Pennsylvania Commerce Bancorp, Inc.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
Date: May 17, 2002
Time: 9:00 a.m.
Place: Crowne Plaza Hotel
23 S. Second Street
Harrisburg, Pennsylvania 17101
Matters to be voted on:
1. Election of Directors. Election of eight (8) directors to serve until
the 2003 annual meeting.
2. Other Business. Any other business properly brought before the
shareholders at the meeting.
You can vote your shares of common stock if our records show that you
owned the shares at the close of business on March 29, 2002 (the "Record Date").
Your vote at the annual meeting is very important to us. Please vote your shares
of common stock by completing the enclosed proxy card and returning it to us in
the enclosed prepaid envelope. This proxy will not be used if you are present at
the meeting and desire to vote in person.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Gary L. Nalbandian
Gary L. Nalbandian
Chairman/President/CEO
Camp Hill, Pennsylvania
April 12, 2002
Pennsylvania Commerce Bancorp, Inc.
------------------
PROXY STATEMENT
April 12, 2002
------------------
GENERAL INFORMATION
This proxy statement has information about the Annual Meeting of
Shareholders of Pennsylvania Commerce Bancorp, Inc. ("Commerce"). The management
of Commerce and Commerce Bank/Harrisburg, N.A. (the "Bank") prepared this proxy
statement for the board of directors. We first mailed this proxy statement and
the enclosed proxy card to shareholders on or about April 12, 2002.
We will pay the costs of preparing, printing and mailing the proxy and all
related materials. In addition to sending you these materials, some of our
employees may contact you by telephone, by mail or in person.
Our executive offices are located at 100 Senate Avenue, Camp Hill,
Pennsylvania 17011, and our telephone number is (717) 975-5630. Our mailing
address is P. O. Box 8599, Camp Hill, Pennsylvania 17001-8599.
Shareholder Proposals for the 2003 Annual Meeting of Shareholders
Under Commerce's Bylaws, no shareholder proposals may be brought before an
annual meeting of shareholders unless a proposal is specified in the notice of
the meeting or is otherwise brought before the meeting by the Board of Directors
or by a shareholder entitled to vote who has delivered notice to Commerce
(containing information specified in the Bylaws) not less than 120 days prior to
the anniversary of the mailing of the previous year's proxy statement. These
requirements are separate from and in addition to the SEC's requirements that a
shareholder must meet in order to have a shareholder proposal included in
Commerce's proxy statement. A shareholder wishing to submit a proposal for
consideration at the 2003 Annual Meeting of Shareholders, either under SEC Rule
14a-8, or otherwise, should do so no later than December 13, 2002.
If the corporate secretary of Commerce receives notice of a shareholder
proposal that complies with the governing Bylaw provision on or prior to the
required date and if such proposal is properly presented at the 2003 Annual
Meeting of shareholders, the proxies appointed by Commerce may exercise
discretionary authority in voting on such proposal if, in Commerce's proxy
statement for such meeting, Commerce advises shareholders of the nature of such
proposal and how the proxies appointed by Commerce intend to vote on such
proposal, unless the shareholder submitting the proposal satisfies certain SEC
requirements, including the mailing of a separate proxy statement to Commerce's
shareholders.
The presiding officer of the meeting may refuse to permit any proposal to
be made at an annual meeting by a shareholder who has not complied with all of
the governing Bylaw procedures, including receipt of the required notice by the
corporate secretary for Commerce by the date specified. If a
shareholder proposal is received by Commerce after the required notice date but
the presiding officer of the meeting nevertheless permits such proposal to be
made at the 2003 Annual Meeting of Shareholders, the proxies appointed by
Commerce may exercise discretionary authority when voting on such proposal.
If the date of our next annual meeting is advanced or delayed by more than
30 days from May 16, 2003, we will promptly inform you of the change of the
annual meeting and the date by which shareholder proposals must be received.
VOTING
Who can vote?
You can vote your shares of common stock if our records show that you
owned the shares at the close of business on March 29, 2002 (the "Record Date").
A total of 1,906,796 shares of common stock were outstanding on the Record Date
and can vote at the annual meeting. You get one vote for each share of common
stock you own. The enclosed proxy card shows the number of shares you can vote.
We will hold the annual meeting if the holders of a majority of the shares of
the common stock entitled to vote either sign and return their proxy cards or
attend the meeting in person.
As of the Record Date, there were 40,000 shares of Series A Non-Cumulative
Preferred Stock ("Preferred Stock") outstanding. Holders of Preferred Stock
cannot vote at the annual meeting.
How do I vote by proxy?
Follow the instructions on the enclosed proxy card to vote on each
proposal to be considered at the annual meeting. Sign and date the proxy card
and mail it back to us in the enclosed prepaid envelope. The proxyholders named
on the proxy card will vote your shares as you instruct. If you sign and return
the proxy card but do not vote on a proposal, the proxyholders will vote for you
on that proposal. Unless you instruct otherwise, the proxyholders will vote for
the election of each of the eight director nominees and for each of the other
proposals to be considered at the meeting.
What vote is required?
All business that may come before the meeting, including the election of
directors, must be approved by the holders of a majority of the outstanding
shares of common stock of Commerce represented at the meeting if a quorum is
present.
What if other matters come up at the annual meeting?
The matters described in this proxy statement are the only matters we know
will be voted on at the meeting. If other matters are properly presented at the
annual meeting, the proxyholders named in the enclosed proxy card will vote your
shares as they see fit.
How are votes counted?
Our judges of election will manually count all votes, which are cast in
person or by proxy at the annual meeting.
Voting is an important right of shareholders. If you abstain or otherwise
fail to cast a vote on any matter, the abstention or failure is not a vote and
will not be counted. Broker non-votes (shares of common stock held in record
name by your broker or nominee for which (i) you have not provided voting
instructions, (ii) the broker or nominee does not have discretion to vote on
your behalf, and (iii) the broker or nominee has indicated on the proxy that it
does not have authority to vote on such matters) will also not be counted as
votes.
2
Can I change my vote after I return my proxy card?
Yes. At any time before the vote on a proposal, you can change your vote
either by:
o giving Commerce's secretary a written notice revoking your proxy
card; or
o signing, dating and returning to us a new proxy card.
We will honor the proxy card with the latest date.
Can I vote in person at the annual meeting?
Yes. We encourage you to complete and return the proxy card to ensure
that your vote is counted. However, you may attend the meeting and vote in
person whether or not you have previously returned a proxy card.
ELECTION OF DIRECTORS OF COMMERCE
The Bylaws of Commerce provide as follows:
o the board of directors may, from time to time, fix the number of
directors;
o the board will consist of not less than five nor more than 25
directors; and
o directors will be elected for a one-year term.
At the annual meeting, we will nominate the eight persons named in this
proxy statement as directors. Although we don't know of any reason why any of
these nominees might not be able to serve, we will propose a substitute nominee
if any nominee is not available for election.
Shareholders also can nominate persons to be directors. If you want to
nominate someone, you must deliver or mail a notice to the Chairman of the Board
of Commerce not less than 45 days prior to the date of the annual meeting. Your
notice must state your name and residence address and the number of shares of
Commerce, which you own. Your notice must also contain the following information
on each proposed nominee:
o the name, address and age of the nominee;
o the principal occupation of the nominee;
o the number of shares of Commerce common stock owned by the
nominee; and
o the total number of shares that, to your knowledge, will be voted
for the nominee.
If you do not follow this procedure, the Chairman of the meeting will
disregard your nominations and the judges of election will disregard any votes
cast for your nominees.
The proxyholders named in the proxy card intend to vote for the election
of the eight persons listed as director nominees to serve until the 2003 annual
meeting. Unless you indicate otherwise, your proxy will be voted in favor of the
election of those nominees. Each nominee is currently a director of Commerce and
the Bank.
The following table shows the name and age of each nominee. Commerce does
not have separate classes of Directors. The table also shows the following
information on each nominee and director:
o business experience, including principal occupation for the past
five years;
o the period during which he has served as a director of Commerce;
and
o the number and percentage of outstanding shares of common stock
of Commerce which he beneficially owned as of the Record Date.
3
Business Experience Amount and Percentage
Including Principal Nature of of
Occupation for the Director Beneficial Outstanding
Name and Age Past Five Years Since Ownership 1 Stock Owned
- ------------ ----------------------------- ---------- ----------- -----------
Gary L. Nalbandian Chairman of Pennsylvania 1985 217,884 2 10.84%
Age 59 Commerce Bancorp, Inc.,
and Commerce Bank/
Harrisburg, N.A., Co-Owner
of Commercial Industrial
Realty Co. (CIR) Camp Hill, PA
Vernon W. Hill, II 3 Vice Chairman of Pennsylvania 1985 267,966 4 13.95%
Age 56 Commerce Bancorp, Inc. and
of Commerce Bank/Harrisburg,
N.A., Chairman of the Board/
President of Commerce
Bancorp, Inc., Cherry Hill, NJ
Douglas S. Gelder Owner, DSG Development, 1987 21,858 5 1.14%
Age 52 Hershey, PA and Partner,
Luttrell & Associates,
Hershey, PA
Alan R. Hassman Owner/Operator of ARH, Inc., 1985 109,733 6 5.71%
Age 62 Harrisburg, PA
Howell C. Mette Attorney-at-Law, 1985 52,759 7 2.75%
Age 74 Mette, Evans & Woodside
Harrisburg, PA
Michael A. Serluco Owner, Consolidated 1985 71,920 7 3.74%
Age 61 Properties, Wormleysburg, PA
Samir J. Srouji, M.D. Physician-Surgeon 1985 64,413 8 3.35%
Age 65 Plastic Surgery, P.C.
Camp Hill, PA
James R. Adair President/CEO of 2001 1,890 *
Age 54 Alexander Constructors, Inc.
1997-Present
Senior Vice President of
Corestates Bank 1996
<FN>
- ---------------
* Less than one percent
1 The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission. Accordingly, they 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 home 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 March 29, 2002. Shares subject
to outstanding stock options, which an individual has the right to acquire
within 60 days after March 29, 2002 are deemed to be outstanding for the
purpose of computing the percentage of outstanding securities of the class of
stock owned by such individual or any group including such individual only.
Beneficial ownership may be disclaimed as to certain of the securities.
4
2 Includes 42,957 shares held by Mr. Nalbandian's individually directed
participant account in the CIR Profit Sharing Trust with respect to which Mr.
Nalbandian has sole voting power, 10,254 shares held by Mr. Nalbandian as
co-trustee of the CIR Profit Sharing Trust with respect to which he shares
voting power, 9,110 shares held in trust by Mr. Nalbandian or Dorothy
Nalbandian for the benefit of Mr. Nalbandian's children and 1,139 shares
owned by Mr. Nalbandian's wife, Jaimie Nalbandian. Also includes 102,282
currently exercisable Incentive Stock Options.
3 In addition to his capacity with Pennsylvania Commerce Bancorp, Inc. and the
Bank, Mr. Hill is a founder of Commerce Bank, N.A., a national bank located
in Cherry Hill, New Jersey. He has served as Chairman of the Board and/or
President of Commerce Bank, N.A. since 1973 and Chairman of the Board and
President of Commerce Bancorp, Inc., a bank holding company which owns 100%
of Commerce Bank, N.A. since 1983.
4 Includes 166,350 shares owned by Commerce Bancorp, Inc., of which Mr. Hill is
the Chairman of the Board and President. This figure also includes 11,723
shares owned by J. V. Properties, a partnership in which Mr. Hill is one of
two partners, 11,723 shares owned by S. J. Dining, a corporation in which Mr.
Hill is one of two shareholders, 9,118 shares owned by InterArch, a
corporation owned by Mr. Hill's wife, and 2,604 shares owned by Mr. Hill's
wife, Shirley Hill. Also includes 14,660 currently exercisable Director Stock
Options.
5 Includes 13,183 currently exercisable Director Stock Options.
6 Includes 25,106 shares owned by Mr. Hassman's wife, Gloria Hassman, and 9,852
shares held in trust by Mr. Hassman, as Trustee, for the benefit of his
children. Also includes 14,660 currently exercisable Director Stock Options.
7 Includes 14,660 currently exercisable Director Stock Options.
8 Includes 8,893 shares owned by Dr. Srouji's wife, Gillian Srouji, and 11,240
shares held by Dr. Srouji's self-directed participant account in the Plastic
Surgery P.C. Profit Sharing Plan. Also includes 14,660 currently exercisable
Director Stock Options.
</FN>
PRINCIPAL SHAREHOLDERS
The following table shows the name, address, amount and nature of
beneficial ownership and percent of class of outstanding Commerce common stock
of each person who we know beneficially owns more than 5% of Commerce's common
stock (as of March 29, 2002).
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Outstanding Stock
------------------- --------------------- ------------------
Gary L. Nalbandian 217,884 1 10.84%
CIR, Camp Hill, PA
Vernon W. Hill, II 267,966 2 13.95%
Commerce Bancorp, Inc.
Cherry Hill, NJ
Commerce Bancorp, Inc. 166,350 3 8.72%
Cherry Hill, NJ
Alan R. Hassman 109,733 4 5.71%
ARH, Inc., Camp Hill, PA
<FN>
- -------------
1 See footnote 2 above.
2 See footnote 4 above.
3 These shares are also reported as beneficially owned by Vernon W. Hill, II.
4 See footnote 6 above.
</FN>
5
The following are all shares owned beneficially by all directors and
executive officers as a group:
Amount and Nature of
Beneficial Ownership
------------------------
Title of Class Direct Indirect Percent of Class
-------------- ----------- ---------- ------------------
Common Stock and Exercisable Stock Options........... 748,561 1 252,984 45.14%
Series A Non-Cumulative Preferred Stock.............. 0 40,000 100%
<FN>
- --------------
1 Includes 73,600 currently exercisable Incentive Stock Options and 25,493
shares held by James T. Gibson, former President/CEO of Commerce and of the
Bank.
</FN>
Directors' Compensation
Each Commerce director received an annual fee of $1,100 plus a monthly fee
of $1,000 for each regular monthly meeting of the board of directors attended in
2001. Each director who is an active member of the Audit, Real Estate and/or
Personnel Committee received $100 for each committee meeting he attended. The
annual fee for 2002 will be $1,500, the meeting fee will be $1,200 and the
committee meeting fee will be $150.
Additionally, Gary L. Nalbandian received a salary of $120,000 in 2001 for
service as Chairman of the Board. Mr. Nalbandian also participated in Commerce's
Retirement Savings Plan (which is a 401K Salary Reduction Plan) and was covered
by Commerce's Medical Health Insurance Plan.
2001 Stock Option Plan for Non-Employee Directors
In 2000, the shareholders of Commerce adopted the 2001 Director's Stock
Option Plan.
A total of 110,250 shares (as adjusted for stock dividends) are subject to
the plan. Pursuant to the plan, on January 15 of each year, we grant to each
director an option to acquire 1,628 shares (as adjusted for stock dividends).
The option price is generally the fair market value of the shares at the time we
grant the option. Options are not transferable other than by will or laws of
descent and distribution. A director can exercise the option only while a
director of Commerce or within three months after he or she stops serving as a
director. If a director dies within the option period, the director's estate may
exercise the option within three months of his or her death.
A director cannot exercise an option before the earlier of (i) one year
from the date we grant the option, or (ii) a "change in control" of Commerce (as
defined in the plan) occurs. Options expire ten years after the date of grant.
The number of shares subject to options and the option price will be
appropriately adjusted if the number of issued shares is decreased or increased
by changes in par value, a combination, stock dividend and the like.
Committees of the Board of Directors
The Board of Directors of Commerce has established four (4) committees:
o the Audit Committee;
o the Personnel Committee;
o the Real Estate Committee; and
o the Executive Committee.
6
We do not have a nomination committee but provide for the nomination of
directors as described under "ELECTION OF DIRECTORS OF COMMERCE" on page 3 of
this proxy statement.
The board of directors met twelve 12 times during 2001. With the exception
of Mr. Vernon W. Hill, II, no director attended fewer than 75% of the total
number of meetings of the board and committees on which he served. Mr. Hill
attended 14% of the meetings of the board and committees on which he served.
Audit Committee
Members: Howell C. Mette Alan R. Hassman James R. Adair
Samir J. Srouji Douglas S. Gelder
Meetings: 4
Functions:
o Recommend to the board the hiring of the outside auditors;
o Review the audit of the books and financial statements of Commerce and
the Bank;
o Review and make recommendations to the board regarding the internal
auditor's report and the certified public accountants' audit report;
and
o Review examination reports by banking regulators.
Personnel Committee
Members: Howell C. Mette Alan R. Hassman
Vernon W. Hill, II Michael A. Serluco
Meetings: 1
Functions:
o Review all personnel policies, including the levels of compensation of
Commerce's and the Bank's officers and administers Commerce's Employee
Stock Option Plan.
Real Estate Committee
Members: Gary L. Nalbandian Douglas S. Gelder Samir J. Srouji
Meetings: 1
Functions:
o Review and approve certified real estate appraisers (residential and
commercial) retained by Commerce and the Bank; and
o Review and approve all potential branch site locations.
Executive Committee
Members: Howell C. Mette Vernon W. Hill, II
Gary L. Nalbandian Michael A. Serluco
Meetings: 1
Functions: Act between regular board meetings to approve loans.
7
Transactions with Officers and Directors
During 2001, the Bank had, and expects to have in the future, banking
transactions in the ordinary course of business with directors, officers, and
principal shareholders (and their associates) of Commerce on the same terms,
including interest rates and collateral on loans as those prevailing at the same
time for comparable transactions with others. Management believes that these
loans present no more than the normal risk of collectibility or other
unfavorable features. The loans to these persons and companies amounted to less
than 3% of total loans outstanding as of December 31, 2001.
As was previously indicated, Commerce Bancorp, Inc. ("Bancorp"), owns
8.72% of Commerce's common stock and 100% of Commerce's Series A preferred
stock. Bancorp, through its subsidiary, Commerce Bank, N.A., a national bank
located in Cherry Hill, New Jersey, provides various services to the Bank
including:
o maintaining the computer wide area network;
o loan review services;
o MAC/VISA card production;
o data processing;
o advertising support.
The Bank also pays insurance premiums and commissions to a subsidiary of
Bancorp.
The Bank paid approximately $622,000 to Bancorp for services provided
during 2001. Additionally, the Bank routinely sells loan participations to
Commerce Bank, N.A. and at December 31, 2001, approximately $12.4 million of
these participations were outstanding.
Vernon W. Hill, II, a director and 13.95% beneficial shareholder of
Commerce, is Chairman of the Board of Bancorp. In 2001, the Bank paid $114,000
to a business owned by Mr. Hill's spouse for interior design services. Also in
2001, this business received commissions of approximately $101,000 on furniture
and facility purchases made directly by Commerce. The Bank leases land for one
of its branches from a limited partnership in which Mr. Hill is a 20% limited
partner. The Bank paid $56,000 on the land lease for 2001.
Howell C. Mette, a director and 2.75% beneficial shareholder of Commerce,
is a partner in the law firm of Mette, Evans and Woodside, which Commerce
retained during 2001, and intends to retain during 2002. The law firm received
professional fees totaling $258,000 in 2001.
The Bank leases land for a billboard from Michael A. Serluco, a director
and 3.74% beneficial shareholder of Commerce. The Bank paid $24,000 on the lease
during 2001.
The Bank paid commissions of $74,000 in 2001 for real estate services to a
company owned by Gary L. Nalbandian, the Chairman of the Board of Commerce and a
10.84% beneficial shareholder.
8
MANAGEMENT
Executive Officers
The following table shows name, age, position and the beneficial ownership
of common stock of Commerce of each of its current executive officers
(determined in accordance with the rules and regulations of the SEC), and for
James T. Gibson, who served as President and CEO of Commerce and the Bank until
February 13, 2002.
Amount and Nature of Percent of
Name and Age Title Beneficial Ownership 1 Outstanding Stock
------------------- ------- ---------------------- -----------------
Gary L. Nalbandian 2 Chairman of the 217,884 10.84%
Age 59 Board; President and
Chief Executive Officer
of Commerce and the Bank
Rory G. Ritrievi 3 Senior Executive Vice President of 1,279 *
Age 38 Commerce and the Bank
Mark A. Zody Executive Vice President 37,043 1.91%
Age 38 & CFO of Commerce and
the Bank
David B. Skerpon 4 Senior Executive Vice President of -- *
Age 41 Commerce and of the Bank
James T. Gibson Former President and Chief Executive 99,0945 5.00%
Age 46 Officer of Commerce and the Bank
<FN>
- -------------
1 Includes currently exercisable options to acquire shares of Commerce.
2 Mr. Nalbandian served as Chairman of the Board of Commerce and the Bank
during 2001. On February 15, 2002 he was appointed to the additional
position of President/CEO of both Commerce and the Bank.
3 Prior to joining Commerce in November 1999, Mr. Ritrievi served as
Executive Vice President/Regional Director of Commercial Lending of
Keystone Financial, Inc.
4 Mr. Skerpon became Senior Executive Vice President/Chief Retail Officer of
Commerce and the Bank on March 4, 2002. Mr. Skerpon served as Senior Vice
President of Commerce Bank from September 2000 to August 2001. Prior to
joining Commerce, Mr. Skerpon served as President of the Commonwealth
Regional Mellon Bank.
5 Includes 73,600 currently exercisable Incentive Stock Options to acquire
shares of Commerce.
* Less than one percent.
</FN>
9
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
Commerce's chief executive officer and each of Commerce's other most highly
compensated executive officers during Commerce's last fiscal year.
Long Term
Annual Compensation Compensation
------------------------------ ---------------
Stock
Other Underlying
Annual Securities All Other
Name and Compen- Option Compen-
Principal Position Year Salary Bonus sation Grant 1 sation 2
- ------------------- ---- ------- -------- -------- ---------- -----------
Gary L. Nalbandian 2001 $120,000 $25,000 -- 15,749 $16,088
Chairman of the Board, 2000 98,000 20,000 -- 11,024 14,348
President and CEO of 1999 95,000 -- -- 11,575 12,025
Commerce and the Bank3
Rory G. Ritrievi 2001 $152,000 $15,000 $11,4406 5,249 $ 2,014
Executive Vice President of 2000 140,000 10,000 19,8406 4,960 --
Commerce and the Bank 1999 140,000 4 20,000 5 -- -- --
Mark A. Zody 2001 $103,000 $ 8,500 -- 3,674 $ 5,527
Executive Vice President & CFO 2000 100,000 7,000 -- 2,756 5,338
of Commerce and the Bank 1999 90,000 13,000 -- 4,051 5,537
James T. Gibson 2001 $255,000 $30,000 -- 10,499 $27,643
Former President & CEO 2000 230,000 30,000 -- 11,024 26,228
of Commerce and the Bank7 1999 200,000 25,000 -- 8,102 24,257
<FN>
- ------------------
1 Adjusted to reflect the 5% common stock dividend paid on February 25, 2002.
2 Includes (a) annual retainer fee and monthly director meeting fees for both
Mr. Nalbandian and Mr. Gibson of $14,200 in 2001, $13,000 in 2000, and
$10,600 in 1999; (b) contributions by Commerce to the 401(k) Retirement
Savings Plan for (i) Mr. Nalbandian - $1,888 in 2001, $1,348 in 2000, and
$1,425 in 1999; (ii) Mr. Ritrievi - $2,014 in 2001; (iii) Mr. Zody - $1,418
in 2001, $1,306 in 2000 and $1,576 in 1999; and (iv) Mr. Gibson - $2,133 in
2001, $1,955 in 2000 and $2,400 in 1999; (c) life insurance premiums for
(i) Mr. Zody - $2,343 in 2001, 2000 and in 1999, and (ii) Mr. Gibson -
$7,138 in 2001, $7,101 in 2000 and $7,085 in 1999; and (d) long-term
disability premiums for (i) Mr. Zody - $1,766 in 2001, $1,689 in 2000 and
$1,618 in 1999; and (ii) Mr. Gibson - $4,172 in 2001, 2000 and 1999.
3 Mr. Nalbandian served as Chairman of the Board of Commerce and the Bank
during 2001, 2000 and 1999, and the salary and bonus shown for him were for
his services as Chairman of the Board. On February 15, 2002 he was
appointed to the additional position of President/CEO of both Commerce and
the Bank.
4 Mr. Ritrievi began employment with Commerce on November 22, 1999. This
figure represents his annualized salary.
5 Mr. Ritrievi was paid a $20,000 signing bonus in 1999.
6 Includes tuition reimbursement for Mr. Ritrievi of $11,440 in 2001 and 2000
and reimbursement for relocation expenses for Mr. Ritrievi of $8,400 in
2000.
7 Mr. Gibson's employment with Commerce and the Bank ceased on February 13,
2002. He served as President/CEO of Commerce and the Bank in 2001, 2000 and
1999.
</FN>
10
Employee Stock Options
In 1996, Commerce shareholders adopted the 1996 Employee Stock Option
Plan. The plan replaced the 1986 Incentive Stock Option Plan, which expired
December 31, 1995. We reserved 478,338 shares of common stock for issuance under
the plan. The plan will expire on December 31, 2005. The plan allows us to grant
incentive stock options (ISO's) and nonqualified stock options (NQSO's). The
board of directors will fix the option price for options granted under the plan.
The option price for ISOs will not be less than the fair market value of the
stock at the date of grant. The option price for NQSOs may be less than 100% of
the fair market value of the stock at the date of grant. Options are generally
exercisable one year after the date of grant subject to the vesting schedule
outlined below, and expire ten years after the date of grant.
Optionees may exercise options only to the extent the options are vested.
Options vest based either on years of service or upon the period of time the
options have been issued, whichever is faster. The vesting schedule is as
follows:
Years of service:
o up to three (3) years of service - 25% vested;
o more than three (3) years but less that six (6) years of service -
50% vested;
o more than six (6) years but less than eight (8) years of service -
75% vested; and
o more than eight (8) years of service - 100% vested.
Period of time after grant:
o more than one (1) year but less than two (2) years - 25% vested;
o more than two (2) years but less than three (3) years - 50% vested;
o more than three (3) years but less than four (4) years - 75% vested;
and
o more than four (4) years - 100% vested.
The plan requires that we adjust the number of shares subject to options
and the option price to reflect changes in the number of outstanding shares
caused by events such as stock dividends and splits.
Stock Option Grants
The following table shows:
o the number of stock options granted to executive officers in 2001;
o the percentage which the executive's options bears in relation to
the total options granted to all employees during the year;
o the option exercise price;
o the expiration of the option; and
o the potential realizable value of the options assuming certain rates
of stock appreciation:
11
EXECUTIVE STOCK OPTION GRANTS
IN FISCAL YEAR 2001
Number of % of Total
Securities Options Exercise Grant
Underlying Granted to or Base Date
Options Employees in Price Present
Name Granted 1 Fiscal Year ($/Sh) 1 Expiration Date Value 2
Gary L. Nalbandian 15,749 18.51% $34.29 11-17-2011 $254,031
Rory G. Ritrievi 5,249 6.17 34.29 11-17-2011 75,428
Mark A. Zody 3,674 4.32 34.29 11-17-2011 59,262
James T. Gibson 10,499 12.34 34.29 11-17-2011 169,349
<FN>
- -------
1 Adjusted to reflect the 5% common stock dividend paid on February 25,
2002.
2 We used the Black-Scholes option pricing model to estimate the grant date
present value of the options. We are not endorsing the accuracy of this
model. All stock option valuation models, including the Black-Scholes
model, require a prediction about future stock prices. The assumptions
used in calculating the values shown above were expected volatility of
.28, a risk-free rate of return of 4.80%, weighted-average expected life
of ten years and no cash dividends. The real value of the options will
depend upon the actual performance of Commerce common stock during the
applicable period.
</FN>
Stock Option Exercises
The following table shows:
o all options exercised by each executive officer of Commerce during
2001;
o the number of shares acquired on exercise;
o the value realized by the executive officer upon exercise; and
o the number of exercisable and un-exercisable options outstanding for
each executive officer, and the value of those options, as of
December 31, 2001:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options at Options at
Acquired Value End Year 2001 2 End Year 2001 3
Name on Exercise Realized 1 Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ---------- ----------- ------------- ----------- -------------
Gary L. Nalbandian -- -- 102,282 15,749 $2,062,829 $19,371
Rory G. Ritrievi -- -- 1,240 8,969 10,863 39,043
Mark A. Zody 2,279 $ 67,664 30,360 3,674 586,018 4,519
James T. Gibson 6,515 201,183 73,600 10,499 1,485,107 12,915
<FN>
- -----------
1 Represents the number of shares acquired upon exercise multiplied by the
difference between the fair market value of Commerce's common stock on the
date of exercise less the exercise price paid by the executive officer.
2 Exercisable ISO's are fully vested. ISO's to vest in the future are
reported as unexercisable.
3 The dollar values were calculated by determining the difference between
the closing trading price of Commerce Common Stock at December 31, 2001,
which was $35.52 per share (adjusted for the 5% common stock dividend paid
on February 25, 2002), and the option price of each ISO as of December 31,
2001.
</FN>
12
REPORT OF THE PERSONNEL COMMITTEE
Only outside non-employee directors serve on the Personnel Committee. The
Personnel Committee reviews, and submits to the full board of directors for
approval, management's recommendations regarding officers and other employees
compensation.
We seek to attract and retain superior talent, reward performance and
align the interests of our executive officers with the long-term interests of
our shareholders. Our executive officers receive compensation packages
consisting of base salary, annual performance bonus, annual stock option grants
and various employee benefits including contributions under Commerce's 401(k)
Retirement Savings Plan. The Personnel Committee bases its recommendations for
compensation on objective factors and its subjective evaluation of the
individual's performance.
The Personnel Committee sets base salary levels for our executive officers
to be competitive with those offered by a peer group of institutions similar to
Commerce. In reviewing base salaries, the Personnel Committee also considers
individual experience and performance.
We award annual performance bonuses to provide direct cash incentives to
executive officers and other key employees. In evaluating Commerce's financial
performance, the Personnel Committee considers budgets set by the board as well
as the performance of a peer group of institutions similar to Commerce. We award
stock options to encourage officers and other key employees to remain employed
with Commerce by providing them with a long term interest in Commerce's overall
performance. In granting stock options, the Personnel Committee considers prior
stock option grants, the executive's level of compensation and the executive's
past contributions to Commerce.
You can see more information about the compensation paid to Commerce's
executive officers in the Summary Compensation Table on page 10 of this proxy
statement.
PERSONNEL COMMITTEE
Alan R. Hassman
Howell C. Mette
Vernon W. Hill, II
Michael A. Serluco
James R. Adair
Personnel Committee Interlocks and Insider Participation
Howell C. Mette is a partner in the firm of Mette, Evans and Woodside
which we retained during 2001 and which we intend to retain during 2002.
Vernon W. Hill, II is Chairman of the Board and President of Commerce
Bancorp, Inc., which provides various services to Commerce.
Michael A. Serluco owns a company, which leased land to the Bank in 2001
for a billboard owned by Commerce.
You can see more information about these transactions under "Transactions
with Officers and Directors" on page 8 of this proxy statement.
13
Financial Performance
The following graph shows the yearly percentage change in Commerce's
cumulative total shareholder return on its common stock from December 31, 1996
to December 31, 2001 compared with the cumulative total return of a NASDAQ
Regional Peer Bank Index and the NASDAQ Composite Market Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Pennsylvania Commerce Bancorp (COBH), NASDAQ Regional Peer Bank Index,
NASDAQ Composite Market Index
Year-End 1996 to Year-End 2001
[GRAPH OMITTED]
Return on Return on the Return on
NASDAQ NASDAQ Bank Index COBH Stock
1996 100% 100% 100%
1997 149% 206% 247%
1998 209% 182% 264%
1999 387% 168% 214%
2000 235% 192% 278%
2001 185% 211% 381%
SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our directors and executive officers must file reports with the SEC
indicating:
o the number of shares of Commerce common stock they beneficially own;
and
o changes in their beneficial ownership.
To the best of our knowledge, our directors and executive officers filed
all required reports in 2001.
14
REPORT OF THE AUDIT COMMITTEE
The Board of Directors of Commerce has established an Audit Committee
composed of five directors, each of whom is independent as identified in the
National Association of Securities Dealers ("NASD") Exchange listing standards.
The Board of Directors has adopted a written charter for the Audit Committee and
a copy of the Charter was included as Appendix A to the Proxy Statement to
Shareholders dated April 17, 2001.
The Audit Committee (the "Committee") has reviewed and discussed the
Company's audited consolidated financial statements with management and with
Beard Miller Company LLP, Commerce's independent auditors for 2001. The
Committee has also discussed with Beard Miller Company LLP the matters required
to be discussed by Statement on Auditing Standards No. 61, Communication with
Audit Committees.
The Audit Committee has received from Beard Miller Company LLP the written
statements required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, and has discussed Beard Miller's independence
with them, and has considered the compatibility of nonaudit services with the
auditor's independence.
Based on the review and discussions referred to above, the Audit Committee
has recommended to the Board of Directors that the audited consolidated
financial statements be included in Commerce's Annual Report on Form 10-K for
the year ended December 31, 2001 for filing with the Securities and Exchange
Commission.
AUDIT COMMITTEE
Howell C. Mette, Chairman
Douglas S. Gelder
Alan R. Hassman
Samir J. Srouji
James R. Adair
OTHER BUSINESS
At the date of mailing of this proxy statement, we are not aware of any
business to be presented at the annual meeting other than the election of
directors. If other proposals are properly brought before the meeting, any
proxies returned to us will be voted as the proxyholders see fit.
INDEPENDENT AUDITORS
Our independent auditors during 2001 were Beard Miller Company LLP, 320
East Market Street, Harrisburg, PA 17101. Based upon the recommendation of the
Audit Committee, the board of directors intends to select Beard Miller Company
LLP to be our independent auditors for 2002. We expect a representative of Beard
Miller Company LLP to attend the annual meeting, to have the opportunity to make
a statement, if he or she so desires, and to be available to respond to
appropriate questions.
15
Audit Fees
Commerce was billed fees of approximately $55,440 by Beard Miller Company
LLP for the 2001 annual audit, including the audit of the consolidated financial
statements, and required quarterly reviews.
Financial Information Systems Design and Implementation Fees
Beard Miller Company LLP did not provide any financial information systems
design and implementation services to Commerce during 2001 and therefore
Commerce did not pay fees to Beard Miller Company LLP for such services.
All Other Fees
Commerce was billed approximately $16,225 by Beard Miller Company LLP for
tax related and other services provided during 2001. The Audit Committee has
determined that the performance of such services is compatible with the
independence of Beard Miller Company LLP.
ANNUAL REPORT
Commerce sends one annual report to shareholders sharing the same address.
We will promptly deliver a separate copy of the annual report to a security
holder at a shared address to which we sent a single copy, upon our receipt of a
written request sent to the address below. If you wish to receive a separate
copy of the annual report in the future, notify Commerce at the phone number or
address below. You can also request that we send only a single copy of the proxy
statement to security holders at a shared address, by sending written notice to
the address below.
Additionally, you can obtain a copy of the Commerce Form 10-K Annual
Report for the year ended December 31, 2001 at no charge by writing to:
Sherry Richart, Shareholder Relations
Pennsylvania Commerce Bancorp, Inc.
P.O. Box 8599
Camp Hill, PA 17001-8599
717-975-5630
RETURN OF PROXY
You should sign, date and return the enclosed proxy card as soon as
possible whether or not you plan to attend the meeting in person. If you do
attend the meeting, you may then withdraw your proxy.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ GARY L. NALBANDIAN
GARY L. NALBANDIAN
Chairman/President/CEO
Camp Hill, Pennsylvania
April 12, 2002
16
PROXY
PENNSYLVANIA COMMERCE BANCORP, INC.
100 Senate Avenue, Camp Hill, PA 17011
Telephone: (717) 975-5630
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PENNSYLVANIA COMMERCE BANCORP, INC.
The undersigned hereby appoints James R. Adair and Howell C. Mette as Proxies,
each with the power to appoint his substitute, and authorizes them to represent
and vote, as designated below, all the shares of common stock of Pennsylvania
Commerce Bancorp, Inc. held of record by the undersigned on March 29, 2002 at
the Annual Meeting of Shareholders to be held on May 17, 2002.
1. ELECTION OF DIRECTORS:
[ ] For all Nominees Listed Below [ ] Withhold Authority
(except as indicated below)
Gary L. Nalbandian, Vernon W. Hill, II, Douglas S. Gelder, Alan R. Hassman,
Michael A. Serluco, Howell C. Mette, Samir J. Srouji, M.D., James R. Adair
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
write that nominee's name(s) in the space immediately below.
---------------------------------------------------------------
2. OTHER BUSINESS:
Take action on other business which may properly come before the meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on the other side.)
The shares represented by this proxy will be voted as specified. If no
specification or direction is made, they will be voted for the election of the
directors and for any other business in accordance with the recommendations of
management. This proxy may be revoked prior to its exercise.
Dated this _____ day of ______________, 2002.
_____________________________________________
Signature (SEAL)
_____________________________________________
Signature (SEAL)
When shares are held by joint tenants, both
should sign. If signing as attorney,
executor, administrator, trustee, guardian,
custodian, corporate official or in any other
fiduciary or representative capacity, please
give your full title as such.
Please sign your name exactly as it appears on this proxy, and mark, date and
return this proxy as soon as possible in the enclosed envelope. No postage is
necessary if mailed in the United States in the enclosed
self-addressed envelope.