<PAGE>
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
Commission file number 0-8026
----------------
THE SUMMIT BANCORPORATION
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2007124
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE MAIN STREET, CHATHAM, NEW JERSEY 07928
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 701-2666
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO .
--- ---
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF SEPTEMBER 30, 1995:
33,897,869
==============================================================================
<PAGE>
INDEX - FORM 10-Q
PAGE
----
PART I FINANCIAL INFORMATION
Item 1 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . 1
CONSOLIDATED BALANCE SHEET. . . . . . . . . . . . . 1
CONSOLIDATED STATEMENT OF INCOME. . . . . . . . . . 2
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY. . . 3
CONSOLIDATED STATEMENT OF CASH FLOWS. . . . . . . . 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. . . . . 5
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . 6
PART II OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . 14
Item 2 CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . 14
Item 3 DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . 14
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . 14
Item 5 OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 14
Item 6 EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . 14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 15
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
PART I. FINANCIAL INFORMATION
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and Due from Banks . . . . . . . . . . . . . . . . . . . . . $ 259,414 $ 261,665
Federal Funds Sold and Other
Short-Term Investments . . . . . . . . . . . . . . . . . . . . 68,883 8,208
Investment Securities:
U.S. Treasury. . . . . . . . . . . . . . . . . . . . . . . . . 12,319 15,689
U.S. Government Agency . . . . . . . . . . . . . . . . . . . . 667,121 390,695
State and Municipal. . . . . . . . . . . . . . . . . . . . . . 22,008 47,919
Other Securities . . . . . . . . . . . . . . . . . . . . . . . 308,407 253,696
--------- ---------
Total Investment Securities (Market
Value of $1,005,224 and $669,154). . . . . . . . . . 1,009,855 707,999
Securities Available for Sale:
U.S. Treasury. . . . . . . . . . . . . . . . . . . . . . . . . 30,025 96,404
U.S. Government Agency . . . . . . . . . . . . . . . . . . . . 487,839 615,301
State and Municipal. . . . . . . . . . . . . . . . . . . . . . 17,519 -
Other Securities . . . . . . . . . . . . . . . . . . . . . . . 144,167 211,709
--------- ---------
Total Securities Available for Sale . . . . . . . . . 679,550 923,414
Trading Account Securities. . . . . . . . . . . . . . . . . . . . 623 1,357
Loans . . . . . . . . . . . . . . . . . . . . . . . . . 3,503,775 3,448,605
Less: Allowance for Loan Losses. . . . . . . . . . . . . . . . . 90,819 91,169
--------- ---------
Net Loans . . . . . . . . . . . . . . . . . . . . . . 3,412,956 3,357,436
Premises and Equipment. . . . . . . . . . . . . . . . . . . . . . 43,667 45,034
Other Real Estate Owned . . . . . . . . . . . . . . . . . . . . . 13,401 15,830
Accrued Interest Receivable . . . . . . . . . . . . . . . . . . . 34,776 29,600
Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 96,175 116,922
--------- ---------
Total Assets. . . . . . . . . . . . . . . . . . . . . $5,619,300 $5,467,465
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand . . . . . . . . . . . . . . . . . . . . . . . . . $ 800,273 $ 781,244
Savings and NOW Accounts . . . . . . . . . . . . . . . . . . . 1,500,466 1,620,081
Money Market Accounts. . . . . . . . . . . . . . . . . . . . . 847,542 770,987
Certificates of Deposits of $100,000 and Over. . . . . . . . . 347,399 223,326
Other Time . . . . . . . . . . . . . . . . . . . . . . . . . . 1,145,812 1,013,680
--------- ---------
Total Deposits. . . . . . . . . . . . . . . . . . . . 4,641,492 4,409,318
<PAGE>
Federal Funds Purchased and Other
Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . . 157,367 231,028
Accrued Expenses and Other Liabilities. . . . . . . . . . . . . . 65,456 56,786
Long-Term Debt. . . . . . . . . . . . . . . . . . . . . . . . . . 270,402 338,763
--------- ---------
Total Liabilities . . . . . . . . . . . . . . . . . . 5,134,717 5,035,895
Stockholders' Equity:
Preferred Stock, No Par Value, Authorized 12,000 Shares
Cumulative Adjustable Rate
Issued and Outstanding 504 and 800 Shares. . . . . . . . . . 12,612 20,000
Common Stock, No Par Value,
Authorized 50,000 Shares, Issued 33,982 and
Issued and Outstanding 33,439 Shares . . . . . . . . . . . . 50,172 49,320
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . 315,700 305,075
Retained Earnings. . . . . . . . . . . . . . . . . . . . . . . 105,088 72,215
Common Stock in Treasury, at Cost, 84 Shares . . . . . . . . . (1,632) -
Net Unrealized Gains (Losses) on Securities
Available for Sale. . . . . . . . . . . . . . . . . . . . . 2,643 (15,040)
--------- ---------
Total Stockholders' Equity. . . . . . . . . . . . . . 484,583 431,570
--------- ---------
Total Liabilities and
Stockholders' Equity . . . . . . . . . . . . . . . $5,619,300 $5,467,465
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1995 1994 1995 1994
-------- -------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and Fees on Loans . . . . . . . . . . . . . . . $ 74,111 $ 63,198 $216,902 $178,040
Interest and Dividends on Investment Securities:
Taxable . . . . . . . . . . . . . . . . . . . . . . . 14,956 11,046 40,461 34,665
Tax-Exempt. . . . . . . . . . . . . . . . . . . . . . 340 566 1,340 1,950
Interest and Dividends on Securities Available for Sale:
Taxable . . . . . . . . . . . . . . . . . . . . . . . 10,020 12,674 32,815 31,735
Tax-Exempt. . . . . . . . . . . . . . . . . . . . . . 602 335 1,637 1,111
Interest on Trading Account Securities . . . . . . . . . 14 16 37 59
Interest on Federal Funds Sold and
Other Short-Term Investments . . . . . . . . . . . . . 923 574 3,373 3,083
------- ------ ------- -------
Total Interest Income . . . . . . . . . . . . . . . 100,966 88,409 296,565 250,643
------- ------ ------- -------
INTEREST EXPENSE:
Interest on Deposits . . . . . . . . . . . . . . . . . . 39,750 26,765 110,279 76,061
Interest on Federal Funds Purchased and
Other Short-Term Borrowings. . . . . . . . . . . . . . 2,286 2,949 8,195 6,241
Interest on Long-Term Debt . . . . . . . . . . . . . . . 5,206 3,990 15,685 11,608
------- ------ ------- -------
Total Interest Expense. . . . . . . . . . . . . . . 47,242 33,704 134,159 93,910
------- ------ ------- -------
NET INTEREST INCOME. . . . . . . . . . . . . . . . . . . 53,724 54,705 162,406 156,733
Provision for Loan Losses. . . . . . . . . . . . . . . . 1,200 1,695 3,600 6,795
------- ------ ------- -------
Net Interest Income After Provision for Loan Losses. . . 52,524 53,010 158,806 149,938
------- ------ ------- -------
NONINTEREST INCOME:
Trust Income . . . . . . . . . . . . . . . . . . . . . . 3,000 2,800 8,740 8,501
Service Fees on Deposit Accounts . . . . . . . . . . . . 4,990 4,797 15,112 13,378
Securities Gains . . . . . . . . . . . . . . . . . . . . 789 - 1,610 180
Other Income . . . . . . . . . . . . . . . . . . . . . . 4,992 4,155 12,387 17,921
------- ------ ------- -------
Total Noninterest Income. . . . . . . . . . . . . . 13,771 11,752 37,849 39,980
------- ------ ------- -------
<PAGE>
NONINTEREST EXPENSE:
Salaries and Employee Benefits . . . . . . . . . . . . . 20,237 21,482 60,625 66,228
Net Occupancy Expense. . . . . . . . . . . . . . . . . . 4,209 4,613 12,995 14,444
Furniture and Equipment Expense. . . . . . . . . . . . . 2,303 2,309 7,032 6,880
Loss on Sale of Assets . . . . . . . . . . . . . . . . . - 35,390 - 35,390
Restructuring and Other Merger-Related Costs . . . . . . - 13,565 - 13,565
Other Expenses . . . . . . . . . . . . . . . . . . . . . 11,248 12,085 33,127 38,203
------- ------ ------- -------
Total Noninterest Expense . . . . . . . . . . . . . 37,997 89,444 113,779 174,710
------- ------ ------- -------
Income Before Income Taxes . . . . . . . . . . . . . . . 28,298 (24,682) 82,876 15,208
Applicable Income Tax Expense (Benefit). . . . . . . . . 10,160 (6,216) 29,524 7,351
------- ------ ------- -------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . . . . $ 18,138 $(18,466) $ 53,352 $ 7,857
====== ====== ======= =======
NET INCOME (LOSS) AVAILABLE TO
COMMON STOCKHOLDERS . . . . . . . . . . . . . . . . . $ 17,949 $(18,766) $ 52,674 $ 6,957
====== ====== ======= =======
Net Income (Loss) Per Common Share . . . . . . . . . . . $.53 $(.57) $1.56 $.21
Cash Dividends Declared Per Common Share . . . . . . . . .21 .19 .63 .57
Weighted Average Shares Outstanding. . . . . . . . . . . 33,802 33,124 33,658 32,997
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1995 1994 1995 1994
------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BEGINNING BALANCE. . . . . . . . . . . . . . . . . . . . $467,304 $458,851 $431,570 $439,360
Net Income (Loss). . . . . . . . . . . . . . . . . . . . 18,138 (18,466) 53,352 7,857
Common Stock Issued Under:
Dividend Reinvestment and Stock Purchase Plan . . . . 3,849 1,563 8,863 3,869
Stock Incentive Plans . . . . . . . . . . . . . . . . 660 1,664 2,614 3,035
Cash Dividends Declared:
Adjustable Rate Preferred Stock . . . . . . . . . . . (189) (300) (678) (900)
Common Stock. . . . . . . . . . . . . . . . . . . . . (7,084) (5,334) (21,205) (15,954)
Change in Net Unrealized Gains (Losses)
on Securities Available for Sale . . . . . . . . . . . 1,905 (8,456) 17,683 (9,245)
Purchase of Treasury Stock . . . . . . . . . . . . . . . - - (1,632) -
Repurchase of Preferred Stock. . . . . . . . . . . . . . - - (5,984) -
Acquisition of Lancaster Financial Ltd., Inc.. . . . . . - - - 2,795
Adjustment for the Pooling of a Company with
a Different Fiscal Year-End. . . . . . . . . . . . . . - - - (1,295)
------- ------- ------- -------
BALANCE, SEPTEMBER 30, . . . . . . . . . . . . . . . . . $484,583 $429,522 $484,583 $429,522
======= ======= ======= =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1995 1994 1995 1994
------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income (Loss). . . . . . . . . . . . . . . . . . . . $ 18,138 $ (18,466) $ 53,352 $ 7,857
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation, Amortization and Accretion. . . . . . . 2,668 5,545 7,920 7,969
Provision for Loan Losses . . . . . . . . . . . . . . 1,200 1,695 3,600 6,795
Securities Gains. . . . . . . . . . . . . . . . . . . (789) - (1,610) (180)
Decrease (Increase) in Trading Account Securities . . 1,117 (276) 734 94
Gain on Sale of Loans . . . . . . . . . . . . . . . . (1,772) (130) (2,939) (2,125)
Net Decrease (Increase) in Loans Originated for Sale. 52 (16,133) (17,684) 64,084
Increase in Accrued Interest Receivable . . . . . . . (2,771) (1,612) (5,176) (3,547)
Increase in Accrued Interest Payable. . . . . . . . . 990 846 2,571 850
Decrease in Other Real Estate Owned . . . . . . . . . 4,471 14,019 9,072 18,997
(Increase) Decrease in Other Assets . . . . . . . . . (1,876) (6,777) 7,844 (24,065)
Increase in Accrued Expenses and Other Liabilities. . 6,425 5,812 6,627 568
------- ------- ------- -------
Net Cash Provided (Used) by Operating Activities. . 27,853 (15,477) 64,311 77,297
------- ------- ------- -------
INVESTING ACTIVITIES:
Net Increase in Loans Made to Customers. . . . . . . . . (52,770) (131,390) (45,140) (313,294)
Purchases of Investment Securities . . . . . . . . . . . (146,929) (13,222) (440,314) (375,753)
Maturities of Investment Securities. . . . . . . . . . . 52,980 107,313 137,924 346,599
Proceeds from Sales of Loan Securitization . . . . . . . - - - 35,334
Purchases of Securities Available for Sale . . . . . . . (11,771) (30,231) (130,813) (643,121)
Maturities of Securities Available for Sale. . . . . . . 33,939 70,684 84,935 511,362
Proceeds from Sales of Securities Available for Sale . . 2,254 - 320,745 81,306
Purchases of Premises and Equipment. . . . . . . . . . . (1,112) (6,448) (4,656) (11,673)
(Increase) Decrease in Short-Term Investments. . . . . . (10,002) 109,995 (60,675) 260,835
------- ------- ------- -------
Net Cash (Used) Provided by Investing Activities. . (133,411) 106,701 (137,994) (108,405)
------- ------- ------- -------
FINANCING ACTIVITIES:
Increase in Deposits . . . . . . . . . . . . . . . . . . 143,771 39,105 231,646 47,144
(Decrease) Increase in Federal Funds Purchased . . . . . (14,723) (136,167) (73,661) 39,990
Long-Term Debt Issued. . . . . . . . . . . . . . . . . . - 33,812 74,925 364,719
Long-Term Debt Matured or Repurchased . . . . . . . . . (46,841) - (143,456) (307,574)
Adjustment Related to Acquisition . . . . . . . . . . . - - - 2,795
Adjustment for Pooling of Interest Accounting. . . . . . - - - (2,177)
Cash Dividends Paid. . . . . . . . . . . . . . . . . . . (7,273) (5,634) (21,883) (16,854)
Common Stock Issued. . . . . . . . . . . . . . . . . . . 4,509 3,227 11,477 6,904
Purchase of Treasury Stock . . . . . . . . . . . . . . . - - (1,632) -
Repurchase of Preferred Stock. . . . . . . . . . . . . . - - (5,984) -
------- ------- ------- -------
<PAGE>
Net Cash Provided (Used) by Financing Activities. . 79,443 (65,657) 71,432 134,947
------- ------- ------- -------
Net (Decrease) Increase in Cash and Due From Banks . . . (26,115) 25,567 (2,251) 103,839
Cash and Due from Banks at Beginning of Period . . . . . 285,529 276,751 261,665 198,479
------- ------- ------- -------
Cash and Due from Banks at End of Period . . . . . . . . $ 259,414 $ 302,318 $ 259,414 $ 302,318
======= ======= ======= =======
SUPPLEMENTAL DISCLOSURES:
Interest Paid. . . . . . . . . . . . . . . . . . . . . . $ 46,252 $ 32,858 $ 131,588 $ 93,060
Income Taxes Paid. . . . . . . . . . . . . . . . . . . . 4,349 622 17,879 12,788
Loans Transferred to Other Real Estate Owned . . . . . . 3,484 2,197 6,643 4,596
Mortgage Loans Swapped Into
Mortgage-Backed Securities . . . . . . . . . . . . . . - - - 35,233
Investment Securities Transferred to
Securities Available for Sale. . . . . . . . . . . . . - 134,093 - 134,093
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The financial statements include the accounts of The Summit Bancorporation and
its subsidiaries (the "Company"). All material intercompany balances and
transactions have been eliminated in consolidation. In the opinion of the
Company, all adjustments (consisting only of normal recurring accruals) which
are necessary for a fair statement of the results of the operations for the
interim periods have been reflected herein.
2. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is increased by provisions charged to expense
and reduced by charge-offs, net of recoveries. The provision for loan losses
is based on management's evaluation of the adequacy of the allowance for loan
losses. This evaluation encompasses consideration of past loan loss
experience, changes in the composition and volume of the credit portfolio, the
level and composition of nonperforming loans, the condition of industries
experiencing particular financial pressures, the relationship of the current
level of the allowance to the credit portfolio and to nonperforming assets,
and economic conditions. This evaluation is inherently subjective as it
requires material estimates including the amounts and timing of future cash
flows expected to be received on impaired loans that may vary significantly.
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for the
Impairment of a Loan" and its subsequent amendment, SFAS No. 118, "Accounting
by Creditors for the Impairment of a Loan - Income Recognition and
Disclosures." Adoption of SFAS No. 114, as amended, prescribes the
recognition criteria for loan impairment and the measurement methods for
certain impaired loans and loans whose terms are modified in troubled debt
restructurings and amends SFAS No. 5, "Accounting for Contingencies," and SFAS
No. 15, "Accounting by Debtors and Creditors for Troubled Debt
Restructurings."
SFAS No. 114, as amended, addresses the accounting for impaired loans and
specifies how allowances for credit losses related to these impaired loans
should be determined. SFAS No. 114 sets forth measurement methods for
estimating the portion of total loans attributable to impaired loans. It does
not address the overall adequacy of the allowance for loan losses, but focuses
instead on the allowance for estimated credit losses on impaired loans. It is
the Company's responsibility to ensure that the overall allowance for loan
losses is adequate to cover all estimated credit losses in the loan portfolio.
At September 30, 1995, impaired loans totaled $25.6 million (representing
total nonaccrual loans) and the related allowance for loan losses was $2.6
million. Since the Company sufficiently evaluates the adequacy of the
allowance for loan losses, the impact of adopting SFAS No. 114, as amended,
did not have an effect on the amount of the allowance for loan losses or the
existing income recognition and charge-off policies for nonperforming loans.
3. EARNINGS PER COMMON SHARE
Earnings per common share is computed by dividing net income available to
common stockholders by the weighted average number of shares outstanding.
Shares issuable under the Stock Incentive Plan have not been included in the
calculation of earnings per share since their effect is not material.
<PAGE>
4. RECENT ACCOUNTING PRONOUNCEMENT
On May 12, 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 122, "Accounting for Mortgage Servicing Rights." This Statement requires
the recognition of mortgage servicing rights as an asset when a mortgage loan
is sold or securitized and servicing retained. Also, the Statement requires
enterprises to measure the impairment of the servicing rights based on the
difference between the carrying amount of the servicing rights and their
current value. SFAS No. 122 is to be applied prospectively in fiscal years
beginning after December 15, 1995 to transactions in which the Company sells
or securitizes mortgage loans with servicing rights retained. The provisions
of this Statement should be applied to the measurement of impairment for all
capitalized servicing rights, including servicing rights capitalized prior to
the initial adoption of this Statement. The Company does not expect the
adoption of SFAS No. 122 to have a material effect on its future financial
position or results of operations.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
EARNINGS SUMMARY
Earnings for the quarter ended September 30, 1995 were $18.1 million, an
increase of 18% over 1994 third-quarter operating earnings of $15.4 million
before after-tax merger-related charges of $33.9 million associated with the
acquisition of Crestmont Financial Corp. ("Crestmont") and Lancaster Financial
Ltd., Inc. For the nine months ended September 30, 1995, the Company posted
record earnings of $53.4 million, up 28% from 1994 nine-month results
excluding merger-related charges. On a per common share basis, earnings were
$.53 for the third quarter of this year, a rise of 15% from operating results
before merger-related charges for the same quarter of last year. Net income
per common share amounted to $1.56 for the first nine months of 1995,
representing a 26% increase over the same period of a year ago excluding
merger-related charges. Third-quarter earnings for 1995 increased slightly
from 1995 second-quarter net income of $17.9 million and per share earnings
for the third quarter were 2% higher than the $.52 earned in the prior
quarter. The Company reported a net loss of $18.5 million in the third
quarter of 1994 and earned $7.9 million for the first nine months of last year
after merger-related charges.
The Company's return on average assets was 1.31% for the third quarter of
1995, compared to 1.30% for the second quarter of 1995 and 1.12% for the third
quarter of 1994 excluding merger-related charges. The return on average
assets for the first nine months of 1995 was 1.30% compared to 1.03% for the
same period of a year ago before merger-related charges. The return on
average common stockholders' equity amounted to 15.58% for the third quarter
of 1995 compared to 16.07% for the second quarter of 1995 and 13.92% for the
third quarter of 1994 excluding merger-related charges. For the first nine
months, such returns were 15.94% for 1995 and 12.66% for 1994 before
merger-related charges. The Company's book value was $13.92 per common share
at September 30, 1995, a 3% increase from the $13.48 reported at June 30,
1995.
The increase in the Company's 1995 third-quarter earnings over the amount
earned before merger-related charges in the comparable prior-year period was
attributable to declining noninterest expenses, a lower loan loss provision
and higher noninterest income, partially offset by a modest decline in net
interest income. Net income for the current year was also slightly higher
than the amount earned in the second quarter of 1995 as a growth in
noninterest revenues and a modest fall in noninterest expenses offset a small
decline in net interest income.
NET INTEREST INCOME
Net interest income on a tax-equivalent basis declined 2% to $54.7 million in
the third quarter of 1995 from the $55.7 million earned in the same quarter of
1994, primarily due to a narrowing in the net interest margin. For the first
nine months of 1995, tax-equivalent net interest income grew 4% to $165.6
million from the first nine months of 1994. The nine-month increase was
attributable to a six basis-point widening of the net interest margin and a 2%
growth in earning assets, primarily loans. Net interest income on a tax-
equivalent basis for the third quarter of 1995 decreased modestly from the
$55.3 million earned in the preceding quarter, also due to a contraction in
the net interest margin.
<PAGE>
The Company's net interest margin for the third quarter of this year narrowed
12 basis points to 4.21% from the 4.33% earned in the third quarter of 1994.
This decline was primarily the result of a larger increase in rates paid on
deposit liabilities than those earned on loans and securities, as well as a
greater proportion of higher rate time deposits. The six basis-point widening
in the margin during the first nine months of 1995 to 4.29% from the same
period of a year ago resulted primarily from a more favorable mix of average
earning assets and an increase in the value of net noninterest bearing funds.
These favorable developments were partly offset by a less favorable mix of
deposit liabilities. The net interest margin for the third quarter of 1995
declined seven basis points from the second-quarter margin of 4.28%,
principally due to an increase in the percentage of higher rate time deposits
which caused a less favorable mix of deposit liabilities.
Average earning assets increased in both the third quarter and first nine
months of this year over the comparable periods of last year as growth in
average loans outpaced a decline in average securities. Average total
deposits for the third quarter and first nine months of 1995 rose slightly
from the same periods of 1994. Increases in average time deposit, demand
deposit and money market account balances were partially offset by declines in
savings and NOW account balances. Additional information regarding average
balances, net interest income and the net interest margin is presented on
pages eight and nine of this report.
6
<PAGE>
NONINTEREST INCOME
Noninterest income amounted to $13.8 million in the third quarter of 1995, up
17% from the same quarter of 1994. Factors contributing to the increase from
the same quarter of a year ago were higher mortgage banking revenues, trust
income, deposit service fees and securities gains. For the first nine months
of 1995, noninterest income fell 5% to $37.8 million from the $40.0 million
earned during the same period of last year, primarily due to a sharp decline
in mortgage banking revenues and lower mutual fund and annuity commissions.
These unfavorable factors were partially offset by a rise in service fees on
deposit accounts and bank equity securities gains. Third-quarter noninterest
income for 1995 was up 7% from the second quarter of 1995 largely due to a
significant recovery in mortgage banking revenues.
NONINTEREST EXPENSE
Third-quarter noninterest expense amounted to $38.0 million in 1995, down 6%
from the same quarter of last year before merger-related charges and modestly
below the level for the second quarter of this year. Included in noninterest
expense for the third quarter of 1995 was a $2.3 million deposit insurance
premium refund from the Federal Deposit Insurance Corporation (FDIC) and a
$2.9 million charge to other real estate owned (OREO) expense in anticipation
of the sale of certain OREO assets. Noninterest expense for the first nine
months of 1995 totaled $113.8 million, a decline of 10% from the level for the
same period of last year before merger-related charges. The principal factor
contributing to these expense declines was the realization of cost savings
resulting from the Crestmont acquisition in September 1994. Both the third-
quarter and nine-month expense declines in 1995 from their respective
prior-year periods were partly offset by increases in advertising and
consulting expenses.
APPLICABLE INCOME TAX EXPENSE (BENEFIT)
Applicable income tax expense for the third quarter of 1995 amounted to $10.2
million compared to an applicable income tax benefit of $6.2 million for the
third quarter a year ago. The effective rate was 35.9% for the third quarter
of 1995 and 25.2% for the third quarter of 1994. Adjusted for the effect of
merger-related charges, the 1994 third-quarter effective rate was 36.5%. The
modest decrease in the effective tax rate for the third quarter of 1995 from
the adjusted effective tax rate for the same quarter of last year was
primarily due to a lower effective state tax rate.
Applicable income taxes for the first nine months of 1995 and 1994 were $29.5
million and $7.4 million. The effective tax rate was 35.6% in the first nine
months of 1995 and 48.3% in the comparable period of 1994. Adjusted for the
effect of the merger-related charges, the 1994 nine-month effective tax rate
would have been 34.9%. The modest increase in the effective tax rate for the
nine months ended September 30, 1995 compared to the adjusted effective tax
rate for the same period of a year ago was primarily attributable to a lower
proportion of tax-exempt income, partly offset by a lower effective state tax
rate.
7
<PAGE>
<TABLE>
<CAPTION>
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEET, NET INTEREST INCOME AND NET INTEREST MARGIN
(In Thousands and on a Tax-Equivalent Basis)
THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------
1995 1994
--------------------------- ----------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Short-Term Investments . . . . . . . . . . . . . $ 65,180 $ 923 5.62% $ 56,489 $ 574 4.03%
Investment Securities:
U.S. Treasury . . . . . . . . . . . . . . . . . 13,595 225 6.57 17,037 209 4.87
U.S. Government Agency. . . . . . . . . . . . . 614,336 10,289 6.70 512,685 7,294 5.69
State and Municipal . . . . . . . . . . . . . . 26,327 547 8.30 53,376 921 6.90
Other Securities. . . . . . . . . . . . . . . . 301,835 4,442 5.89 246,363 3,545 5.76
--------- ------- --------- -------
Total Investment Securities . . . . . . . . . 956,093 15,503 6.49 829,461 11,969 5.77
Securities Available For Sale:
U.S. Treasury . . . . . . . . . . . . . . . . . 39,672 597 5.97 117,152 1,368 4.63
U.S. Government Agency. . . . . . . . . . . . . 499,421 7,953 6.37 575,801 8,449 5.87
State and Municipal . . . . . . . . . . . . . . 12,646 219 6.92 - - -
Other Securities. . . . . . . . . . . . . . . . 144,004 2,261 6.28 242,436 3,428 5.66
--------- ------- --------- -------
Total Securities Available For Sale . . . . . 695,743 11,030 6.34 935,389 13,245 5.66
Trading Account Securities . . . . . . . . . . . 1,005 14 5.53 1,085 16 5.85
Loans:
Commercial. . . . . . . . . . . . . . . . . . . 631,545 15,061 9.46 611,464 12,422 8.06
Consumer. . . . . . . . . . . . . . . . . . . . 534,539 12,166 9.03 468,089 9,973 8.45
Construction. . . . . . . . . . . . . . . . . . 90,390 2,356 10.34 81,540 1,802 8.77
Commercial Mortgage . . . . . . . . . . . . . . 734,667 16,717 9.10 800,756 16,309 8.15
Residential Mortgage. . . . . . . . . . . . . . 1,499,217 28,205 7.53 1,354,558 23,125 6.83
--------- ------- --------- -------
Total Loans . . . . . . . . . . . . . . . . . 3,490,358 74,505 8.51 3,316,407 63,631 7.65
--------- ------- --------- -------
Total Earning Assets. . . . . . . . . . . . . 5,208,379 101,975 7.81 5,138,831 89,435 6.94
------- ---- ------- ----
Allowance for Loan Losses. . . . . . . . . . . . (92,167) (95,813)
Cash and Due from Banks. . . . . . . . . . . . . 243,799 232,723
Premises and Equipment . . . . . . . . . . . . . 44,319 46,591
Other Real Estate Owned. . . . . . . . . . . . . 14,127 29,768
Other Assets . . . . . . . . . . . . . . . . . . 121,896 142,290
--------- ---------
Total Assets. . . . . . . . . . . . . . . . . $ 5,540,353 $ 5,494,390
========= =========
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
NOW Accounts . . . . . . . . . . . . . . . . . . $ 625,080 2,013 1.28 $ 689,559 2,359 1.36
Money Market Accounts. . . . . . . . . . . . . . 843,578 8,816 4.15 805,863 5,258 2.59
Savings Deposits . . . . . . . . . . . . . . . . 891,422 8,640 3.85 1,022,922 6,901 2.68
Money Market Certificates of Deposit . . . . . . 206,720 2,418 4.64 298,681 2,043 2.71
Certificates of Deposits of $100,000 and Over. . 286,378 4,167 5.77 228,233 2,391 4.16
Other Time Deposits. . . . . . . . . . . . . . . 953,429 13,696 5.70 708,385 7,813 4.38
--------- ------- --------- -------
Total Interest Bearing Deposits . . . . . . . 3,806,607 39,750 4.14 3,753,643 26,765 2.83
Short-Term Borrowings. . . . . . . . . . . . . . 159,112 2,286 5.70 268,793 2,949 4.35
Long-Term Debt . . . . . . . . . . . . . . . . . 301,160 5,206 6.91 251,672 3,990 6.34
--------- ------- --------- -------
Total Interest Bearing Liabilities. . . . . . 4,266,879 47,242 4.40 4,274,108 33,704 3.13
------- ---- ------- ----
Demand Deposits. . . . . . . . . . . . . . . . . 727,733 684,847
Accrued Expenses and Other Liabilities . . . . . 72,195 80,932
--------- ---------
Total Liabilities . . . . . . . . . . . . . . 5,066,807 5,039,887
Preferred Stock. . . . . . . . . . . . . . . . . 12,612 20,000
Common Stock . . . . . . . . . . . . . . . . . . 460,934 434,503
--------- ---------
Total Stockholders' Equity. . . . . . . . . . 473,546 454,503
--------- ---------
Total Liabilities and Stockholders' Equity. . $ 5,540,353 $ 5,494,390
========= =========
Spread on Interest Bearing Liabilities . . . . . 3.41 3.81
Effect of Net Noninterest Bearing Funds. . . . . .80 .52
---- ----
NET INTEREST INCOME. . . . . . . . . . . . . . . $ 54,733 $ 55,731
====== ======
NET INTEREST MARGIN. . . . . . . . . . . . . . . 4.21% 4.33%
==== ====
</TABLE>
Notes:
(1) The above table includes nonaccrual loans.
(2) Fees on loans have been included in interest on loans.
8
<PAGE>
<TABLE>
<CAPTION>
THE SUMMIT BANCORPORATION AND SUBSIDIARIES
AVERAGE CONSOLIDATED BALANCE SHEET, NET INTEREST INCOME AND NET INTEREST MARGIN
(In Thousands and on a Tax-Equivalent Basis)
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------
1995 1994
--------------------------- ----------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Short-Term Investments . . . . . . . . . . . . . $ 76,243 $ 3,373 5.91% $ 120,535 $ 3,083 3.42%
Investment Securities:
U.S. Treasury . . . . . . . . . . . . . . . . . 14,291 711 6.65 21,672 819 5.05
U.S. Government Agency. . . . . . . . . . . . . 554,170 27,202 6.54 519,483 21,723 5.58
State and Municipal . . . . . . . . . . . . . . 36,573 2,153 7.85 61,773 3,174 6.85
Other Securities. . . . . . . . . . . . . . . . 286,078 12,548 5.85 273,679 12,123 5.91
--------- ------- --------- -------
Total Investment Securities . . . . . . . . . 891,112 42,614 6.38 876,607 37,839 5.76
--------- ------- --------- -------
Securities Available For Sale:
U.S. Treasury . . . . . . . . . . . . . . . . . 42,648 1,849 5.80 91,057 3,214 4.72
U.S. Government Agency. . . . . . . . . . . . . 512,000 25,875 6.74 501,960 20,740 5.51
State and Municipal . . . . . . . . . . . . . . 6,717 353 7.01 - - -
Other Securities. . . . . . . . . . . . . . . . 148,502 7,490 6.72 264,517 9,666 4.87
--------- ------- --------- -------
Total Securities Available For Sale . . . . . 709,867 35,567 6.68 857,534 33,620 5.23
--------- ------- --------- -------
Trading Account Securities . . . . . . . . . . . 887 37 5.58 1,434 59 5.50
Loans:
Commercial. . . . . . . . . . . . . . . . . . . 637,802 44,966 9.43 589,281 33,426 7.58
Consumer. . . . . . . . . . . . . . . . . . . . 521,630 35,105 9.00 426,130 27,309 8.57
Construction. . . . . . . . . . . . . . . . . . 85,664 6,868 10.72 91,520 5,593 8.17
Commercial Mortgage . . . . . . . . . . . . . . 733,167 49,502 9.00 805,140 47,836 7.92
Residential Mortgage. . . . . . . . . . . . . . 1,490,184 81,687 7.31 1,260,515 64,994 6.87
--------- ------- --------- -------
Total Loans . . . . . . . . . . . . . . . . . 3,468,447 218,128 8.39 3,172,586 179,158 7.54
--------- ------- --------- -------
Total Earning Assets. . . . . . . . . . . . . 5,146,556 299,719 7.77 5,028,696 253,759 6.73
------- ---- ------- ----
Allowance for Loan Losses. . . . . . . . . . . . (91,975) (95,365)
Cash and Due from Banks. . . . . . . . . . . . . 232,056 229,151
Premises and Equipment . . . . . . . . . . . . . 44,870 45,828
Other Real Estate Owned. . . . . . . . . . . . . 15,613 33,320
Other Assets . . . . . . . . . . . . . . . . . . 132,599 142,122
--------- ---------
Total Assets. . . . . . . . . . . . . . . . . $ 5,479,719 $ 5,383,752
========= =========
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
NOW Accounts . . . . . . . . . . . . . . . . . . $ 636,133 6,175 1.30 $ 694,278 7,162 1.38
Money Market Accounts. . . . . . . . . . . . . . 814,196 24,735 4.06 798,856 13,933 2.33
Savings Deposits . . . . . . . . . . . . . . . . 902,202 23,929 3.55 1,039,383 19,770 2.54
Money Market Certificates of Deposit . . . . . . 213,973 6,709 4.19 335,045 6,772 2.70
Certificates of Deposits of $100,000 and Over. . 277,242 11,900 5.74 133,366 3,686 3.70
Other Time Deposits. . . . . . . . . . . . . . . 896,237 36,831 5.49 736,685 24,738 4.49
--------- ------- --------- -------
Total Interest Bearing Deposits . . . . . . . 3,739,983 110,279 3.94 3,737,613 76,061 2.72
--------- ------- --------- -------
Short-Term Borrowings. . . . . . . . . . . . . . 188,329 8,195 5.82 205,401 6,241 4.06
Long-Term Debt . . . . . . . . . . . . . . . . . 309,729 15,685 6.75 256,347 11,608 6.04
--------- ------- --------- -------
Total Interest Bearing Liabilities. . . . . . 4,238,041 134,159 4.23 4,199,361 93,910 2.99
------- ---- ------- ----
Demand Deposits. . . . . . . . . . . . . . . . . 710,627 654,826
Accrued Expenses and Other Liabilities . . . . . 75,850 79,472
--------- ---------
Total Liabilities . . . . . . . . . . . . . . 5,024,518 4,933,659
Preferred Stock. . . . . . . . . . . . . . . . . 14,628 20,000
Common Stock . . . . . . . . . . . . . . . . . . 440,573 430,093
--------- ---------
Total Stockholders' Equity. . . . . . . . . . 455,201 450,093
--------- ---------
Total Liabilities and Stockholders' Equity. . $ 5,479,719 $ 5,383,752
========= =========
Spread on Interest Bearing Liabilities . . . . . 3.54 3.74
Effect of Net Noninterest Bearing Funds. . . . . .75 .49
---- ----
NET INTEREST INCOME. . . . . . . . . . . . . . . $ 165,560 $ 159,849
======= =======
NET INTEREST MARGIN. . . . . . . . . . . . . . . 4.29% 4.23%
==== ====
</TABLE>
Notes:
(1) The above table includes nonaccrual loans.
(2) Fees on loans have been included in interest on loans.
9
<PAGE>
FINANCIAL CONDITION
ASSET QUALITY
Nonperforming assets, consisting of both nonperforming loans and OREO,
amounted to $39.0 million at September 30, 1995, $45.3 million at June 30,
1995 and $65.3 million at September 30, 1994. Total nonperforming loans were
$25.6 million at September 30, 1995 compared to $30.9 million at June 30, 1995
and $46.2 million at September 30, 1994. OREO totaled $13.4 million at
September 30, 1995 versus $14.4 million at June 30, 1995 and $19.1 million at
September 30, 1994.
The allowance for loan losses at September 30, 1995 was $90.8 million covering
233% of nonperforming assets and 354% of nonperforming loans. The comparable
nonperforming coverage ratios were 202% and 295% at June 30, 1995 and 139% and
197% at September 30, 1994. At September 30, 1995, nonperforming assets as a
percentage of loans and OREO totaled 1.11% compared to 1.31% at June 30, 1995
and 1.94% at September 30, 1994.
The provision for loan losses equaled $1.2 million in both the second and
third quarters of 1995 and $1.7 million in the third quarter of last year.
Net charge-offs amounted to $1.8 million in the third quarter of 1995,
$1.0 million in the second quarter of 1995 and $5.1 million in the third
quarter of 1994. The loan loss provision was $3.6 million and $6.8 million in
the first nine months of 1995 and 1994, respectively, while net charge-offs
totaled $4.0 million and $10.9 million for the same periods.
Further information regarding the Company's loan portfolio, nonaccrual loans,
nonperforming assets and allowance for loan losses is presented on pages 12
and 13 of this report.
SECURITIES
The composition of the securities portfolio reflects the objective of
maximizing interest income commensurate with interest rate risk, credit risk
and liquidity considerations. Investment securities are acquired with the
intent and ability to hold the securities to maturity. Securities that may be
sold prior to maturity are designated as securities available for sale.
Trading account securities are securities held for trading purposes and are
carried at market value. Realized gains and losses and gains and losses from
marking the trading portfolio to market value are included in trading account
gains and losses. Investment strategies for each portfolio take into account
such factors as asset concentrations, interest rate risk, liquidity, credit
risk, market volatility, interest rate spreads and economic conditions.
Strategic initiatives, therefore, are subject to the interaction and relative
importance of these and other factors.
INTEREST RATE SENSITIVITY AND LIQUIDITY MANAGEMENT
Since the assets, liabilities and off-balance sheet instruments (E.G.,
financial derivatives) have diverse repricing characteristics that influence
net interest revenues, the Company analyzes its sensitivity to changes in
interest rates through the use of gap analysis and simulation models.
Interest rate sensitivity management seeks to enhance the long-term growth of
net interest revenues and to minimize net interest margin fluctuations caused
by changing interest rates. The Asset/Liability Management Committee (the
"ALCO") is responsible for managing interest rate risk and for evaluating the
impact of changing interest rate conditions on net interest income.
<PAGE>
The purpose of liquidity management is to ensure that adequate funds are
available to meet asset and liability cash flow requirements and to respond to
these needs promptly and economically. Current and future liquidity needs are
reviewed by the ALCO to determine the appropriate asset/liability mix.
FINANCIAL DERIVATIVES
The Company uses off-balance financial instruments to augment the management
of its interest rate sensitivity risk. The notional principal amounts
associated with these instruments are not recorded as assets or liabilities,
but are used primarily to determine the amount of cash flows to be exchanged.
The notional principal amounts are not exchanged. Notional values are also
used as a basis for evaluating market risk and counterparty credit risk, but
do not represent the amount of potential gain or loss associated with these
risks. Financial derivatives are employed only after a review of the current
and prospective financial implications of such transactions by the ALCO. The
notional value of interest rate swap and cap agreements were $175 million at
September 30, 1995, $180 million at June 30, 1995 and $248 million at
September 30, 1994.
CAPITAL ADEQUACY
The Company strives to maintain a strong capital position. Capital adequacy
is monitored in relation to the size, composition and quality of its asset
base and with consideration given to regulatory guidelines and requirements as
well as industry standards. Management seeks to maintain a capital structure
that will support anticipated asset growth and provide for favorable access to
the capital markets.
10
<PAGE>
On May 9, 1995, the Company announced that its Board of Directors authorized
the repurchase of up to 7% of the total common shares outstanding or
approximately 2.3 million shares. This stock repurchase is anticipated to be
undertaken from time to time in the open market or through privately
negotiated transactions. Management does not anticipate any further
repurchase transactions under this new program in view of the recently
announced definitive agreement with UJB Financial Corp ("UJB").
The Federal Reserve has established guidelines for a risk-based capital
approach to measure capital adequacy. These standards provide a method of
monitoring capital adequacy that is more sensitive to the risk factors of a
bank's asset base, including off-balance sheet risk exposures. A minimum
ratio of total capital to risk-weighted assets of 8%, of which at least 4%
should be Tier 1 capital, is required. Based on these guidelines, the
Company's Tier 1 risk-adjusted capital ratio was 12.80% at September 30, 1995
and 11.99% at September 30, 1994. The Company's total capital ratio equaled
15.40% on September 30, 1995 and 14.65% on September 30, 1994. These ratios
continue to exceed the regulatory minimums prescribed for bank holding
companies.
In addition to the risk-based capital guidelines, the Federal Reserve has
adopted a leverage standard to supplement the risk-based ratios in determining
overall capital adequacy. A minimum ratio of Tier 1 capital to total assets
of 3% was established. Under these guidelines, institutions operating at the
3% minimum are expected to have well diversified risk profiles, including no
undue interest rate risk, excellent asset quality, high liquidity, and good
earnings. Institutions not meeting these characteristics, as well as
institutions experiencing growth, would be expected to maintain capital levels
ranging from 100 to 200 basis points above the minimum. The Company's Tier 1
capital to asset ratio was 8.44% on September 30, 1995 and 7.79% on
September 30, 1994.
The Federal Reserve adopted regulations effective January 17, 1995 which
identify concentration of credit risk and certain risks arising from
nontraditional activities, as well as an institution's ability to manage these
risks, as important factors in assessing an institution's overall capital
adequacy. The Federal Reserve believes that there is no currently acceptable
method to add a quantitative formula to the risk-based capital standards in
order to measure credit risk. Therefore, it is likely that institutions
identified through the examination process as having significant exposure to
concentration of credit risk or risks arising from nontraditional activities,
or identified as not adequately managing such risks, may be required to hold
capital in excess of the regulatory minimums.
PENDING ACQUISITION AND MERGER
On June 14, 1995, the Company and Garden State BancShares, Inc. ("Garden
State") announced a definitive purchase agreement for the Company to acquire
Garden State in a tax-free exchange of stock. The merger is subject to
approval by Garden State shareholders, as well as by the appropriate state and
federal banking authorities.
<PAGE>
On September 11, 1995, UJB and the Company announced a definitive agreement to
merge in a stock-for-stock exchange. The Company's shareholders will receive
.90 shares of UJB common stock for each share of the Company's common stock in
a tax-free exchange. The merger will be accounted for as a pooling of
interests. The merger is subject to approval by both the Company's and UJB's
shareholders and by the appropriate state and federal banking authorities.
This transaction is expected to close in the first quarter of 1996.
11
<PAGE>
ASSET QUALITY DATA (IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------------------------
NONPERFORMING LOANS AS
LOANS A % OF LOAN CATEGORY
---------------------------------------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
LOAN PORTFOLIO
Commercial . . . . . . . . . . . . . . . . . . $ 623,366 $ 624,971 1.10% 2.87%
Consumer . . . . . . . . . . . . . . . . . . . 550,295 485,943 .58 .55
Real Estate:
Construction . . . . . . . . . . . . . . . . 96,308 77,166 2.91 8.75
Commercial . . . . . . . . . . . . . . . . . 760,567 744,009 1.08 1.67
Residential. . . . . . . . . . . . . . . . . 1,473,239 1,420,808 .31 .45
--------- ---------
Total. . . . . . . . . . . . . . . . . . $3,503,775 $3,352,897 .73% 1.38%
========= ========= ==== ====
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
-------------------- ------------
1995 1994 1994
------ ------ ------
<S> <C> <C> <C>
NONPERFORMING ASSETS
Nonaccrual Loans:
Commercial . . . . . . . . . . . . . . . . . $ 6,886 $17,732 $12,022
Consumer . . . . . . . . . . . . . . . . . . 3,219 2,680 3,034
Real Estate:
Construction . . . . . . . . . . . . . . 2,807 6,753 5,591
Commercial . . . . . . . . . . . . . . . 8,210 12,461 8,083
Residential. . . . . . . . . . . . . . . 4,511 6,430 5,514
------ ------ ------
Total Nonaccrual Loans . . . . . . . . . 25,633 46,056 34,244
Restructured Loans:
Commercial . . . . . . . . . . . . . . . . . - 184 182
Real Estate - Commercial . . . . . . . . . . - - -
------ ------ ------
Total Restructured Loans . . . . . . . . - 184 182
------ ------ ------
Total Nonperforming Loans. . . . . . . . 25,633 46,240 34,426
Other Real Estate Owned (OREO) . . . . . . . . 13,401 19,047 15,830
------ ------ ------
Total Nonperforming Assets . . . . . . . $39,034 $65,287 $50,256
====== ====== ======
Loans Past Due 90 Days or More
and Accruing . . . . . . . . . . . . . . . . $13,807 $15,702 $14,182
====== ====== ======
As a % of Loans and OREO:
Nonperforming Assets . . . . . . . . . . . . 1.11% 1.94% 1.45%
Loans Past Due 90 Days or More
and Accruing . . . . . . . . . . . . . . . .39 .47 .41
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
CHANGE IN NONPERFORMING LOANS
Balance, January 1,. . . . . . . . . . . . . . $34,426 $78,594
Adjustment for the Pooling of a Company
with a Different Fiscal Year-End . . . . . . - (1,400)
Loans Placed on Nonaccrual Status. . . . . . . 15,253 33,246
Loans Sold . . . . . . . . . . . . . . . . . . - (30,399)
Principal Repayments . . . . . . . . . . . . . (8,156) (14,314)
Charge-Offs. . . . . . . . . . . . . . . . . . (6,187) (14,008)
Transfers to OREO. . . . . . . . . . . . . . . (6,643) (4,596)
Restored to Accrual Status . . . . . . . . . . (1,912) (28)
Interest Payments Applied to Principal . . . . (1,148) (855)
------ ------
Balance, September 30, . . . . . . . . . $25,633 $46,240
====== ======
</TABLE>
12
<PAGE>
ASSET QUALITY DATA (IN THOUSANDS) (CONTINUED)
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
ALLOWANCE FOR LOAN LOSSES
Balance, January 1, . . . . . . . . . . . . . . . . . . . . . . . . $91,169 $ 94,874
Balance Relating to Acquisition . . . . . . . . . . . . . . . . . . - 255
Adjustment for the Pooling of a Company with a
Different Fiscal Year-End . . . . . . . . . . . . . . . . . . . . - (178)
Charge-Offs:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . (2,632) (3,040)
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,437) (1,127)
Real Estate:
Construction. . . . . . . . . . . . . . . . . . . . . . . . (450) (29)
Commercial. . . . . . . . . . . . . . . . . . . . . . . . . (853) (7,075)
Residential . . . . . . . . . . . . . . . . . . . . . . . . (815) (2,737)
----- ------
Total Charge-Offs . . . . . . . . . . . . . . . . . . . . (6,187) (14,008)
----- ------
Recoveries:
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . 1,342 2,183
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . 384 462
Real Estate:
Construction. . . . . . . . . . . . . . . . . . . . . . . . 205 73
Commercial. . . . . . . . . . . . . . . . . . . . . . . . . 148 85
Residential . . . . . . . . . . . . . . . . . . . . . . . . 158 321
----- -----
Total Recoveries. . . . . . . . . . . . . . . . . . . . . 2,237 3,124
----- ------
Net Charge-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . (3,950) (10,884)
Provision for Loan Losses . . . . . . . . . . . . . . . . . . . . . 3,600 6,795
------ ------
Balance, September 30,. . . . . . . . . . . . . . . . . . $90,819 $ 90,862
====== ======
Net Charge-Offs as a % of Average Loans . . . . . . . . . . . . . . .15% .46%
Allowance for Loan Losses as a % of:
Loans at Period-End. . . . . . . . . . . . . . . . . . . . . . 2.59 2.71
Nonperforming Loans. . . . . . . . . . . . . . . . . . . . . . 354 197
Nonperforming Assets . . . . . . . . . . . . . . . . . . . . . 233 139
</TABLE>
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No information is reported under this item.
ITEM 2. CHANGES IN SECURITIES
No changes have been made to the rights of holders of any class of securities
during the third quarter of 1995.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No default has occurred with respect to any of the Company's securities during
the third quarter of 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In accordance with the instructions to Form 10-Q, no response is required.
ITEM 5. OTHER INFORMATION
No information is reported under this item.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 10(l). Agreements dated September 1, 1995 between The Summit
Bancorporation and Robert G. Cox, John R. Feeney, Dennis
McChesney, James S. Little, Elwood L. Bowman II, Stewart
McClure and Richard Ranelli.
Exhibit 12. Computation of Ratio of Earnings to Fixed Charges.
(b) Reports on Form 8-K
The following reports on Form 8-K has been filed during the quarter for which
this report is filed:
Date Subject
June 13, 1995 Announcement of the signing of a definitive merger
agreement with Garden State BancShares, Inc. pursuant
to which the Company will acquire Garden State in a
tax-free, stock-for-stock merger.
September 10, 1995 Announcement of the signing of a definitive merger
agreement with UJB Financial Corp., pursuant to which
the Registrant will be merged with and into UJB in a
stock-for-stock transaction.
14
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 23RD DAY OF OCTOBER 1995.
THE SUMMIT BANCORPORATION
(REGISTRANT)
By
/s/ Alfred J. Soles
. . . . . . . . . . . . . . . .
(ALFRED J. SOLES, SENIOR VICE
PRESIDENT AND PRINCIPAL ACCOUNTING
OFFICER)
15
<PAGE>
INDEX - EXHIBITS
EXHIBIT NO. DESCRIPTION PAGE
- ---------- ----------- ----
10(l) Agreements dated September 1, 1995 between The Summit
Bancorporation and Robert G. Cox, John R. Feeney, Dennis
S. McChesney, James S. Little, Elwood L. Bowman II,
Stewart McClure and Richard Ranelli. . . . . . . . . . . 17
12 Computation of Ratio of Earnings to Fixed Charges. . . . 136
16
<PAGE>
AGREEMENT
THIS AGREEMENT, dated as of September 1, 1995 (this "Agreement"), is
made by and between The Summit Bancorporation, a New Jersey corporation, having
its principal offices at One Main Street, Chatham, New Jersey 07928 (the
"Company"), and Mr. Robert G. Cox residing at 211 Liberty Corner Road, Far
Hills, New Jersey 07931 (the "Executive").
WHEREAS, the Company considers it essential to the best interests of
its shareholders to foster the continued employment of key executive management
personnel; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined in Section 1.3 below) of the
Company exists from time to time and that such possibility, and the
uncertainty, instability and questions which it may raise for and among key
executive management personnel, may result in the premature departure or
significant distraction of such management personnel to the material detriment
of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce, focus and encourage the continued attention and dedication
of key members of the executive management of the Company and its subsidiaries,
including (without limitation) the Executive, to their assigned duties without
distraction in the face of potentially disturbing or unsettling circumstances
arising from the possibility of a Change in Control of the Company;
NOW THEREFORE, in consideration of the premises and the mutual cove-
nants herein contained, the Company and the Executive hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
1.1 "ANNUAL BASE SALARY" shall mean the Executive's rate of regular
basic annual compensation prior to any reduction under a salary reduction
agreement pursuant to section 401(k) or section 125 of the Internal Revenue
Code of 1986, as amended from time to time (the "Code"), and shall not include
(without limitation) cost of living allowances, fees, retainers,
reimbursements, car allowances, bonuses, incentive awards, prizes or similar
payments.
1.2 "CAUSE" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by the Executive to substantially perform the Executive's
duties with the Company, or a subsidiary of the Company, including (without
limitation) Summit Bank, a New Jersey chartered bank (the "Bank"), as such
17
duties may reasonably be defined from time to time by the Board (or a duly
designated and authorized committee thereof), or to abide by the reasonable
written policies of the Company or of the Executive's primary employer (other
than any such failure resulting from the Executive's incapacity due to physical
or mental illness or any such actual or anticipated failure after the issuance
<PAGE>
of a Notice of Termination by the Executive for Good Reason pursuant to Section
7.1) after a written demand for substantial performance is delivered to the
Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's duties or has not abided by any reasonable written policies, or
(ii) the continued and willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive in bad faith and
without reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Company or its subsidiaries. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Board or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the Company
and its subsidiaries. The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the affirmative vote of
not less than three quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice of any
such meeting is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, the Executive is guilty of the
conduct described in clause (i) or (ii) above, and specifying the particulars
thereof in detail.
1.3 "CHANGE IN CONTROL" shall mean and be deemed to have occurred
if:
(i) any Person is or becomes the Beneficial Owner (as that
term is defined in Rule 13d-3 under the Securities Exchange Act of
1934 (the "Exchange Act")), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company)
representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities, or there occurs
any transaction which the Company is required to disclose pursuant to
Item 1(a) of Form 8-K (as filed pursuant to Rule 13a-11 or Rule 15d-
11 of the Exchange Act); or
(ii) during any period of twenty-four (24) consecutive
months (not including any period prior to September 1, 1995),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person
who has entered into an agreement with the Company to effect a
18
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies
or consents) whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of such period or whose election or
<PAGE>
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially
all of the individuals and entities who were Beneficial Owners,
immediately prior to such reorganization, merger or consolidation, of
the combined voting power of the Company's then outstanding
securities beneficially own, directly or indirectly, immediately
after such reorganization, merger or consolidation, more then
seventy-five percent (75%) of the combined voting power of the
securities of the corporation resulting from such reorganization,
merger or consolidation in substantially the same proportions as
their respective ownership, immediately prior to such reorganization,
merger or consolidation, of the combined voting power of the
Company's securities; or
(iv) the shareholders of the Company approve (a) the sale
or disposition by the Company (other than to a subsidiary of the
Company) of the Bank, or (b) a complete liquidation or dissolution of
the Company or the Bank.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction which results from the action (excluding the
Executive's employment activities with the Company, the Bank or any of their
respective subsidiaries) of any Person or group of Persons which includes, is
directly affiliated with or is wholly or partly controlled by one or more
executive officers of the Company and in which the Executive actively
participates.
1.4 "COMPANY" shall include The Summit Bancorporation and any
successor to its business and/or assets which assumes (either expressly, by
operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Company has occurred in connection
with such succession).
1.5 "DISABILITY" shall mean and be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, (i) the Executive
shall have been absent from the full-time performance of the Executive's duties
19
with the Company for a period of six (6) consecutive months, (ii) the Company
gives the Executive a Notice of Termination for Disability, and (iii) within
thirty (30) days after such Notice of Termination is given, the Executive does
not return to the full-time performance of the Executive's duties.
1.6 "GOOD REASON" for termination by the Executive of the
Executive's employment, in connection with or as a result of any Change in
Control, shall mean the occurrence (without the Executive's prior express
written consent) of any one of the following acts, or failures to act, unless,
in the case of any act or failure to act described in clauses (i), (iv), (v) or
(vi) below, such act or failure to act is corrected by the Company prior to the
Date of Termination specified in the Notice of Termination given in respect
thereof:
<PAGE>
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with those described in Section 3.2
below or with the Executive's position(s) (including without
limitation status, offices, titles, and reporting
responsibilities/rights) as an executive officer of the Company and
its subsidiaries or a substantial adverse alteration in the nature of
the Executive's authority, duties, or responsibilities from those
described in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base Salary as
in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal executive
offices to a location more than thirty (30) miles from its location
on the date of this Agreement (or, if different, more than thirty
(30) miles from where such offices are located immediately prior to
any Potential Change in Control) or the Company's requiring the
Executive to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's
business to an extent substantially consistent with the Executive's
business travel obligations as of the date of this Agreement;
(iv) any failure by the Company to comply with any of the
provisions of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(v) the failure by the Company or a subsidiary to continue
in effect any pension benefit or incentive or deferred compensation
plan in which the Executive participates immediately prior to any
Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made
with respect to such plan, or the failure by the Company or a
20
subsidiary to continue the Executive's participation therein (or in
such substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Potential Change in
Control;
(vi) the failure by the Company or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of
the Company's or a subsidiary's retirement, life insurance, medical,
health and accident, or disability or similar plans in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Company or a subsidiary
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Potential Change in
Control, or the failure by the Company or a subsidiary to provide the
Executive with the number of paid vacation days to which the
<PAGE>
Executive is entitled in accordance with the Company's or a
subsidiary's normal vacation policy in effect at the time of the
Potential Change in Control;
(vii) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1; and/or
(viii) a termination by the Executive for any reason
during the thirty (30) day period immediately following the first
anniversary of any Change in Control.
1.7 "PERSON" shall have the meaning ascribed thereto in Section
3(a)(9) of the Exchange Act, as modified applied, and used in Sections 13(d)
and 14(d) thereof; provided, however, a Person shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries (in its capacity as such), (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same character and proportions as their ownership of stock
of the Company.
1.8 "POTENTIAL CHANGE IN CONTROL" shall mean and be deemed to have
occurred if:
(i) the Company commences negotiations in respect of or
enters into an agreement, the consummation of which would result in
the occurrence of a Change in Control;
21
(ii) the Company or any Person publicly announces an
intention to take actions which, if consummated, would constitute a
Change in Control; and/or
(iii) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing ten percent
(10%) or more of the combined voting power of the Company's then
outstanding securities, or any Person increases such Person's
beneficial ownership of such securities by five (5) percentage points
or more over the percentage so owned by such Person on September 1,
1995.
1.9 "RETIREMENT" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment if such employment
is terminated in accordance with the Company's normal retirement policy for
those aged 65 and older, not including early retirement or so-called "window
period" retirements, generally applicable to its salaried employees, as in
effect immediately prior to any Potential Change in Control.
2. TERM OF THIS AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1998; provided,
--------
however, that commencing on January 1, 1998 and each January 1 thereafter, the
- -------
<PAGE>
term of this Agreement shall automatically be extended for one additional year
unless, not later than June 30 of the preceding year, the Company or the
Executive shall have given written notice to the other not to extend this
Agreement or a Change in Control shall have occurred prior to any such January
1; provided, further, however, that if a Change in Control shall have occurred
-------- ------- -------
during the term of this Agreement, this Agreement shall continue in effect for
a period of not less than thirty-six (36) months beyond the month in which such
Change in Control occurred (the "Term"). Notwithstanding the foregoing
provisions of this Section 2, the Term shall terminate upon the Executive's
attaining the age of sixty-five (65) years.
3. COMPANY'S COVENANTS.
3.1 SEVERANCE PAYMENTS. In order to induce the Executive to remain
in the employ of the Company and/or one or more of its subsidiaries and in
consideration of the Executive's covenants set forth in Section 4 below, the
Company agrees, under the terms and conditions described herein and in addition
to the amounts payable to the Executive under Section 5 below, to pay the
Executive the "Severance Payments" described in Section 6.1 below and the other
payments and benefits described herein in the event the Executive's employment
with the Company is terminated during the Term and after a Change in Control or
under the other circumstances set forth in Section 6.1 below.
3.2 POSITION AND DUTIES. During the period commencing on the date
of any Change in Control until the earliest to occur of (i) the date which is
thirty-six (36) months from the date of any such Change in Control, (ii) the
date of termination by the Executive of the Executive's employment for any
reason, or (iii) the termination by the Company of the Executive's employment
for any reason (the "Employment Period"), (a) the Executive's position
22
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control, and (b) the Executive's services shall be
performed at the location where the Executive was employed immediately
preceding any such Potential Change in Control, or any office or location less
than thirty (30) miles from such location.
3.3 BASE SALARY. During the Employment Period, the Executive shall
receive Annual Base Salary at least equal to twelve (12) times the highest
monthly base salary paid or payable, including (without limitation) any base
salary which has been earned but deferred, to the Executive by the Company and
its affiliated companies in respect of the twelve (12) month period immediately
preceding the month in which any related Potential Change in Control occurs.
In addition, Annual Base Salary shall not be reduced after the occurrence of a
Potential Change in Control. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
3.4 ANNUAL BONUS. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the Executive's
highest bonus for the last three (3) full fiscal years prior to the fiscal year
in which the related Potential Change in Control occurs (annualized in the
event that the Executive was not employed by the Company for the whole of any
such prior fiscal year). Each Annual Bonus shall be paid no later than the end
<PAGE>
of the third month of the fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
3.5 INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at
any time during the one hundred eighty (180) day period immediately preceding
any related Potential Change in Control or if more favorable to the Executive,
those provided generally at any time thereafter to other peer executives of the
Company and its affiliated companies.
3.6 WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be entitled
to participate in and shall receive all benefits under all of the health and
welfare benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical,
23
prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in effect for
the Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, those provided generally at any time thereafter to
other peer executives of the Company and its affiliated companies.
3.7 EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
3.8 FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and an automobile allowance
and payment of related expenses, in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies in
effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
<PAGE>
3.9 OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
3.10 VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
4. THE EXECUTIVE'S COVENANTS.
24
4.1 EMPLOYMENT. The Executive agrees that, subject to the terms and
conditions of this Agreement, in the event of a Change in Control during the
Term the Executive will remain in the employ of the Company during any related
Employment Period.
4.2 TIME AND ATTENTION. During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary
to discharge the responsibilities and duties assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities and duties. During the Employment Period
it shall not be a violation of this Agreement for the Executive to (i) serve on
corporate, civic or charitable boards or committees, (ii) deliver lectures,
fulfill speaking engagements or teach at educational institutions, and (iii)
manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to any Potential Change in Control, the
reinstatement or continued conduct of such activities (or the reinstatement or
conduct of activities similar in nature and scope thereto) subsequent to any
related Potential Change in Control shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Company.
4.3 CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by direct or indirect acts by the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
<PAGE>
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event, however, shall an asserted violation of the
provisions of this Section 4.3 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
5. COMPENSATION OTHER THAN SEVERANCE PAYMENTS.
5.1 DISABILITY. Following a Potential Change in Control and during
the Term, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Executive's full salary shall be paid to the Executive by
the Company at a rate no less than the rate in effect at the commencement of
any such disability period, together with all compensation and benefits payable
to the Executive under the terms of any compensation or benefit plan, program
25
or arrangement maintained by the Company or its subsidiaries during such
disability period, until the Executive's employment is terminated by the
Company for Disability.
5.2 BASE SALARY. If the Executive's employment shall be terminated
for any reason following a Potential Change in Control and during the Term, the
Executive's full salary shall be paid to the Executive by the Company through
the Date of Termination (as defined below in Section 7.2) at the rate in effect
at the time the Notice of Termination is given, together with all compensation
and benefits payable to or with respect to the Executive through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Company or its subsidiaries during such period.
5.3 BENEFITS. If the Executive's employment shall be terminated for
any reason following a Potential Change in Control and during the Term, the
Executive's normal post-termination compensation and benefits shall be paid to
the Executive as such payments become due. Such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
retirement, insurance and other compensation or benefit plans, programs and
arrangements maintained by the Company or its subsidiaries.
6. SEVERANCE PAYMENTS.
6.1 SEVERANCE. The Company shall pay the Executive the payments
described in this Section 6.1 (the "Severance Payments") upon the termination
of the Executive's employment with the Company following a Change in Control
and during the Term, in addition to the payments and benefits described in
Section 5 hereof, unless such termination is (i) by the Company for Cause, (ii)
by reason of Retirement, or (iii) by the Executive without Good Reason. In
addition, the Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the Executive
with Good Reason (a) if the Executive reasonably demonstrates that the
Executive's employment was terminated prior to a Change in Control without
Cause (1) at the request of a Person who has entered into an agreement with the
Company the consummation of which will constitute a Change in Control (or who
has taken other steps reasonably calculated to effect a Change in Control) or
(2) otherwise in connection with, as a result of or in anticipation of a Change
in Control, (b) if the Executive terminates his employment for Good Reason
<PAGE>
prior to a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control, or (c) if the Executive dies or is
terminated by the Company due to Disability, in each case, after the occurrence
of a Potential Change in Control and a related Change in Control actually
occurs within one (1) year after the Date of Termination or the date of death,
as the case may be. The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the Executive's incapacity
due to physical or mental illness. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
26
6.1.1 In lieu of any further salary and annual bonus
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to three (3) or, if less, the
number of years, including fractions, from the Date of Termination
until the Executive reaches the age of sixty-five (65) years times
the sum of (i) the highest Annual Base Salary paid or payable to the
Executive during the thirty-six (36) month period immediately
preceding the month in which the Change in Control occurs, and (ii)
the highest annual bonus paid or determined and payable to the
Executive during such thirty-six (36) month period.
6.1.2 For a thirty-six (36) month period after the Date of
Termination, or if sooner, until the Executive reaches the age of
sixty-five (65) years, the Company shall arrange to provide the
Executive with life, disability, accident and health insurance
benefits substantially similar to those which the Executive is
receiving immediately prior to any related Potential Change in
Control or the receipt of the Notice of Termination (without giving
effect to any reduction in such benefits subsequent to a Change in
Control which reduction constitutes Good Reason), whichever is
greater. Benefits otherwise receivable by the Executive pursuant to
this Section 6.1.2 shall be reduced to the extent comparable benefits
are actually received by or made available to the Executive without
cost during such period following the Executive's termination of
employment (and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
6.2 SPECIAL REIMBURSEMENT. In the event that the Executive becomes
entitled to the Severance Payments, if any payment or benefit paid or payable,
or received or to be received, by or on behalf of the Executive in connection
with a Change in Control or the termination of the Executive's employment,
whether any such payments or benefits are pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any of
its subsidiaries, any Person, or otherwise (the "Total Payments"), will or
would be subject to the excise tax imposed under section 4999 of the Code (the
"Excise Tax"), the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") which amount shall be equal to the sum of (a) the amount of
such Excise Tax imposed (determined without regard to the Gross-Up Payment),
and (b) the product of (i) such Excise Tax (determined without regard to the
Gross-Up Payment), and (ii) the Aggregate Combined Marginal Tax Rate. For
<PAGE>
purposes of this Section 6.2, "Aggregate Combined Marginal Tax Rate" means (and
shall equal) the sum of (A) the combined highest marginal state and local
income tax rates applicable for the tax year in which the Executive receives
the Gross-Up Payment (adjusted downward to take into account the tax
deductibility, if any, of such state and local income taxes), plus (B) the rate
of excise tax imposed on "golden parachute" payments under Section 4999 of the
Code, plus (C) the highest marginal federal income tax rate applicable for the
tax year in which the Executive receives the Gross-Up Payment (adjusted upward
to take into account any reduction in otherwise allowable itemized deductions
attributable to Section 68 of the Code), plus (D) the tax rate applicable to
27
the Executive under the hospital insurance portion of the Federal Insurance
Contributions Act under Section 3101(b) of the Code for the tax year in which
the Executive receives the Gross-Up Payment.
6.2.1 For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of
section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel (delivered to the
Executive) selected by the Company and reasonably acceptable to the
Executive such Total Payments (in whole or in part) (a) do not
constitute parachute payments, including (without limitation) by
reason of section 280G(b)(4)(A) of the Code, (b) such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of
section 280G(b)(4)(B) of the Code, or (c) are otherwise not subject
to the Excise Tax, and (ii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
6.2.2 In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at
the time of termination of the Executive's employment, the Executive
shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the
amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the
time of the termination of the Executive's employment (including by
reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus
any interest, penalties or additions payable by the Executive with
respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect
to the Severance Payments.
6.3 DATE OF PAYMENT. The payments provided for in Section 6.1.1 and
<PAGE>
Section 6.2 hereof shall be made not later than the fifteenth (15th) day
following the Date of Termination; provided, however, that if the amounts of
-------- -------
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments to which the Executive
28
is likely to be entitled to and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later
than the thirtieth (30th) day after the Date of Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section 6.3, the Company
shall provide the Executive with a detailed written statement setting forth the
manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice the
Company has received from outside counsel, auditors or consultants (and any
such opinions or advice which are in writing shall be attached to the
statement).
6.4 LEGAL COSTS. The Company shall also reimburse the Executive for
all legal fees and expenses incurred in good faith by the Executive as a result
of any dispute with any party (including, but not limited to, the Company or
the Bank) regarding the payment of any benefit provided for in this Agreement
(including, but not limited, all such fees and expenses incurred in disputing
any termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code plus in each case interest on any delayed payment at the applicable
Federal rate provided for in section 7872(f)(2)(A) of the Code. Such payments
shall be made within five (5) business days after delivery of the Executive's
written requests for payment accompanied by such evidence of fees and expenses
incurred as the Company reasonably may require.
7. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
7.1 NOTICE OF TERMINATION. After a Change in Control and during the
Term, any purported termination of the Executive's employment with the Company
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment with the Company under the provision so indicated. Further, a
Notice of Termination for Cause is required to include a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board at a meeting of the Board which was called
and held for the purpose of considering such termination (which meeting may be
a regular meeting of the Board where prior notice of consideration of such
termination is given to members of the Board) finding that, in the good faith
opinion of the Board, the Executive engaged in conduct set forth in clause (i)
<PAGE>
or (ii) of the definition of Cause herein, and specifying the particulars
thereof in detail. For purposes of this Agreement, any purported termination
not effected in accordance with this Section 7.1 shall not be considered
effective.
29
7.2 DATE OF TERMINATION. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control
and during the Term, shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty (30) day period), and (ii) if the
Executive's employment is terminated for any other reason, the date specified
in the Notice of Termination (which, in the case of a termination by the
Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, after the date such Notice of Termination is given).
7.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided,
--------
however, that the Date of Termination shall be extended by a notice of dispute
- -------
only if the basis for such notice is reasonable, such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence.
7.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and during the Term, and such termination is
disputed in accordance with Section 7.3 above, the Company shall continue to
pay the Executive the full compensation (including without limitation Annual
Base Salary and Annual Bonus) in effect at the time of any related Potential
Change in Control or when the notice giving rise to the dispute was given
(whichever is greater) and continue the Executive as a participant in all
compensation, incentive, pension and welfare benefit and insurance plans in
which the Executive was participating at the time of any Potential Change in
Control or when the notice giving rise to the dispute was given, whichever is
greater, until the dispute is finally resolved in accordance with Section 7.3
hereof. Amounts paid under this Section 7.4 are in addition to all other
amounts due under this Agreement (other than those due under Section 5.2
hereof) and shall not be offset against or reduce any other amounts due under
this Agreement or any other plan, agreement or arrangement.
8. NO MITIGATION. The Company agrees that, if the Executive's
employment is terminated during the Term, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 6 or Section 7.4. Further, the
amount of any payment or benefit provided for in Section 6 (other than pursuant
to Section 6.1.2) or Section 7.4 shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
<PAGE>
retirement benefits, or offset against any amount claimed to be owed by the
Executive to the Company or any of its subsidiaries, or otherwise.
30
9. SUCCESSORS; BINDING AGREEMENT.
9.1 SUCCESSORS. In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 BINDING AGREEMENT. This Agreement shall inure to the benefit of
and be enforceable by this Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would still be payable
to the Executive hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate.
10. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
The Summit Bancorporation
One Main Street
Chatham, New Jersey 07928
Attention: Corporate Secretary
To the Executive:
Mr. Robert G. Cox
211 Liberty Corner Road
Far Hills, New Jersey 07931
<PAGE>
31
11. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of New Jersey without regard to the
principles of conflict of laws thereof. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to and include any
successor provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under federal, state
or local law and any additional withholding to which the Executive has agreed.
The rights and obligations of the Company and the Executive under this
Agreement shall survive the expiration of the Term and the Employment Period.
12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. NO LIMITATION. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement
with the Company or any of its affiliated companies at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement.
The Summit Bancorporation
By:
/s/ Samuel V. Gilman Jr.
----------------------------
Samuel V. Gilman Jr.
32
<PAGE>
/s/ Robert G. Cox
----------------------------
Robert G. Cox
33
AGREEMENT
THIS AGREEMENT, dated as of September 1, 1995 (this "Agreement"), is
made by and between The Summit Bancorporation, a New Jersey corporation, having
its principal offices at One Main Street, Chatham, New Jersey 07928 (the
"Company"), and Mr. John R. Feeney residing at 249 Williamsburg Drive,
Shrewsbury, New Jersey 07702 (the "Executive").
WHEREAS, the Company considers it essential to the best interests of
its shareholders to foster the continued employment of key executive management
personnel; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined in Section 1.3 below) of the
Company exists from time to time and that such possibility, and the
uncertainty, instability and questions which it may raise for and among key
executive management personnel, may result in the premature departure or
significant distraction of such management personnel to the material detriment
<PAGE>
of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce, focus and encourage the continued attention and dedication
of key members of the executive management of the Company and its subsidiaries,
including (without limitation) the Executive, to their assigned duties without
distraction in the face of potentially disturbing or unsettling circumstances
arising from the possibility of a Change in Control of the Company;
NOW THEREFORE, in consideration of the premises and the mutual cove-
nants herein contained, the Company and the Executive hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
1.1 "ANNUAL BASE SALARY" shall mean the Executive's rate of regular
basic annual compensation prior to any reduction under a salary reduction
agreement pursuant to section 401(k) or section 125 of the Internal Revenue
Code of 1986, as amended from time to time (the "Code"), and shall not include
(without limitation) cost of living allowances, fees, retainers,
reimbursements, car allowances, bonuses, incentive awards, prizes or similar
payments.
1.2 "CAUSE" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by the Executive to substantially perform the Executive's
duties with the Company, or a subsidiary of the Company, including (without
limitation) Summit Bank, a New Jersey chartered bank (the "Bank"), as such
34
duties may reasonably be defined from time to time by the Board (or a duly
designated and authorized committee thereof), or to abide by the reasonable
written policies of the Company or of the Executive's primary employer (other
than any such failure resulting from the Executive's incapacity due to physical
or mental illness or any such actual or anticipated failure after the issuance
of a Notice of Termination by the Executive for Good Reason pursuant to Section
7.1) after a written demand for substantial performance is delivered to the
Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's duties or has not abided by any reasonable written policies, or
(ii) the continued and willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive in bad faith and
without reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Company or its subsidiaries. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Board or the Company's chief executive
officer or other duly authorized senior officer of the Company or based upon
the advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company and its subsidiaries. The cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire membership of
<PAGE>
the Board at a meeting of the Board called and held for such purpose (after
reasonable notice of any such meeting is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the Executive
is guilty of the conduct described in clause (i) or (ii) above, and specifying
the particulars thereof in detail.
1.3 "CHANGE IN CONTROL" shall mean and be deemed to have occurred
if:
(i) any Person is or becomes the Beneficial Owner (as that
term is defined in Rule 13d-3 under the Securities Exchange Act of
1934 (the "Exchange Act")), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company)
representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities, or there occurs
any transaction which the Company is required to disclose pursuant to
Item 1(a) of Form 8-K (as filed pursuant to Rule 13a-11 or Rule 15d-
11 of the Exchange Act); or
(ii) during any period of twenty-four (24) consecutive
months (not including any period prior to September 1, 1995),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person
who has entered into an agreement with the Company to effect a
35
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies
or consents) whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of such period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially
all of the individuals and entities who were Beneficial Owners,
immediately prior to such reorganization, merger or consolidation, of
the combined voting power of the Company's then outstanding
securities beneficially own, directly or indirectly, immediately
after such reorganization, merger or consolidation, more then
seventy-five percent (75%) of the combined voting power of the
securities of the corporation resulting from such reorganization,
merger or consolidation in substantially the same proportions as
their respective ownership, immediately prior to such reorganization,
merger or consolidation, of the combined voting power of the
Company's securities; or
(iv) the shareholders of the Company approve (a) the sale
or disposition by the Company (other than to a subsidiary of the
Company) of the Bank, or (b) a complete liquidation or dissolution of
<PAGE>
the Company or the Bank.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction which results from the action (excluding the
Executive's employment activities with the Company, the Bank or any of their
respective subsidiaries) of any Person or group of Persons which includes, is
directly affiliated with or is wholly or partly controlled by one or more
executive officers of the Company and in which the Executive actively
participates.
1.4 "COMPANY" shall include The Summit Bancorporation and any
successor to its business and/or assets which assumes (either expressly, by
operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Company has occurred in connection
with such succession).
1.5 "DISABILITY" shall mean and be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, (i) the Executive
shall have been absent from the full-time performance of the Executive's duties
36
with the Company for a period of six (6) consecutive months, (ii) the Company
gives the Executive a Notice of Termination for Disability, and (iii) within
thirty (30) days after such Notice of Termination is given, the Executive does
not return to the full-time performance of the Executive's duties.
1.6 "GOOD REASON" for termination by the Executive of the
Executive's employment, in connection with or as a result of any Change in
Control, shall mean the occurrence (without the Executive's prior express
written consent) of any one of the following acts, or failures to act, unless,
in the case of any act or failure to act described in clauses (i), (iv), (v) or
(vi) below, such act or failure to act is corrected by the Company prior to the
Date of Termination specified in the Notice of Termination given in respect
thereof:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with those described in Section 3.2
below or with the Executive's position(s) (including without
limitation status, offices, titles, and reporting
responsibilities/rights) as an executive officer of the Company and
its subsidiaries or a substantial adverse alteration in the nature of
the Executive's authority, duties, or responsibilities from those
described in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base Salary as
in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal executive
offices to a location more than thirty (30) miles from its location
on the date of this Agreement (or, if different, more than thirty
(30) miles from where such offices are located immediately prior to
any Potential Change in Control) or the Company's requiring the
Executive to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's
<PAGE>
business to an extent substantially consistent with the Executive's
business travel obligations as of the date of this Agreement;
(iv) any failure by the Company to comply with any of the
provisions of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(v) the failure by the Company or a subsidiary to continue
in effect any pension benefit or incentive or deferred compensation
plan in which the Executive participates immediately prior to any
Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made
with respect to such plan, or the failure by the Company or a
37
subsidiary to continue the Executive's participation therein (or in
such substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Potential Change in
Control;
(vi) the failure by the Company or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of
the Company's or a subsidiary's retirement, life insurance, medical,
health and accident, or disability or similar plans in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Company or a subsidiary
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Potential Change in
Control, or the failure by the Company or a subsidiary to provide the
Executive with the number of paid vacation days to which the
Executive is entitled in accordance with the Company's or a
subsidiary's normal vacation policy in effect at the time of the
Potential Change in Control;
(vii) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1; and/or
(viii) a termination by the Executive for any reason
during the thirty (30) day period immediately following the first
anniversary of any Change in Control.
1.7 "PERSON" shall have the meaning ascribed thereto in Section
3(a)(9) of the Exchange Act, as modified applied, and used in Sections 13(d)
and 14(d) thereof; provided, however, a Person shall not include (i) the
-------- -------
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
<PAGE>
subsidiaries (in its capacity as such), (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same character and proportions as their ownership of stock
of the Company.
1.8 "POTENTIAL CHANGE IN CONTROL" shall mean and be deemed to have
occurred if:
(i) the Company commences negotiations in respect of or
enters into an agreement, the consummation of which would result in
the occurrence of a Change in Control;
38
(ii) the Company or any Person publicly announces an
intention to take actions which, if consummated, would constitute a
Change in Control; and/or
(iii) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing ten percent
(10%) or more of the combined voting power of the Company's then
outstanding securities, or any Person increases such Person's
beneficial ownership of such securities by five (5) percentage points
or more over the percentage so owned by such Person on September 1,
1995.
1.9 "RETIREMENT" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment if such employment
is terminated in accordance with the Company's normal retirement policy for
those aged 65 and older, not including early retirement or so-called "window
period" retirements, generally applicable to its salaried employees, as in
effect immediately prior to any Potential Change in Control.
2. TERM OF THIS AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1998; provided,
--------
however, that commencing on January 1, 1998 and each January 1 thereafter, the
- -------
term of this Agreement shall automatically be extended for one additional year
unless, not later than June 30 of the preceding year, the Company or the
Executive shall have given written notice to the other not to extend this
Agreement or a Change in Control shall have occurred prior to any such January
1; provided, further, however, that if a Change in Control shall have occurred
-------- ------- -------
during the term of this Agreement, this Agreement shall continue in effect for
a period of not less than thirty-six (36) months beyond the month in which such
Change in Control occurred (the "Term"). Notwithstanding the foregoing
provisions of this Section 2, the Term shall terminate upon the Executive's
attaining the age of sixty-five (65) years.
3. COMPANY'S COVENANTS.
3.1 SEVERANCE PAYMENTS. In order to induce the Executive to remain
<PAGE>
in the employ of the Company and/or one or more of its subsidiaries and in
consideration of the Executive's covenants set forth in Section 4 below, the
Company agrees, under the terms and conditions described herein and in addition
to the amounts payable to the Executive under Section 5 below, to pay the
Executive the "Severance Payments" described in Section 6.1 below and the other
payments and benefits described herein in the event the Executive's employment
with the Company is terminated during the Term and after a Change in Control or
under the other circumstances set forth in Section 6.1 below.
3.2 POSITION AND DUTIES. During the period commencing on the date
of any Change in Control until the earliest to occur of (i) the date which is
thirty-six (36) months from the date of any such Change in Control, (ii) the
date of termination by the Executive of the Executive's employment for any
reason, or (iii) the termination by the Company of the Executive's employment
for any reason (the "Employment Period"), (a) the Executive's position
39
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control, and (b) the Executive's services shall be
performed at the location where the Executive was employed immediately
preceding any such Potential Change in Control, or any office or location less
than thirty (30) miles from such location.
3.3 BASE SALARY. During the Employment Period, the Executive shall
receive Annual Base Salary at least equal to twelve (12) times the highest
monthly base salary paid or payable, including (without limitation) any base
salary which has been earned but deferred, to the Executive by the Company and
its affiliated companies in respect of the twelve (12) month period immediately
preceding the month in which any related Potential Change in Control occurs.
In addition, Annual Base Salary shall not be reduced after the occurrence of a
Potential Change in Control. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
3.4 ANNUAL BONUS. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the Executive's
highest bonus for the last three (3) full fiscal years prior to the fiscal year
in which the related Potential Change in Control occurs (annualized in the
event that the Executive was not employed by the Company for the whole of any
such prior fiscal year). Each Annual Bonus shall be paid no later than the end
of the third month of the fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
3.5 INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
<PAGE>
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at
any time during the one hundred eighty (180) day period immediately preceding
any related Potential Change in Control or if more favorable to the Executive,
those provided generally at any time thereafter to other peer executives of the
Company and its affiliated companies.
3.6 WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be entitled
to participate in and shall receive all benefits under all of the health and
welfare benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical,
40
prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in effect for
the Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, those provided generally at any time thereafter to
other peer executives of the Company and its affiliated companies.
3.7 EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
3.8 FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and an automobile allowance
and payment of related expenses, in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies in
effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
3.9 OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
3.10 VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
<PAGE>
in effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
4. THE EXECUTIVE'S COVENANTS.
41
4.1 EMPLOYMENT. The Executive agrees that, subject to the terms and
conditions of this Agreement, in the event of a Change in Control during the
Term the Executive will remain in the employ of the Company during any related
Employment Period.
4.2 TIME AND ATTENTION. During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary
to discharge the responsibilities and duties assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities and duties. During the Employment Period
it shall not be a violation of this Agreement for the Executive to (i) serve on
corporate, civic or charitable boards or committees, (ii) deliver lectures,
fulfill speaking engagements or teach at educational institutions, and (iii)
manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to any Potential Change in Control, the
reinstatement or continued conduct of such activities (or the reinstatement or
conduct of activities similar in nature and scope thereto) subsequent to any
related Potential Change in Control shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Company.
4.3 CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by direct or indirect acts by the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event, however, shall an asserted violation of the
provisions of this Section 4.3 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
5. COMPENSATION OTHER THAN SEVERANCE PAYMENTS.
5.1 DISABILITY. Following a Potential Change in Control and during
the Term, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Executive's full salary shall be paid to the Executive by
the Company at a rate no less than the rate in effect at the commencement of
<PAGE>
any such disability period, together with all compensation and benefits payable
to the Executive under the terms of any compensation or benefit plan, program
42
or arrangement maintained by the Company or its subsidiaries during such
disability period, until the Executive's employment is terminated by the
Company for Disability.
5.2 BASE SALARY. If the Executive's employment shall be terminated
for any reason following a Potential Change in Control and during the Term, the
Executive's full salary shall be paid to the Executive by the Company through
the Date of Termination (as defined below in Section 7.2) at the rate in effect
at the time the Notice of Termination is given, together with all compensation
and benefits payable to or with respect to the Executive through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Company or its subsidiaries during such period.
5.3 BENEFITS. If the Executive's employment shall be terminated for
any reason following a Potential Change in Control and during the Term, the
Executive's normal post-termination compensation and benefits shall be paid to
the Executive as such payments become due. Such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
retirement, insurance and other compensation or benefit plans, programs and
arrangements maintained by the Company or its subsidiaries.
6. SEVERANCE PAYMENTS.
6.1 SEVERANCE. The Company shall pay the Executive the payments
described in this Section 6.1 (the "Severance Payments") upon the termination
of the Executive's employment with the Company following a Change in Control
and during the Term, in addition to the payments and benefits described in
Section 5 hereof, unless such termination is (i) by the Company for Cause, (ii)
by reason of Retirement, or (iii) by the Executive without Good Reason. In
addition, the Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the Executive
with Good Reason (a) if the Executive reasonably demonstrates that the
Executive's employment was terminated prior to a Change in Control without
Cause (1) at the request of a Person who has entered into an agreement with the
Company the consummation of which will constitute a Change in Control (or who
has taken other steps reasonably calculated to effect a Change in Control) or
(2) otherwise in connection with, as a result of or in anticipation of a Change
in Control, (b) if the Executive terminates his employment for Good Reason
prior to a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control, or (c) if the Executive dies or is
terminated by the Company due to Disability, in each case, after the occurrence
of a Potential Change in Control and a related Change in Control actually
occurs within one (1) year after the Date of Termination or the date of death,
as the case may be. The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the Executive's incapacity
due to physical or mental illness. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
<PAGE>
43
6.1.1 In lieu of any further salary and annual bonus
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to two (2) or, if less, the number
of years, including fractions, from the Date of Termination until the
Executive reaches the age of sixty-five (65) years times the sum of
(i) the highest Annual Base Salary paid or payable to the Executive
during the thirty-six (36) month period immediately preceding the
month in which the Change in Control occurs, and (ii) the highest
annual bonus paid or determined and payable to the Executive during
such thirty-six (36) month period.
6.1.2 For a twenty-four (24) month period after the Date
of Termination, or if sooner, until the Executive reaches the age of
sixty-five (65) years, the Company shall arrange to provide the
Executive with life, disability, accident and health insurance
benefits substantially similar to those which the Executive is
receiving immediately prior to any related Potential Change in
Control or the receipt of the Notice of Termination (without giving
effect to any reduction in such benefits subsequent to a Change in
Control which reduction constitutes Good Reason), whichever is
greater. Benefits otherwise receivable by the Executive pursuant to
this Section 6.1.2 shall be reduced to the extent comparable benefits
are actually received by or made available to the Executive without
cost during such period following the Executive's termination of
employment (and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
6.2 SPECIAL REIMBURSEMENT. In the event that the Executive becomes
entitled to the Severance Payments, if any payment or benefit paid or payable,
or received or to be received, by or on behalf of the Executive in connection
with a Change in Control or the termination of the Executive's employment,
whether any such payments or benefits are pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any of
its subsidiaries, any Person, or otherwise (the "Total Payments"), will or
would be subject to the excise tax imposed under section 4999 of the Code (the
"Excise Tax"), the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") which amount shall be equal to the sum of (a) the amount of
such Excise Tax imposed (determined without regard to the Gross-Up Payment),
and (b) the product of (i) such Excise Tax (determined without regard to the
Gross-Up Payment), and (ii) the Aggregate Combined Marginal Tax Rate. For
purposes of this Section 6.2, "Aggregate Combined Marginal Tax Rate" means (and
shall equal) the sum of (A) the combined highest marginal state and local
income tax rates applicable for the tax year in which the Executive receives
the Gross-Up Payment (adjusted downward to take into account the tax
deductibility, if any, of such state and local income taxes), plus (B) the rate
of excise tax imposed on "golden parachute" payments under Section 4999 of the
Code, plus (C) the highest marginal federal income tax rate applicable for the
tax year in which the Executive receives the Gross-Up Payment (adjusted upward
to take into account any reduction in otherwise allowable itemized deductions
attributable to Section 68 of the Code), plus (D) the tax rate applicable to
44
<PAGE>
the Executive under the hospital insurance portion of the Federal Insurance
Contributions Act under Section 3101(b) of the Code for the tax year in which
the Executive receives the Gross-Up Payment.
6.2.1 For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of
section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel (delivered to the
Executive) selected by the Company and reasonably acceptable to the
Executive such Total Payments (in whole or in part) (a) do not
constitute parachute payments, including (without limitation) by
reason of section 280G(b)(4)(A) of the Code, (b) such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of
section 280G(b)(4)(B) of the Code, or (c) are otherwise not subject
to the Excise Tax, and (ii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
6.2.2 In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at
the time of termination of the Executive's employment, the Executive
shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the
amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the
time of the termination of the Executive's employment (including by
reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus
any interest, penalties or additions payable by the Executive with
respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect
to the Severance Payments.
6.3 DATE OF PAYMENT. The payments provided for in Section 6.1.1 and
Section 6.2 hereof shall be made not later than the fifteenth (15th) day
following the Date of Termination; provided, however, that if the amounts of
-------- -------
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments to which the Executive
45
is likely to be entitled to and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
<PAGE>
Code) as soon as the amount thereof can be determined but in no event later
than the thirtieth (30th) day after the Date of Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section 6.3, the Company
shall provide the Executive with a detailed written statement setting forth the
manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice the
Company has received from outside counsel, auditors or consultants (and any
such opinions or advice which are in writing shall be attached to the
statement).
6.4 LEGAL COSTS. The Company shall also reimburse the Executive for
all legal fees and expenses incurred in good faith by the Executive as a result
of any dispute with any party (including, but not limited to, the Company or
the Bank) regarding the payment of any benefit provided for in this Agreement
(including, but not limited, all such fees and expenses incurred in disputing
any termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code plus in each case interest on any delayed payment at the applicable
Federal rate provided for in section 7872(f)(2)(A) of the Code. Such payments
shall be made within five (5) business days after delivery of the Executive's
written requests for payment accompanied by such evidence of fees and expenses
incurred as the Company reasonably may require.
7. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
7.1 NOTICE OF TERMINATION. After a Change in Control and during the
Term, any purported termination of the Executive's employment with the Company
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment with the Company under the provision so indicated. Further, a
Notice of Termination for Cause is required to include a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board at a meeting of the Board which was called
and held for the purpose of considering such termination (which meeting may be
a regular meeting of the Board where prior notice of consideration of such
termination is given to members of the Board) finding that, in the good faith
opinion of the Board, the Executive engaged in conduct set forth in clause (i)
or (ii) of the definition of Cause herein, and specifying the particulars
thereof in detail. For purposes of this Agreement, any purported termination
not effected in accordance with this Section 7.1 shall not be considered
effective.
46
7.2 DATE OF TERMINATION. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control
and during the Term, shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of the
<PAGE>
Executive's duties during such thirty (30) day period), and (ii) if the
Executive's employment is terminated for any other reason, the date specified
in the Notice of Termination (which, in the case of a termination by the
Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, after the date such Notice of Termination is given).
7.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided,
--------
however, that the Date of Termination shall be extended by a notice of dispute
- -------
only if the basis for such notice is reasonable, such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence.
7.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and during the Term, and such termination is
disputed in accordance with Section 7.3 above, the Company shall continue to
pay the Executive the full compensation (including without limitation Annual
Base Salary and Annual Bonus) in effect at the time of any related Potential
Change in Control or when the notice giving rise to the dispute was given
(whichever is greater) and continue the Executive as a participant in all
compensation, incentive, pension and welfare benefit and insurance plans in
which the Executive was participating at the time of any Potential Change in
Control or when the notice giving rise to the dispute was given, whichever is
greater, until the dispute is finally resolved in accordance with Section 7.3
hereof. Amounts paid under this Section 7.4 are in addition to all other
amounts due under this Agreement (other than those due under Section 5.2
hereof) and shall not be offset against or reduce any other amounts due under
this Agreement or any other plan, agreement or arrangement.
8. NO MITIGATION. The Company agrees that, if the Executive's
employment is terminated during the Term, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 6 or Section 7.4. Further, the
amount of any payment or benefit provided for in Section 6 (other than pursuant
to Section 6.1.2) or Section 7.4 shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or offset against any amount claimed to be owed by the
Executive to the Company or any of its subsidiaries, or otherwise.
47
9. SUCCESSORS; BINDING AGREEMENT.
9.1 SUCCESSORS. In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
<PAGE>
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 BINDING AGREEMENT. This Agreement shall inure to the benefit of
and be enforceable by this Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would still be payable
to the Executive hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate.
10. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
The Summit Bancorporation
One Main Street
Chatham, New Jersey 07928
Attention: Corporate Secretary
To the Executive:
Mr. John R. Feeney
249 Williamsburg Drive
Shrewsbury, New Jersey 07702
48
11. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
<PAGE>
shall be governed by the laws of the State of New Jersey without regard to the
principles of conflict of laws thereof. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to and include any
successor provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under federal, state
or local law and any additional withholding to which the Executive has agreed.
The rights and obligations of the Company and the Executive under this
Agreement shall survive the expiration of the Term and the Employment Period.
12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. NO LIMITATION. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement
with the Company or any of its affiliated companies at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement.
The Summit Bancorporation
By:
/s/ Robert G. Cox
----------------------------
Robert G. Cox
49
/s/ John R. Feeney
----------------------------
John R. Feeney
<PAGE>
50
AGREEMENT
THIS AGREEMENT, dated as of September 1, 1995 (this "Agreement"), is
made by and between The Summit Bancorporation, a New Jersey corporation, having
its principal offices at One Main Street, Chatham, New Jersey 07928 (the
"Company"), and Mr. Dennis S. McChesney residing at 60 Lambert Drive, Sparta,
New Jersey 07871 (the "Executive").
WHEREAS, the Company considers it essential to the best interests of
its shareholders to foster the continued employment of key executive management
personnel; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined in Section 1.3 below) of the
Company exists from time to time and that such possibility, and the
uncertainty, instability and questions which it may raise for and among key
executive management personnel, may result in the premature departure or
significant distraction of such management personnel to the material detriment
of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce, focus and encourage the continued attention and dedication
of key members of the executive management of the Company and its subsidiaries,
including (without limitation) the Executive, to their assigned duties without
distraction in the face of potentially disturbing or unsettling circumstances
arising from the possibility of a Change in Control of the Company;
NOW THEREFORE, in consideration of the premises and the mutual cove-
nants herein contained, the Company and the Executive hereby agree as follows:
<PAGE>
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
1.1 "ANNUAL BASE SALARY" shall mean the Executive's rate of regular
basic annual compensation prior to any reduction under a salary reduction
agreement pursuant to section 401(k) or section 125 of the Internal Revenue
Code of 1986, as amended from time to time (the "Code"), and shall not include
(without limitation) cost of living allowances, fees, retainers,
reimbursements, car allowances, bonuses, incentive awards, prizes or similar
payments.
1.2 "CAUSE" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by the Executive to substantially perform the Executive's
duties with the Company, or a subsidiary of the Company, including (without
limitation) Summit Bank, a New Jersey chartered bank (the "Bank"), as such
51
duties may reasonably be defined from time to time by the Board (or a duly
designated and authorized committee thereof), or to abide by the reasonable
written policies of the Company or of the Executive's primary employer (other
than any such failure resulting from the Executive's incapacity due to physical
or mental illness or any such actual or anticipated failure after the issuance
of a Notice of Termination by the Executive for Good Reason pursuant to Section
7.1) after a written demand for substantial performance is delivered to the
Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's duties or has not abided by any reasonable written policies, or
(ii) the continued and willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive in bad faith and
without reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Company or its subsidiaries. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Board or the Company's chief executive
officer or other duly authorized senior officer of the Company or based upon
the advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company and its subsidiaries. The cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire membership of
the Board at a meeting of the Board called and held for such purpose (after
reasonable notice of any such meeting is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the Executive
is guilty of the conduct described in clause (i) or (ii) above, and specifying
the particulars thereof in detail.
1.3 "CHANGE IN CONTROL" shall mean and be deemed to have occurred
if:
(i) any Person is or becomes the Beneficial Owner (as that
term is defined in Rule 13d-3 under the Securities Exchange Act of
<PAGE>
1934 (the "Exchange Act")), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company)
representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities, or there occurs
any transaction which the Company is required to disclose pursuant to
Item 1(a) of Form 8-K (as filed pursuant to Rule 13a-11 or Rule 15d-
11 of the Exchange Act); or
(ii) during any period of twenty-four (24) consecutive
months (not including any period prior to September 1, 1995),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person
52
who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies
or consents) whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of such period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially
all of the individuals and entities who were Beneficial Owners,
immediately prior to such reorganization, merger or consolidation, of
the combined voting power of the Company's then outstanding
securities beneficially own, directly or indirectly, immediately
after such reorganization, merger or consolidation, more then
seventy-five percent (75%) of the combined voting power of the
securities of the corporation resulting from such reorganization,
merger or consolidation in substantially the same proportions as
their respective ownership, immediately prior to such reorganization,
merger or consolidation, of the combined voting power of the
Company's securities; or
(iv) the shareholders of the Company approve (a) the sale
or disposition by the Company (other than to a subsidiary of the
Company) of the Bank, or (b) a complete liquidation or dissolution of
the Company or the Bank.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction which results from the action (excluding the
Executive's employment activities with the Company, the Bank or any of their
respective subsidiaries) of any Person or group of Persons which includes, is
directly affiliated with or is wholly or partly controlled by one or more
executive officers of the Company and in which the Executive actively
participates.
1.4 "COMPANY" shall include The Summit Bancorporation and any
<PAGE>
successor to its business and/or assets which assumes (either expressly, by
operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Company has occurred in connection
with such succession).
1.5 "DISABILITY" shall mean and be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, (i) the Executive
shall have been absent from the full-time performance of the Executive's duties
53
with the Company for a period of six (6) consecutive months, (ii) the Company
gives the Executive a Notice of Termination for Disability, and (iii) within
thirty (30) days after such Notice of Termination is given, the Executive does
not return to the full-time performance of the Executive's duties.
1.6 "GOOD REASON" for termination by the Executive of the
Executive's employment, in connection with or as a result of any Change in
Control, shall mean the occurrence (without the Executive's prior express
written consent) of any one of the following acts, or failures to act, unless,
in the case of any act or failure to act described in clauses (i), (iv), (v) or
(vi) below, such act or failure to act is corrected by the Company prior to the
Date of Termination specified in the Notice of Termination given in respect
thereof:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with those described in Section 3.2
below or with the Executive's position(s) (including without
limitation status, offices, titles, and reporting
responsibilities/rights) as an executive officer of the Company and
its subsidiaries or a substantial adverse alteration in the nature of
the Executive's authority, duties, or responsibilities from those
described in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base Salary as
in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal executive
offices to a location more than thirty (30) miles from its location
on the date of this Agreement (or, if different, more than thirty
(30) miles from where such offices are located immediately prior to
any Potential Change in Control) or the Company's requiring the
Executive to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's
business to an extent substantially consistent with the Executive's
business travel obligations as of the date of this Agreement;
(iv) any failure by the Company to comply with any of the
provisions of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(v) the failure by the Company or a subsidiary to continue
in effect any pension benefit or incentive or deferred compensation
plan in which the Executive participates immediately prior to any
<PAGE>
Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made
with respect to such plan, or the failure by the Company or a
54
subsidiary to continue the Executive's participation therein (or in
such substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Potential Change in
Control;
(vi) the failure by the Company or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of
the Company's or a subsidiary's retirement, life insurance, medical,
health and accident, or disability or similar plans in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Company or a subsidiary
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Potential Change in
Control, or the failure by the Company or a subsidiary to provide the
Executive with the number of paid vacation days to which the
Executive is entitled in accordance with the Company's or a
subsidiary's normal vacation policy in effect at the time of the
Potential Change in Control;
(vii) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1; and/or
(viii) a termination by the Executive for any reason
during the thirty (30) day period immediately following the first
anniversary of any Change in Control.
1.7 "PERSON" shall have the meaning ascribed thereto in Section
3(a)(9) of the Exchange Act, as modified applied, and used in Sections 13(d)
and 14(d) thereof; provided, however, a Person shall not include (i) the
-------- -------
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries (in its capacity as such), (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same character and proportions as their ownership of stock
of the Company.
1.8 "POTENTIAL CHANGE IN CONTROL" shall mean and be deemed to have
occurred if:
(i) the Company commences negotiations in respect of or
enters into an agreement, the consummation of which would result in
the occurrence of a Change in Control;
<PAGE>
55
(ii) the Company or any Person publicly announces an
intention to take actions which, if consummated, would constitute a
Change in Control; and/or
(iii) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing ten percent
(10%) or more of the combined voting power of the Company's then
outstanding securities, or any Person increases such Person's
beneficial ownership of such securities by five (5) percentage points
or more over the percentage so owned by such Person on September 1,
1995.
1.9 "RETIREMENT" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment if such employment
is terminated in accordance with the Company's normal retirement policy for
those aged 65 and older, not including early retirement or so-called "window
period" retirements, generally applicable to its salaried employees, as in
effect immediately prior to any Potential Change in Control.
2. TERM OF THIS AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1998; provided,
--------
however, that commencing on January 1, 1998 and each January 1 thereafter, the
- -------
term of this Agreement shall automatically be extended for one additional year
unless, not later than June 30 of the preceding year, the Company or the
Executive shall have given written notice to the other not to extend this
Agreement or a Change in Control shall have occurred prior to any such January
1; provided, further, however, that if a Change in Control shall have occurred
-------- ------- -------
during the term of this Agreement, this Agreement shall continue in effect for
a period of not less than thirty-six (36) months beyond the month in which such
Change in Control occurred (the "Term"). Notwithstanding the foregoing
provisions of this Section 2, the Term shall terminate upon the Executive's
attaining the age of sixty-five (65) years.
3. COMPANY'S COVENANTS.
3.1 SEVERANCE PAYMENTS. In order to induce the Executive to remain
in the employ of the Company and/or one or more of its subsidiaries and in
consideration of the Executive's covenants set forth in Section 4 below, the
Company agrees, under the terms and conditions described herein and in addition
to the amounts payable to the Executive under Section 5 below, to pay the
Executive the "Severance Payments" described in Section 6.1 below and the other
payments and benefits described herein in the event the Executive's employment
with the Company is terminated during the Term and after a Change in Control or
under the other circumstances set forth in Section 6.1 below.
3.2 POSITION AND DUTIES. During the period commencing on the date
of any Change in Control until the earliest to occur of (i) the date which is
thirty-six (36) months from the date of any such Change in Control, (ii) the
date of termination by the Executive of the Executive's employment for any
reason, or (iii) the termination by the Company of the Executive's employment
<PAGE>
for any reason (the "Employment Period"), (a) the Executive's position
56
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control, and (b) the Executive's services shall be
performed at the location where the Executive was employed immediately
preceding any such Potential Change in Control, or any office or location less
than thirty (30) miles from such location.
3.3 BASE SALARY. During the Employment Period, the Executive shall
receive Annual Base Salary at least equal to twelve (12) times the highest
monthly base salary paid or payable, including (without limitation) any base
salary which has been earned but deferred, to the Executive by the Company and
its affiliated companies in respect of the twelve (12) month period immediately
preceding the month in which any related Potential Change in Control occurs.
In addition, Annual Base Salary shall not be reduced after the occurrence of a
Potential Change in Control. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
3.4 ANNUAL BONUS. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the Executive's
highest bonus for the last three (3) full fiscal years prior to the fiscal year
in which the related Potential Change in Control occurs (annualized in the
event that the Executive was not employed by the Company for the whole of any
such prior fiscal year). Each Annual Bonus shall be paid no later than the end
of the third month of the fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
3.5 INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at
any time during the one hundred eighty (180) day period immediately preceding
any related Potential Change in Control or if more favorable to the Executive,
those provided generally at any time thereafter to other peer executives of the
Company and its affiliated companies.
3.6 WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be entitled
to participate in and shall receive all benefits under all of the health and
welfare benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical,
<PAGE>
57
prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in effect for
the Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, those provided generally at any time thereafter to
other peer executives of the Company and its affiliated companies.
3.7 EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
3.8 FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and an automobile allowance
and payment of related expenses, in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies in
effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
3.9 OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
3.10 VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
4. THE EXECUTIVE'S COVENANTS.
58
4.1 EMPLOYMENT. The Executive agrees that, subject to the terms and
conditions of this Agreement, in the event of a Change in Control during the
Term the Executive will remain in the employ of the Company during any related
<PAGE>
Employment Period.
4.2 TIME AND ATTENTION. During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary
to discharge the responsibilities and duties assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities and duties. During the Employment Period
it shall not be a violation of this Agreement for the Executive to (i) serve on
corporate, civic or charitable boards or committees, (ii) deliver lectures,
fulfill speaking engagements or teach at educational institutions, and (iii)
manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to any Potential Change in Control, the
reinstatement or continued conduct of such activities (or the reinstatement or
conduct of activities similar in nature and scope thereto) subsequent to any
related Potential Change in Control shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Company.
4.3 CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by direct or indirect acts by the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event, however, shall an asserted violation of the
provisions of this Section 4.3 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
5. COMPENSATION OTHER THAN SEVERANCE PAYMENTS.
5.1 DISABILITY. Following a Potential Change in Control and during
the Term, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Executive's full salary shall be paid to the Executive by
the Company at a rate no less than the rate in effect at the commencement of
any such disability period, together with all compensation and benefits payable
to the Executive under the terms of any compensation or benefit plan, program
59
or arrangement maintained by the Company or its subsidiaries during such
disability period, until the Executive's employment is terminated by the
Company for Disability.
5.2 BASE SALARY. If the Executive's employment shall be terminated
for any reason following a Potential Change in Control and during the Term, the
Executive's full salary shall be paid to the Executive by the Company through
<PAGE>
the Date of Termination (as defined below in Section 7.2) at the rate in effect
at the time the Notice of Termination is given, together with all compensation
and benefits payable to or with respect to the Executive through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Company or its subsidiaries during such period.
5.3 BENEFITS. If the Executive's employment shall be terminated for
any reason following a Potential Change in Control and during the Term, the
Executive's normal post-termination compensation and benefits shall be paid to
the Executive as such payments become due. Such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
retirement, insurance and other compensation or benefit plans, programs and
arrangements maintained by the Company or its subsidiaries.
6. SEVERANCE PAYMENTS.
6.1 SEVERANCE. The Company shall pay the Executive the payments
described in this Section 6.1 (the "Severance Payments") upon the termination
of the Executive's employment with the Company following a Change in Control
and during the Term, in addition to the payments and benefits described in
Section 5 hereof, unless such termination is (i) by the Company for Cause, (ii)
by reason of Retirement, or (iii) by the Executive without Good Reason. In
addition, the Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the Executive
with Good Reason (a) if the Executive reasonably demonstrates that the
Executive's employment was terminated prior to a Change in Control without
Cause (1) at the request of a Person who has entered into an agreement with the
Company the consummation of which will constitute a Change in Control (or who
has taken other steps reasonably calculated to effect a Change in Control) or
(2) otherwise in connection with, as a result of or in anticipation of a Change
in Control, (b) if the Executive terminates his employment for Good Reason
prior to a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control, or (c) if the Executive dies or is
terminated by the Company due to Disability, in each case, after the occurrence
of a Potential Change in Control and a related Change in Control actually
occurs within one (1) year after the Date of Termination or the date of death,
as the case may be. The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the Executive's incapacity
due to physical or mental illness. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
60
6.1.1 In lieu of any further salary and annual bonus
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to two (2) or, if less, the number
of years, including fractions, from the Date of Termination until the
Executive reaches the age of sixty-five (65) years times the sum of
(i) the highest Annual Base Salary paid or payable to the Executive
during the thirty-six (36) month period immediately preceding the
month in which the Change in Control occurs, and (ii) the highest
annual bonus paid or determined and payable to the Executive during
such thirty-six (36) month period.
<PAGE>
6.1.2 For a twenty-four (24) month period after the Date
of Termination, or if sooner, until the Executive reaches the age of
sixty-five (65) years, the Company shall arrange to provide the
Executive with life, disability, accident and health insurance
benefits substantially similar to those which the Executive is
receiving immediately prior to any related Potential Change in
Control or the receipt of the Notice of Termination (without giving
effect to any reduction in such benefits subsequent to a Change in
Control which reduction constitutes Good Reason), whichever is
greater. Benefits otherwise receivable by the Executive pursuant to
this Section 6.1.2 shall be reduced to the extent comparable benefits
are actually received by or made available to the Executive without
cost during such period following the Executive's termination of
employment (and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
6.2 SPECIAL REIMBURSEMENT. In the event that the Executive becomes
entitled to the Severance Payments, if any payment or benefit paid or payable,
or received or to be received, by or on behalf of the Executive in connection
with a Change in Control or the termination of the Executive's employment,
whether any such payments or benefits are pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any of
its subsidiaries, any Person, or otherwise (the "Total Payments"), will or
would be subject to the excise tax imposed under section 4999 of the Code (the
"Excise Tax"), the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") which amount shall be equal to the sum of (a) the amount of
such Excise Tax imposed (determined without regard to the Gross-Up Payment),
and (b) the product of (i) such Excise Tax (determined without regard to the
Gross-Up Payment), and (ii) the Aggregate Combined Marginal Tax Rate. For
purposes of this Section 6.2, "Aggregate Combined Marginal Tax Rate" means (and
shall equal) the sum of (A) the combined highest marginal state and local
income tax rates applicable for the tax year in which the Executive receives
the Gross-Up Payment (adjusted downward to take into account the tax
deductibility, if any, of such state and local income taxes), plus (B) the rate
of excise tax imposed on "golden parachute" payments under Section 4999 of the
Code, plus (C) the highest marginal federal income tax rate applicable for the
tax year in which the Executive receives the Gross-Up Payment (adjusted upward
to take into account any reduction in otherwise allowable itemized deductions
attributable to Section 68 of the Code), plus (D) the tax rate applicable to
61
the Executive under the hospital insurance portion of the Federal Insurance
Contributions Act under Section 3101(b) of the Code for the tax year in which
the Executive receives the Gross-Up Payment.
6.2.1 For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of
section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel (delivered to the
Executive) selected by the Company and reasonably acceptable to the
Executive such Total Payments (in whole or in part) (a) do not
constitute parachute payments, including (without limitation) by
reason of section 280G(b)(4)(A) of the Code, (b) such excess
<PAGE>
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of
section 280G(b)(4)(B) of the Code, or (c) are otherwise not subject
to the Excise Tax, and (ii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
6.2.2 In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at
the time of termination of the Executive's employment, the Executive
shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the
amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the
time of the termination of the Executive's employment (including by
reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus
any interest, penalties or additions payable by the Executive with
respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect
to the Severance Payments.
6.3 DATE OF PAYMENT. The payments provided for in Section 6.1.1 and
Section 6.2 hereof shall be made not later than the fifteenth (15th) day
following the Date of Termination; provided, however, that if the amounts of
-------- -------
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments to which the Executive
62
is likely to be entitled to and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later
than the thirtieth (30th) day after the Date of Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section 6.3, the Company
shall provide the Executive with a detailed written statement setting forth the
manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice the
Company has received from outside counsel, auditors or consultants (and any
such opinions or advice which are in writing shall be attached to the
statement).
6.4 LEGAL COSTS. The Company shall also reimburse the Executive for
all legal fees and expenses incurred in good faith by the Executive as a result
<PAGE>
of any dispute with any party (including, but not limited to, the Company or
the Bank) regarding the payment of any benefit provided for in this Agreement
(including, but not limited, all such fees and expenses incurred in disputing
any termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code plus in each case interest on any delayed payment at the applicable
Federal rate provided for in section 7872(f)(2)(A) of the Code. Such payments
shall be made within five (5) business days after delivery of the Executive's
written requests for payment accompanied by such evidence of fees and expenses
incurred as the Company reasonably may require.
7. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
7.1 NOTICE OF TERMINATION. After a Change in Control and during the
Term, any purported termination of the Executive's employment with the Company
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment with the Company under the provision so indicated. Further, a
Notice of Termination for Cause is required to include a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board at a meeting of the Board which was called
and held for the purpose of considering such termination (which meeting may be
a regular meeting of the Board where prior notice of consideration of such
termination is given to members of the Board) finding that, in the good faith
opinion of the Board, the Executive engaged in conduct set forth in clause (i)
or (ii) of the definition of Cause herein, and specifying the particulars
thereof in detail. For purposes of this Agreement, any purported termination
not effected in accordance with this Section 7.1 shall not be considered
effective.
63
7.2 DATE OF TERMINATION. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control
and during the Term, shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty (30) day period), and (ii) if the
Executive's employment is terminated for any other reason, the date specified
in the Notice of Termination (which, in the case of a termination by the
Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, after the date such Notice of Termination is given).
7.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided,
--------
<PAGE>
however, that the Date of Termination shall be extended by a notice of dispute
- -------
only if the basis for such notice is reasonable, such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence.
7.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and during the Term, and such termination is
disputed in accordance with Section 7.3 above, the Company shall continue to
pay the Executive the full compensation (including without limitation Annual
Base Salary and Annual Bonus) in effect at the time of any related Potential
Change in Control or when the notice giving rise to the dispute was given
(whichever is greater) and continue the Executive as a participant in all
compensation, incentive, pension and welfare benefit and insurance plans in
which the Executive was participating at the time of any Potential Change in
Control or when the notice giving rise to the dispute was given, whichever is
greater, until the dispute is finally resolved in accordance with Section 7.3
hereof. Amounts paid under this Section 7.4 are in addition to all other
amounts due under this Agreement (other than those due under Section 5.2
hereof) and shall not be offset against or reduce any other amounts due under
this Agreement or any other plan, agreement or arrangement.
8. NO MITIGATION. The Company agrees that, if the Executive's
employment is terminated during the Term, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 6 or Section 7.4. Further, the
amount of any payment or benefit provided for in Section 6 (other than pursuant
to Section 6.1.2) or Section 7.4 shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or offset against any amount claimed to be owed by the
Executive to the Company or any of its subsidiaries, or otherwise.
64
9. SUCCESSORS; BINDING AGREEMENT.
9.1 SUCCESSORS. In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 BINDING AGREEMENT. This Agreement shall inure to the benefit of
and be enforceable by this Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would still be payable
to the Executive hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the executors, personal representatives or
<PAGE>
administrators of the Executive's estate.
10. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
The Summit Bancorporation
One Main Street
Chatham, New Jersey 07928
Attention: Corporate Secretary
To the Executive:
Mr. Dennis S. McChesney
60 Lambert Drive
Sparta, New Jersey 07871
65
11. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of New Jersey without regard to the
principles of conflict of laws thereof. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to and include any
successor provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under federal, state
or local law and any additional withholding to which the Executive has agreed.
The rights and obligations of the Company and the Executive under this
Agreement shall survive the expiration of the Term and the Employment Period.
12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. NO LIMITATION. Nothing in this Agreement shall prevent or limit the
<PAGE>
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement
with the Company or any of its affiliated companies at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement.
The Summit Bancorporation
By:
/s/ Robert G. Cox
----------------------------
Robert G. Cox
66
/s/ Dennis S. McChesney
----------------------------
Dennis S. McChesney
<PAGE>
67
AGREEMENT
THIS AGREEMENT, dated as of September 1, 1995 (this "Agreement"), is
made by and between The Summit Bancorporation, a New Jersey corporation, having
its principal offices at One Main Street, Chatham, New Jersey 07928 (the
"Company"), and Mr. James S. Little residing at 64 Beekman Road, Summit, New
Jersey 07901 (the "Executive").
WHEREAS, the Company considers it essential to the best interests of
its shareholders to foster the continued employment of key executive management
personnel; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined in Section 1.3 below) of the
Company exists from time to time and that such possibility, and the
uncertainty, instability and questions which it may raise for and among key
executive management personnel, may result in the premature departure or
significant distraction of such management personnel to the material detriment
of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce, focus and encourage the continued attention and dedication
of key members of the executive management of the Company and its subsidiaries,
including (without limitation) the Executive, to their assigned duties without
distraction in the face of potentially disturbing or unsettling circumstances
arising from the possibility of a Change in Control of the Company;
NOW THEREFORE, in consideration of the premises and the mutual cove-
nants herein contained, the Company and the Executive hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
1.1 "ANNUAL BASE SALARY" shall mean the Executive's rate of regular
basic annual compensation prior to any reduction under a salary reduction
agreement pursuant to section 401(k) or section 125 of the Internal Revenue
Code of 1986, as amended from time to time (the "Code"), and shall not include
(without limitation) cost of living allowances, fees, retainers,
reimbursements, car allowances, bonuses, incentive awards, prizes or similar
payments.
1.2 "CAUSE" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by the Executive to substantially perform the Executive's
duties with the Company, or a subsidiary of the Company, including (without
limitation) Summit Bank, a New Jersey chartered bank (the "Bank"), as such
68
<PAGE>
duties may reasonably be defined from time to time by the Board (or a duly
designated and authorized committee thereof), or to abide by the reasonable
written policies of the Company or of the Executive's primary employer (other
than any such failure resulting from the Executive's incapacity due to physical
or mental illness or any such actual or anticipated failure after the issuance
of a Notice of Termination by the Executive for Good Reason pursuant to Section
7.1) after a written demand for substantial performance is delivered to the
Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's duties or has not abided by any reasonable written policies, or
(ii) the continued and willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive in bad faith and
without reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Company or its subsidiaries. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Board or the Company's chief executive
officer or other duly authorized senior officer of the Company or based upon
the advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company and its subsidiaries. The cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire membership of
the Board at a meeting of the Board called and held for such purpose (after
reasonable notice of any such meeting is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the Executive
is guilty of the conduct described in clause (i) or (ii) above, and specifying
the particulars thereof in detail.
1.3 "CHANGE IN CONTROL" shall mean and be deemed to have occurred
if:
(i) any Person is or becomes the Beneficial Owner (as that
term is defined in Rule 13d-3 under the Securities Exchange Act of
1934 (the "Exchange Act")), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company)
representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities, or there occurs
any transaction which the Company is required to disclose pursuant to
Item 1(a) of Form 8-K (as filed pursuant to Rule 13a-11 or Rule 15d-
11 of the Exchange Act); or
(ii) during any period of twenty-four (24) consecutive
months (not including any period prior to September 1, 1995),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person
69
who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
<PAGE>
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies
or consents) whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of such period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially
all of the individuals and entities who were Beneficial Owners,
immediately prior to such reorganization, merger or consolidation, of
the combined voting power of the Company's then outstanding
securities beneficially own, directly or indirectly, immediately
after such reorganization, merger or consolidation, more then
seventy-five percent (75%) of the combined voting power of the
securities of the corporation resulting from such reorganization,
merger or consolidation in substantially the same proportions as
their respective ownership, immediately prior to such reorganization,
merger or consolidation, of the combined voting power of the
Company's securities; or
(iv) the shareholders of the Company approve (a) the sale
or disposition by the Company (other than to a subsidiary of the
Company) of the Bank, or (b) a complete liquidation or dissolution of
the Company or the Bank.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction which results from the action (excluding the
Executive's employment activities with the Company, the Bank or any of their
respective subsidiaries) of any Person or group of Persons which includes, is
directly affiliated with or is wholly or partly controlled by one or more
executive officers of the Company and in which the Executive actively
participates.
1.4 "COMPANY" shall include The Summit Bancorporation and any
successor to its business and/or assets which assumes (either expressly, by
operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Company has occurred in connection
with such succession).
1.5 "DISABILITY" shall mean and be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, (i) the Executive
shall have been absent from the full-time performance of the Executive's duties
70
with the Company for a period of six (6) consecutive months, (ii) the Company
gives the Executive a Notice of Termination for Disability, and (iii) within
thirty (30) days after such Notice of Termination is given, the Executive does
not return to the full-time performance of the Executive's duties.
1.6 "GOOD REASON" for termination by the Executive of the
Executive's employment, in connection with or as a result of any Change in
<PAGE>
Control, shall mean the occurrence (without the Executive's prior express
written consent) of any one of the following acts, or failures to act, unless,
in the case of any act or failure to act described in clauses (i), (iv), (v) or
(vi) below, such act or failure to act is corrected by the Company prior to the
Date of Termination specified in the Notice of Termination given in respect
thereof:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with those described in Section 3.2
below or with the Executive's position(s) (including without
limitation status, offices, titles, and reporting
responsibilities/rights) as an executive officer of the Company and
its subsidiaries or a substantial adverse alteration in the nature of
the Executive's authority, duties, or responsibilities from those
described in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base Salary as
in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal executive
offices to a location more than thirty (30) miles from its location
on the date of this Agreement (or, if different, more than thirty
(30) miles from where such offices are located immediately prior to
any Potential Change in Control) or the Company's requiring the
Executive to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's
business to an extent substantially consistent with the Executive's
business travel obligations as of the date of this Agreement;
(iv) any failure by the Company to comply with any of the
provisions of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(v) the failure by the Company or a subsidiary to continue
in effect any pension benefit or incentive or deferred compensation
plan in which the Executive participates immediately prior to any
Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made
with respect to such plan, or the failure by the Company or a
71
subsidiary to continue the Executive's participation therein (or in
such substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Potential Change in
Control;
(vi) the failure by the Company or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of
<PAGE>
the Company's or a subsidiary's retirement, life insurance, medical,
health and accident, or disability or similar plans in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Company or a subsidiary
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Potential Change in
Control, or the failure by the Company or a subsidiary to provide the
Executive with the number of paid vacation days to which the
Executive is entitled in accordance with the Company's or a
subsidiary's normal vacation policy in effect at the time of the
Potential Change in Control;
(vii) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1; and/or
(viii) a termination by the Executive for any reason
during the thirty (30) day period immediately following the first
anniversary of any Change in Control.
1.7 "PERSON" shall have the meaning ascribed thereto in Section
3(a)(9) of the Exchange Act, as modified applied, and used in Sections 13(d)
and 14(d) thereof; provided, however, a Person shall not include (i) the
-------- -------
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries (in its capacity as such), (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same character and proportions as their ownership of stock
of the Company.
1.8 "POTENTIAL CHANGE IN CONTROL" shall mean and be deemed to have
occurred if:
(i) the Company commences negotiations in respect of or
enters into an agreement, the consummation of which would result in
the occurrence of a Change in Control;
72
(ii) the Company or any Person publicly announces an
intention to take actions which, if consummated, would constitute a
Change in Control; and/or
(iii) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing ten percent
(10%) or more of the combined voting power of the Company's then
outstanding securities, or any Person increases such Person's
beneficial ownership of such securities by five (5) percentage points
or more over the percentage so owned by such Person on September 1,
1995.
<PAGE>
1.9 "RETIREMENT" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment if such employment
is terminated in accordance with the Company's normal retirement policy for
those aged 65 and older, not including early retirement or so-called "window
period" retirements, generally applicable to its salaried employees, as in
effect immediately prior to any Potential Change in Control.
2. TERM OF THIS AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1998; provided,
--------
however, that commencing on January 1, 1998 and each January 1 thereafter, the
- -------
term of this Agreement shall automatically be extended for one additional year
unless, not later than June 30 of the preceding year, the Company or the
Executive shall have given written notice to the other not to extend this
Agreement or a Change in Control shall have occurred prior to any such January
1; provided, further, however, that if a Change in Control shall have occurred
-------- ------- -------
during the term of this Agreement, this Agreement shall continue in effect for
a period of not less than thirty-six (36) months beyond the month in which such
Change in Control occurred (the "Term"). Notwithstanding the foregoing
provisions of this Section 2, the Term shall terminate upon the Executive's
attaining the age of sixty-five (65) years.
3. COMPANY'S COVENANTS.
3.1 SEVERANCE PAYMENTS. In order to induce the Executive to remain
in the employ of the Company and/or one or more of its subsidiaries and in
consideration of the Executive's covenants set forth in Section 4 below, the
Company agrees, under the terms and conditions described herein and in addition
to the amounts payable to the Executive under Section 5 below, to pay the
Executive the "Severance Payments" described in Section 6.1 below and the other
payments and benefits described herein in the event the Executive's employment
with the Company is terminated during the Term and after a Change in Control or
under the other circumstances set forth in Section 6.1 below.
3.2 POSITION AND DUTIES. During the period commencing on the date
of any Change in Control until the earliest to occur of (i) the date which is
thirty-six (36) months from the date of any such Change in Control, (ii) the
date of termination by the Executive of the Executive's employment for any
reason, or (iii) the termination by the Company of the Executive's employment
for any reason (the "Employment Period"), (a) the Executive's position
73
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control, and (b) the Executive's services shall be
performed at the location where the Executive was employed immediately
preceding any such Potential Change in Control, or any office or location less
than thirty (30) miles from such location.
3.3 BASE SALARY. During the Employment Period, the Executive shall
receive Annual Base Salary at least equal to twelve (12) times the highest
monthly base salary paid or payable, including (without limitation) any base
salary which has been earned but deferred, to the Executive by the Company and
<PAGE>
its affiliated companies in respect of the twelve (12) month period immediately
preceding the month in which any related Potential Change in Control occurs.
In addition, Annual Base Salary shall not be reduced after the occurrence of a
Potential Change in Control. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
3.4 ANNUAL BONUS. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the Executive's
highest bonus for the last three (3) full fiscal years prior to the fiscal year
in which the related Potential Change in Control occurs (annualized in the
event that the Executive was not employed by the Company for the whole of any
such prior fiscal year). Each Annual Bonus shall be paid no later than the end
of the third month of the fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
3.5 INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at
any time during the one hundred eighty (180) day period immediately preceding
any related Potential Change in Control or if more favorable to the Executive,
those provided generally at any time thereafter to other peer executives of the
Company and its affiliated companies.
3.6 WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be entitled
to participate in and shall receive all benefits under all of the health and
welfare benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical,
74
prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in effect for
the Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, those provided generally at any time thereafter to
other peer executives of the Company and its affiliated companies.
3.7 EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
<PAGE>
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
3.8 FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and an automobile allowance
and payment of related expenses, in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies in
effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
3.9 OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
3.10 VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
4. THE EXECUTIVE'S COVENANTS.
75
4.1 EMPLOYMENT. The Executive agrees that, subject to the terms and
conditions of this Agreement, in the event of a Change in Control during the
Term the Executive will remain in the employ of the Company during any related
Employment Period.
4.2 TIME AND ATTENTION. During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary
to discharge the responsibilities and duties assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities and duties. During the Employment Period
it shall not be a violation of this Agreement for the Executive to (i) serve on
corporate, civic or charitable boards or committees, (ii) deliver lectures,
fulfill speaking engagements or teach at educational institutions, and (iii)
manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to any Potential Change in Control, the
reinstatement or continued conduct of such activities (or the reinstatement or
<PAGE>
conduct of activities similar in nature and scope thereto) subsequent to any
related Potential Change in Control shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Company.
4.3 CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by direct or indirect acts by the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event, however, shall an asserted violation of the
provisions of this Section 4.3 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
5. COMPENSATION OTHER THAN SEVERANCE PAYMENTS.
5.1 DISABILITY. Following a Potential Change in Control and during
the Term, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Executive's full salary shall be paid to the Executive by
the Company at a rate no less than the rate in effect at the commencement of
any such disability period, together with all compensation and benefits payable
to the Executive under the terms of any compensation or benefit plan, program
76
or arrangement maintained by the Company or its subsidiaries during such
disability period, until the Executive's employment is terminated by the
Company for Disability.
5.2 BASE SALARY. If the Executive's employment shall be terminated
for any reason following a Potential Change in Control and during the Term, the
Executive's full salary shall be paid to the Executive by the Company through
the Date of Termination (as defined below in Section 7.2) at the rate in effect
at the time the Notice of Termination is given, together with all compensation
and benefits payable to or with respect to the Executive through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Company or its subsidiaries during such period.
5.3 BENEFITS. If the Executive's employment shall be terminated for
any reason following a Potential Change in Control and during the Term, the
Executive's normal post-termination compensation and benefits shall be paid to
the Executive as such payments become due. Such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
retirement, insurance and other compensation or benefit plans, programs and
arrangements maintained by the Company or its subsidiaries.
6. SEVERANCE PAYMENTS.
6.1 SEVERANCE. The Company shall pay the Executive the payments
described in this Section 6.1 (the "Severance Payments") upon the termination
<PAGE>
of the Executive's employment with the Company following a Change in Control
and during the Term, in addition to the payments and benefits described in
Section 5 hereof, unless such termination is (i) by the Company for Cause, (ii)
by reason of Retirement, or (iii) by the Executive without Good Reason. In
addition, the Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the Executive
with Good Reason (a) if the Executive reasonably demonstrates that the
Executive's employment was terminated prior to a Change in Control without
Cause (1) at the request of a Person who has entered into an agreement with the
Company the consummation of which will constitute a Change in Control (or who
has taken other steps reasonably calculated to effect a Change in Control) or
(2) otherwise in connection with, as a result of or in anticipation of a Change
in Control, (b) if the Executive terminates his employment for Good Reason
prior to a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control, or (c) if the Executive dies or is
terminated by the Company due to Disability, in each case, after the occurrence
of a Potential Change in Control and a related Change in Control actually
occurs within one (1) year after the Date of Termination or the date of death,
as the case may be. The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the Executive's incapacity
due to physical or mental illness. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
77
6.1.1 In lieu of any further salary and annual bonus
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to two (2) or, if less, the number
of years, including fractions, from the Date of Termination until the
Executive reaches the age of sixty-five (65) years times the sum of
(i) the highest Annual Base Salary paid or payable to the Executive
during the thirty-six (36) month period immediately preceding the
month in which the Change in Control occurs, and (ii) the highest
annual bonus paid or determined and payable to the Executive during
such thirty-six (36) month period.
6.1.2 For a twenty-four (24) month period after the Date
of Termination, or if sooner, until the Executive reaches the age of
sixty-five (65) years, the Company shall arrange to provide the
Executive with life, disability, accident and health insurance
benefits substantially similar to those which the Executive is
receiving immediately prior to any related Potential Change in
Control or the receipt of the Notice of Termination (without giving
effect to any reduction in such benefits subsequent to a Change in
Control which reduction constitutes Good Reason), whichever is
greater. Benefits otherwise receivable by the Executive pursuant to
this Section 6.1.2 shall be reduced to the extent comparable benefits
are actually received by or made available to the Executive without
cost during such period following the Executive's termination of
employment (and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
6.2 SPECIAL REIMBURSEMENT. In the event that the Executive becomes
<PAGE>
entitled to the Severance Payments, if any payment or benefit paid or payable,
or received or to be received, by or on behalf of the Executive in connection
with a Change in Control or the termination of the Executive's employment,
whether any such payments or benefits are pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any of
its subsidiaries, any Person, or otherwise (the "Total Payments"), will or
would be subject to the excise tax imposed under section 4999 of the Code (the
"Excise Tax"), the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") which amount shall be equal to the sum of (a) the amount of
such Excise Tax imposed (determined without regard to the Gross-Up Payment),
and (b) the product of (i) such Excise Tax (determined without regard to the
Gross-Up Payment), and (ii) the Aggregate Combined Marginal Tax Rate. For
purposes of this Section 6.2, "Aggregate Combined Marginal Tax Rate" means (and
shall equal) the sum of (A) the combined highest marginal state and local
income tax rates applicable for the tax year in which the Executive receives
the Gross-Up Payment (adjusted downward to take into account the tax
deductibility, if any, of such state and local income taxes), plus (B) the rate
of excise tax imposed on "golden parachute" payments under Section 4999 of the
Code, plus (C) the highest marginal federal income tax rate applicable for the
tax year in which the Executive receives the Gross-Up Payment (adjusted upward
to take into account any reduction in otherwise allowable itemized deductions
attributable to Section 68 of the Code), plus (D) the tax rate applicable to
78
the Executive under the hospital insurance portion of the Federal Insurance
Contributions Act under Section 3101(b) of the Code for the tax year in which
the Executive receives the Gross-Up Payment.
6.2.1 For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of
section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel (delivered to the
Executive) selected by the Company and reasonably acceptable to the
Executive such Total Payments (in whole or in part) (a) do not
constitute parachute payments, including (without limitation) by
reason of section 280G(b)(4)(A) of the Code, (b) such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of
section 280G(b)(4)(B) of the Code, or (c) are otherwise not subject
to the Excise Tax, and (ii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
6.2.2 In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at
the time of termination of the Executive's employment, the Executive
shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the
amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the
time of the termination of the Executive's employment (including by
<PAGE>
reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus
any interest, penalties or additions payable by the Executive with
respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect
to the Severance Payments.
6.3 DATE OF PAYMENT. The payments provided for in Section 6.1.1 and
Section 6.2 hereof shall be made not later than the fifteenth (15th) day
following the Date of Termination; provided, however, that if the amounts of
-------- -------
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments to which the Executive
79
is likely to be entitled to and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later
than the thirtieth (30th) day after the Date of Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section 6.3, the Company
shall provide the Executive with a detailed written statement setting forth the
manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice the
Company has received from outside counsel, auditors or consultants (and any
such opinions or advice which are in writing shall be attached to the
statement).
6.4 LEGAL COSTS. The Company shall also reimburse the Executive for
all legal fees and expenses incurred in good faith by the Executive as a result
of any dispute with any party (including, but not limited to, the Company or
the Bank) regarding the payment of any benefit provided for in this Agreement
(including, but not limited, all such fees and expenses incurred in disputing
any termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code plus in each case interest on any delayed payment at the applicable
Federal rate provided for in section 7872(f)(2)(A) of the Code. Such payments
shall be made within five (5) business days after delivery of the Executive's
written requests for payment accompanied by such evidence of fees and expenses
incurred as the Company reasonably may require.
7. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
7.1 NOTICE OF TERMINATION. After a Change in Control and during the
Term, any purported termination of the Executive's employment with the Company
(other than by reason of death) shall be communicated by written Notice of
<PAGE>
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment with the Company under the provision so indicated. Further, a
Notice of Termination for Cause is required to include a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board at a meeting of the Board which was called
and held for the purpose of considering such termination (which meeting may be
a regular meeting of the Board where prior notice of consideration of such
termination is given to members of the Board) finding that, in the good faith
opinion of the Board, the Executive engaged in conduct set forth in clause (i)
or (ii) of the definition of Cause herein, and specifying the particulars
thereof in detail. For purposes of this Agreement, any purported termination
not effected in accordance with this Section 7.1 shall not be considered
effective.
80
7.2 DATE OF TERMINATION. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control
and during the Term, shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty (30) day period), and (ii) if the
Executive's employment is terminated for any other reason, the date specified
in the Notice of Termination (which, in the case of a termination by the
Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, after the date such Notice of Termination is given).
7.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided,
--------
however, that the Date of Termination shall be extended by a notice of dispute
- -------
only if the basis for such notice is reasonable, such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence.
7.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and during the Term, and such termination is
disputed in accordance with Section 7.3 above, the Company shall continue to
pay the Executive the full compensation (including without limitation Annual
Base Salary and Annual Bonus) in effect at the time of any related Potential
Change in Control or when the notice giving rise to the dispute was given
(whichever is greater) and continue the Executive as a participant in all
compensation, incentive, pension and welfare benefit and insurance plans in
which the Executive was participating at the time of any Potential Change in
Control or when the notice giving rise to the dispute was given, whichever is
greater, until the dispute is finally resolved in accordance with Section 7.3
<PAGE>
hereof. Amounts paid under this Section 7.4 are in addition to all other
amounts due under this Agreement (other than those due under Section 5.2
hereof) and shall not be offset against or reduce any other amounts due under
this Agreement or any other plan, agreement or arrangement.
8. NO MITIGATION. The Company agrees that, if the Executive's
employment is terminated during the Term, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 6 or Section 7.4. Further, the
amount of any payment or benefit provided for in Section 6 (other than pursuant
to Section 6.1.2) or Section 7.4 shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or offset against any amount claimed to be owed by the
Executive to the Company or any of its subsidiaries, or otherwise.
81
9. SUCCESSORS; BINDING AGREEMENT.
9.1 SUCCESSORS. In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 BINDING AGREEMENT. This Agreement shall inure to the benefit of
and be enforceable by this Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would still be payable
to the Executive hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate.
10. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
The Summit Bancorporation
One Main Street
Chatham, New Jersey 07928
Attention: Corporate Secretary
<PAGE>
To the Executive:
Mr. James S. Little
64 Beekman Road
Summit, New Jersey 07901
82
11. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of New Jersey without regard to the
principles of conflict of laws thereof. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to and include any
successor provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under federal, state
or local law and any additional withholding to which the Executive has agreed.
The rights and obligations of the Company and the Executive under this
Agreement shall survive the expiration of the Term and the Employment Period.
12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. NO LIMITATION. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement
with the Company or any of its affiliated companies at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement.
The Summit Bancorporation
<PAGE>
By:
/s/ Robert G. Cox
----------------------------
Robert G. Cox
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/s/ James S. Little
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James S. Little
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<PAGE>
AGREEMENT
THIS AGREEMENT, dated as of September 1, 1995 (this "Agreement"), is
made by and between The Summit Bancorporation, a New Jersey corporation, having
its principal offices at One Main Street, Chatham, New Jersey 07928 (the
"Company"), and Mr. Elwood L. Bowman II residing at 112 Honeyman Road,
Whitehouse, New Jersey 08889 (the "Executive").
WHEREAS, the Company considers it essential to the best interests of
its shareholders to foster the continued employment of key executive management
personnel; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined in Section 1.3 below) of the
Company exists from time to time and that such possibility, and the
uncertainty, instability and questions which it may raise for and among key
executive management personnel, may result in the premature departure or
significant distraction of such management personnel to the material detriment
of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce, focus and encourage the continued attention and dedication
of key members of the executive management of the Company and its subsidiaries,
including (without limitation) the Executive, to their assigned duties without
distraction in the face of potentially disturbing or unsettling circumstances
arising from the possibility of a Change in Control of the Company;
NOW THEREFORE, in consideration of the premises and the mutual cove-
nants herein contained, the Company and the Executive hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
1.1 "ANNUAL BASE SALARY" shall mean the Executive's rate of regular
basic annual compensation prior to any reduction under a salary reduction
agreement pursuant to section 401(k) or section 125 of the Internal Revenue
Code of 1986, as amended from time to time (the "Code"), and shall not include
(without limitation) cost of living allowances, fees, retainers,
reimbursements, car allowances, bonuses, incentive awards, prizes or similar
payments.
1.2 "CAUSE" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by the Executive to substantially perform the Executive's
duties with the Company, or a subsidiary of the Company, including (without
limitation) Summit Bank, a New Jersey chartered bank (the "Bank"), as such
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duties may reasonably be defined from time to time by the Board (or a duly
designated and authorized committee thereof), or to abide by the reasonable
written policies of the Company or of the Executive's primary employer (other
<PAGE>
than any such failure resulting from the Executive's incapacity due to physical
or mental illness or any such actual or anticipated failure after the issuance
of a Notice of Termination by the Executive for Good Reason pursuant to Section
7.1) after a written demand for substantial performance is delivered to the
Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's duties or has not abided by any reasonable written policies, or
(ii) the continued and willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive in bad faith and
without reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Company or its subsidiaries. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Board or the Company's chief executive
officer or other duly authorized senior officer of the Company or based upon
the advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company and its subsidiaries. The cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire membership of
the Board at a meeting of the Board called and held for such purpose (after
reasonable notice of any such meeting is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the Executive
is guilty of the conduct described in clause (i) or (ii) above, and specifying
the particulars thereof in detail.
1.3 "CHANGE IN CONTROL" shall mean and be deemed to have occurred
if:
(i) any Person is or becomes the Beneficial Owner (as that
term is defined in Rule 13d-3 under the Securities Exchange Act of
1934 (the "Exchange Act")), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company)
representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities, or there occurs
any transaction which the Company is required to disclose pursuant to
Item 1(a) of Form 8-K (as filed pursuant to Rule 13a-11 or Rule 15d-
11 of the Exchange Act); or
(ii) during any period of twenty-four (24) consecutive
months (not including any period prior to September 1, 1995),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person
who has entered into an agreement with the Company to effect a
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transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies
or consents) whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least
<PAGE>
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of such period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially
all of the individuals and entities who were Beneficial Owners,
immediately prior to such reorganization, merger or consolidation, of
the combined voting power of the Company's then outstanding
securities beneficially own, directly or indirectly, immediately
after such reorganization, merger or consolidation, more then
seventy-five percent (75%) of the combined voting power of the
securities of the corporation resulting from such reorganization,
merger or consolidation in substantially the same proportions as
their respective ownership, immediately prior to such reorganization,
merger or consolidation, of the combined voting power of the
Company's securities; or
(iv) the shareholders of the Company approve (a) the sale
or disposition by the Company (other than to a subsidiary of the
Company) of the Bank, or (b) a complete liquidation or dissolution of
the Company or the Bank.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction which results from the action (excluding the
Executive's employment activities with the Company, the Bank or any of their
respective subsidiaries) of any Person or group of Persons which includes, is
directly affiliated with or is wholly or partly controlled by one or more
executive officers of the Company and in which the Executive actively
participates.
1.4 "COMPANY" shall include The Summit Bancorporation and any
successor to its business and/or assets which assumes (either expressly, by
operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Company has occurred in connection
with such succession).
1.5 "DISABILITY" shall mean and be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, (i) the Executive
shall have been absent from the full-time performance of the Executive's duties
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with the Company for a period of six (6) consecutive months, (ii) the Company
gives the Executive a Notice of Termination for Disability, and (iii) within
thirty (30) days after such Notice of Termination is given, the Executive does
not return to the full-time performance of the Executive's duties.
1.6 "GOOD REASON" for termination by the Executive of the
Executive's employment, in connection with or as a result of any Change in
Control, shall mean the occurrence (without the Executive's prior express
written consent) of any one of the following acts, or failures to act, unless,
in the case of any act or failure to act described in clauses (i), (iv), (v) or
(vi) below, such act or failure to act is corrected by the Company prior to the
Date of Termination specified in the Notice of Termination given in respect
<PAGE>
thereof:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with those described in Section 3.2
below or with the Executive's position(s) (including without
limitation status, offices, titles, and reporting
responsibilities/rights) as an executive officer of the Company and
its subsidiaries or a substantial adverse alteration in the nature of
the Executive's authority, duties, or responsibilities from those
described in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base Salary as
in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal executive
offices to a location more than thirty (30) miles from its location
on the date of this Agreement (or, if different, more than thirty
(30) miles from where such offices are located immediately prior to
any Potential Change in Control) or the Company's requiring the
Executive to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's
business to an extent substantially consistent with the Executive's
business travel obligations as of the date of this Agreement;
(iv) any failure by the Company to comply with any of the
provisions of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(v) the failure by the Company or a subsidiary to continue
in effect any pension benefit or incentive or deferred compensation
plan in which the Executive participates immediately prior to any
Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made
with respect to such plan, or the failure by the Company or a
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subsidiary to continue the Executive's participation therein (or in
such substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Potential Change in
Control;
(vi) the failure by the Company or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of
the Company's or a subsidiary's retirement, life insurance, medical,
health and accident, or disability or similar plans in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Company or a subsidiary
which would directly or indirectly materially reduce any of such
<PAGE>
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Potential Change in
Control, or the failure by the Company or a subsidiary to provide the
Executive with the number of paid vacation days to which the
Executive is entitled in accordance with the Company's or a
subsidiary's normal vacation policy in effect at the time of the
Potential Change in Control;
(vii) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1; and/or
(viii) a termination by the Executive for any reason
during the thirty (30) day period immediately following the first
anniversary of any Change in Control.
1.7 "PERSON" shall have the meaning ascribed thereto in Section
3(a)(9) of the Exchange Act, as modified applied, and used in Sections 13(d)
and 14(d) thereof; provided, however, a Person shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries (in its capacity as such), (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same character and proportions as their ownership of stock
of the Company.
1.8 "POTENTIAL CHANGE IN CONTROL" shall mean and be deemed to have
occurred if:
(i) the Company commences negotiations in respect of or
enters into an agreement, the consummation of which would result in
the occurrence of a Change in Control;
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(ii) the Company or any Person publicly announces an
intention to take actions which, if consummated, would constitute a
Change in Control; and/or
(iii) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing ten percent
(10%) or more of the combined voting power of the Company's then
outstanding securities, or any Person increases such Person's
beneficial ownership of such securities by five (5) percentage points
or more over the percentage so owned by such Person on September 1,
1995.
1.9 "RETIREMENT" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment if such employment
is terminated in accordance with the Company's normal retirement policy for
those aged 65 and older, not including early retirement or so-called "window
period" retirements, generally applicable to its salaried employees, as in
effect immediately prior to any Potential Change in Control.
<PAGE>
2. TERM OF THIS AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1998; provided,
--------
however, that commencing on January 1, 1998 and each January 1 thereafter, the
- -------
term of this Agreement shall automatically be extended for one additional year
unless, not later than June 30 of the preceding year, the Company or the
Executive shall have given written notice to the other not to extend this
Agreement or a Change in Control shall have occurred prior to any such January
1; provided, further, however, that if a Change in Control shall have occurred
-------- ------- -------
during the term of this Agreement, this Agreement shall continue in effect for
a period of not less than thirty-six (36) months beyond the month in which such
Change in Control occurred (the "Term"). Notwithstanding the foregoing
provisions of this Section 2, the Term shall terminate upon the Executive's
attaining the age of sixty-five (65) years.
3. COMPANY'S COVENANTS.
3.1 SEVERANCE PAYMENTS. In order to induce the Executive to remain
in the employ of the Company and/or one or more of its subsidiaries and in
consideration of the Executive's covenants set forth in Section 4 below, the
Company agrees, under the terms and conditions described herein and in addition
to the amounts payable to the Executive under Section 5 below, to pay the
Executive the "Severance Payments" described in Section 6.1 below and the other
payments and benefits described herein in the event the Executive's employment
with the Company is terminated during the Term and after a Change in Control or
under the other circumstances set forth in Section 6.1 below.
3.2 POSITION AND DUTIES. During the period commencing on the date
of any Change in Control until the earliest to occur of (i) the date which is
thirty-six (36) months from the date of any such Change in Control, (ii) the
date of termination by the Executive of the Executive's employment for any
reason, or (iii) the termination by the Company of the Executive's employment
for any reason (the "Employment Period"), (a) the Executive's position
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(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control, and (b) the Executive's services shall be
performed at the location where the Executive was employed immediately
preceding any such Potential Change in Control, or any office or location less
than thirty (30) miles from such location.
3.3 BASE SALARY. During the Employment Period, the Executive shall
receive Annual Base Salary at least equal to twelve (12) times the highest
monthly base salary paid or payable, including (without limitation) any base
salary which has been earned but deferred, to the Executive by the Company and
its affiliated companies in respect of the twelve (12) month period immediately
preceding the month in which any related Potential Change in Control occurs.
In addition, Annual Base Salary shall not be reduced after the occurrence of a
Potential Change in Control. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
3.4 ANNUAL BONUS. In addition to Annual Base Salary, the Executive
<PAGE>
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the Executive's
highest bonus for the last three (3) full fiscal years prior to the fiscal year
in which the related Potential Change in Control occurs (annualized in the
event that the Executive was not employed by the Company for the whole of any
such prior fiscal year). Each Annual Bonus shall be paid no later than the end
of the third month of the fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
3.5 INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at
any time during the one hundred eighty (180) day period immediately preceding
any related Potential Change in Control or if more favorable to the Executive,
those provided generally at any time thereafter to other peer executives of the
Company and its affiliated companies.
3.6 WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be entitled
to participate in and shall receive all benefits under all of the health and
welfare benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical,
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prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in effect for
the Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, those provided generally at any time thereafter to
other peer executives of the Company and its affiliated companies.
3.7 EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
3.8 FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and an automobile allowance
and payment of related expenses, in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies in
<PAGE>
effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
3.9 OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
3.10 VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
4. THE EXECUTIVE'S COVENANTS.
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4.1 EMPLOYMENT. The Executive agrees that, subject to the terms and
conditions of this Agreement, in the event of a Change in Control during the
Term the Executive will remain in the employ of the Company during any related
Employment Period.
4.2 TIME AND ATTENTION. During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary
to discharge the responsibilities and duties assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities and duties. During the Employment Period
it shall not be a violation of this Agreement for the Executive to (i) serve on
corporate, civic or charitable boards or committees, (ii) deliver lectures,
fulfill speaking engagements or teach at educational institutions, and (iii)
manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to any Potential Change in Control, the
reinstatement or continued conduct of such activities (or the reinstatement or
conduct of activities similar in nature and scope thereto) subsequent to any
related Potential Change in Control shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Company.
4.3 CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
<PAGE>
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by direct or indirect acts by the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event, however, shall an asserted violation of the
provisions of this Section 4.3 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
5. COMPENSATION OTHER THAN SEVERANCE PAYMENTS.
5.1 DISABILITY. Following a Potential Change in Control and during
the Term, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Executive's full salary shall be paid to the Executive by
the Company at a rate no less than the rate in effect at the commencement of
any such disability period, together with all compensation and benefits payable
to the Executive under the terms of any compensation or benefit plan, program
93
or arrangement maintained by the Company or its subsidiaries during such
disability period, until the Executive's employment is terminated by the
Company for Disability.
5.2 BASE SALARY. If the Executive's employment shall be terminated
for any reason following a Potential Change in Control and during the Term, the
Executive's full salary shall be paid to the Executive by the Company through
the Date of Termination (as defined below in Section 7.2) at the rate in effect
at the time the Notice of Termination is given, together with all compensation
and benefits payable to or with respect to the Executive through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Company or its subsidiaries during such period.
5.3 BENEFITS. If the Executive's employment shall be terminated for
any reason following a Potential Change in Control and during the Term, the
Executive's normal post-termination compensation and benefits shall be paid to
the Executive as such payments become due. Such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
retirement, insurance and other compensation or benefit plans, programs and
arrangements maintained by the Company or its subsidiaries.
6. SEVERANCE PAYMENTS.
6.1 SEVERANCE. The Company shall pay the Executive the payments
described in this Section 6.1 (the "Severance Payments") upon the termination
of the Executive's employment with the Company following a Change in Control
and during the Term, in addition to the payments and benefits described in
Section 5 hereof, unless such termination is (i) by the Company for Cause, (ii)
by reason of Retirement, or (iii) by the Executive without Good Reason. In
addition, the Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the Executive
with Good Reason (a) if the Executive reasonably demonstrates that the
Executive's employment was terminated prior to a Change in Control without
<PAGE>
Cause (1) at the request of a Person who has entered into an agreement with the
Company the consummation of which will constitute a Change in Control (or who
has taken other steps reasonably calculated to effect a Change in Control) or
(2) otherwise in connection with, as a result of or in anticipation of a Change
in Control, (b) if the Executive terminates his employment for Good Reason
prior to a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control, or (c) if the Executive dies or is
terminated by the Company due to Disability, in each case, after the occurrence
of a Potential Change in Control and a related Change in Control actually
occurs within one (1) year after the Date of Termination or the date of death,
as the case may be. The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the Executive's incapacity
due to physical or mental illness. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
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6.1.1 In lieu of any further salary and annual bonus
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to two (2) or, if less, the number
of years, including fractions, from the Date of Termination until the
Executive reaches the age of sixty-five (65) years times the sum of
(i) the highest Annual Base Salary paid or payable to the Executive
during the thirty-six (36) month period immediately preceding the
month in which the Change in Control occurs, and (ii) the highest
annual bonus paid or determined and payable to the Executive during
such thirty-six (36) month period.
6.1.2 For a twenty-four (24) month period after the Date
of Termination, or if sooner, until the Executive reaches the age of
sixty-five (65) years, the Company shall arrange to provide the
Executive with life, disability, accident and health insurance
benefits substantially similar to those which the Executive is
receiving immediately prior to any related Potential Change in
Control or the receipt of the Notice of Termination (without giving
effect to any reduction in such benefits subsequent to a Change in
Control which reduction constitutes Good Reason), whichever is
greater. Benefits otherwise receivable by the Executive pursuant to
this Section 6.1.2 shall be reduced to the extent comparable benefits
are actually received by or made available to the Executive without
cost during such period following the Executive's termination of
employment (and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
6.2 SPECIAL REIMBURSEMENT. In the event that the Executive becomes
entitled to the Severance Payments, if any payment or benefit paid or payable,
or received or to be received, by or on behalf of the Executive in connection
with a Change in Control or the termination of the Executive's employment,
whether any such payments or benefits are pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any of
its subsidiaries, any Person, or otherwise (the "Total Payments"), will or
<PAGE>
would be subject to the excise tax imposed under section 4999 of the Code (the
"Excise Tax"), the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") which amount shall be equal to the sum of (a) the amount of
such Excise Tax imposed (determined without regard to the Gross-Up Payment),
and (b) the product of (i) such Excise Tax (determined without regard to the
Gross-Up Payment), and (ii) the Aggregate Combined Marginal Tax Rate. For
purposes of this Section 6.2, "Aggregate Combined Marginal Tax Rate" means (and
shall equal) the sum of (A) the combined highest marginal state and local
income tax rates applicable for the tax year in which the Executive receives
the Gross-Up Payment (adjusted downward to take into account the tax
deductibility, if any, of such state and local income taxes), plus (B) the rate
of excise tax imposed on "golden parachute" payments under Section 4999 of the
Code, plus (C) the highest marginal federal income tax rate applicable for the
tax year in which the Executive receives the Gross-Up Payment (adjusted upward
to take into account any reduction in otherwise allowable itemized deductions
attributable to Section 68 of the Code), plus (D) the tax rate applicable to
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the Executive under the hospital insurance portion of the Federal Insurance
Contributions Act under Section 3101(b) of the Code for the tax year in which
the Executive receives the Gross-Up Payment.
6.2.1 For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of
section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel (delivered to the
Executive) selected by the Company and reasonably acceptable to the
Executive such Total Payments (in whole or in part) (a) do not
constitute parachute payments, including (without limitation) by
reason of section 280G(b)(4)(A) of the Code, (b) such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of
section 280G(b)(4)(B) of the Code, or (c) are otherwise not subject
to the Excise Tax, and (ii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
6.2.2 In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at
the time of termination of the Executive's employment, the Executive
shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the
amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the
time of the termination of the Executive's employment (including by
reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus
any interest, penalties or additions payable by the Executive with
respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any
<PAGE>
administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect
to the Severance Payments.
6.3 DATE OF PAYMENT. The payments provided for in Section 6.1.1 and
Section 6.2 hereof shall be made not later than the fifteenth (15th) day
following the Date of Termination; provided, however, that if the amounts of
-------- -------
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments to which the Executive
96
is likely to be entitled to and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later
than the thirtieth (30th) day after the Date of Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section 6.3, the Company
shall provide the Executive with a detailed written statement setting forth the
manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice the
Company has received from outside counsel, auditors or consultants (and any
such opinions or advice which are in writing shall be attached to the
statement).
6.4 LEGAL COSTS. The Company shall also reimburse the Executive for
all legal fees and expenses incurred in good faith by the Executive as a result
of any dispute with any party (including, but not limited to, the Company or
the Bank) regarding the payment of any benefit provided for in this Agreement
(including, but not limited, all such fees and expenses incurred in disputing
any termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code plus in each case interest on any delayed payment at the applicable
Federal rate provided for in section 7872(f)(2)(A) of the Code. Such payments
shall be made within five (5) business days after delivery of the Executive's
written requests for payment accompanied by such evidence of fees and expenses
incurred as the Company reasonably may require.
7. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
7.1 NOTICE OF TERMINATION. After a Change in Control and during the
Term, any purported termination of the Executive's employment with the Company
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment with the Company under the provision so indicated. Further, a
Notice of Termination for Cause is required to include a copy of a resolution
<PAGE>
duly adopted by the affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board at a meeting of the Board which was called
and held for the purpose of considering such termination (which meeting may be
a regular meeting of the Board where prior notice of consideration of such
termination is given to members of the Board) finding that, in the good faith
opinion of the Board, the Executive engaged in conduct set forth in clause (i)
or (ii) of the definition of Cause herein, and specifying the particulars
thereof in detail. For purposes of this Agreement, any purported termination
not effected in accordance with this Section 7.1 shall not be considered
effective.
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7.2 DATE OF TERMINATION. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control
and during the Term, shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty (30) day period), and (ii) if the
Executive's employment is terminated for any other reason, the date specified
in the Notice of Termination (which, in the case of a termination by the
Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, after the date such Notice of Termination is given).
7.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided,
--------
however, that the Date of Termination shall be extended by a notice of dispute
- -------
only if the basis for such notice is reasonable, such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence.
7.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and during the Term, and such termination is
disputed in accordance with Section 7.3 above, the Company shall continue to
pay the Executive the full compensation (including without limitation Annual
Base Salary and Annual Bonus) in effect at the time of any related Potential
Change in Control or when the notice giving rise to the dispute was given
(whichever is greater) and continue the Executive as a participant in all
compensation, incentive, pension and welfare benefit and insurance plans in
which the Executive was participating at the time of any Potential Change in
Control or when the notice giving rise to the dispute was given, whichever is
greater, until the dispute is finally resolved in accordance with Section 7.3
hereof. Amounts paid under this Section 7.4 are in addition to all other
amounts due under this Agreement (other than those due under Section 5.2
hereof) and shall not be offset against or reduce any other amounts due under
this Agreement or any other plan, agreement or arrangement.
<PAGE>
8. NO MITIGATION. The Company agrees that, if the Executive's
employment is terminated during the Term, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 6 or Section 7.4. Further, the
amount of any payment or benefit provided for in Section 6 (other than pursuant
to Section 6.1.2) or Section 7.4 shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or offset against any amount claimed to be owed by the
Executive to the Company or any of its subsidiaries, or otherwise.
98
9. SUCCESSORS; BINDING AGREEMENT.
9.1 SUCCESSORS. In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 BINDING AGREEMENT. This Agreement shall inure to the benefit of
and be enforceable by this Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would still be payable
to the Executive hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate.
10. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
The Summit Bancorporation
One Main Street
Chatham, New Jersey 07928
Attention: Corporate Secretary
To the Executive:
Mr. Elwood L. Bowman II
112 Honeyman Road
Whitehouse, New Jersey 08889
<PAGE>
99
11. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of New Jersey without regard to the
principles of conflict of laws thereof. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to and include any
successor provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under federal, state
or local law and any additional withholding to which the Executive has agreed.
The rights and obligations of the Company and the Executive under this
Agreement shall survive the expiration of the Term and the Employment Period.
12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. NO LIMITATION. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement
with the Company or any of its affiliated companies at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement.
The Summit Bancorporation
By:
/s/ Robert G. Cox
----------------------------
Robert G. Cox
<PAGE>
100
/s/ Elwood L. Bowman II
----------------------------
Elwood L. Bowman II
101
AGREEMENT
THIS AGREEMENT, dated as of September 1, 1995 (this "Agreement"), is
made by and between The Summit Bancorporation, a New Jersey corporation, having
its principal offices at One Main Street, Chatham, New Jersey 07928 (the
"Company"), and Mr. Stewart E. McClure, Jr. residing at 18 Dean Road, Mendham,
New Jersey 07945 (the "Executive").
WHEREAS, the Company considers it essential to the best interests of
its shareholders to foster the continued employment of key executive management
personnel; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
<PAGE>
possibility of a Change in Control (as defined in Section 1.3 below) of the
Company exists from time to time and that such possibility, and the
uncertainty, instability and questions which it may raise for and among key
executive management personnel, may result in the premature departure or
significant distraction of such management personnel to the material detriment
of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce, focus and encourage the continued attention and dedication
of key members of the executive management of the Company and its subsidiaries,
including (without limitation) the Executive, to their assigned duties without
distraction in the face of potentially disturbing or unsettling circumstances
arising from the possibility of a Change in Control of the Company;
NOW THEREFORE, in consideration of the premises and the mutual cove-
nants herein contained, the Company and the Executive hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
1.1 "ANNUAL BASE SALARY" shall mean the Executive's rate of regular
basic annual compensation prior to any reduction under a salary reduction
agreement pursuant to section 401(k) or section 125 of the Internal Revenue
Code of 1986, as amended from time to time (the "Code"), and shall not include
(without limitation) cost of living allowances, fees, retainers,
reimbursements, car allowances, bonuses, incentive awards, prizes or similar
payments.
1.2 "CAUSE" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by the Executive to substantially perform the Executive's
duties with the Company, or a subsidiary of the Company, including (without
limitation) Summit Bank, a New Jersey chartered bank (the "Bank"), as such
102
duties may reasonably be defined from time to time by the Board (or a duly
designated and authorized committee thereof), or to abide by the reasonable
written policies of the Company or of the Executive's primary employer (other
than any such failure resulting from the Executive's incapacity due to physical
or mental illness or any such actual or anticipated failure after the issuance
of a Notice of Termination by the Executive for Good Reason pursuant to Section
7.1) after a written demand for substantial performance is delivered to the
Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's duties or has not abided by any reasonable written policies, or
(ii) the continued and willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive in bad faith and
without reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Company or its subsidiaries. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Board or the Company's chief executive
officer or other duly authorized senior officer of the Company or based upon
the advice of counsel for the Company shall be conclusively presumed to be
<PAGE>
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company and its subsidiaries. The cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire membership of
the Board at a meeting of the Board called and held for such purpose (after
reasonable notice of any such meeting is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the Executive
is guilty of the conduct described in clause (i) or (ii) above, and specifying
the particulars thereof in detail.
1.3 "CHANGE IN CONTROL" shall mean and be deemed to have occurred
if:
(i) any Person is or becomes the Beneficial Owner (as that
term is defined in Rule 13d-3 under the Securities Exchange Act of
1934 (the "Exchange Act")), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company)
representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities, or there occurs
any transaction which the Company is required to disclose pursuant to
Item 1(a) of Form 8-K (as filed pursuant to Rule 13a-11 or Rule 15d-
11 of the Exchange Act); or
(ii) during any period of twenty-four (24) consecutive
months (not including any period prior to September 1, 1995),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person
103
who has entered into an agreement with the Company to effect a transaction
described in clause (i), (iii) or (iv) of this definition or any such
individual whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents) whose election by the Board or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially
all of the individuals and entities who were Beneficial Owners,
immediately prior to such reorganization, merger or consolidation, of
the combined voting power of the Company's then outstanding
securities beneficially own, directly or indirectly, immediately
after such reorganization, merger or consolidation, more then
seventy-five percent (75%) of the combined voting power of the
securities of the corporation resulting from such reorganization,
merger or consolidation in substantially the same proportions as
their respective ownership, immediately prior to such reorganization,
merger or consolidation, of the combined voting power of the
<PAGE>
Company's securities; or
(iv) the shareholders of the Company approve (a) the sale
or disposition by the Company (other than to a subsidiary of the
Company) of the Bank, or (b) a complete liquidation or dissolution of
the Company or the Bank.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction which results from the action (excluding the
Executive's employment activities with the Company, the Bank or any of their
respective subsidiaries) of any Person or group of Persons which includes, is
directly affiliated with or is wholly or partly controlled by one or more
executive officers of the Company and in which the Executive actively
participates.
1.4 "COMPANY" shall include The Summit Bancorporation and any
successor to its business and/or assets which assumes (either expressly, by
operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
whether or not any Change in Control of the Company has occurred in connection
with such succession).
1.5 "DISABILITY" shall mean and be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, (i) the Executive
shall have been absent from the full-time performance of the Executive's duties
104
with the Company for a period of six (6) consecutive months, (ii) the Company
gives the Executive a Notice of Termination for Disability, and (iii) within
thirty (30) days after such Notice of Termination is given, the Executive does
not return to the full-time performance of the Executive's duties.
1.6 "GOOD REASON" for termination by the Executive of the
Executive's employment, in connection with or as a result of any Change in
Control, shall mean the occurrence (without the Executive's prior express
written consent) of any one of the following acts, or failures to act, unless,
in the case of any act or failure to act described in clauses (i), (iv), (v) or
(vi) below, such act or failure to act is corrected by the Company prior to the
Date of Termination specified in the Notice of Termination given in respect
thereof:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with those described in Section 3.2
below or with the Executive's position(s) (including without
limitation status, offices, titles, and reporting
responsibilities/rights) as an executive officer of the Company and
its subsidiaries or a substantial adverse alteration in the nature of
the Executive's authority, duties, or responsibilities from those
described in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base Salary as
in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal executive
offices to a location more than thirty (30) miles from its location
<PAGE>
on the date of this Agreement (or, if different, more than thirty
(30) miles from where such offices are located immediately prior to
any Potential Change in Control) or the Company's requiring the
Executive to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's
business to an extent substantially consistent with the Executive's
business travel obligations as of the date of this Agreement;
(iv) any failure by the Company to comply with any of the
provisions of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(v) the failure by the Company or a subsidiary to continue
in effect any pension benefit or incentive or deferred compensation
plan in which the Executive participates immediately prior to any
Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made
with respect to such plan, or the failure by the Company or a
105
subsidiary to continue the Executive's participation therein (or in
such substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Potential Change in
Control;
(vi) the failure by the Company or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of
the Company's or a subsidiary's retirement, life insurance, medical,
health and accident, or disability or similar plans in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Company or a subsidiary
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Potential Change in
Control, or the failure by the Company or a subsidiary to provide the
Executive with the number of paid vacation days to which the
Executive is entitled in accordance with the Company's or a
subsidiary's normal vacation policy in effect at the time of the
Potential Change in Control;
(vii) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1; and/or
(viii) a termination by the Executive for any reason
during the thirty (30) day period immediately following the first
anniversary of any Change in Control.
1.7 "PERSON" shall have the meaning ascribed thereto in Section
3(a)(9) of the Exchange Act, as modified applied, and used in Sections 13(d)
<PAGE>
and 14(d) thereof; provided, however, a Person shall not include (i) the
-------- -------
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries (in its capacity as such), (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same character and proportions as their ownership of stock
of the Company.
1.8 "POTENTIAL CHANGE IN CONTROL" shall mean and be deemed to have
occurred if:
(i) the Company commences negotiations in respect of or
enters into an agreement, the consummation of which would result in
the occurrence of a Change in Control;
106
(ii) the Company or any Person publicly announces an
intention to take actions which, if consummated, would constitute a
Change in Control; and/or
(iii) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing ten percent
(10%) or more of the combined voting power of the Company's then
outstanding securities, or any Person increases such Person's
beneficial ownership of such securities by five (5) percentage points
or more over the percentage so owned by such Person on September 1,
1995.
1.9 "RETIREMENT" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment if such employment
is terminated in accordance with the Company's normal retirement policy for
those aged 65 and older, not including early retirement or so-called "window
period" retirements, generally applicable to its salaried employees, as in
effect immediately prior to any Potential Change in Control.
2. TERM OF THIS AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1998; provided,
--------
however, that commencing on January 1, 1998 and each January 1 thereafter, the
- -------
term of this Agreement shall automatically be extended for one additional year
unless, not later than June 30 of the preceding year, the Company or the
Executive shall have given written notice to the other not to extend this
Agreement or a Change in Control shall have occurred prior to any such January
1; provided, further, however, that if a Change in Control shall have occurred
-------- ------- -------
during the term of this Agreement, this Agreement shall continue in effect for
a period of not less than thirty-six (36) months beyond the month in which such
Change in Control occurred (the "Term"). Notwithstanding the foregoing
provisions of this Section 2, the Term shall terminate upon the Executive's
attaining the age of sixty-five (65) years.
<PAGE>
3. COMPANY'S COVENANTS.
3.1 SEVERANCE PAYMENTS. In order to induce the Executive to remain
in the employ of the Company and/or one or more of its subsidiaries and in
consideration of the Executive's covenants set forth in Section 4 below, the
Company agrees, under the terms and conditions described herein and in addition
to the amounts payable to the Executive under Section 5 below, to pay the
Executive the "Severance Payments" described in Section 6.1 below and the other
payments and benefits described herein in the event the Executive's employment
with the Company is terminated during the Term and after a Change in Control or
under the other circumstances set forth in Section 6.1 below.
3.2 POSITION AND DUTIES. During the period commencing on the date
of any Change in Control until the earliest to occur of (i) the date which is
thirty-six (36) months from the date of any such Change in Control, (ii) the
date of termination by the Executive of the Executive's employment for any
reason, or (iii) the termination by the Company of the Executive's employment
for any reason (the "Employment Period"), (a) the Executive's position
107
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control, and (b) the Executive's services shall be
performed at the location where the Executive was employed immediately
preceding any such Potential Change in Control, or any office or location less
than thirty (30) miles from such location.
3.3 BASE SALARY. During the Employment Period, the Executive shall
receive Annual Base Salary at least equal to twelve (12) times the highest
monthly base salary paid or payable, including (without limitation) any base
salary which has been earned but deferred, to the Executive by the Company and
its affiliated companies in respect of the twelve (12) month period immediately
preceding the month in which any related Potential Change in Control occurs.
In addition, Annual Base Salary shall not be reduced after the occurrence of a
Potential Change in Control. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
3.4 ANNUAL BONUS. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the Executive's
highest bonus for the last three (3) full fiscal years prior to the fiscal year
in which the related Potential Change in Control occurs (annualized in the
event that the Executive was not employed by the Company for the whole of any
such prior fiscal year). Each Annual Bonus shall be paid no later than the end
of the third month of the fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
3.5 INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to both regular
<PAGE>
and special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at
any time during the one hundred eighty (180) day period immediately preceding
any related Potential Change in Control or if more favorable to the Executive,
those provided generally at any time thereafter to other peer executives of the
Company and its affiliated companies.
3.6 WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be entitled
to participate in and shall receive all benefits under all of the health and
welfare benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical,
108
prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in effect for
the Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, those provided generally at any time thereafter to
other peer executives of the Company and its affiliated companies.
3.7 EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
3.8 FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and an automobile allowance
and payment of related expenses, in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies in
effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
3.9 OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
<PAGE>
3.10 VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
4. THE EXECUTIVE'S COVENANTS.
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4.1 EMPLOYMENT. The Executive agrees that, subject to the terms and
conditions of this Agreement, in the event of a Change in Control during the
Term the Executive will remain in the employ of the Company during any related
Employment Period.
4.2 TIME AND ATTENTION. During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary
to discharge the responsibilities and duties assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities and duties. During the Employment Period
it shall not be a violation of this Agreement for the Executive to (i) serve on
corporate, civic or charitable boards or committees, (ii) deliver lectures,
fulfill speaking engagements or teach at educational institutions, and (iii)
manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to any Potential Change in Control, the
reinstatement or continued conduct of such activities (or the reinstatement or
conduct of activities similar in nature and scope thereto) subsequent to any
related Potential Change in Control shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Company.
4.3 CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by direct or indirect acts by the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event, however, shall an asserted violation of the
provisions of this Section 4.3 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
5. COMPENSATION OTHER THAN SEVERANCE PAYMENTS.
5.1 DISABILITY. Following a Potential Change in Control and during
the Term, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
<PAGE>
mental illness, the Executive's full salary shall be paid to the Executive by
the Company at a rate no less than the rate in effect at the commencement of
any such disability period, together with all compensation and benefits payable
to the Executive under the terms of any compensation or benefit plan, program
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or arrangement maintained by the Company or its subsidiaries during such
disability period, until the Executive's employment is terminated by the
Company for Disability.
5.2 BASE SALARY. If the Executive's employment shall be terminated
for any reason following a Potential Change in Control and during the Term, the
Executive's full salary shall be paid to the Executive by the Company through
the Date of Termination (as defined below in Section 7.2) at the rate in effect
at the time the Notice of Termination is given, together with all compensation
and benefits payable to or with respect to the Executive through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Company or its subsidiaries during such period.
5.3 BENEFITS. If the Executive's employment shall be terminated for
any reason following a Potential Change in Control and during the Term, the
Executive's normal post-termination compensation and benefits shall be paid to
the Executive as such payments become due. Such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
retirement, insurance and other compensation or benefit plans, programs and
arrangements maintained by the Company or its subsidiaries.
6. SEVERANCE PAYMENTS.
6.1 SEVERANCE. The Company shall pay the Executive the payments
described in this Section 6.1 (the "Severance Payments") upon the termination
of the Executive's employment with the Company following a Change in Control
and during the Term, in addition to the payments and benefits described in
Section 5 hereof, unless such termination is (i) by the Company for Cause, (ii)
by reason of Retirement, or (iii) by the Executive without Good Reason. In
addition, the Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the Executive
with Good Reason (a) if the Executive reasonably demonstrates that the
Executive's employment was terminated prior to a Change in Control without
Cause (1) at the request of a Person who has entered into an agreement with the
Company the consummation of which will constitute a Change in Control (or who
has taken other steps reasonably calculated to effect a Change in Control) or
(2) otherwise in connection with, as a result of or in anticipation of a Change
in Control, (b) if the Executive terminates his employment for Good Reason
prior to a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control, or (c) if the Executive dies or is
terminated by the Company due to Disability, in each case, after the occurrence
of a Potential Change in Control and a related Change in Control actually
occurs within one (1) year after the Date of Termination or the date of death,
as the case may be. The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the Executive's incapacity
due to physical or mental illness. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
<PAGE>
failure to act constituting Good Reason hereunder.
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6.1.1 In lieu of any further salary and annual bonus
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to two (2) or, if less, the number
of years, including fractions, from the Date of Termination until the
Executive reaches the age of sixty-five (65) years times the sum of
(i) the highest Annual Base Salary paid or payable to the Executive
during the thirty-six (36) month period immediately preceding the
month in which the Change in Control occurs, and (ii) the highest
annual bonus paid or determined and payable to the Executive during
such thirty-six (36) month period.
6.1.2 For a twenty-four (24) month period after the Date
of Termination, or if sooner, until the Executive reaches the age of
sixty-five (65) years, the Company shall arrange to provide the
Executive with life, disability, accident and health insurance
benefits substantially similar to those which the Executive is
receiving immediately prior to any related Potential Change in
Control or the receipt of the Notice of Termination (without giving
effect to any reduction in such benefits subsequent to a Change in
Control which reduction constitutes Good Reason), whichever is
greater. Benefits otherwise receivable by the Executive pursuant to
this Section 6.1.2 shall be reduced to the extent comparable benefits
are actually received by or made available to the Executive without
cost during such period following the Executive's termination of
employment (and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
6.2 SPECIAL REIMBURSEMENT. In the event that the Executive becomes
entitled to the Severance Payments, if any payment or benefit paid or payable,
or received or to be received, by or on behalf of the Executive in connection
with a Change in Control or the termination of the Executive's employment,
whether any such payments or benefits are pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any of
its subsidiaries, any Person, or otherwise (the "Total Payments"), will or
would be subject to the excise tax imposed under section 4999 of the Code (the
"Excise Tax"), the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") which amount shall be equal to the sum of (a) the amount of
such Excise Tax imposed (determined without regard to the Gross-Up Payment),
and (b) the product of (i) such Excise Tax (determined without regard to the
Gross-Up Payment), and (ii) the Aggregate Combined Marginal Tax Rate. For
purposes of this Section 6.2, "Aggregate Combined Marginal Tax Rate" means (and
shall equal) the sum of (A) the combined highest marginal state and local
income tax rates applicable for the tax year in which the Executive receives
the Gross-Up Payment (adjusted downward to take into account the tax
deductibility, if any, of such state and local income taxes), plus (B) the rate
of excise tax imposed on "golden parachute" payments under Section 4999 of the
Code, plus (C) the highest marginal federal income tax rate applicable for the
tax year in which the Executive receives the Gross-Up Payment (adjusted upward
to take into account any reduction in otherwise allowable itemized deductions
attributable to Section 68 of the Code), plus (D) the tax rate applicable to
<PAGE>
112
the Executive under the hospital insurance portion of the Federal Insurance
Contributions Act under Section 3101(b) of the Code for the tax year in which
the Executive receives the Gross-Up Payment.
6.2.1 For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of
section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel (delivered to the
Executive) selected by the Company and reasonably acceptable to the
Executive such Total Payments (in whole or in part) (a) do not
constitute parachute payments, including (without limitation) by
reason of section 280G(b)(4)(A) of the Code, (b) such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of
section 280G(b)(4)(B) of the Code, or (c) are otherwise not subject
to the Excise Tax, and (ii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
6.2.2 In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at
the time of termination of the Executive's employment, the Executive
shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the
amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the
time of the termination of the Executive's employment (including by
reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus
any interest, penalties or additions payable by the Executive with
respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect
to the Severance Payments.
6.3 DATE OF PAYMENT. The payments provided for in Section 6.1.1 and
Section 6.2 hereof shall be made not later than the fifteenth (15th) day
following the Date of Termination; provided, however, that if the amounts of
-------- -------
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments to which the Executive
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is likely to be entitled to and shall pay the remainder of such payments
<PAGE>
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later
than the thirtieth (30th) day after the Date of Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section 6.3, the Company
shall provide the Executive with a detailed written statement setting forth the
manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice the
Company has received from outside counsel, auditors or consultants (and any
such opinions or advice which are in writing shall be attached to the
statement).
6.4 LEGAL COSTS. The Company shall also reimburse the Executive for
all legal fees and expenses incurred in good faith by the Executive as a result
of any dispute with any party (including, but not limited to, the Company or
the Bank) regarding the payment of any benefit provided for in this Agreement
(including, but not limited, all such fees and expenses incurred in disputing
any termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code plus in each case interest on any delayed payment at the applicable
Federal rate provided for in section 7872(f)(2)(A) of the Code. Such payments
shall be made within five (5) business days after delivery of the Executive's
written requests for payment accompanied by such evidence of fees and expenses
incurred as the Company reasonably may require.
7. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
7.1 NOTICE OF TERMINATION. After a Change in Control and during the
Term, any purported termination of the Executive's employment with the Company
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment with the Company under the provision so indicated. Further, a
Notice of Termination for Cause is required to include a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board at a meeting of the Board which was called
and held for the purpose of considering such termination (which meeting may be
a regular meeting of the Board where prior notice of consideration of such
termination is given to members of the Board) finding that, in the good faith
opinion of the Board, the Executive engaged in conduct set forth in clause (i)
or (ii) of the definition of Cause herein, and specifying the particulars
thereof in detail. For purposes of this Agreement, any purported termination
not effected in accordance with this Section 7.1 shall not be considered
effective.
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7.2 DATE OF TERMINATION. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control
and during the Term, shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of the
<PAGE>
Executive's duties during such thirty (30) day period), and (ii) if the
Executive's employment is terminated for any other reason, the date specified
in the Notice of Termination (which, in the case of a termination by the
Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, after the date such Notice of Termination is given).
7.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided,
--------
however, that the Date of Termination shall be extended by a notice of dispute
- -------
only if the basis for such notice is reasonable, such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence.
7.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and during the Term, and such termination is
disputed in accordance with Section 7.3 above, the Company shall continue to
pay the Executive the full compensation (including without limitation Annual
Base Salary and Annual Bonus) in effect at the time of any related Potential
Change in Control or when the notice giving rise to the dispute was given
(whichever is greater) and continue the Executive as a participant in all
compensation, incentive, pension and welfare benefit and insurance plans in
which the Executive was participating at the time of any Potential Change in
Control or when the notice giving rise to the dispute was given, whichever is
greater, until the dispute is finally resolved in accordance with Section 7.3
hereof. Amounts paid under this Section 7.4 are in addition to all other
amounts due under this Agreement (other than those due under Section 5.2
hereof) and shall not be offset against or reduce any other amounts due under
this Agreement or any other plan, agreement or arrangement.
8. NO MITIGATION. The Company agrees that, if the Executive's
employment is terminated during the Term, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 6 or Section 7.4. Further, the
amount of any payment or benefit provided for in Section 6 (other than pursuant
to Section 6.1.2) or Section 7.4 shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or offset against any amount claimed to be owed by the
Executive to the Company or any of its subsidiaries, or otherwise.
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9. SUCCESSORS; BINDING AGREEMENT.
9.1 SUCCESSORS. In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
<PAGE>
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 BINDING AGREEMENT. This Agreement shall inure to the benefit of
and be enforceable by this Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would still be payable
to the Executive hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate.
10. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
The Summit Bancorporation
One Main Street
Chatham, New Jersey 07928
Attention: Corporate Secretary
To the Executive:
Mr. Stewart E. McClure, Jr.
18 Dean Road
Mendham, New Jersey 07945
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11. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
<PAGE>
shall be governed by the laws of the State of New Jersey without regard to the
principles of conflict of laws thereof. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to and include any
successor provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under federal, state
or local law and any additional withholding to which the Executive has agreed.
The rights and obligations of the Company and the Executive under this
Agreement shall survive the expiration of the Term and the Employment Period.
12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. NO LIMITATION. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement
with the Company or any of its affiliated companies at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement.
The Summit Bancorporation
By:
/s/ Robert G. Cox
----------------------------
Robert G. Cox
117
/s/ Stewart E. McClure, Jr.
----------------------------
Stewart E. McClure, Jr.
<PAGE>
118
AGREEMENT
THIS AGREEMENT, dated as of September 1, 1995 (this "Agreement"), is
made by and between The Summit Bancorporation, a New Jersey corporation, having
its principal offices at One Main Street, Chatham, New Jersey 07928 (the
"Company"), and Mr. Richard J. Ranelli residing at 51 B-2 Sandra Circle,
Westfield, New Jersey 07090 (the "Executive").
WHEREAS, the Company considers it essential to the best interests of
its shareholders to foster the continued employment of key executive management
personnel; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly-held corporations, the
possibility of a Change in Control (as defined in Section 1.3 below) of the
Company exists from time to time and that such possibility, and the
uncertainty, instability and questions which it may raise for and among key
executive management personnel, may result in the premature departure or
significant distraction of such management personnel to the material detriment
of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce, focus and encourage the continued attention and dedication
of key members of the executive management of the Company and its subsidiaries,
including (without limitation) the Executive, to their assigned duties without
distraction in the face of potentially disturbing or unsettling circumstances
arising from the possibility of a Change in Control of the Company;
NOW THEREFORE, in consideration of the premises and the mutual cove-
nants herein contained, the Company and the Executive hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
<PAGE>
1.1 "ANNUAL BASE SALARY" shall mean the Executive's rate of regular
basic annual compensation prior to any reduction under a salary reduction
agreement pursuant to section 401(k) or section 125 of the Internal Revenue
Code of 1986, as amended from time to time (the "Code"), and shall not include
(without limitation) cost of living allowances, fees, retainers,
reimbursements, car allowances, bonuses, incentive awards, prizes or similar
payments.
1.2 "CAUSE" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by the Executive to substantially perform the Executive's
duties with the Company, or a subsidiary of the Company, including (without
limitation) Summit Bank, a New Jersey chartered bank (the "Bank"), as such
119
duties may reasonably be defined from time to time by the Board (or a duly
designated and authorized committee thereof), or to abide by the reasonable
written policies of the Company or of the Executive's primary employer (other
than any such failure resulting from the Executive's incapacity due to physical
or mental illness or any such actual or anticipated failure after the issuance
of a Notice of Termination by the Executive for Good Reason pursuant to Section
7.1) after a written demand for substantial performance is delivered to the
Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's duties or has not abided by any reasonable written policies, or
(ii) the continued and willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive in bad faith and
without reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Company or its subsidiaries. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Board or the Company's chief executive
officer or other duly authorized senior officer of the Company or based upon
the advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company and its subsidiaries. The cessation of employment of
the Executive shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire membership of
the Board at a meeting of the Board called and held for such purpose (after
reasonable notice of any such meeting is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the Executive
is guilty of the conduct described in clause (i) or (ii) above, and specifying
the particulars thereof in detail.
1.3 "CHANGE IN CONTROL" shall mean and be deemed to have occurred
if:
(i) any Person is or becomes the Beneficial Owner (as that
term is defined in Rule 13d-3 under the Securities Exchange Act of
1934 (the "Exchange Act")), directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company)
<PAGE>
representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities, or there occurs
any transaction which the Company is required to disclose pursuant to
Item 1(a) of Form 8-K (as filed pursuant to Rule 13a-11 or Rule 15d-
11 of the Exchange Act); or
(ii) during any period of twenty-four (24) consecutive
months (not including any period prior to September 1, 1995),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person
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who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this definition
or any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies
or consents) whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of such period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; or
(iii) the shareholders of the Company approve a
reorganization, merger or consolidation, other than a reorganization,
merger or consolidation with respect to which all or substantially
all of the individuals and entities who were Beneficial Owners,
immediately prior to such reorganization, merger or consolidation, of
the combined voting power of the Company's then outstanding
securities beneficially own, directly or indirectly, immediately
after such reorganization, merger or consolidation, more then
seventy-five percent (75%) of the combined voting power of the
securities of the corporation resulting from such reorganization,
merger or consolidation in substantially the same proportions as
their respective ownership, immediately prior to such reorganization,
merger or consolidation, of the combined voting power of the
Company's securities; or
(iv) the shareholders of the Company approve (a) the sale
or disposition by the Company (other than to a subsidiary of the
Company) of the Bank, or (b) a complete liquidation or dissolution of
the Company or the Bank.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction which results from the action (excluding the
Executive's employment activities with the Company, the Bank or any of their
respective subsidiaries) of any Person or group of Persons which includes, is
directly affiliated with or is wholly or partly controlled by one or more
executive officers of the Company and in which the Executive actively
participates.
1.4 "COMPANY" shall include The Summit Bancorporation and any
successor to its business and/or assets which assumes (either expressly, by
operation of law or otherwise) and/or agrees to perform this Agreement by
operation of law or otherwise (except in determining, under Section 1.3 hereof,
<PAGE>
whether or not any Change in Control of the Company has occurred in connection
with such succession).
1.5 "DISABILITY" shall mean and be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, (i) the Executive
shall have been absent from the full-time performance of the Executive's duties
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with the Company for a period of six (6) consecutive months, (ii) the Company
gives the Executive a Notice of Termination for Disability, and (iii) within
thirty (30) days after such Notice of Termination is given, the Executive does
not return to the full-time performance of the Executive's duties.
1.6 "GOOD REASON" for termination by the Executive of the
Executive's employment, in connection with or as a result of any Change in
Control, shall mean the occurrence (without the Executive's prior express
written consent) of any one of the following acts, or failures to act, unless,
in the case of any act or failure to act described in clauses (i), (iv), (v) or
(vi) below, such act or failure to act is corrected by the Company prior to the
Date of Termination specified in the Notice of Termination given in respect
thereof:
(i) the assignment to the Executive of any duties or
responsibilities inconsistent with those described in Section 3.2
below or with the Executive's position(s) (including without
limitation status, offices, titles, and reporting
responsibilities/rights) as an executive officer of the Company and
its subsidiaries or a substantial adverse alteration in the nature of
the Executive's authority, duties, or responsibilities from those
described in Section 3.2 below or otherwise;
(ii) a reduction in the Executive's Annual Base Salary as
in effect on the date of this Agreement or as the same may be
increased at any time thereafter and from time to time;
(iii) the relocation of the Company's principal executive
offices to a location more than thirty (30) miles from its location
on the date of this Agreement (or, if different, more than thirty
(30) miles from where such offices are located immediately prior to
any Potential Change in Control) or the Company's requiring the
Executive to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's
business to an extent substantially consistent with the Executive's
business travel obligations as of the date of this Agreement;
(iv) any failure by the Company to comply with any of the
provisions of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(v) the failure by the Company or a subsidiary to continue
in effect any pension benefit or incentive or deferred compensation
plan in which the Executive participates immediately prior to any
Potential Change in Control which is material to the Executive's
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan or arrangement) has been made
<PAGE>
with respect to such plan, or the failure by the Company or a
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subsidiary to continue the Executive's participation therein (or in
such substitute or alternative plan or arrangement) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Potential Change in
Control;
(vi) the failure by the Company or a subsidiary to
continue to provide the Executive with health and welfare benefits
substantially similar to those enjoyed by the Executive under any of
the Company's or a subsidiary's retirement, life insurance, medical,
health and accident, or disability or similar plans in which the
Executive was participating at the time of any Potential Change in
Control, the taking of any action by the Company or a subsidiary
which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Potential Change in
Control, or the failure by the Company or a subsidiary to provide the
Executive with the number of paid vacation days to which the
Executive is entitled in accordance with the Company's or a
subsidiary's normal vacation policy in effect at the time of the
Potential Change in Control;
(vii) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1; and/or
(viii) a termination by the Executive for any reason
during the thirty (30) day period immediately following the first
anniversary of any Change in Control.
1.7 "PERSON" shall have the meaning ascribed thereto in Section
3(a)(9) of the Exchange Act, as modified applied, and used in Sections 13(d)
and 14(d) thereof; provided, however, a Person shall not include (i) the
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Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries (in its capacity as such), (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same character and proportions as their ownership of stock
of the Company.
1.8 "POTENTIAL CHANGE IN CONTROL" shall mean and be deemed to have
occurred if:
(i) the Company commences negotiations in respect of or
enters into an agreement, the consummation of which would result in
the occurrence of a Change in Control;
<PAGE>
123
(ii) the Company or any Person publicly announces an
intention to take actions which, if consummated, would constitute a
Change in Control; and/or
(iii) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing ten percent
(10%) or more of the combined voting power of the Company's then
outstanding securities, or any Person increases such Person's
beneficial ownership of such securities by five (5) percentage points
or more over the percentage so owned by such Person on September 1,
1995.
1.9 "RETIREMENT" shall mean and be deemed the reason for the
termination by the Executive of the Executive's employment if such employment
is terminated in accordance with the Company's normal retirement policy for
those aged 65 and older, not including early retirement or so-called "window
period" retirements, generally applicable to its salaried employees, as in
effect immediately prior to any Potential Change in Control.
2. TERM OF THIS AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1998; provided,
--------
however, that commencing on January 1, 1998 and each January 1 thereafter, the
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term of this Agreement shall automatically be extended for one additional year
unless, not later than June 30 of the preceding year, the Company or the
Executive shall have given written notice to the other not to extend this
Agreement or a Change in Control shall have occurred prior to any such January
1; provided, further, however, that if a Change in Control shall have occurred
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during the term of this Agreement, this Agreement shall continue in effect for
a period of not less than thirty-six (36) months beyond the month in which such
Change in Control occurred (the "Term"). Notwithstanding the foregoing
provisions of this Section 2, the Term shall terminate upon the Executive's
attaining the age of sixty-five (65) years.
3. COMPANY'S COVENANTS.
3.1 SEVERANCE PAYMENTS. In order to induce the Executive to remain
in the employ of the Company and/or one or more of its subsidiaries and in
consideration of the Executive's covenants set forth in Section 4 below, the
Company agrees, under the terms and conditions described herein and in addition
to the amounts payable to the Executive under Section 5 below, to pay the
Executive the "Severance Payments" described in Section 6.1 below and the other
payments and benefits described herein in the event the Executive's employment
with the Company is terminated during the Term and after a Change in Control or
under the other circumstances set forth in Section 6.1 below.
3.2 POSITION AND DUTIES. During the period commencing on the date
of any Change in Control until the earliest to occur of (i) the date which is
thirty-six (36) months from the date of any such Change in Control, (ii) the
date of termination by the Executive of the Executive's employment for any
reason, or (iii) the termination by the Company of the Executive's employment
for any reason (the "Employment Period"), (a) the Executive's position
<PAGE>
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(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control, and (b) the Executive's services shall be
performed at the location where the Executive was employed immediately
preceding any such Potential Change in Control, or any office or location less
than thirty (30) miles from such location.
3.3 BASE SALARY. During the Employment Period, the Executive shall
receive Annual Base Salary at least equal to twelve (12) times the highest
monthly base salary paid or payable, including (without limitation) any base
salary which has been earned but deferred, to the Executive by the Company and
its affiliated companies in respect of the twelve (12) month period immediately
preceding the month in which any related Potential Change in Control occurs.
In addition, Annual Base Salary shall not be reduced after the occurrence of a
Potential Change in Control. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
3.4 ANNUAL BONUS. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the Executive's
highest bonus for the last three (3) full fiscal years prior to the fiscal year
in which the related Potential Change in Control occurs (annualized in the
event that the Executive was not employed by the Company for the whole of any
such prior fiscal year). Each Annual Bonus shall be paid no later than the end
of the third month of the fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus.
3.5 INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at
any time during the one hundred eighty (180) day period immediately preceding
any related Potential Change in Control or if more favorable to the Executive,
those provided generally at any time thereafter to other peer executives of the
Company and its affiliated companies.
3.6 WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be entitled
to participate in and shall receive all benefits under all of the health and
welfare benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical,
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prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans and programs) to the extent applicable
<PAGE>
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in effect for
the Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, those provided generally at any time thereafter to
other peer executives of the Company and its affiliated companies.
3.7 EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the one hundred eighty (180) day period
immediately preceding any related Potential Change in Control or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
3.8 FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and an automobile allowance
and payment of related expenses, in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies in
effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
3.9 OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the one hundred eighty (180) day period immediately preceding any
related Potential Change in Control or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
3.10 VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the one hundred eighty (180) day
period immediately preceding any related Potential Change in Control or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
4. THE EXECUTIVE'S COVENANTS.
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4.1 EMPLOYMENT. The Executive agrees that, subject to the terms and
conditions of this Agreement, in the event of a Change in Control during the
Term the Executive will remain in the employ of the Company during any related
Employment Period.
4.2 TIME AND ATTENTION. During the Employment Period, and excluding
<PAGE>
any periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary
to discharge the responsibilities and duties assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities and duties. During the Employment Period
it shall not be a violation of this Agreement for the Executive to (i) serve on
corporate, civic or charitable boards or committees, (ii) deliver lectures,
fulfill speaking engagements or teach at educational institutions, and (iii)
manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to any Potential Change in Control, the
reinstatement or continued conduct of such activities (or the reinstatement or
conduct of activities similar in nature and scope thereto) subsequent to any
related Potential Change in Control shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Company.
4.3 CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by direct or indirect acts by the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event, however, shall an asserted violation of the
provisions of this Section 4.3 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
5. COMPENSATION OTHER THAN SEVERANCE PAYMENTS.
5.1 DISABILITY. Following a Potential Change in Control and during
the Term, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Executive's full salary shall be paid to the Executive by
the Company at a rate no less than the rate in effect at the commencement of
any such disability period, together with all compensation and benefits payable
to the Executive under the terms of any compensation or benefit plan, program
127
or arrangement maintained by the Company or its subsidiaries during such
disability period, until the Executive's employment is terminated by the
Company for Disability.
5.2 BASE SALARY. If the Executive's employment shall be terminated
for any reason following a Potential Change in Control and during the Term, the
Executive's full salary shall be paid to the Executive by the Company through
the Date of Termination (as defined below in Section 7.2) at the rate in effect
at the time the Notice of Termination is given, together with all compensation
and benefits payable to or with respect to the Executive through the Date of
<PAGE>
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Company or its subsidiaries during such period.
5.3 BENEFITS. If the Executive's employment shall be terminated for
any reason following a Potential Change in Control and during the Term, the
Executive's normal post-termination compensation and benefits shall be paid to
the Executive as such payments become due. Such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
retirement, insurance and other compensation or benefit plans, programs and
arrangements maintained by the Company or its subsidiaries.
6. SEVERANCE PAYMENTS.
6.1 SEVERANCE. The Company shall pay the Executive the payments
described in this Section 6.1 (the "Severance Payments") upon the termination
of the Executive's employment with the Company following a Change in Control
and during the Term, in addition to the payments and benefits described in
Section 5 hereof, unless such termination is (i) by the Company for Cause, (ii)
by reason of Retirement, or (iii) by the Executive without Good Reason. In
addition, the Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without Cause or by the Executive
with Good Reason (a) if the Executive reasonably demonstrates that the
Executive's employment was terminated prior to a Change in Control without
Cause (1) at the request of a Person who has entered into an agreement with the
Company the consummation of which will constitute a Change in Control (or who
has taken other steps reasonably calculated to effect a Change in Control) or
(2) otherwise in connection with, as a result of or in anticipation of a Change
in Control, (b) if the Executive terminates his employment for Good Reason
prior to a Change in Control and the Executive reasonably demonstrates that the
circumstance(s) or event(s) which constitute such Good Reason occurred (1) at
the request of such Person or (2) otherwise in connection with, as a result of
or in anticipation of a Change in Control, or (c) if the Executive dies or is
terminated by the Company due to Disability, in each case, after the occurrence
of a Potential Change in Control and a related Change in Control actually
occurs within one (1) year after the Date of Termination or the date of death,
as the case may be. The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the Executive's incapacity
due to physical or mental illness. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
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6.1.1 In lieu of any further salary and annual bonus
payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to two (2) or, if less, the number
of years, including fractions, from the Date of Termination until the
Executive reaches the age of sixty-five (65) years times the sum of
(i) the highest Annual Base Salary paid or payable to the Executive
during the thirty-six (36) month period immediately preceding the
month in which the Change in Control occurs, and (ii) the highest
annual bonus paid or determined and payable to the Executive during
such thirty-six (36) month period.
6.1.2 For a twenty-four (24) month period after the Date
of Termination, or if sooner, until the Executive reaches the age of
<PAGE>
sixty-five (65) years, the Company shall arrange to provide the
Executive with life, disability, accident and health insurance
benefits substantially similar to those which the Executive is
receiving immediately prior to any related Potential Change in
Control or the receipt of the Notice of Termination (without giving
effect to any reduction in such benefits subsequent to a Change in
Control which reduction constitutes Good Reason), whichever is
greater. Benefits otherwise receivable by the Executive pursuant to
this Section 6.1.2 shall be reduced to the extent comparable benefits
are actually received by or made available to the Executive without
cost during such period following the Executive's termination of
employment (and any such benefits actually received by the Executive
shall be reported to the Company by the Executive).
6.2 SPECIAL REIMBURSEMENT. In the event that the Executive becomes
entitled to the Severance Payments, if any payment or benefit paid or payable,
or received or to be received, by or on behalf of the Executive in connection
with a Change in Control or the termination of the Executive's employment,
whether any such payments or benefits are pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any of
its subsidiaries, any Person, or otherwise (the "Total Payments"), will or
would be subject to the excise tax imposed under section 4999 of the Code (the
"Excise Tax"), the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") which amount shall be equal to the sum of (a) the amount of
such Excise Tax imposed (determined without regard to the Gross-Up Payment),
and (b) the product of (i) such Excise Tax (determined without regard to the
Gross-Up Payment), and (ii) the Aggregate Combined Marginal Tax Rate. For
purposes of this Section 6.2, "Aggregate Combined Marginal Tax Rate" means (and
shall equal) the sum of (A) the combined highest marginal state and local
income tax rates applicable for the tax year in which the Executive receives
the Gross-Up Payment (adjusted downward to take into account the tax
deductibility, if any, of such state and local income taxes), plus (B) the rate
of excise tax imposed on "golden parachute" payments under Section 4999 of the
Code, plus (C) the highest marginal federal income tax rate applicable for the
tax year in which the Executive receives the Gross-Up Payment (adjusted upward
to take into account any reduction in otherwise allowable itemized deductions
attributable to Section 68 of the Code), plus (D) the tax rate applicable to
129
the Executive under the hospital insurance portion of the Federal Insurance
Contributions Act under Section 3101(b) of the Code for the tax year in which
the Executive receives the Gross-Up Payment.
6.2.1 For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of
section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel (delivered to the
Executive) selected by the Company and reasonably acceptable to the
Executive such Total Payments (in whole or in part) (a) do not
constitute parachute payments, including (without limitation) by
reason of section 280G(b)(4)(A) of the Code, (b) such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of
section 280G(b)(4)(B) of the Code, or (c) are otherwise not subject
<PAGE>
to the Excise Tax, and (ii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
6.2.2 In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at
the time of termination of the Executive's employment, the Executive
shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction plus interest on the
amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the
time of the termination of the Executive's employment (including by
reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus
any interest, penalties or additions payable by the Executive with
respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of any such subsequent liability for Excise Tax with respect
to the Severance Payments.
6.3 DATE OF PAYMENT. The payments provided for in Section 6.1.1 and
Section 6.2 hereof shall be made not later than the fifteenth (15th) day
following the Date of Termination; provided, however, that if the amounts of
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such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments to which the Executive
130
is likely to be entitled to and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later
than the thirtieth (30th) day after the Date of Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section 6.3, the Company
shall provide the Executive with a detailed written statement setting forth the
manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice the
Company has received from outside counsel, auditors or consultants (and any
such opinions or advice which are in writing shall be attached to the
statement).
6.4 LEGAL COSTS. The Company shall also reimburse the Executive for
all legal fees and expenses incurred in good faith by the Executive as a result
of any dispute with any party (including, but not limited to, the Company or
the Bank) regarding the payment of any benefit provided for in this Agreement
(including, but not limited, all such fees and expenses incurred in disputing
<PAGE>
any termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code plus in each case interest on any delayed payment at the applicable
Federal rate provided for in section 7872(f)(2)(A) of the Code. Such payments
shall be made within five (5) business days after delivery of the Executive's
written requests for payment accompanied by such evidence of fees and expenses
incurred as the Company reasonably may require.
7. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
7.1 NOTICE OF TERMINATION. After a Change in Control and during the
Term, any purported termination of the Executive's employment with the Company
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment with the Company under the provision so indicated. Further, a
Notice of Termination for Cause is required to include a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters (3/4) of
the entire membership of the Board at a meeting of the Board which was called
and held for the purpose of considering such termination (which meeting may be
a regular meeting of the Board where prior notice of consideration of such
termination is given to members of the Board) finding that, in the good faith
opinion of the Board, the Executive engaged in conduct set forth in clause (i)
or (ii) of the definition of Cause herein, and specifying the particulars
thereof in detail. For purposes of this Agreement, any purported termination
not effected in accordance with this Section 7.1 shall not be considered
effective.
131
7.2 DATE OF TERMINATION. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control
and during the Term, shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty (30) day period), and (ii) if the
Executive's employment is terminated for any other reason, the date specified
in the Notice of Termination (which, in the case of a termination by the
Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, after the date such Notice of Termination is given).
7.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided,
--------
however, that the Date of Termination shall be extended by a notice of dispute
- -------
<PAGE>
only if the basis for such notice is reasonable, such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence.
7.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and during the Term, and such termination is
disputed in accordance with Section 7.3 above, the Company shall continue to
pay the Executive the full compensation (including without limitation Annual
Base Salary and Annual Bonus) in effect at the time of any related Potential
Change in Control or when the notice giving rise to the dispute was given
(whichever is greater) and continue the Executive as a participant in all
compensation, incentive, pension and welfare benefit and insurance plans in
which the Executive was participating at the time of any Potential Change in
Control or when the notice giving rise to the dispute was given, whichever is
greater, until the dispute is finally resolved in accordance with Section 7.3
hereof. Amounts paid under this Section 7.4 are in addition to all other
amounts due under this Agreement (other than those due under Section 5.2
hereof) and shall not be offset against or reduce any other amounts due under
this Agreement or any other plan, agreement or arrangement.
8. NO MITIGATION. The Company agrees that, if the Executive's
employment is terminated during the Term, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 6 or Section 7.4. Further, the
amount of any payment or benefit provided for in Section 6 (other than pursuant
to Section 6.1.2) or Section 7.4 shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, or offset against any amount claimed to be owed by the
Executive to the Company or any of its subsidiaries, or otherwise.
132
9. SUCCESSORS; BINDING AGREEMENT.
9.1 SUCCESSORS. In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 BINDING AGREEMENT. This Agreement shall inure to the benefit of
and be enforceable by this Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would still be payable
to the Executive hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the executors, personal representatives or
administrators of the Executive's estate.
<PAGE>
10. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
The Summit Bancorporation
One Main Street
Chatham, New Jersey 07928
Attention: Corporate Secretary
To the Executive:
Mr. Richard J. Ranelli
51 B-2 Sandra Circle
Westfield, New Jersey 07090
133
11. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of New Jersey without regard to the
principles of conflict of laws thereof. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to and include any
successor provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under federal, state
or local law and any additional withholding to which the Executive has agreed.
The rights and obligations of the Company and the Executive under this
Agreement shall survive the expiration of the Term and the Employment Period.
12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. NO LIMITATION. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
<PAGE>
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement
with the Company or any of its affiliated companies at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement.
The Summit Bancorporation
By:
/s/ Robert G. Cox
----------------------------
Robert G. Cox
134
/s/ Richard J. Ranelli
----------------------------
Richard J. Ranelli
135
<PAGE>
EXHIBIT 12
THE SUMMIT BANCORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1995 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
EARNINGS:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,352 $ 7,857
Applicable Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 29,524 7,351
Fixed Charges, Excluding Interest on Deposits . . . . . . . . . . . . . . . 25,661 20,014
------- -------
Total Earnings, Excluding Interest on Deposits . . . . . . . . . . . . 108,537 35,222
Interest on Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,279 76,061
------- -------
Total Earnings, Including Interest on Deposits . . . . . . . . . . . . $218,816 $111,283
======= =======
FIXED CHARGES:
Interest Expense, Excluding Interest on Deposits. . . . . . . . . . . . . . $ 23,880 $ 17,849
One Third of Appropriate Net Rental Expense*. . . . . . . . . . . . . . . . 1,781 2,165
------ ------
Total Fixed Charges, Excluding Interest on Deposits. . . . . . . . . . 25,661 20,014
Interest on Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,279 76,061
------- ------
Total Fixed Charges, Including Interest on Deposits. . . . . . . . . . $135,940 $ 96,075
======= ======
RATIO OF EARNINGS TO FIXED CHARGES:
Excluding Interest on Deposits. . . . . . . . . . . . . . . . . . . . . . . 4.23X 1.76X
Including Interest on Deposits. . . . . . . . . . . . . . . . . . . . . . . 1.61 1.16
* Represents the portion of long-term operating lease payments deemed to
be representative of the interest factor.
136
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 259,414
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 68,883
<TRADING-ASSETS> 623
<INVESTMENTS-HELD-FOR-SALE> 679,550
<INVESTMENTS-CARRYING> 1,009,855
<INVESTMENTS-MARKET> 1,005,224
<LOANS> 3,503,775
<ALLOWANCE> 90,819
<TOTAL-ASSETS> 5,619,300
<DEPOSITS> 4,641,492
<SHORT-TERM> 157,367
<LIABILITIES-OTHER> 65,456
<LONG-TERM> 270,402
<COMMON> 50,172
0
12,612
<OTHER-SE> 421,799
<TOTAL-LIABILITIES-AND-EQUITY> 5,619,300
<INTEREST-LOAN> 216,902
<INTEREST-INVEST> 76,290
<INTEREST-OTHER> 3,373
<INTEREST-TOTAL> 296,565
<INTEREST-DEPOSIT> 110,279
<INTEREST-EXPENSE> 134,159
<INTEREST-INCOME-NET> 162,406
<LOAN-LOSSES> 3,600
<SECURITIES-GAINS> 1,610
<EXPENSE-OTHER> 113,779
<INCOME-PRETAX> 82,876
<INCOME-PRE-EXTRAORDINARY> 53,352
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,352
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.56
<YIELD-ACTUAL> 7.77
<LOANS-NON> 25,633
<LOANS-PAST> 13,807
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 91,169
<CHARGE-OFFS> 6,187
<RECOVERIES> 2,237
<ALLOWANCE-CLOSE> 90,819
<ALLOWANCE-DOMESTIC> 72,922
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 17,897
</TABLE>
