SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
COMMERCE BANCORP, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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COMMERCE BANCORP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Shareholders
(the "Annual Meeting") of Commerce Bancorp, Inc. ("Bancorp") will be held at
Commerce University, 17000 Horizon Way, Mt. Laurel, New Jersey, on Tuesday, May
25, 1999, at 5:00 P.M., local time, and at any adjournment or postponement
thereof, to consider and act upon the following matters as more fully described
in the annexed Proxy Statement:
1. To elect Directors; and
2. To act upon such other matters as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed April 5, 1999 as the record date for
determination of shareholders entitled to vote at the Annual Meeting. Only
shareholders of record at the close of business on that date will be entitled to
receive notice of, and to vote at, the Annual Meeting.
You are cordially invited to attend the Annual Meeting in person.
Whether or not you expect to attend the Annual Meeting in person, you are urged
to sign and date the enclosed Proxy and promptly return it in the envelope
provided for that purpose.
By Order of the Board of Directors
ROBERT C. BECK,
Secretary
April 15, 1999
COMMERCE BANCORP, INC.
COMMERCE ATRIUM
1701 ROUTE 70 EAST
CHERRY HILL, NEW JERSEY 08034-5400
PROXY STATEMENT
This Notice of Annual Meeting, Proxy Statement and enclosed Proxy are
being furnished to shareholders of Commerce Bancorp, Inc. ("Bancorp" or the
"Company") in conjunction with the solicitation of proxies by the Board of
Directors of Bancorp for use at Bancorp's 1999 Annual Meeting of Shareholders to
be held on Tuesday, May 25, 1999, at 5:00 P.M., local time, at Commerce
University, 17000 Horizon Way, Mt. Laurel, New Jersey, (the "Annual Meeting"),
and at any adjournment or postponement thereof. The approximate date upon which
this Proxy Statement and the accompanying form of Proxy will be first sent,
given or otherwise made available to Bancorp's shareholders is April 15, 1999.
The expense of the proxy solicitation will be borne by Bancorp. In
addition to solicitation by mail, proxies may be solicited in person or by
telephone by directors, officers or employees of Bancorp and its subsidiaries
without additional compensation. Bancorp is required to pay the reasonable
expenses incurred by recordholders of Bancorp Common Stock who are brokers,
dealers, banks or voting trustees, or their nominees, for mailing proxy material
and annual shareholder reports to the beneficial owners of Bancorp Common Stock
they hold of record, upon request of such recordholders.
The Board of Directors of Bancorp has fixed the close of business on
April 5, 1999, as the date for determining holders of record of Bancorp Common
Stock, par value $1.5625 per share (the "Common Stock") entitled to receive
notice of, and to vote at, the Annual Meeting. On that date, there were
27,478,476 shares of Common Stock outstanding. Each holder of Common Stock is
entitled to cast one vote for each share held of record on that date.
The holders of a majority of the aggregate outstanding shares of Common
Stock, present either in person or by proxy, will constitute a quorum for the
transaction of business at the Annual Meeting. Pursuant to the New Jersey
Business Corporation Act ("NJBCA"), abstentions and broker non-votes (which may
occur if a beneficial owner of stock where shares are held in a brokerage or
bank account fails to provide the broker or bank voting instructions as to such
shares) will be counted solely for the purpose of determining whether a quorum
is present.
If the enclosed form of Proxy is properly marked, signed, and returned
in time to be voted at the Annual Meeting and not revoked, the shares
represented by the Proxy will be voted in accordance with the instructions
marked thereon. Signed Proxies not marked to the contrary will be voted "FOR"
the election of all nominees for director. Sending in a signed Proxy will not
affect a shareholders' right to attend the Annual Meeting and vote in person,
since the Proxy is revocable.
Any Bancorp shareholder giving a Proxy may revoke it at any time before
it is voted by (i) giving written notice of such revocation, signed in the same
manner as the Proxy, to Bancorp's Secretary, (ii) executing a new Proxy and
returning it to the Secretary of Bancorp prior to the voting of the first Proxy
at the Annual Meeting, or (iii) attending the Annual Meeting and voting in
person (although attendance at the Annual Meeting will not in and of itself
constitute revocation of a Proxy).
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
Common Stock
The following table sets forth, as of April 5, 1999, the beneficial
ownership of Bancorp's Common Stock by (i) each director and nominee for
director of the Company, (ii) each of the executive officers of the Company
named in the Summary Compensation Table and (iii) all the directors, nominees
for directors, and executive officers of the Company as a group. No person is
known by the Company to own beneficially more than 5% of the Company's
outstanding Common Stock. Unless otherwise specified, all persons listed below
have sole voting and investment power with respect to their shares.
COMMON STOCK
---------------------------------------------
Name of Number of Shares Percent of
Beneficial Owner or Beneficially Class
Identity of Group Owned(1) Beneficially Owned(1)
----------------- -------- ---------------------
David Baird, IV ..................................... 104,805 (2) *
Robert C. Beck....................................... 160,980 (3) *
Jack R Bershad....................................... 52,115 (4) *
Joseph E. Buckelew................................... 269,082 (5) *
Vernon W. Hill, II................................... 1,113,534 (6) 3.98%
C. Edward Jordan, Jr................................. 272,688 (7) *
Morton N. Kerr....................................... 67,400 (8) *
Steven M. Lewis ..................................... 188,713 (9) *
Daniel J. Ragone..................................... 81,230 (10) *
William A. Schwartz, Jr.............................. 20,600 (11) *
Joseph T. Tarquini, Jr............................... 243,339 (12) *
Frank C. Videon, Sr.................................. 77,303 (13) *
Peter M. Musumeci, Jr ............................... 211,233 (14) *
Robert D. Falese, Jr................................. 137,433 (15) *
Dennis M. DiFlorio................................... 217,048 (16) *
Thomas J. Sukay...................................... 94,572 (17) *
David Wojcik......................................... 163,014 (18) *
All Directors, Nominees for Directors
and Executive Officers of the Company
as a Group (19 Persons).............................. 3,334,987 (19) 11.59%
- -----------------------------
* less than 1%
2
(1) The securities "beneficially owned" are determined in accordance with the
definitions of "beneficial ownership" as set forth in the regulations of
the Securities and Exchange Commission and, accordingly, may include
securities owned by or for, among others, the wife and/or minor children
of the individual and any other relative who has the same residence as
such individual as well as other securities as to which the individual has
or shares voting or investment power or has the right to acquire under
outstanding stock options within 60 days after April 5, 1999. Shares
subject to outstanding stock options which an individual has the right to
acquire within 60 days after April 5, 1999 are deemed to be outstanding
for the purpose of computing the percentage of outstanding securities of
the class owned by such individual or any group including such individual
only. Beneficial ownership may be disclaimed as to certain of the
securities.
(2) Includes 1,377 shares of Common Stock issuable upon the exercise of stock
options granted under the Company's 1989 and 1998 Stock Option Plans for
Non-Employee Directors.
(3) Includes 525 shares of Common Stock held by Mr. Beck's wife and 9,364
shares of Common Stock issuable upon the exercise of stock options granted
under the Company's 1989 and 1998 Stock Option Plans for Non-Employee
Directors.
(4) Includes 18,659 shares of Common Stock held by Mr. Bershad's wife and
15,180 shares of Common Stock issuable upon the exercise of stock options
granted under the Company's 1989 and 1998 Stock Option Plans for
Non-Employee Directors.
(5) Includes 75,472 shares of Common Stock held by Mr. Buckelew's wife, 2,276
shares held by Buckelew & Lane Investments and 3,111 shares of Common
Stock issuable upon the exercise of stock options granted under the
Company's 1989 Stock Option Plan for Non-Employee Directors and 13,778
shares of Common Stock issuable upon the exercise of stock options granted
under the Company's 1997 Employee Stock Option Plan. Mr. Buckelew is a
partner of Buckelew & Lane Investments.
(6) Includes 49,372 shares held by Site Development Inc., 25,559 shares held
by the wife of Mr. Hill, 69,306 shares held by S. J. Dining, Inc., 70,796
shares held by U.S. Restaurants, Inc., 44,961 shares held by J.V.
Properties, 17,023 shares held by InterArch, Inc., 58,570 shares held by
the Hill Family Trust and 13,351 shares allocated to Mr. Hill by the
Company's ESOP. Mr. Hill is the Chairman of the Board of Site Development,
Inc., a shareholder of S. J. Dining, Inc., a shareholder of U.S.
Restaurants, Inc., a partner in J.V. Properties, a co-trustee and
beneficiary of the Hill Family Trust and a co-trustee and beneficiary of
the Company's ESOP Trust. InterArch, Inc., is a company owned by Mr.
Hill's wife. This amount also includes 485,864 shares of Common Stock
issuable upon the exercise of stock options granted to Mr. Hill under the
Company's 1984, 1994 and 1997 Employee Stock Option Plans. This amount
does not include any unallocated shares of Common Stock held by the
Company's ESOP as to which Mr. Hill is a co-trustee.
(7) Includes 148,231 shares of Common Stock issuable upon the exercise of
stock options granted to Mr. Jordan under the Company's 1984, 1994 and
1997 Employee Stock Option Plans, 11,336 shares allocated to Mr. Jordan by
the Company's ESOP, of which Mr. Jordan is a co-trustee and beneficiary,
and 2,604 shares held in trust for Mr. Jordan's minor children. This
amount does not include any unallocated shares of Common Stock held by the
Company's ESOP as to which Mr. Jordan is a co-trustee.
3
(8) Includes 201 shares of Common Stock held by Mr. Kerr's wife and 66,344
shares held by the Markeim-Chalmers, Inc. Pension Plan. Markeim-Chalmers,
Inc. is a company owned by Mr. Kerr.
(9) Includes 69,306 shares held by S. J. Dining, Inc., 70,796 shares held by
U.S. Restaurants, Inc. and 15,180 shares of Common Stock issuable upon the
exercise of stock options granted to Mr. Lewis under the Company's 1989
and 1998 Stock Option Plans for Non-Employee Directors. Mr. Lewis is
President of S. J. Dining, Inc. and President of U.S. Restaurants, Inc.
This amount also includes 2,506 shares held in trust for Mr. Lewis' minor
children.
(10) Includes 24,431 shares held by Mr. Ragone's wife, 17,087 shares held
jointly with Mr. Ragone's wife and 3,942 shares of Common Stock issuable
upon the exercise of stock options granted to Mr. Ragone under the
Company's 1989 and 1998 Stock Option Plans for Non-Employee Directors.
(11) Includes 2,928 shares held by Mr. Schwartz's wife, 8,252 shares held
jointly with Mr. Schwartz's wife and 7,255 shares of Common Stock issuable
upon the exercise of stock options granted to Mr. Schwartz under the
Company's 1989 and 1998 Stock Option Plans for Non-Employee Directors.
(12) Includes 19,390 shares held by Mr. Tarquini's wife, 21,929 shares held by
The Tarquini Organization Profit Sharing Plan, 2,237 shares held by The
Tarquini Foundation and 7,608 shares of Common Stock issuable upon the
exercise of stock options granted to Mr. Tarquini under the Company's 1989
and 1998 Stock Option Plans for Non-Employee Directors. Mr. Tarquini is
the President of The Tarquini Organization.
(13) Includes 25,744 shares held jointly with Mr. Videon's wife, 8,016 shares
held by Mr. Videon's wife, 9,889 shares held by Frank C. Videon, Inc.,
Profit Sharing Trust, 4,017 shares held by Videon Chevrolet Profit Sharing
Plan, 14,549 shares held by the Videon Dodge, Inc., Employee Profit
Sharing Trust, 7,612 shares held by the Frank C. Videon Funeral Home
Profit Sharing Plan, 2,988 shares held in Trust for Mr. Videon's minor
grandchildren and 4,488 shares of Common Stock issuable upon the exercise
of stock options granted to Mr. Videon under the Company's 1989 and 1998
Stock Option Plans for Non-Employee Directors. Mr. Videon is president of
Frank C. Videon, Inc., Vice President of Videon Chevrolet, President of
Videon Dodge, Inc., and Owner of Videon Funeral Home.
(14) Includes 81,312 shares held jointly with Mr. Musumeci's wife, 118,786
shares of Common Stock issuable upon the exercise of stock options granted
to Mr. Musumeci under the Company's 1984, 1994 and 1997 Employee Stock
Option Plans and 10,728 shares of Common Stock allocated to Mr. Musumeci
under the Company's ESOP.
(15) Includes 119,433 shares of Common Stock issuable upon the exercise of
stock options granted to Mr. Falese under the Company's 1984, 1994 and
1997 Employee Stock Option Plans and 1,895 shares of Common Stock
allocated to Mr. Falese under the Company's ESOP, 10,430 shares held by
Mr. Falese's wife, 946 shares held jointly with Mr. Falese's wife and
3,510 shares held by Mr. Falese's wife in trust for their minor daughter.
4
(16) Includes 157,130 shares of Common Stock issuable upon the exercise of
stock options granted to Mr. DiFlorio under the Company's 1984, 1994 and
1997 Employee Stock Option Plans and 5,935 shares of Common Stock
allocated to Mr. DiFlorio under the Company's ESOP.
(17) Includes 85,845 shares of Common Stock issuable upon the exercise of stock
options granted to Mr. Sukay under the Company's 1984, 1994 and 1997
Employee Stock Option Plans and 3,664 shares allocated to Mr. Sukay by the
Company's ESOP.
(18) Includes 116,198 shares of Common Stock issuable upon the exercise of
stock options granted to Mr. Wojcik under the Company's 1984, 1994 and
1997 Employee Stock Option Plans, 20,225 shares held by the wife of Mr.
Wojcik, 330 shares held in trust for Mr. Wojcik's minor children and 5,802
shares allocated to Mr. Wojcik by the Company's ESOP.
(19) Includes an aggregate of 1,298,992 shares of Common Stock issuable upon
the exercise of stock options granted to directors and certain executive
officers of the Company under the Company's Stock Option Plans.
ELECTION OF DIRECTORS
The Bylaws of Bancorp provide that Bancorp's business shall be managed
by a Board of not less than five nor more than twenty-five directors and that
within these limits the number of directors shall be as established by
resolution of a majority of the full Board of Directors. The Board of Directors
by resolution has set the number of persons to be elected to the Board of
Directors at the Annual Meeting at twelve.
The election of directors will be determined by a plurality vote and
the twelve nominees receiving the most "FOR" votes will be elected. Shares may
be voted "FOR" or withheld from each nominee. Abstentions and broker non-votes
(which may occur if a beneficial owner of stock where shares are held in a
brokerage or bank account fails to provide the broker or bank voting
instructions as to such shares) will have no effect on the outcome of the
election because directors will be elected by a plurality of the shares voted
for directors.
The Board of Directors unanimously recommends a vote "FOR" the election
as directors of the nominees named herein.
The Board of Directors has designated the twelve persons listed below
to be nominees for election as directors. All of the nominees are currently
members of the Board, and each of them has consented to serve if elected.
Bancorp has no reason to believe that any of the nominees will be unavailable
for election; however, if any nominee becomes unavailable for any reason, the
Board of Directors may designate a substitute nominee, or the number of
directors to be elected at the Annual Meeting will be reduced accordingly.
Directors of Bancorp hold office for one year and until their respective
successors have been duly elected and qualified.
5
The following information regarding Bancorp's nominees is based, in
part, on information furnished by the nominees.
Name Age Positions with Bancorp and Subsidiaries
- ---- --- ---------------------------------------
Vernon W. Hill, II 53 Chairman and President of Bancorp; Chairman and
President of Commerce NJ; Chairman and President of
Commerce PA; Chairman of Commerce Shore and Commerce North
C. Edward Jordan, Jr. 55 Executive Vice President and Director of Bancorp; Executive
Vice President and Director of Commerce NJ; Director of
Commerce PA
Robert C. Beck 63 Secretary and Director of Bancorp; Secretary and Director of
Commerce NJ; Director of Commerce PA
David Baird, IV 62 Director of Bancorp, Commerce NJ and Commerce PA
Jack R Bershad 68 Director of Bancorp, Commerce NJ and Commerce PA
Joseph E. Buckelew 70 Director of Bancorp, Commerce Shore and Commerce PA;
President of Commerce Shore; Chairman of Commerce National
Insurance Services, Inc.
Morton N. Kerr 68 Director of Bancorp, Commerce NJ and Commerce PA
Steven M. Lewis 49 Director of Bancorp, Commerce NJ and Commerce PA
Daniel J. Ragone 71 Director of Bancorp, Commerce NJ and Commerce PA
William A. Schwartz, Jr. 58 Director of Bancorp, Commerce NJ and Commerce PA
Joseph T. Tarquini, Jr. 63 Director of Bancorp, Commerce NJ and Commerce PA
Frank C. Videon, Sr. 76 Director of Bancorp, Commerce NJ and Commerce PA
Mr. Hill, a director of Commerce NJ since 1973 and Bancorp since 1982,
has been Chairman and/or President of Commerce NJ since 1973 and Chairman and
President of Bancorp since 1982. Mr. Hill has been Chairman and/or President of
Site Development, Inc., Cherry Hill, New Jersey, a developer of real estate,
since 1968. Mr. Hill has been Chairman of the Board of Directors of Commerce PA
from June 1984 to June 1986 and from January 1987 to the present, President of
Commerce PA since June 1994, a director of Commerce Bank/Harrisburg, Camp Hill,
Pennsylvania since 1985, Chairman of Commerce Shore since January, 1989 and
Chairman of Commerce North since January, 1997.
Mr. Jordan, a director of Commerce NJ since 1974, Bancorp since 1982
and Commerce PA since June, 1997, has been Executive Vice President of Commerce
NJ since 1974 and Executive Vice President of Bancorp since 1982.
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Mr. Beck, a director of Commerce NJ since 1973, Bancorp since 1982 and
Commerce PA since June, 1997, has been Secretary of Commerce NJ since 1973 and
Secretary of Bancorp since 1982. Mr. Beck has been a partner of the law firm of
Parker, McCay & Criscuolo, Marlton, New Jersey since 1987.
Mr. Baird, a director of Bancorp and Commerce NJ since 1988 and
Commerce PA since June, 1997, has been President of Haddonfield Lumber Company,
Inc., Cherry Hill, New Jersey since 1962.
Mr. Bershad, a director of Commerce PA since 1984 and Bancorp and
Commerce NJ since 1987, has been a partner of the law firm of Blank Rome Comisky
& McCauley LLP, Philadelphia, Pennsylvania and Cherry Hill, New Jersey, since
1964 and its Chairman since 1990.
Mr. Buckelew has been a director of Bancorp and Chairman of Commerce
National Insurance Services, Inc., the wholly-owned insurance brokerage
subsidiary of Bancorp, since November, 1996 and has been a director of Commerce
Shore since 1993 and Commerce NJ and Commerce PA since June, 1997. Mr. Buckelew
was elected President of Commerce Shore in 1998. Mr. Buckelew was the President
of Morales, Potter & Buckelew, Inc. t/a Buckelew & Associates, Toms River, New
Jersey from 1959 to November 1996, when this insurance agency was acquired by
Bancorp.
Mr. Kerr, a director of Commerce NJ since 1973, Bancorp since 1982 and
Commerce PA since June, 1997, has been President of Markeim-Chalmers, Inc.,
Realtors, Cherry Hill, New Jersey, since 1965.
Mr. Lewis, a director of Commerce PA since 1984 and a director of
Bancorp and Commerce NJ since 1988, has been President of U.S. Restaurants,
Inc., Blue Bell, Pennsylvania since 1985 and President of S. J. Dining, Inc.
since 1986.
Mr. Ragone, a director of Commerce NJ since 1981, Bancorp since 1982
and Commerce PA since June, 1997, has been Chairman and President of Ragone,
Raible, Lacatena & Beppel, C.P.A., Haddonfield, New Jersey, and its predecessor
firms, since 1960.
Mr. Schwartz, a director of Commerce PA since 1984 and a director of
Bancorp and Commerce NJ since June, 1997, has been Chairman, President and Chief
Executive Officer of U.S. Vision, Glendora, New Jersey, or its predecessor
firms, since 1967.
Mr. Tarquini, a director of Commerce NJ since 1973, Bancorp since 1982
and Commerce PA since June, 1997, has been President of The Tarquini
Organization, A.I.A., Camden, New Jersey, since 1980. Prior thereto, he had been
a partner in its predecessor firms.
Mr. Videon, a director of Commerce PA since 1991 and a director of
Bancorp and Commerce NJ since June, 1997, has been the owner of Frank C. Videon
Funeral Home, Broomall, Pennsylvania, since 1982.
Director Compensation
Directors of Bancorp, Commerce NJ and Commerce PA were paid an annual
fee of $10,000 plus $750 for each meeting of the Board of Directors and
committee meeting attended in 1998 and will be paid an annual fee of $12,000
plus $1,000 for each meeting of the Board of Directors and committee meeting
attended in 1999. When meetings of the Board of Directors of Bancorp, Commerce
NJ and Commerce PA occur on the same day, only one fee is paid. Directors of
Commerce Shore are paid a fee of $500 for each meeting of the Board of Directors
and committee meeting attended, and directors of Commerce North are paid a fee
of $500 for each meeting of the Board of Directors and committee meeting
attended. No fees are paid to directors who are also operating officers of
Bancorp, Commerce NJ, Commerce PA, Commerce Shore or Commerce North. Each
director of Bancorp is provided with $100,000 of permanent life insurance.
7
A retirement plan for outside directors, i.e., directors who are not
officers or employees of Bancorp on the date their service as a Bancorp director
ends, provides that outside directors with five or more years of service as a
Bancorp director are entitled to receive annually, for ten years or the number
of years served as a director, whichever is less, commencing upon such
director's attainment of age 65 and retirement from the Bancorp Board or upon
such director's disability, payments equal to the highest 1099 Compensation (as
such term is defined in the plan) in effect at any time during the five year
period immediately preceding such director's retirement or, if earlier, death or
disability. This plan further provides that, in the event a director dies before
receiving all benefits to which he or she is entitled, such director's surviving
spouse is entitled to receive all benefits not received by the deceased director
commencing upon such director's death. Upon a change in control of Bancorp, the
plan provides that each director then sitting on the Bancorp Board,
notwithstanding the length of time served as a director, becomes entitled to
receive annually, for ten years, or twice the number of years served as a
director, whichever is less, payments equal to the higher of the director's 1099
Compensation at the time of the director's termination of Board service and the
highest 1099 Compensation in effect at any time during the five year period
immediately preceding the change in control commencing on the latest to occur of
the termination of the director's Board service, attainment of age 65 or any
date designated by the director at any time and from time to time. The
definition of "change in control" for purposes of this plan parallels the
definition of that term contained in the Employment Agreements discussed on page
12 of this Proxy Statement. This plan became effective January 1, 1993, as
amended.
1989 and 1998 Stock Option Plans For Non-Employee Directors
Effective April 24, 1989 (and as amended in 1994), Bancorp adopted the
1989 Stock Option Plan for Non-Employee Directors (the "1989 Plan") which
provides for the purchase of a total of not more than 305,419 shares (as
adjusted for all stock splits and dividends through April 5, 1999) of Bancorp
Common Stock by members of the Boards of Directors of Bancorp and its subsidiary
corporations. Options granted pursuant to the 1989 Plan may be exercised
beginning on the earlier to occur of (i) one year after the date of their grant
or (ii) a "change in control" of Bancorp, as such term is defined in the 1989
Plan. No further options may be granted under the 1989 Plan. As of April 5,
1999, 97,130 options (as adjusted for all stock splits and stock dividends
through April 5, 1999) remain outstanding under the 1989 Plan.
Effective June 29, 1998, Bancorp adopted the 1998 Stock Option Plan for
Non-Employee Directors (the "1998 Plan") which provides for the purchase of a
total of not more than 525,000 shares (as adjusted for all stock splits and
dividends through April 5, 1999) of Bancorp Common Stock by members of the
Boards of Directors of Bancorp and its subsidiary corporations. Under the 1998
Plan, members of the Board of Directors of Bancorp and its current and future
subsidiary corporations (i.e. any corporation in which Bancorp owns, directly or
indirectly, fifty percent or more of the outstanding voting power of all classes
of stock of such corporation at the time of election or reelection of such
director) who are not also employees of Bancorp or its subsidiary corporations
are entitled to receive options to purchase Bancorp Common Stock. Options
granted pursuant to the 1998 Plan may be exercised in whole, or from time to
time in part, beginning on the earlier to occur of (i)one year after the date of
their grant or (ii) a "change in control" of the Company, as such term is
defined in the 1998 Plan. As of April 5, 1999, 330,653 options (as adjusted for
all stock splits and stock dividends through April 5, 1999) had been granted
under the 1998 Plan and 194,347 options (as adjusted for all stock splits and
stock dividends through April 5, 1999) were available for grant. Options may
continue to be granted under the 1998 Plan through December 31, 2007.
8
Both the 1989 Plan and 1998 Plan are administered by the Board of
Directors of Bancorp, including non-employee directors. Options granted under
both the 1989 Plan and/or 1998 Plan are not "incentive stock options" as defined
in Section 422 of the Internal Revenue Code of 1986, as amended. Option prices
are intended to equal 100% of the fair market value of Bancorp's Common Stock on
the date of option grant. The Board of Directors of Bancorp, in their sole
discretion, may grant options under the 1998 Plan to non-employee directors and
determine the number of shares subject to each option, the rate of option
exercisability, and subject to certain limitations, the option price and the
duration of the options. Unless terminated earlier by the option's terms,
options granted under the 1998 Plan expire ten years after the date they are
granted.
For the year ended December 31, 1998, options to purchase the following
shares of Bancorp Common Stock (as adjusted to reflect the 5-for-4 stock split
in the form of a 25% stock dividend declared on June 29, 1998 and the 5% stock
dividend declared on December 15, 1998) were granted to the following directors
under the 1998 Plan: Messrs. Baird, 13,123; Beck, 32,811; Bershad, 16,405; Kerr,
32,811; Lewis, 15,748; Ragone, 22,311; Schwartz, 9,842; Tarquini, 32,811; and
Videon, 5,248. Such options were not exercisable in 1998.
Meetings and Committees of the Board of Directors
During 1998, there were 13 meetings of the Board of Directors of
Bancorp. The Board of Directors of Bancorp has established an Audit Committee,
an Oversight Committee and a Personnel Committee but does not have a standing
Nominating Committee. In addition, each of Bancorp's four subsidiary banks,
Commerce Bank, N.A., Cherry Hill, New Jersey ("Commerce NJ"), Commerce
Bank/Pennsylvania, N.A., Philadelphia, Pennsylvania ("Commerce PA"), Commerce
Bank/Shore, N.A. ("Commerce Shore") and Commerce Bank/North ("Commerce North")
has various committees of their respective boards.
Information with respect to the committees of the Board of Directors of
Bancorp is set forth below.
Audit Committee
The Audit Committee reviews Bancorp's and its wholly-owned subsidiary
banks' financial statements, accounting procedures and methods employed in
connection with audit programs. It serves as the principal liaison between the
Board of Directors and Bancorp's independent auditors. In addition, this
committee makes recommendations to the Board of Directors concerning the
selection of Bancorp's independent auditors. Daniel J. Ragone and Joseph T.
Tarquini, Jr. are the current members of the Audit Committee. During 1998, there
were four meetings of the Audit Committee.
Oversight Committee
The Oversight Committee reviews compliance matters at Bancorp and its
banking subsidiaries, and reports to Bancorp's Audit Committee. Daniel J.
Ragone, Joseph T. Tarquini, Jr., Joseph A. Haynes (Director of Commerce North)
and Daniel M. Monroe (Director of Commerce Shore) are the current members of the
Oversight Committee. During 1998, there were four meetings of the Oversight
Committee.
Personnel Committee
The Personnel Committee reviews and recommends the levels of
compensation of Commerce NJ's, Commerce PA's, Commerce Shore's and Commerce
North's executive officers and administers Bancorp's Employee Stock Option
Plans. Morton N. Kerr, Daniel J. Ragone and Jack R Bershad are the current
members of the Personnel Committee. During 1998, there was one meeting of the
Personnel Committee. The report of the Personnel Committee with respect to 1998
compensation is set forth on page 18 of this Proxy Statement.
9
Attendance
In 1998, each of Bancorp's directors and nominees for directors
attended more than 75% of the aggregate of the total number of meetings of the
Board of Directors and all committees of which they were members of Bancorp,
Commerce NJ, Commerce PA, Commerce Shore and Commerce North, as the case may be.
EXECUTIVE OFFICERS
The executive officers of Bancorp and its banking subsidiaries, as of
April 5, 1999, are set forth below.
Position with Bancorp, Commerce NJ, Commerce PA,
Commerce Shore and Commerce North
Name Age Principal Occupation
---- --- --------------------
Vernon W. Hill, II 53 Chairman and President of Bancorp since 1982; Chairman and/or President of
Commerce NJ since 1973; Chairman of Commerce PA from June 1984 to June
1986 and from January 1987 to present; President of Commerce PA from June
1994 to present; Chairman of Commerce Shore since 1989 and Commerce North
since 1997.
C. Edward Jordan, Jr. 55 Executive Vice President and Director of Bancorp since 1982; Executive Vice
President and Director of Commerce NJ since 1974; Director of Commerce PA
since 1997.
Peter M. Musumeci, Jr. 48 Executive Vice President and Senior Credit Officer of Bancorp since 1986 and
Treasurer and Assistant Secretary of Bancorp since 1984; Executive Vice
President of Commerce NJ since 1986; Director of Commerce Shore since 1989.
Robert D. Falese, Jr. 52 Executive Vice President and Senior Loan Officer of Commerce NJ since 1992.
Dennis M. DiFlorio 45 Executive Vice President of Commerce NJ since January, 1996; Director of
Commerce North since 1997. Prior thereto Mr. DiFlorio was Senior Vice
President of Commerce NJ since 1988.
David Wojcik 46 Senior Vice President of Bancorp since 1988.
Thomas J. Sukay 45 Senior Vice President of Bancorp since 1989.
10
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table is a summary of certain information concerning the
compensation during the last three fiscal years awarded or paid to, or earned
by, Bancorp's chief executive officer and each of Bancorp's other four most
highly compensated executive officers during Bancorp's last fiscal year.
Long Term
Annual Compensation Compensation
-------------------------------------------------- ------------
Securities
Other Underlying All
Annual Stock Option Other
Name/Title Year Salary Bonus Compensation(1) Grants(2) Compensation(3)
---------- ---- ------ ----- --------------- ------------ ---------------
Vernon W. Hill, II 1998 $620,000 $150,000 $69,006 236,250 $34,568
Chairman and President of Bancorp; 1997 550,000 150,000 67,213 137,813 37,004
Chairman and President of Commerce NJ 1996 480,000 150,000 62,377 190,285 37,381
and Commerce PA; Chairman of
Commerce Shore and Commerce North
C. Edward Jordan, Jr. 1998 $ 250,000 $ 25,000 10,631 $25,950 (3)
Executive Vice President of Bancorp; 1997 260,000 25,000 6,891 28,346
Executive Vice President of Commerce NJ 1996 240,000 60,000 59,328 29,654
Peter M. Musumeci, Jr. 1998 $280,000 $ 60,000 21,131 $20,057 (3)
Executive Vice President and Senior Credit 1997 265,000 60,000 27,563 25,528
Officer, Treasurer and Assistant Secretary 1996 240,000 60,000 59,328 26,423
of Bancorp; Executive Vice President of
Commerce NJ
Robert D. Falese, Jr. 1998 $300,000 $ 80,000 26,381 $ 18,211 (3)
Executive Vice President and Senior Loan 1997 275,000 80,000 34,453 19,997
Officer of Commerce NJ 1996 240,000 80,000 66,563 15,908
Dennis M. DiFlorio 1998 $300,000 $ 80,000 26,381 $ 8,632 (3)
Executive Vice President of 1997 275,000 80,000 34,453 10,413
Commerce NJ 1996 200,000 80,000 66,563 10,609
- ------------------------
(1) The total in this column reflects personal use of a company car (1998,
$4,517; 1997, $4,517; 1996, $4,517), expense allowances (1998, $62,004;
1997, $54,996; 1996, $50,600) and country club dues (1998, $2,485; 1997,
$7,700; 1996, $7,260). The value of such other annual compensation did not
exceed the lesser of $50,000 or 10% of salary and bonus for any individual
in any year except Mr. Hill.
11
(2) The stock option grants reflected in this column have been adjusted for
the 5-for 4 stock split in the form of a 25% stock dividend declared on
June 29, 1998, and the 5% stock dividends declared on December 15, 1998,
December 16, 1997, December 19, 1996 and January 2, 1996. The original
grant was adjusted based on the unexercised option shares outstanding on
the date of the stock dividend.
(3) The totals in this column reflect (i) premiums on life insurance (for
1998, Mr. Hill, $23,375; Mr. Jordan, $16,855; and Mr. Musumeci, $10,084;
for 1997, Mr. Hill, $24,032; Mr. Jordan, $17,344; and Mr. Musumeci,
$13,738; and for 1996, Mr. Hill, $25,128; Mr. Jordan, $18,218; and Mr.
Musumeci, $14,275); (ii) long-term disability policies (for 1998, Mr.
Hill, $7,033; Mr. Jordan, $4,935, Mr. Musumeci, $5,813; Mr. Falese,
$14,051 and Mr. DiFlorio, $4,472; for 1997, Mr. Hill $7,094; Mr. Jordan,
$5,124; Mr. Musumeci, $5,912; Mr. Falese, $14,119; and Mr. DiFlorio,
$4,535 and for 1996, Mr. Hill, $5,179; Mr. Jordan, $4,362; Mr. Musumeci,
$5,074; Mr. Falese, $8,834; and Mr. DiFlorio, $3,535); and (iii)
contributions to Bancorp's ESOP (in 1998, $4,160 each for all five
individuals; in 1997, $5,878 each for all five individuals; and in 1996,
$7,074 each for all five individuals).
Employment Agreements
Mr. Hill's Employment Agreement provides that he will be employed by
Bancorp and Commerce NJ as Chairman of the Board, President and Chief Executive
Officer for a term of five years effective January 1, 1992, provided that on
each January 1 thereafter the Employment Agreement shall be automatically
renewed and extended for a new five year term unless either Bancorp or Hill
gives the other at least ninety days prior written notice of their desire to
terminate the Agreement, in which event the term will have four years remaining.
Under the terms of the Employment Agreement, Mr. Hill's "base salary"
shall not be less than $700,000. The Employment Agreement provides that Mr. Hill
will participate in any benefit or compensation programs in effect which are
generally made available from time to time to executive officers of Bancorp and
provides for all other fringe benefits as in effect from time to time which are
generally available to Bancorp's salaried officers including, without
limitation, medical and hospitalization coverage, life insurance coverage and
disability coverage.
The Employment Agreement requires Bancorp to compensate Mr. Hill for
the balance of the term of the Employment Agreement at a rate equal to seventy
percent of his annual base salary if he becomes permanently disabled (as defined
in the Employment Agreement) during the term and to pay Mr. Hill's designated
beneficiary a lump sum death benefit if he dies during the term in an amount
equal to three times his average annual base salary in effect during the
twenty-four months immediately preceding his death.
The Employment Agreement allows Mr. Hill to terminate his employment
with Bancorp upon a change in control of Bancorp (as defined in the Employment
Agreement) and if within three years of such change in control, without Mr.
Hill's consent, among other things, the nature and scope of his authority with
Bancorp or a surviving or acquiring person are materially reduced to a level
below that which he enjoyed on January 1, 1992. If Mr. Hill terminates his
employment because of a change in control, he will be entitled to a lump sum
severance payment equal to four times his average annual base salary in effect
during the twenty-four month period immediately preceding such termination
(provided that such payment does not constitute a "parachute payment" under
Section 280G of the Internal Revenue Code of 1986, as amended, and in the event
such payment would constitute a "parachute payment", such lump sum severance
payment shall be reduced so as to not constitute a "parachute payment"), and the
continuation of certain benefits including medical, hospitalization and life
insurance. The Employment Agreement contains a non-competition covenant for Mr.
Hill should his employment with Bancorp be terminated under certain
circumstances.
12
The Employment Agreements for Messrs. Jordan, Musumeci, Falese and
DiFlorio are substantially similar to that of Mr. Hill's except that: Mr. Jordan
will serve as Executive Vice President of Bancorp and Commerce NJ, Mr. Musumeci
will serve as Executive Vice President/Senior Credit Officer of Bancorp and
Commerce NJ, Mr. Falese will serve as Executive Vice President and Senior Loan
Officer of Bancorp and Commerce NJ, and Mr. DiFlorio will serve as Executive
Vice President of Bancorp and Commerce NJ. The term of each Employment Agreement
is three years and the lump sum death benefit is each equal to two times their
respective average annual base salary in effect during the twenty-four month
period preceding death. Mr. Jordan's "base salary" under his Employment
Agreement is $262,500, Mr. Musumeci's "base salary" under his Employment
Agreement is $300,000, Mr. Falese's "base salary" under his Employment Agreement
is $325,000 and Mr. DiFlorio's "base salary" under his Employment Agreement is
$325,000.
Employee Stock Option Plans
Effective April, 1984, Bancorp adopted the Commerce Bancorp, Inc.
Incentive Stock Option Plan (the "1984 Plan") which provided for the purchase of
a total of not more than 1,858,005 shares of Bancorp Common Stock (as adjusted
for all stock splits and stock dividends through April 5, 1999) by officers and
key employees. Options granted under the 1984 Plan were intended to constitute
"incentive stock options" as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"). No further options may be granted under the
1984 Plan. As of April 5, 1999, 414,182 options (as adjusted for all stock
splits and stock dividends through April 5, 1999) remain outstanding under the
1984 Plan.
Effective May, 1994, Bancorp adopted the Commerce Bancorp, Inc. 1994
Employee Stock Option Plan (the "1994 Plan") which provided for the purchase of
a total of not more than 1,594,562 shares of Bancorp Common Stock (as adjusted
for all stock splits and stock dividends through April 5, 1999) by officers and
key employees. Pursuant to the 1994 Plan, stock options may be granted which
qualify under the Code as incentive stock options as well as stock options that
do not qualify as incentive stock options. No further options may be granted
under the 1994 Plan. As of April 5, 1999, 1,126,506 options (as adjusted for all
stock splits and stock dividends through April 5, 1999) remain outstanding under
the 1994 Plan.
Effective May, 1997, Bancorp adopted the Commerce Bancorp, Inc. 1997
Employee Stock Option Plan (the "1997 Plan") which provides for the purchase of
a total of not more than 3,445,313 shares of Bancorp Common Stock (as adjusted
for all stock splits and stock dividends through April 5, 1999) by officers and
key employees. Pursuant to the 1997 Plan, stock options may be granted which
qualify under the Code as incentive stock options as well as stock options that
do not qualify as incentive stock options. All officers and key employees of
Bancorp or any current or future subsidiary corporation are eligible to receive
options under the 1997 Plan. As of April 5, 1999, 2,439,826 options (as adjusted
for all stock splits and stock dividends through April 5, 1999) had been granted
under the 1997 Plan and 1,005,487 options (as adjusted for all stock splits and
stock dividends through April 5, 1999) were available for grant. Options may
continue to be granted under the 1997 Plan through December 31, 2006.
(The 1984 Plan, 1994 Plan and 1997 Plan are collectively referred to as
the "Employee Plans.")
The purpose of the Employee Plans is to provide additional incentive to
employees of Bancorp by encouraging them to invest in Bancorp's Common Stock and
thereby acquire a proprietary interest in Bancorp and an increased personal
interest in Bancorp's continued success and progress.
13
The Employee Plans are administered by the Personnel Committee
("Committee") which is appointed by the Board of Directors and consists only of
Directors who are not eligible to receive options under the Employee Plans. The
Committee determines, among other things, which officers and key employees
receive an option or options under the Employee Plans, the type of option
(incentive stock options or non-qualified stock options, or both) to be granted,
the number of shares subject to each option, the rate of option exercisability,
and, subject to certain other provisions to be discussed below, the option price
and duration of the option. Under the 1997 Plan, no individual may be granted a
number of options that is more than 50% of the total number of shares of Bancorp
Common Stock authorized for issuance under the 1997 Plan and incentive stock
options first exercisable by an employee in any one year under the 1997 Plan
(and all other Employee Plans of Bancorp) may not exceed $100,000 in value
(determined at the time of grant). The Committee may, in its discretion, modify
or amend any of the option terms hereafter described, provided that if an
incentive option is granted, the option as modified or amended continues to be
an incentive stock option.
In the event of any change in the capitalization of Bancorp, such as by
stock dividend, stock split or what the Board of Directors deems in its sole
discretion to be similar circumstances, the aggregate number and kind of shares
which may be issued under the Employee Plans will be appropriately adjusted in a
manner determined in the sole discretion of the Board of Directors. Reacquired
shares of Bancorp's Common Stock, as well as unissued shares, may be used for
the purpose of the 1997 Plan. Common Stock of Bancorp subject to options which
have terminated unexercised, either in whole or in part, will be available for
future options granted under the 1997 Plan. The option price for options issued
under the 1997 Plan must be at least equal to 100% of the fair market value of
the Common Stock as of the date the option is granted.
Options granted pursuant to the Employee Plans are not exercisable
until one year after the date of grant and then are exercisable pursuant to a
schedule based on years of service or option holding period. Under the 1994 Plan
and 1997 Plan, but not the 1984 Plan, in the event of a "change in control" of
Bancorp, as defined in the 1994 Plan and 1997 Plan, each optionee may exercise
the total number of shares then subject to the option. The Committee has the
authority to provide for a different rate of option exercisability for any
optionee.
Options granted under the 1984 Plan and 1994 Plan are not transferable
other than by will or by the laws of descent and distribution. Except as
otherwise authorized by the Committee with respect to non-qualified stock
options only, options granted pursuant to the 1997 Plan are not transferable,
except by will or the laws of descent and distribution in the event of death.
Options granted under the 1984 Plan had a term of ten years subject to
earlier termination in the event of termination of employment, death, or
disability. The 1984 Plan provided that during the lifetime of an optionee, his
option is exercisable only by him and only while employed by Bancorp or a
subsidiary or within (i) three months after his retirement, or (ii) three months
after he otherwise ceases to be so employed, to the extent the option was
exercisable on the last day of employment. For these purposes, retirement means
termination of employment by an optionee who has attained age 65. If an optionee
retires due to disability, his options may be exercised within twelve months of
his retirement date. If an optionee dies within a period during which his option
could have been exercised by him, his option may be exercised within one year of
his death (unless the option earlier terminates) by those entitled under his
will or the laws of descent and distribution, but only to the extent the option
was exercisable by him immediately prior to his death.
Under the 1994 Plan and 1997 Plan, unless terminated earlier by the
option's terms, both incentive stock options and non-qualified stock options
expire ten years after the date they are granted. Options terminate three months
after the date on which employment is terminated (whether such termination be
voluntary or involuntary), other than by reason of death or disability. The
option terminates one year from the date of termination due to death or
disability (but not later than the scheduled termination date). During an
optionee's lifetime, the option is exercisable only by the optionee including,
for this purpose, the optionee's legal guardian or custodian in the event of
disability, except that under the 1997 Plan, if specifically permitted by the
Committee or the Board of Directors, non-qualified stock options are
transferrable.
14
During 1998, Bancorp granted stock options to purchase an aggregate of
1,564,363 shares (as adjusted for all stock splits and stock dividends through
April 5,1999) of Bancorp's Common Stock at an average price of $43.82 per share
(as adjusted for all stock splits and stock dividends through April 5, 1999)
under the 1997 Plan. During 1998, a total of 223,057 options were exercised
under the Employee Stock Option Plans.
Stock Option Tables
The following table sets forth certain information regarding options
granted during 1998 to each of the executive officers named in the Summary
Compensation Table.
INDIVIDUAL OPTION GRANTS IN 1998
Number of % of Total
Securities Options
Underlying Granted to Black-Scholes
Options Employees in Exercise Expiration Grant Date
Name Granted(1) Fiscal Year Price (1) Date Present Value (2)
---- ---------- ----------- --------- ---- -----------------
Vernon W. Hill, II 131,250 8.4% $ 42.66 June 29, 2008 $ 1,303,313
105,000 6.7% 45.89 December 15, 2008 1,148,700
C. Edward Jordan, Jr. 131 0.0% $ 42.66 June 29, 2008 1,301
10,500 0.7% 45.89 December 15, 2008 114,870
Peter M. Musumeci, Jr. 131 0.0% $ 42.66 June 29, 2008 1,301
21,000 1.3% 45.89 December 15, 2008 229,740
Robert D. Falese, Jr. 131 0.0% $ 42.66 June 29, 2008 1,301
26,250 1.7% 45.89 December 15, 2008 287,175
Dennis M. DiFlorio 131 0.0% $ 42.66 June 29, 2008 1,301
26,250 1.7% 45.89 December 15, 2008 287,175
- -----------------
(1) The stock option grants and exercise price reflected in these columns have
been adjusted for the 5-for-4 stock split in the form of a 25% stock
dividend declared on June 29, 1998, and the 5% stock dividend declared on
December 15, 1998.
(2) In accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was chosen to estimate the grant date
present value of the options set forth in this table. Bancorp's use of
this model should not be construed as an endorsement of its accuracy at
valuing options. All stock option valuation models, including the
Black-Scholes model, require a prediction about future movement of the
stock price. The assumptions used in the model were expected volatility of
.288 to .316, risk-free rates of return of 4.54% to 5.47%, dividend yield
of 3%, and weighted average expected life of four years. The real value of
the options in this table depends upon the actual performance of Bancorp's
Common Stock during the applicable period.
15
The following table sets forth certain information regarding individual
exercises of stock options during 1998 by each of the executive officers named
in the Summary Compensation Table.
AGGREGATED STOCK OPTION EXERCISES IN 1998 AND YEAR-END STOCK OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised in the
Stock Options at Money Stock Options
Shares Year-End 1998 (1) at Year-End 1998
Acquired on Value --------------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
Vernon W. Hill, II --- --- 495,022 236,250 $14,920,720 $1,394,906
C. Edward Jordan, Jr. 44,677 $1,489,561 148,231 10,631 5,354,130 44,112
Peter M. Musumeci, Jr. --- --- 118,786 21,131 3,591,932 87,267
Robert D. Falese, Jr. 7,500 323,966 136,727 59,618 4,450,033 1,088,979
Dennis M. DiFlorio 17,832 634,774 168,946 26,381 5,397,964 108,845
- --------
(1) The stock options reflected in this column have been adjusted for the
5-for-4 stock split in the form of a 25% stock dividend declared on June
29, 1998 and the 5% stock dividend declared on December 15, 1998.
Employee Stock Ownership Plan
Effective January 1, 1989, Bancorp's Board of Directors established
the Commerce Bancorp, Inc. Employee Stock Ownership Plan ("ESOP") as a
restatement of Bancorp's Stock Bonus Plan. Employees of Bancorp and its
subsidiaries are eligible to participate in the ESOP if they are at least 21
years of age and have completed at least 1,000 hours of service to Bancorp or
its subsidiaries during the twelve-month period beginning on the date of hire or
during any subsequent calendar year. Participants are 100% vested in their
accounts under the ESOP upon death, total disability, a complete discontinuance
of contributions by Bancorp, termination of the ESOP, and a partial termination
of the ESOP where a participant is involved in that termination. Except as
provided above, generally, participants are 20% vested after 3 years of credited
service, increasing by 20% for each additional year of credited service so that
participants are 100% vested in their accounts under the ESOP after seven years
of credited service with Bancorp or a subsidiary.
Subject to limitations contained in the Code, contributions by Bancorp
to the ESOP are deductible for federal income tax purposes. Except as described
below, such contributions are determined annually by Bancorp's Board of
Directors at its discretion. Contributions may consist either of shares of
Bancorp's stock, or cash, which may be invested by the trustees of the ESOP's
trust in shares of Bancorp's stock or to provide funds to pay principal or
interest on any indebtedness incurred by the ESOP in purchasing shares.
Contributions by Bancorp are allocated as of the close of each plan year among
accounts of participants in the ESOP. Each participant's account is credited
with that portion of contributions by Bancorp as such participant's compensation
(as defined in the ESOP) bears to all participants' compensation.
16
In January 1990, the ESOP Trust purchased 417,000 shares of Series C
ESOP Cumulative Convertible Preferred Stock ("ESOP Shares") from Bancorp for an
aggregate purchase price of $7,500,000. The ESOP Trust borrowed the purchase
price for the ESOP Shares from an unaffiliated bank, which loan was refinanced
with another unaffiliated bank in 1994 (the "Loan"). The Loan is guaranteed by
Bancorp and its subsidiaries, and is secured by the pledge of the ESOP Shares
obtained with the proceeds of the Loan. Bancorp has agreed to contribute to the
ESOP amounts sufficient to permit the ESOP to make principal and interest
payments on the Loan. Pursuant to the loan agreement with the ESOP's bank
lender, a portion of the ESOP Shares pledged by the ESOP for repayment of the
Loan will be released from the pledge according to a formula based on the
portion of principal and interest which has been repaid each year. As of
December 31, 1998, the outstanding principal balance on the Loan was $1,282,000.
Effective March 1, 1998, the Trustees of the ESOP exercised their
right to convert all 417,000 ESOP Shares held by the ESOP into 849,062 shares of
Bancorp Common Stock. As of April 5, 1999, the ESOP Trust held of record 943,122
shares of Common Stock. As of April 5, 1999, approximately 787,700 shares of
Common Stock held by the ESOP Trust were allocated to individual participant
accounts. The unallocated shares of common stock the ESOP held of record as of
April 5, 1999 were less than 1% of Bancorp's Common Stock.
The co-trustees of the ESOP are Vernon W. Hill, II and C. Edward
Jordan, Jr. Each participant may direct the trustees of the ESOP's trust as to
the manner in which shares of voting stock allocated to his account are to be
voted. Each participant in the ESOP will become entitled to direct the trustees
as to the voting of the shares of Common Stock which are released from the
pledge and which are allocated to his account under the ESOP. The enclosed form
of Proxy also serves as the voting instruction card for the trustees of the ESOP
with respect to the shares of Common Stock which have been allocated to the
accounts of participants under the ESOP. Shares which have not been allocated to
the account of any participant will be voted by the co-trustees in accordance
with such procedures as Bancorp, as the Plan Administrator, shall direct. Shares
which have been allocated to the accounts of participants but for which no
voting directions are received will be voted as the trustees direct in the
exercise of their independent judgment. For the Plan Year ended December 31,
1998, Bancorp contributed $1,134,000 to the ESOP.
Supplemental Executive Retirement Plan
Effective January 1, 1992, Bancorp established a Supplemental
Executive Retirement Plan ("SERP") for certain designated executives in order to
provide supplemental retirement income if Bancorp's ESOP and Social Security
retirement benefits fall below sixty percent of average annual compensation at
the time of retirement. Average annual compensation is defined as the average of
the actual annual compensation paid to the executive by Bancorp during the
period of three consecutive years which produces the highest such average during
the ten year period ending with termination of employment. The SERP is unfunded,
is not a qualified plan under the Code and benefits are paid directly by
Bancorp. Messrs. Hill, Jordan, Musumeci, Falese and DiFlorio have been
designated to participate in the SERP.
Certain Transactions
Certain directors and executive officers of Bancorp, Commerce NJ,
Commerce PA, Commerce Shore and Commerce North, certain of their immediate
family members and certain corporations or organizations with which they are
affiliated have had and expect to continue to have loan and other banking
transactions with Commerce NJ, Commerce PA, Commerce Shore and Commerce North.
All such loans and other banking transactions were made in the ordinary course
of business, were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions for
unrelated parties, and did not involve more than the normal risk of
uncollectibility or present other unfavorable features.
The Board of Directors of Bancorp approves all transactions in which
an officer or director of Bancorp or any of its subsidiaries has an interest. In
the case of a transaction involving a director of Bancorp, such director does
not vote on the transaction.
17
Mr. Kerr, a director and nominee for director of Bancorp, is the
President of Markeim-Chalmers, Inc. which in 1998 received $304,000 in fees for
real estate related services, primarily real estate appraisals.
Messrs. Beck and Bershad, directors and nominees for directors of
Bancorp, are members of law firms which Bancorp and its subsidiaries have
retained during Bancorp's last fiscal year and which Bancorp and its
subsidiaries intend to retain during its current fiscal year.
Bancorp leases from limited partnerships in which Mr. Hill is a
partner or in which a corporation owned by Mr. Hill is a partner under separate
operating lease agreements the land on which it has constructed ten branch
offices. The aggregate annual rental under these leases for 1998 was
approximately $440,000. These leases expire periodically through 2018 but are
renewable through 2038. Aggregate annual rentals escalate to $575,000 in 2007.
Bancorp leases land to a limited partnership partially comprised of the
directors of Bancorp including Messrs. Bershad, Hill and Lewis and a corporation
owned by Mr. Hill. The initial lease term is 25 years, with two successive
10-year options. As of December 31, 1998, the future minimum lease payments to
be received by Bancorp amount to approximately $432,000 for the remainder of the
initial lease term. In accordance with the provision of the land lease, the
limited partnership constructed and owns the office building located on the
land. Commerce PA leases the building as a branch facility. The initial lease
term expires in 2010.
Management believes that the rental paid or received for each of the
foregoing leases is comparable to the rental which they would have to pay to or
would have received from, as the case may be, and that the option prices are
comparable to or more favorable than those that could have been obtained or
received from, non-affiliated parties in similar commercial transactions for
similar locations, assuming that such locations were available.
During 1998, Commerce NJ, Commerce PA, Commerce Shore and Commerce
North obtained interior design, facilities management and general contractor
services in the amount of $1,313,000 from a business corporation of which
Shirley Hill, wife of Vernon W. Hill, II, is a principal shareholder and the
president. Additionally, during 1998 the business received commissions of
$814,000 on furniture and facility purchases made directly by Commerce NJ,
Commerce PA, Commerce Shore and Commerce North. These expenditures related
primarily to the furnishing and related design services of the opening and/or
refurbishing of certain offices during the period. In the opinion of management,
such expenses were substantially equivalent to those that would have been paid
to unaffiliated companies for similar furniture and services.
REPORT OF THE PERSONNEL COMMITTEE
The Personnel Committee of the Board of Directors of Bancorp is
composed of outside non-employee directors. Bancorp's compensation package for
its executive officers consists of base salary, annual performance bonus, annual
stock option grants and various broad based employee benefits including
contributions under Bancorp's ESOP. Management recommendations of base salary
levels, annual performance bonuses and stock option grants are reviewed by the
Personnel Committee and submitted to the full Board of Directors for approval.
18
The objective of Bancorp's executive compensation is to enhance
Bancorp's long-term profitability by providing compensation that will attract
and retain superior talent, reward performance and align the interests of the
executive officers with the long term interests of the shareholders of Bancorp.
The Company has employment agreements with Messrs. Hill, Jordan,
Musumeci, Falese and DiFlorio which were effective January 1, 1992 for Messrs.
Hill, Jordan and Musumeci, and January 1, 1998 for Messrs. Falese and DiFlorio.
See "Employment Agreements."
Base salary levels for Bancorp's executive officers are competitively
set relative to companies in peer businesses. In reviewing base salaries, the
Personnel Committee also takes into account individual experience and
performance.
Bancorp's annual performance bonuses are intended to provide a direct
cash incentive to executive officers and other key employees to maximize
Bancorp's profitability. Financial performance is compared against budgets as
well as peer businesses.
Stock options are intended to encourage officers and other key
employees to remain employed by Bancorp by providing them with a long term
interest in Bancorp's overall performance as reflected by the performance of the
market of Bancorp's Common Stock. In granting stock options, the Personnel
Committee takes into account prior stock option grants and considers the
executive's level of compensation and past contributions to Bancorp.
Vernon W. Hill, II was Bancorp's Chairman, President and Chief
Executive Officer for 1998. Mr. Hill's base salary is set competitively relative
to other chief executive officers in financial service companies in Bancorp's
market area. In determining Mr. Hill's base salary as well as annual performance
bonus, the Committee reviewed independent compensation data and Bancorp's
performance as compared against budgets and peer businesses. As with Bancorp's
other executive officers, Mr. Hill's total compensation involves certain
subjective judgments and is not based solely upon any specific objective
criteria or weighting.
The Personnel Committee and Bancorp are considering the future impact
on executive compensation, and whether certain changes should be made as a
result, of Section 162(m) of the Code which became effective January 1, 1994.
This provision generally denies a deduction for Federal income tax purposes for
annual compensation in excess of $1.0 million for executive officers named in
the "Summary Compensation Table" contained in this Proxy Statement, except for
certain compensation that is performance-based and for compensation that is paid
pursuant to certain contracts entered into prior to February, 1993. Bancorp
believes that the limitation will have no material effect on it in 1999.
PERSONNEL COMMITTEE
Morton N. Kerr
Daniel J. Ragone
Jack R Bershad
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Personnel Committee Interlocks and Insider Participation
The Personnel Committee members are Morton N. Kerr, Daniel J. Ragone
and Jack R Bershad.
Mr. Kerr, a director and nominee for director of Bancorp, is the
President of Markeim-Chalmers, Inc. which in 1998 received $304,000 in fees for
real estate related services, primarily real estate appraisals.
Mr. Bershad, a director and nominee for director of Bancorp, is a
member of a law firm which Bancorp and its subsidiaries have retained during
Bancorp's last fiscal year and which Bancorp and its subsidiaries intend to
retain during its current fiscal year. See "Certain Transactions."
Financial Performance
The graph below shows a comparison of the cumulative return
experienced by Bancorp's shareholders over the years 1994 through 1998, the KBW
Eastern Regional Index and the S&P 500 Index assuming an investment of $100 in
each at December 31, 1993 and the reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Commerce Bancorp, KBW Eastern Regional Index, S&P 500 Index
Year-End 1994 to Year-End 1998
700 ----------------------------------------------------------------------
| |
| |
| * |
600 |----------------------------------------------------------------------|
| |
| |
| |
500 |----------------------------------------------------------------------|
| |
| |
| * |
400 |----------------------------------------------------------------------|
| |
| & |
| & |
300 |----------------------------------------------------------------------|
| # |
| * |
| & # |
200 |----------------------------------------------------------------------|
| * # |
| * #& |
| # |
100 |*#&-------------------------------------------------------------------|
| & |
| |
| |
0 ----------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
* Commerce Bancorp # S & P 500 Index & KBW Eastern Regional Index
Commerce S & P 500 KBW Eastern
Year Bancorp Index Regional Index
---- -------- --------- --------------
1993 100.0 100.0 100.0
1994 135.4 101.3 88.8
1995 162.6 139.4 150.7
1996 262.5 171.4 206.7
1997 436.2 228.9 330.7
1998 602.6 293.9 344.6
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Bancorp's directors and
executive officers, and persons who own more than 10% of a registered class of
Bancorp's equity securities, to file with the Securities and Exchange Commission
("SEC") reports about their beneficial ownership of Common Stock and other
equity securities of Bancorp. All such persons are required by SEC regulation to
furnish Bancorp with copies of all Section 16(a) reports they file.
Based solely on review of the copies of such reports furnished to
Bancorp and written representations that no other reports were required during
the fiscal year ended December 31, 1998, Bancorp believes all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than 10% beneficial owners were timely complied with.
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RELATIONSHIP WITH INDEPENDENT AUDITORS
Bancorp's independent auditors during the most recent year were Ernst &
Young LLP, 2001 Market Street, Philadelphia, PA 19103. Based upon the
recommendation of the Audit Committee, the Board of Directors has selected Ernst
& Young LLP to be Bancorp's independent auditors for 1999. The selection of
Bancorp's independent auditors is not being submitted to shareholders because
there is no legal requirement to do so. A representative of Ernst & Young LLP is
expected to be present at the Annual Meeting and to have the opportunity to make
a statement, if he desires to do so, and to be available to respond to
appropriate questions.
SHAREHOLDER PROPOSALS
Pursuant to the proxy rules promulgated under the Securities Exchange
Act of 1934, Bancorp shareholders are notified that the deadline for providing
Bancorp timely notice of any shareholder proposal to be submitted outside of the
Rule 14a-8 process for consideration at Bancorp's Annual Meeting to be held in
2000 (the "2000 Annual Meeting") will be February 28, 2000. As to all such
matters which Bancorp does not have notice on or prior to February 28, 2000,
discretionary authority shall be granted to the persons designated in Bancorp's
proxy related to the 2000 Annual Meeting to vote on such proposal.
A shareholder proposal for the 2000 Annual Meeting must be submitted to
Bancorp at its headquarters located at the Commerce Atrium, 1701 Route 70 East,
Cherry Hill, NJ 08034, Attention: C. Edward Jordan, Jr., by December 15, 1999 to
receive consideration for inclusion in Bancorp's proxy materials relating to the
2000 Annual Meeting. Any such proposal must also comply with the proxy rules
under the Securities Exchange Act of 1934, including Rule 14a-8.
OTHER MATTERS
Bancorp is not currently aware of any matters which will be brought
before the Annual Meeting (other than procedural matters) which are not referred
to in the enclosed Notice of Annual Meeting. Nevertheless, the enclosed Proxy
confers discretionary authority to vote with respect to those matters described
in Rule 14a-4(c) under the Exchange Act, including matters that the Board of
Directors does not know, a reasonable time before proxy solicitation, are to be
presented at the Annual Meeting. If any such matters are presented at the Annual
Meeting, then the persons named in the enclosed Proxy will vote in accordance
with their best judgment.
A COPY OF BANCORP'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 WILL BE FURNISHED
WITHOUT CHARGE TO ANY SHAREHOLDER UPON WRITTEN REQUEST TO C. EDWARD JORDAN, JR.,
EXECUTIVE VICE PRESIDENT, COMMERCE BANCORP, INC., COMMERCE ATRIUM, 1701 ROUTE 70
EAST, CHERRY HILL, NEW JERSEY, 08034-5400.
By Order of the Board of Directors
ROBERT C. BECK
Secretary
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