for one share of Garden State Common stock in
the Merger, based on the new Exchange Ratio, is at least as high as the
value would have been if the Exchange Ratio were unchanged and the Average
Closing Price were $17.00.
7.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement by either Summit or Garden State pursuant to
Section 7.1, this Agreement shall forthwith become void and have no effect,
without any liability on the part of any party or its officers, directors or
stockholders. Nothing contained herein, however, shall relieve any party from
any liability for any breach of this Agreement.
7.3. Amendment. This Agreement may be amended by mutual action taken by
the parties hereto at any time before or after adoption of this Agreement by the
stockholders of Garden State but, after any such adoption, no amendment shall be
made which reduces or changes the amount or form of the consideration to be
delivered to the shareholders of Garden State without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of Summit and Garden State.
7.4. Extension; Waiver. The parties may, at any time prior to the
Effective Time of the Merger, (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto; (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto; or (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of any
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party against which the waiver is
sought to be enforced.
ARTICLE VIII
MISCELLANEOUS
8.1. Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including legal, accounting
and investment banking fees and expenses) shall be borne by the party incurring
such costs and expenses.
8.2. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by telecopier with confirming copy sent the same day by registered or
certified mail, postage prepaid, as follows:
(a) If to Summit, to:
The Summit Bancorporation
One Main Street, Second Floor
Chatham, New Jersey 07928
Attn.: Robert G. Cox
President and Chief Executive Officer
Telecopier No. (201) 701-2520
Copy to:
Bourne, Noll & Kenyon
382 Springfield Avenue
Summit, New Jersey 07901
Attn: Charles R. Berman, Esq.
Telecopier No. (908) 277-6808
A-28
<PAGE> 97
(b) If to Garden State, to:
Garden State BancShares, Inc.
2290 West County Line Road
Jackson, New Jersey 08527
Attn: Theodore D. Bessler,
President and Chief Executive Officer
Telecopier No. (908) 905-2339
Copy to:
Pitney, Hardin, Kipp & Szuch
Delivery:
200 Campus Drive
Florham Park, New Jersey 07932
Mail:
P.O. Box 1945
Morristown, New Jersey 07962-1945
Attn.: Ronald H. Janis, Esq.
Telecopier No. (201) 966-1550
or such other addresses as shall be furnished in writing by any party, and any
such notice or communications shall be deemed to have been given as of the date
so delivered or telecopied and mailed.
8.3. Parties in Interest. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. No assignment of this Agreement may be made except upon the
written consent of the other parties hereto. Nothing in this Agreement is
intended to confer, expressly or by implication, upon any other person any
rights or remedies under or by reason of this Agreement, except for the present
and former directors and officers of Garden State or its Subsidiaries referred
to in Section 5.12 hereof, who shall be entitled to the benefits of such Section
5.12.
8.4. Entire Agreement. This Agreement, which includes the Disclosure
Schedules hereto and the other documents, agreements and instruments executed
and delivered pursuant to or in connection with this Agreement, contains the
entire Agreement between the parties hereto with respect to the transactions
contemplated by this Agreement and supersedes all prior negotiations,
arrangements or understandings, written or oral, with respect thereto, including
the Letter of Intent.
8.5. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
8.6. Governing Law. This Agreement shall be governed by the laws of the
State of New Jersey, without giving effect to the principles of conflicts of
laws thereof.
8.7. Descriptive Headings. The descriptive headings of this Agreement are
for convenience only and shall not control or affect the meaning or construction
of any provision of this Agreement.
A-29
<PAGE> 98
IN WITNESS WHEREOF, Summit, Summit Bank, the Bank and Garden State have
caused this Agreement to be executed by their duly authorized officers as of the
day and year first above written.
<TABLE>
<S> <C>
ATTEST: THE SUMMIT BANCORPORATION
By: /s/ JOHN F. KUNTZ By: /s/ ROBERT G. COX
----------------------------------------- -------------------------------------
John F. Kuntz, Secretary Robert G. Cox, President
and Chief Executive Officer
ATTEST: GARDEN STATE BANCSHARES, INC.
By: /s/ LISA M. MACQUAIDE By: /s/ THEODORE D. BESSLER
----------------------------------------- -----------------------------------------
Lisa M. MacQuaide, Secretary Theodore D. Bessler, President
and Chief Executive Officer
ATTEST: SUMMIT BANK
By: /s/ JOHN F. KUNTZ By: /s/ ROBERT G. COX
----------------------------------------- -----------------------------------------
John F. Kuntz, Secretary Robert G. Cox, President
and Chief Executive Officer
ATTEST: GARDEN STATE BANK
By: /s/ LISA M. MACQUAIDE By: /s/ THEODORE D. BESSLER
----------------------------------------- -----------------------------------------
Lisa M. MacQuaide, Secretary Theodore D. Bessler, President
and Chief Executive Officer
</TABLE>
A-30
<PAGE> 99
CERTIFICATE OF GARDEN STATE DIRECTORS
Reference is made to the Agreement and Plan of Merger, dated June 13, 1995
(the "Agreement"), among The Summit Bancorporation, Summit Bank, Garden State
BancShares, Inc. and Garden State Bank. Capitalized terms used herein have the
meanings given to them in the Agreement.
Each of the following persons, being all of the directors of Garden State,
agrees to vote or cause to be voted all shares of Garden State Common Stock
which are held by such person, or over which such person exercises full voting
control, in favor of the Merger.
/s/ THEODORE D. BESSLER
- ---------------------------------------------------------
Theodore D. Bessler
/s/ PETER BOYARIN
- ---------------------------------------------------------
Peter Boyarin
/s/ H. GEORGE BUCKWALD
- ---------------------------------------------------------
H. George Buckwald
/s/ LEE A. HARRIS
- ---------------------------------------------------------
Lee A. Harris
/s/ MICHAEL E. LEVIN
- ---------------------------------------------------------
Michael E. Levin
/s/ MATTHEW LINDENBAUM
- ---------------------------------------------------------
Matthew Lindenbaum
/s/ ARNOLD D. MOHEL
- ---------------------------------------------------------
Arnold D. Mohel
/s/ RONALD P. VOGEL
- ---------------------------------------------------------
Ronald P. Vogel
/s/ HERBERT WISHNICK
- ---------------------------------------------------------
Herbert Wishnick
Dated: June 13, 1995
A-31
<PAGE> 100
APPENDIX B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") dated June 13, 1995, is by and
between THE SUMMIT BANCORPORATION, a New Jersey corporation and registered bank
holding company
("Summit"), and Garden State BancShares, Inc. a New Jersey corporation ("Garden
State") and registered bank holding company for Garden State Bank ("Bank").
BACKGROUND
1. Summit, Garden State, the Bank and Summit Bank ("Summit Bank"), a
wholly-owned subsidiary of Summit, as of the date hereof, have executed an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which Summit
will acquire Garden State through a merger of Garden State with and into Summit
(the "Merger").
2. As an inducement required by Summit to enter into the Merger Agreement,
Garden State has agreed to grant to Summit an option to purchase authorized but
unissued shares of common stock of Garden State in an amount and on the terms
and conditions hereinafter set forth.
AGREEMENT
In consideration of the foregoing and the mutual covenants and agreements
set forth herein and in the Merger Agreement, Summit and Garden State, intending
to be legally bound hereby, agree:
1. Grant of Option. Garden State hereby grants to Summit the option
to purchase 752,770 shares (the "Option Shares") of common stock, no par
value (the "Common Stock") of Garden State at an exercise price of $15.75
per share (the "Option Price"), on the terms and conditions set forth
herein (the "Option").
2. Exercise of Option. The Option shall not be exercisable until the
occurrence of a Triggering Event (as such term is hereinafter defined).
Upon or after the occurrence of a Triggering Event (as such term is
hereinafter defined), Summit may exercise the Option, in whole or in part,
at any time or from time to time in accordance with the terms and
conditions hereof.
The term "Triggering Event" means the occurrence of any of the following
events:
A person or group (as such terms are defined in the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder) other than Summit or an affiliate of Summit:
a. acquires beneficial ownership (as such term is defined in Rule
13d-3 as promulgated under the Exchange Act) of at least 20% of the then
outstanding shares of Common Stock;
b. enters into a written letter of intent or an agreement with
Garden State pursuant to which such person or any affiliate of such
person would (i) merge or consolidate or enter into any similar
transaction with Garden State, (ii) acquire all or a significant portion
of the assets or liabilities of Garden State or (iii) acquire beneficial
ownership of securities representing, or the right to acquire beneficial
ownership or to vote securities representing, 20% or more of the then
outstanding shares of Common Stock;
c. makes a filing with any bank or thrift regulatory authority or
publicly announces a bona fide proposal (a "Proposal") for (i) any
merger, consolidation or acquisition of all or a significant portion of
all the assets or liabilities of Garden State or any other business
combination involving Garden State, or (ii) a transaction involving the
transfer of beneficial ownership of securities representing, or the
right to acquire beneficial ownership or to vote securities
representing, 20% or more of the outstanding shares of Common Stock, and
thereafter, if such Proposal has not been Publicly Withdrawn (as such
term is hereinafter defined) at least 15 days prior to the meeting of
stockholders
B-1
<PAGE> 101
of Garden State called to vote on the Merger and Garden State
stockholders fail to approve the Merger by the vote required by
applicable law at the meeting of stockholders called for such purpose;
or
d. makes a bona fide Proposal and thereafter, but before such
Proposal has been Publicly Withdrawn, Garden State willfully takes any
action in any manner which would materially interfere with its desire or
ability to consummate the Merger or would materially reduce the value of
the Merger to Summit.
The term "Triggering Event" also means the taking of any direct or indirect
action by Garden State or any of its directors, officers or agents to invite,
encourage or solicit any proposal which has as its purpose a tender offer for
the shares of Common Stock, a merger, consolidation, plan of exchange, plan of
acquisition or reorganization of Garden State, or a sale of shares of Common
Stock or any significant portion of Garden State's assets or liabilities.
The term "significant portion" means 25% of the assets or liabilities of
Garden State.
"Publicly Withdrawn", for purposes of clauses (c) and (d) above, shall mean
an unconditional bona fide withdrawal of the Proposal coupled with a public
announcement of no further interest in pursuing such Proposal or in acquiring
any controlling influence over Garden State or in soliciting or inducing any
other person (other than Summit or any affiliate) to do so.
Notwithstanding the foregoing, the Option may not be exercised at any time
(i) in the absence of any required governmental or regulatory approval or
consent necessary for Garden State to issue the Option Shares or Summit to
exercise the Option or prior to the expiration or termination of any waiting
period required by law, or (ii) so long as any injunction or other order, decree
or ruling issued by any federal or state court of competent jurisdiction is in
effect which prohibits the sale or delivery of the Option Shares.
Garden State shall notify Summit promptly in writing of the occurrence of
any Triggering Event known to it, it being understood that the giving of such
notice by Garden State shall not be a condition to the right of Summit to
exercise the Option. Garden State will not take any action which would have the
effect of preventing or disabling Garden State from delivering the Option Shares
to Summit upon exercise of the Option or otherwise performing its obligations
under this Agreement.
In the event Summit wishes to exercise the Option, Summit shall send a
written notice to Garden State (the date of which is hereinafter referred to as
the "Notice Date") specifying the total number of Option Shares it wishes to
purchase and a place and date for the closing of such a purchase (a "Closing");
provided, however, that a Closing shall not occur prior to two days after the
later of receipt of any necessary regulatory approvals and the expiration of any
legally required notice or waiting period, if any.
3. Merger, Consolidation, etc. (a) In case prior to the termination of
this Agreement (1) Garden State shall consolidate with or merge into any Person,
other than Summit or one of its Affiliates, and Garden State shall not be the
continuing or surviving corporation of such consolidation or merger, (2) any
Person, other than Summit or one of its Affiliates, shall merge into Garden
State and Garden State shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding Common Stock shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property or the then outstanding Common Stock after such merger shall
represent less than 50% of the outstanding shares and share equivalents of the
merged company, or (3) Garden State shall sell or otherwise transfer all or
substantially all of its assets to any Person, other than Summit or one of its
Affiliates, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into and exchangeable for an option (the "Substitute
Option"), at the election of the Holder, of either (i) the Acquiring Corporation
or (ii) any Person which controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean either (i) the continuing or
surviving corporation of a consolidation or merger with Garden State (if
other than Garden State), (ii) Garden State in a merger in
B-2
<PAGE> 102
which Garden State is the continuing or surviving person, or (iii) the
transferee of all or substantially all of Garden State's assets, as
applicable.
(ii) "Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 promulgated under the Exchange Act.
(iii) "Assigned Value" shall mean the Market/Offer Price, as defined
below; provided, however, that in the event of a sale of all or
substantially all of Garden State's assets, the Assigned Value shall mean
the sum of the price paid in such sale for such assets and the current
market value of the remaining assets of Garden State as determined by the
Valuation Expert (less the book value of the remaining liabilities),
divided by the number of shares of Common Stock of Garden State outstanding
at the time of such sale.
(iv) "Average Price" shall mean the average closing price of a share
of Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided, that if Garden State is the
issuer of the Substitute Option, the Average Price shall be computed with
respect to a share of common stock issued by the Person merging into Garden
State or by any company which controls such Person, as the Holder may
elect.
(v) "Holder" shall mean a holder of the Option evidenced by this
Agreement.
(vi) "Market/Offer Price" shall mean the highest of (a) the price per
share of Common Stock at which a tender offer or exchange offer therefor
has been consummated by any person (other than Summit or any of its
Affiliates), if, upon consummation of such offer, the offeror had
beneficial ownership of 20% or more of the Common Stock then outstanding
(exclusive of shares issuable upon the exercise of the Option), (b) the
consideration per share of Common Stock to be paid by any third party
pursuant to an agreement with Garden State, and (c) the highest closing
sales price for Common Stock within the six-month period immediately
preceding the consolidation, merger or sale in question. The value of any
non-cash consideration under clause (a) or (b) above shall be the amount
determined by the Valuation Expert.
(vii) A "Person" shall mean any individual, firm, corporation or other
entity and include as well any syndicate or group deemed to be a "person"
pursuant to Section 13(e)(3) of the Exchange Act.
(viii) "Substitute Common Stock" shall mean the common stock issuable
by the issuer of the Substitute Option.
(ix) "Valuation Expert" shall mean a nationally recognized investment
banking firm selected by the Holder (or by a majority in interest of the
Holders if there shall be more than one Holder) and reasonably acceptable
to Garden State.
(c) Except as otherwise provided herein, the Substitute Option shall have
the same terms as the Option, provided, that if the terms of the Substitute
Option cannot, for legal reasons, be the same as the Option, such terms shall be
as similar as possible and in no event less advantageous to the Holder. The
issuer of the Substitute Option shall also enter into an agreement with the then
Holder or Holders of the Substitute Option in substantially the same form as
this Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to (i) the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by (ii) the Average Price. The exercise price of the Substitute Option
per share of Substitute Common Stock shall be equal to the Option Price
multiplied by a fraction of which the numerator is the number of shares of
Common Stock for which the Option is then exercisable and the denominator is the
number of shares of Substitute Common Stock for which the Substitute Option is
exercisable.
B-3
<PAGE> 103
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the number of shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
(f) Garden State shall not enter into any transaction described in
paragraph (a) of this Section 3 unless the Acquiring Corporation and any Person
which controls the Acquiring Corporation assumes in writing all the obligations
of Garden State hereunder.
4. Payment and Delivery of Certificates. At any Closing hereunder (a)
Summit will make payment to Garden State of the aggregate price for the Option
Shares so purchased by wire transfer of immediately available funds to an
account designated by Garden State, (b) Garden State will deliver to Summit a
stock certificate or certificates representing the number of Option Shares so
purchased, free and clear of all liens, claims, charges and encumbrances of any
kind or nature whatsoever created by or through Garden State, registered in the
name of Summit or its designee, in such denominations as were specified by
Summit in its notice of exercise and bearing a legend as set forth below and (c)
Summit shall pay any transfer or other taxes required by reason of the issuance
of the Option Shares so purchased.
Unless a registration statement is filed and declared effective under
Section 5 hereof, a legend will be placed on each stock certificate evidencing
Option Shares issued pursuant to this Agreement, which legend will read
substantially as follows:
The shares of stock evidenced by this certificate have not been
registered for sale under the Securities Act of 1933 (the "1933 Act").
These shares may not be sold, transferred or otherwise disposed of unless a
registration statement with respect to the sale of such shares has been
filed under the 1933 Act and declared effective or, in the opinion of
counsel reasonably acceptable to Garden State BancShares, Inc., said
transfer would be exempt from registration under the provisions of the 1933
Act and the regulations promulgated thereunder.
5. Registration Rights. Upon or after the occurrence of a Triggering
Event and upon receipt of a written request from Summit, Garden State shall
promptly prepare and file a registration statement with the Securities and
Exchange Commission, covering the Option and such number of Option Shares as
Summit shall specify in its request, and Garden State shall use its best efforts
to cause such registration statement to be declared effective and remain current
in order to permit the sale or other disposition of the Option and the Option
Shares, provided that Summit shall in no event have the right to have more than
one such registration statement become effective and Garden State shall not be
required to maintain the effectiveness of such registration statement for more
than 180 days.
In connection with such filing, Garden State shall use its best efforts to
cause to be delivered to Summit such certificates, opinions, accountant's
letters and other documents as Summit shall reasonably request and as are
customarily provided in connection with registrations of securities under the
Securities Act of 1933, as amended. All expenses incurred by Garden State in
complying with the provisions of this Section 5, including without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for Garden State and blue sky fees and expenses shall be paid by Garden
State. Underwriting discounts and commissions to brokers and dealers relating to
the Option Shares, fees and disbursements of counsel to Summit and any other
expenses incurred by Summit in connection with such registration shall be borne
by Summit. In connection with such filing, Garden State shall indemnify and hold
harmless Summit against any losses, claims, damages or liabilities, joint or
several, to which Summit may become subject, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement with respect to Garden State or alleged untrue
statement with respect to Garden State of any material fact with respect to
Garden State contained in any preliminary or final registration statement or any
amendment or supplement thereto, or arise out of a material fact with respect to
Garden State required to be stated therein or necessary to make the statements
therein with respect to Garden State not misleading; and Garden State will
reimburse Summit for any legal or other expense reasonably incurred by Summit in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that Garden State will not be liable in
any case to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement of omission
or alleged omission
B-4
<PAGE> 104
made in such preliminary or final registration statement or such amendment or
supplement thereto in reliance upon and in conformity with written information
furnished by or on behalf of Summit specifically for use in the preparation
thereof. Summit will indemnify and hold harmless Garden State to the same extent
as set forth in the immediately preceding sentence but only with reference to
written information specifically furnished by or on behalf of Summit for use in
the preparation of such preliminary or final registration statement or such
amendment or supplement thereto; and Summit will reimburse Garden State for any
legal or other expense reasonably incurred by Garden State in connection with
investigating or defending any such loss, claim, damage, liability or action.
6. Adjustment Upon Changes in Capitalization. In the event of any change
in the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, conversions, exchanges of shares or the like,
then the number and kind of Option Shares and the Option Price shall be
appropriately adjusted.
In the event any capital reorganization or reclassification of the Common
Stock, or any consolidation, merger or similar transaction of Garden State with
another entity, or in the event any sale of all or substantially all of the
assets of Garden State shall be effected in such a way that the holders of
Common Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions (in form reasonably satisfactory to the holder hereof) shall
be made whereby the holder hereof shall thereafter have the right to purchase
and receive upon the basis and upon the terms and conditions specified herein
and in lieu of the Common Stock immediately theretofore purchasable and
receivable upon exercise of the rights represented by the Option, such shares of
stock, securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
purchasable and receivable upon exercise of the rights represented by the Option
had such reorganization, reclassification, consolidation, merger or sale not
taken place; provided, however, that if such transaction results in the holders
of Common Stock receiving only cash, the holder hereof shall be paid the
difference between the Option Price and such cash consideration without the need
to exercise the Option.
7. Filings and Consents. Each of Summit and Garden State will use its
best efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement.
Exercise of the Option herein provided shall be subject to compliance with
all applicable laws including, in the event Summit is the holder hereof,
approval of the Board of Governors of the Federal Reserve System and Garden
State agrees to cooperate with and furnish to the holder hereof such information
and documents as may be reasonably required to secure such approvals.
8. Representations and Warranties of Garden State. Garden State hereby
represents and warrants to Summit as follows:
a. Due Authorization. Garden State has full corporate power and
authority to execute, deliver and perform this Agreement and all corporate
action necessary for execution, delivery and performance of this Agreement
has been duly taken by Garden State.
b. Authorized Shares. Garden State has taken and, as long as the
Option is outstanding, will take all necessary corporate action to
authorize and reserve for issuance all shares of Common Stock that may be
issued pursuant to any exercise of the Option.
c. No Conflicts. Neither the execution and delivery of this
Agreement nor consummation of the transactions contemplated hereby
(assuming all appropriate regulatory approvals) will violate or result in
any violation or default of or be in conflict with or constitute a default
under any term of the certificate of incorporation or by-laws of Garden
State or, to its knowledge, any agreement, instrument, judgment, decree,
statute, rule or order applicable to Garden State.
9. Specific Performance. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Agreement and that the
obligations of the parties hereto shall be specifically
B-5
<PAGE> 105
enforceable. Notwithstanding the foregoing, Summit shall have the right to seek
money damages against Garden State for a breach of this Agreement.
10. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, among the
parties or any of them with respect to the subject matter hereof.
11. Assignment or Transfer. Summit may not sell, assign or otherwise
transfer its rights and obligations hereunder, in whole or in part, to any
person or group of persons other than to an affiliate of Summit. Summit
represents that it is acquiring the Option for Summit's own account and not with
a view to or for sale in connection with any distribution of the Option. Summit
is aware that presently neither the Option nor the Option Shares are being
offered by a registration statement filed with, and declared effective by, the
Securities and Exchange Commission, but instead are being offered in reliance
upon the exemption from the registration requirements pursuant to Section 4(2)
of the Securities Act of 1933, as amended.
12. Amendment of Agreement. By mutual consent of the parties hereto, this
Agreement may be amended in writing at any time, for the purpose of facilitating
performance hereunder or to comply with any applicable regulation of any
governmental authority or any applicable order of any court or for any other
purpose.
13. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
14. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by telecopier with confirming copy sent the same day by registered or
certified mail, postage prepaid, as follows:
(a) If to Summit, to:
The Summit Bancorporation
One Main Street, Second Floor
Chatham, New Jersey 07928
Attn.: Robert G. Cox
President and Chief Executive Officer
Telecopier No. (201) 701-2520
Copy to:
Bourne, Noll & Kenyon
382 Springfield Avenue
Summit, New Jersey 07901
Attn: Charles R. Berman, Esq.
Telecopier No. (908) 277-6808
(b) If to Garden State, to:
Garden State BancShares, Inc.
2290 West County Line Road
Jackson, New Jersey 08527
Attn: Theodore D. Bessler,
President and Chief Executive Officer
Telecopier No. (908) 905-2339
Copy to:
Pitney, Hardin, Kipp & Szuch
Delivery:
200 Campus Drive
Florham Park, New Jersey 07932
B-6
<PAGE> 106
Mail:
P.O. Box 1945
Morristown, New Jersey 07962-1945
Attn.: Ronald H. Janis, Esq.
Telecopier No. (201) 966-1550
or such other addresses as shall be furnished in writing by any party, and any
such notice or communications shall be deemed to have been given as of the date
so delivered or telecopied and mailed.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
16. Captions. The captions in the Agreement are inserted for convenience
and reference purposes, and shall not limit or otherwise affect any of the terms
or provisions hereof.
17. Waivers and Extensions. The parties hereto may, by mutual consent,
extend the time for performance of any of the obligations or acts of either
party hereto. Each party may waive (i) compliance with any of the covenants of
the other party contained in this Agreement and/or (ii) the other party's
performance of any of its obligations set forth in this Agreement.
18. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement, except
as provided in Section 11 permitting Summit to assign its rights and obligations
hereunder only to an affiliate of Summit.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
20. Termination. The Option granted hereby, to the extent not previously
exercised, shall terminate upon the earliest of (i) 12 months after the first
occurrence of a Triggering Event, (ii) consummation of the Merger, (iii) the
termination of the Merger Agreement in accordance with the terms thereof prior
to the occurrence of a Triggering Event (other than if terminated by Summit
pursuant to Section 7.1(f) thereof due to a failure by Garden State to fulfill a
condition contained in Section 6.2(a) thereof), (iv) 12 months after the
termination of the Merger Agreement for any reason, provided that the Option
shall not terminate pursuant to this clause (iv) in the event that a Triggering
Event shall have occurred prior to the expiration of such 12-month period and
instead shall terminate in accordance with clause (i) hereof.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to resolutions
adopted by its Board of Directors, has caused this Agreement to be executed by
its duly authorized officer, all as of the day and year first above written.
GARDEN STATE BANCSHARES, INC.
By: /s/ Theodore D. Bessler
-----------------------------------
Theodore D. Bessler
President and
Chief Executive Officer
THE SUMMIT BANCORPORATION
By: /s/ Robert G. Cox
-----------------------------------
Robert G. Cox
President and
Chief Executive Officer
B-7
<PAGE> 107
APPENDIX C
December 8, 1995
Board of Directors
Garden State BancShares, Inc.
2290 West County Line Road
Jackson, New Jersey 08527
Members of the Board:
Garden State BancShares, Inc. ("Garden State") and The Summit
Bancorporation ("Summit") entered into an agreement and Plan of Merger dated as
of June 13, 1995 (the "Agreement"), pursuant to which Garden State will be
merged with and into Summit in a merger transaction (the "Merger").
The Agreement provides that each outstanding share of Garden State common
stock, no par value, will be converted into the right to receive 1.08 shares of
Summit common stock, no par value (the "Exchange Ratio"), subject to adjustment
under certain circumstances. In addition, Garden State has the right to declare,
set aside or pay cash dividends per share of Garden State common stock
equivalent to the cash dividends per share declared, set aside or paid by Summit
multiplied by the Exchange Ratio up until the Effective Time (the "Equivalent
Rate Dividend"). The terms and conditions of the proposed transaction are
described in more detail in the Agreement. The Agreement is expected to be
considered by the shareholders of Garden State at a shareholders' meeting and
consummated shortly after the receipt of shareholder and state and federal
regulatory approvals.
In connection with executing the Agreement, Garden State entered into a
Stock Option Agreement (the "Option Agreement") dated June 13, 1995 pursuant to
which Garden State granted Summit an option to acquire up to 752,770 shares of
Garden State common stock at a price of $15.75 per share, exercisable upon the
occurrence of certain events specified in the Option Agreement.
You have asked us whether, in our opinion, the Exchange Ratio is fair, from
a financial point of view, to the shareholders of Garden State.
In arriving at the opinion set forth below, we have, among other things:
reviewed the Agreement and the exhibits and schedules thereto; reviewed the
Option Agreement; reviewed the Annual Reports on Form 10-K for each of Garden
State and Summit for the three fiscal years ended December 31, 1994, as well as
unaudited financial information for the quarters ending September 30, 1995 for
each of Garden State and Summit; reviewed certain financial information as filed
with federal banking agencies for the three years ended December 31, 1994, as
well as the nine months ended September 30, 1995, for each of Garden State and
Summit, including comparative financial and operating data on the banking
industry and certain institutions which were deemed to be comparable to the
companies; reviewed the historical market prices and trading activity for the
common shares of each of Garden State and Summit and compared them with certain
publicly-traded companies which we deemed to be comparable to each company;
considered the beneficial financial impact to the shareholders of Garden State
of the Equivalent Rate Dividend, reviewed certain bank mergers and acquisitions
on a state, regional and nationwide basis for institutions which were deemed to
be comparable to Garden State and compared the proposed consideration with the
consideration paid in other mergers and acquisitions which we deemed relevant;
conducted limited discussions with members of senior management of each of
Garden State and Summit concerning the financial condition, business and
prospects of each respective company; and reviewed such other financial studies
and analyses and performed such other investigations and took into account such
other matters as we deemed necessary.
C-1
<PAGE> 108
In preparing this opinion we have assumed and relied on the accuracy and
completeness of all financial and other information reviewed by us for the
purposes of this opinion, and we have not independently verified such
information nor we have undertaken an independent evaluation of the assets or
liabilities of Garden State or Summit. Advest has been retained by the Board of
Directors of Garden State to act as financial advisor to Garden State with
respect to the Merger and will receive a fee for its services including a fee
for this opinion. This opinion is necessarily based upon circumstances and
conditions as they exist and can be evaluated by us as of the date of this
letter. Our opinion is directed to the Board of Directors of Garden State and
does not constitute a recommendation of any kind to any shareholder of Garden
State as to how such shareholder should vote at the shareholders' meeting to be
held in connection with the Merger. We have assumed for purposes of this opinion
that there has been no material change in the financial condition of either
Garden State or Summit from that existing on September 30, 1995.
In reliance upon and subject to the foregoing, it is our opinion that, as
of the date hereof, the Exchange Ratio is fair, from a financial point of view,
to the shareholders of Garden State.
Very truly yours,
Advest, Inc.
By: /s/ MICHAEL T. MAYES
------------------------------------
Michael T. Mayes
Managing Director
and Group Head
MTM:ge
C-2
