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SCHEDULE 14A -- INFORMATION REQUIRED IN PROXY STATEMENT
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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 Section 240.14a-11(c) or Section 240.14a-12
Heritage Commerce Corp
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transactions
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):
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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(Amended by Sec Act Rel No. 7331; Exch Act Rel No. 37692, eff. 10/7/96.)
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HERITAGE COMMERCE CORP
April 17, 2001
Dear Shareholder:
We are pleased to enclose our 2000 Annual Report and Form 10K, Notice of
2001 Annual Meeting, Proxy Statement and Form of Proxy.
You are cordially invited to attend the 2001 Annual Meeting of
Shareholders, which will be held at 3:00 p.m. on Thursday, May 24, 2001, at
Heritage Commerce Corp's offices, located at 150 Almaden Boulevard, San Jose,
California, 95113.
The accompanying Notice of Annual Meeting and Proxy Statement provide
information pertaining to the matters to be considered and acted upon at the
Meeting.
Your continued support is appreciated and we hope you will attend the
Annual Meeting. Whether or not you are personally present, it is very important
that your shares be represented at the Meeting. Accordingly, please sign, date,
and mail the enclosed Proxy promptly. If you wish to vote in accordance with the
Board of Directors' recommendations, it is not necessary to specify your
choices. You may simply sign, date and return the enclosed proxy card.
Sincerely,
/s/ Brad L. Smith /s/ Richard L. Conniff
Brad L. Smith Richard L. Conniff
Chairman and Chief Executive Officer President and Chief Operating Officer
150 Almaden Boulevard, San Jose, California 95113 - Telephone (408)
947-6900 - Fax (408) 947-6910
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HERITAGE COMMERCE CORP
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Heritage Commerce Corp ("Commerce
Corp") will be held at Commerce Corp's offices, located at 150 Almaden
Boulevard, San Jose, California 95113 on May 24, 2001, at 3:00 p.m., for the
following purposes:
1. To elect the following nominees to serve as directors of Commerce Corp
until the next Annual Meeting of Shareholders and until their successors
shall be elected and qualified:
Hugh P. Barton Roy E. Lave
Frank G. Bisceglia Louis O. ("Lon") Normandin
James R. Blair Jack L. Peckham
Richard L. Conniff Robert W. Peters
William J. Del Biaggio, Jr. Humphrey P. Polanen
Anneke Dury Brad L. Smith
Kurt G. Hammerstrom Howard J. Weiland
John W. Larsen
2. To approve a proposal to amend Commerce Corp's Articles of Incorporation
to eliminate the availability of cumulative voting in the election of
Commerce Corp's directors.
3. To approve a proposal to amend Commerce Corp's Bylaws to provide for
classification of the Board of Directors into three classes for purposes
of the election of directors.
4. To approve a proposal to amend the Heritage Commerce Corp Restated 1994
Tandem Stock Option Plan to increase the number of shares available for
grants of options under the Plan.
5. To ratify the Board of Directors' selection of Deloitte & Touche LLP,
independent certified public accountants, to serve as the Company's
auditors for the fiscal year ending December 31, 2001.
6. To consider and transact such other business as may properly be brought
before the meeting.
Shareholders of record at the close of business on April 10, 2001 are
entitled to notice of and to vote at the meeting.
Provisions of the Bylaws of Commerce Corp govern nominations for election
of members of the Board of Directors, as follows:
Nominations for election of members of the Board of Directors may be made
by the Board of Directors or by any holder of any outstanding class of capital
stock of the corporation entitled to vote for the election of directors. Notice
of intention to make any nominations (other than for persons named in the notice
of any meeting called for the election of directors) are required to be made in
writing and to be delivered or mailed to the president of the corporation by the
later of: (i) the close of business 21 days prior to any meeting of stockholders
called for the election of directors, or (ii) ten days after the date of mailing
of notice of the meeting to stockholders. Such notification must contain the
following information to the extent known to the notifying stockholder: (a) the
name and address of each proposed nominee; (b) the principal occupation of each
proposed nominee; (c) the number of shares of capital stock of the corporation
owned by each proposed nominee; (d) the name and residence address of the
notifying stockholder; (e) the number of shares of capital stock of the
corporation owned by the notifying stockholder; (f) the number of shares of
capital stock of any bank, bank holding company, savings and loan association or
other depository institution owned beneficially by the nominee or by the
notifying stockholder and the identities and locations of any such institutions;
(g) whether the proposed nominee has ever been convicted of or pleaded nolo
contendere to any criminal offense involving dishonesty or breach of trust,
filed a petition in bankruptcy or been adjudged bankrupt; and (h) a statement
regarding the nominee's compliance with Section 2.3 [Qualification of Directors]
of these Bylaws. The notification shall be signed by the nominating stockholder
and by each nominee, and shall be accompanied by a written consent to be named
as a nominee for election as a director from each proposed
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nominee. Nominations not made in accordance with these procedures shall be
disregarded by the Chairman of the meeting, and upon his instructions, the
inspectors of election shall disregard all votes cast for each such nominee. The
foregoing requirements do not apply to the nomination of a person to replace a
proposed nominee who has become unable to serve as a director between the last
day for giving notice in accordance with this paragraph and the date of election
of directors if the procedure noted in this paragraph was followed with respect
to the nomination of the proposed nominee.
All shareholders are cordially invited to attend the meeting in person. To
ensure your representation at the meeting, you are requested to date, execute
and return the enclosed proxy card, without delay, in the enclosed postage-paid
envelope whether or not you plan to attend the meeting. Any shareholder present
at the meeting may vote personally on all matters brought before the meeting. If
you elect to vote personally at the meeting, your proxy will not be used.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Rebecca A. Levey
Rebecca A. Levey
Corporate Secretary
April 17, 2001
San Jose, California
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING,
PLEASE SIGN AND RETURN THE ENCLOSED PROXY
AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
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PROXY STATEMENT
OF
HERITAGE COMMERCE CORP
150 ALMADEN BOULEVARD
SAN JOSE, CALIFORNIA 95113
TELEPHONE (408) 947-6900 FAX (408) 947-6910
This statement is furnished in connection with the solicitation of proxies
to be used by the Board of Directors of Heritage Commerce Corp ("Commerce Corp")
at the Annual Meeting of Shareholders of the Company to be held at the Company's
offices, 150 Almaden Boulevard, San Jose, California, on May 24, 2001, at 3:00
p.m., and at any adjournments or postponements thereof ("Meeting").
This Proxy Statement and the accompanying form of proxy are being mailed to
shareholders on or about April 17, 2001.
A form of proxy for voting your shares at the Meeting is enclosed. Any
shareholder who executes and delivers a proxy has the right to revoke it at any
time before it is voted by filing with the Corporate Secretary of Commerce Corp,
an instrument revoking said proxy or a duly executed proxy bearing a later date.
In addition, the powers of the proxyholders will be revoked if the person
executing the proxy is present at the Meeting and advises the Chairman of his or
her election to vote in person. Unless revoked, all shares represented by a
properly executed proxy received prior to the Meeting will be voted as specified
by each shareholder in the proxy. If no specifications are given by a
shareholder, then the proxy will be voted in favor of election of nominees
specified, in favor of the proposal to eliminate cumulative voting, in favor of
the proposal to classify the Board of Directors, in favor of the proposal to
increase the number of shares available for grants of stock options, in favor of
the ratification of the Board's selection of independent accountants, and in the
discretion of the Board on such other business as may properly come before the
Meeting as described below.
The proxy also confers discretionary authority to vote the shares
represented thereby on any matter that was not known at the time this Proxy
Statement was mailed which may properly be presented for action at the Meeting
and may include: action with respect to procedural matters pertaining to the
conduct of the Meeting and election of any person to any office for which a bona
fide nominee is named herein, if such nominee is unable to serve or for good
cause will not serve.
The enclosed proxy is being solicited by Commerce Corp's Board of Directors
and the cost of the solicitation is being borne by Commerce Corp. The principal
solicitation of proxies is being made by mail, although additional solicitation
may be made by telephone, telegraph, facsimile or personal visits by directors,
officers and employees of Commerce Corp and its subsidiary banks.
PURPOSE OF THE MEETING
The Meeting is being held for the following purposes:
1. To elect 15 directors (the entire Board of Directors) to serve until the
next annual meeting of shareholders and until their successors shall be
elected and qualified.
2. To approve a proposal to amend Commerce Corp's Articles of Incorporation
to eliminate the availability of cumulative voting in the election of
Commerce Corp's directors.
3. To approve a proposal to amend Commerce Corp's Bylaws to provide for
classification of Commerce Corp's Board of Directors into three classes
for purposes of the election of directors.
4. To approve a proposal to amend the Heritage Commerce Corp Restated 1994
Tandem Stock Option Plan to increase the number of shares available for
grants of options under the Plan.
5. To ratify the Board of Directors' selection of Deloitte & Touche LLP,
independent certified public accountants, to serve as Commerce Corps'
auditors for the fiscal year ending December 31, 2001.
6. To consider and transact such other business as may properly be brought
before the meeting.
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VOTING SECURITIES
Shareholders of record as of the close of business on April 10, 2001
("Record Date") will be entitled to notice of and to vote at the Meeting. As of
April 2, 2001, the Company had 11,076,965 shares of common stock outstanding.
Unless otherwise noted, all per share information has been adjusted to reflect a
ten percent stock dividend paid to shareholders of record as of February 5,
1996, a five percent stock dividend paid to shareholders of record as of
February 5, 1997, a three for two stock split paid to shareholders of record as
of August 1, 1997, a three for two stock split paid to shareholders of record as
of February 5, 1999, and a ten percent stock dividend paid to shareholders of
record as of February 7, 2000.
Each shareholder of record is entitled to one vote, in person or by proxy,
for each share held on all matters to come before the meeting, except that
shareholders may have cumulative voting rights with respect to the election of
directors.
Cumulative voting allows the shareholder to cast a number of votes equal to
the number of directors to be elected, 15, multiplied by the number of votes
held by the shareholder on the Record Date. This total number of votes may be
cast for one nominee or may be distributed among as many candidates as the
shareholder desires.
Pursuant to California law, no shareholder may cumulate votes for a
candidate unless such candidate or candidates' names have been placed in
nomination prior to the voting and the shareholder has given notice at the
Meeting prior to the voting of the shareholder's intention to cumulate the
shareholder's votes. If any shareholder has given such notice, all the
shareholders may cumulate their votes for the candidates who have been
nominated.
The Board of Directors does not, at this time, intend to give such notice
or to cumulate the votes it may hold pursuant to the proxies solicited herein
unless the required notice by a shareholder is given. In the event such notice
is provided, the votes represented by proxies delivered pursuant to this Proxy
Statement may be cumulated in the discretion of proxyholders, in accordance with
the recommendations of the Board of Directors. Therefore, discretionary
authority to cumulate votes in such event is solicited in this Proxy Statement.
In the election of directors, the 15 candidates receiving the highest
number of votes will be elected. Broker non-votes (i.e., shares held by brokers
or nominees which are represented at the meeting but with respect to which the
broker or nominee is not authorized to vote on a particular proposal) and
abstentions will not be counted, except for quorum purposes, and will have no
effect on the election of directors. Approval of the proposals to eliminate
cumulative voting and to classify the Board of Directors require approval by
shareholders holding at least a majority of the outstanding shares of common
stock. Approval of the proposal to increase the number of shares available for
grants of stock options and ratification of the selection of Deloitte & Touche
LLP as Commerce Corp's auditors require the affirmative vote of a majority of
all shares represented and voting at the Meeting. In determining whether the
requisite shareholder approval has been received for the elimination of
cumulative voting and classification of the Board of Directors, abstentions and
broker non-voter will have the same effect as a vote against the proposal. In
determining whether the requisite shareholder approval has been received for
amendment of the Stock Option Plan and ratification of the selection of
auditors, abstentions will have the same effect as a vote against the matter and
broker non-votes will be disregarded and have no effect on the outcome of the
vote.
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PROPOSAL 1
ELECTION OF DIRECTORS
The Bylaws of Commerce Corp provide that the number of directors shall not
be less than 11 nor more than 21. By resolution, the Board of Directors has
fixed the number of directors at 15.
The Bylaws of Commerce Corp provide the procedure for nominations and
election of the Board of Directors. This procedure is printed in full in the
Notice of Annual Meeting of Shareholders accompanying this Proxy Statement.
Nominations not made in accordance with the procedures may be disregarded by the
Chairman of the Meeting, and upon his instructions, the Inspector of Election
shall disregard all votes cast for such nominees.
The 15 persons named below will be nominated for election as directors to
serve until the next Annual Meeting and until their successors are duly elected
and qualified. However, if Proposal 3 is approved and the Board of Directors is
classified into three classes with staggered three year terms (see "PROPOSAL
3 -- CLASSIFICATION OF BOARD OF DIRECTORS"), Class I Directors will be elected
for an initial one-year term, Class II Directors will be elected for an initial
two-year term, and Class III Directors will be elected for an initial three-year
term. Votes will be cast in such a way as to effect the election of all nominees
or as many as possible under the rules of cumulative voting. If any nominee
should become unable or unwilling to serve as a director, either (i) the proxies
will be voted for such substitute nominees as shall be designated by the Board
of Directors, or (ii) the number of nominees may be reduced. The Board of
Directors presently has no knowledge that any of the nominees will be unable or
unwilling to serve. The 15 nominees receiving the highest number of votes at the
Meeting shall be elected.
NOMINEES FOR DIRECTOR
The persons named below have been nominated by the current Board of
Directors for election as directors to serve until the next Annual Meeting and
until their successors are duly elected and qualified. For information
pertaining to stock ownership of each of the nominees, reference can be made to
the "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" section of
this Proxy Statement. The column headed "Name/Class" indicates whether the
nominee is nominated as a Class I, Class II or Class III director in the event
Proposal 3 is approved.
PRINCIPAL OCCUPATION, BUSINESS
POSITION WITH DIRECTOR EXPERIENCE DURING PAST FIVE YEARS
NAME CLASS AGE COMMERCE CORP SINCE AND OTHER INFORMATION
---- ----- --- ------------- -------- ---------------------------------
Hugh P. Barton................. I 69 Director 2000 Director, Heritage Commerce Corp
since 2000; Director, Bank of Los
Altos, from 1995 to present;
Co-Acquirer, Foothill Bank (Bank
of Los Altos) 1994; Partner,
Barton Ranch, from 1961 to 1984;
President and CEO of Barton Ranch
from 1961 to 1987; Organizing
Director and Board Chair, Modesto
Banking Company, from 1977 to
1994.
Frank G. Bisceglia............. III 55 Director 1994 Senior Vice President --
Investments, Senior Portfolio
Manager, Portfolio Management
Program at Paine Webber, an
independent, full service
securities firm.
James R. Blair................. II 56 Director 1994 President of Renco Properties,
Inc., a real estate development
company.
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8
PRINCIPAL OCCUPATION, BUSINESS
POSITION WITH DIRECTOR EXPERIENCE DURING PAST FIVE YEARS
NAME CLASS AGE COMMERCE CORP SINCE AND OTHER INFORMATION
---- ----- --- ------------- -------- ---------------------------------
Richard L. Conniff............. I 54 Director, 1998 President and COO, Heritage
President and Commerce Corp since 2000; from
COO 1998 to 2000, President and Chief
Executive Officer of Heritage
Bank East Bay, a wholly-owned
subsidiary of Heritage Commerce
Corp; from 1997 to 1998,
President and Chief Executive
Officer of Acacia Bank, an
industrial loan company; and from
1995 to 1997, Senior Vice
President and Chief Financial
Officer of South Valley
Bancorporation.
William J. Del Biaggio, Jr. ... II 60 Director 1994 President of Heritage Beverage
Company, a beverage importer-
brokerage firm, since 1994.
Anneke Dury.................... III 56 Director 1994 Independent Financial Consultant
for various Santa Clara County
technology companies.
Kurt G. Hammerstrom............ III 60 Director 2001 President, Kurt G. Hammerstrom,
DDS, Inc. since 1972; Director,
Bank of Los Altos, from 1996 to
present.
John W. Larsen................. I 66 Director 1998 Chairman and Director, Heritage
Bank East Bay, since 1998; Vice
President of Loan Supervision for
U.S. Bank from 1996 to 1997;
Executive Vice President and
Chief Credit Officer of
California Bancshares from 1988
to 1996.
Roy E. Lave.................... II 66 Director 2000 Chief Executive Officer of
Systan, Inc., a consulting firm
since 1966; Director, Bank of Los
Altos, from 1995 to present. From
1962 to 1974, tenured professor
of engineering at Stanford
University.
Louis O. ["Lon"] Normandin..... III 66 Director 1994 Owner and Chairman of Normandin
Chrysler-Plymouth Jeep.
Jack L. Peckham................ II 59 Director 1994 Chairman and CEO of Timpani
Networks Inc. since 2000.
President and CEO of Lightspeed
Semiconductor from 1998 to 2000;
Vice President/ General Manager
of Atmel Corporation, a
semiconductor manufacturing
company, from 1985 to 1998.
Robert W. Peters............... I 61 Director 1994 Private investor in technology
companies.
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PRINCIPAL OCCUPATION, BUSINESS
POSITION WITH DIRECTOR EXPERIENCE DURING PAST FIVE YEARS
NAME CLASS AGE COMMERCE CORP SINCE AND OTHER INFORMATION
---- ----- --- ------------- -------- ---------------------------------
Humphrey P. Polanen............ III 51 Director 1994 Managing Director, Internet
Venture Partners BV, an
investment firm, since 2000;
President and CEO, Trustworks
Systems, a network security
company, from 1998 until 1999;
General Manager, Network Security
Products and Internet Commerce
Groups, Sun Microsystems, a
computer systems company, from
1995 to 1998.
Brad L. Smith.................. I 51 Chairman and 1999 Chairman and CEO of Heritage
CEO Commerce Corp and President and
CEO of Heritage Bank of Commerce
since June 2000; Chairman of
Heritage Commerce Corp since
1999; President and CEO of
Heritage Bank South Valley, a
wholly owned subsidiary of
Heritage Commerce Corp, 2000;
President of South Valley branch
of Heritage Bank of Commerce
during 1999; and President and
Chief Executive Officer of South
Valley National Bank from 1985
through 1998.
Howard J. Weiland.............. II 60 Director 2000 Partner of Harb, Levy, and
Weiland LLP, Certified Public
Accountants since 1967; Director,
Bank of Los Altos, from 1995 to
present.
There are no family relationships among any of Commerce Corp's Executive
Officers, Directors or Director nominees.
No director or nominee chosen by the Board of Directors is a director of
any other company with a class of securities registered pursuant to Section 12
of the Securities Exchange Act of 1934, or subject to the requirements of
Section 15(d) of such Act or of any company registered as an investment company
under the Investment Company Act of 1940.
DESIGNATION OF CLASSES IF PROPOSAL 3 IS APPROVED
If one or more persons other than management's nominees are nominated and
receive sufficient votes to be elected and Proposal 3 is approved, such person
or persons will be deemed elected to the class of directors for which
management's nominee who was not elected was proposed. If two or more of
management's nominees are not elected, the other persons elected shall be
entitled to select, in order of the number of votes cast in their favor, the
class to which they are elected from the classes to which fewer than all of the
management's nominees were elected. Accordingly, a person other than a nominee
of management may receive more votes than any of management's nominees for a
particular class, e.g., Class III, but if all of management's nominees for Class
III are among the 15 candidates receiving the greatest number of votes, such
nominees will be elected as Class III directors and the other person elected to
the Board must select from a class to which fewer than all of management's
nominees were elected.
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EXECUTIVE OFFICERS OF COMMERCE CORP
Set forth below is certain information with respect to the Executive
Officers of Commerce Corp.
NAME AGE POSITION OFFICER SINCE
---- --- -------- -------------
Richard L. Conniff................... 54 President and Chief Operating 1998
Officer/Heritage Commerce Corp
Kenneth A. Corsello.................. 50 Executive Vice President and Chief Credit 1995
Officer
Lawrence D. McGovern................. 46 Executive Vice President and Chief Financial 1998
Officer
Brad L. Smith........................ 51 Chairman and Chief Executive 1999
Officer/Heritage Commerce Corp; President
and Chief Executive Officer/Heritage Bank of
Commerce
For each officer who became an officer of Heritage Bank of Commerce before
the inception of the Company in 1997, the date shown is the officer's
commencement date as an officer of Heritage Bank of Commerce. A brief summary of
the background and business experience of the Executive Officers of the Company
who have not previously been described is set forth below:
Kenneth A. Corsello has served as an Executive Vice President since 1996,
as Chief Credit Officer of Heritage Bank of Commerce since 1995, and of Heritage
Commerce Corp since 1998. From 1994 to 1995, Mr. Corsello served as Senior Vice
President/Credit Administrator with Cupertino National Bank, and from 1990 to
1994, as a Department Head with the Federal Deposit Insurance Corporation.
Lawrence D. McGovern has served as Executive Vice President and Chief
Financial Officer of Heritage Commerce Corp since July 1998. From August 1997 to
June 1998, Mr. McGovern served as an independent financial analyst for several
companies. From 1995 to 1997, Mr. McGovern served as Chief Financial Officer of
Business & Professional Bank and from 1994 to 1995, as Chief Financial Officer
of Capitol Bank.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of the Record Date pertaining
to beneficial ownership of Commerce Corp's common stock (the sole class of stock
outstanding) by persons known to Commerce Corp to own five percent or more of
Commerce Corp's common stock, current directors of Commerce Corp, nominees to be
elected to the Board of Directors, and all directors and officers(1) of Commerce
Corp as a group. This information has been obtained from Commerce Corp's
records, or from information furnished directly by the individual or entity to
Commerce Corp.
For purposes of the following table, shares issuable pursuant to stock
options which may be exercised within 60 days of the Record Date are deemed to
be issued and outstanding and have been treated as outstanding in determining
the amount and nature of beneficial ownership and in calculating the percentage
of ownership of those individuals possessing such interest, but not for any
other individuals. Thus, the total number of shares considered to be outstanding
for the purposes of this table may vary depending upon the individual's
particular circumstance.
SHARES
BENEFICIALLY PERCENT
RELATIONSHIP WITH OWNED EXERCISABLE OF CLASS
NAME OF BENEFICIAL OWNER(1) COMMERCE CORP (2),(3) OPTIONS (3)
--------------------------- ----------------- ------------ ----------- ----------
Hugh P. Barton............................ Director 253,910(4) 767 2.3%
Frank G. Bisceglia........................ Director 115,231(5) 34,861 1.0%
James R. Blair............................ Director 58,347(6) 29,143 0.5%
- ---------------
(1)As used throughout this Proxy Statement, the terms "Officer" and "Executive
Officer" refer to the Chairman and Chief Executive Officer; the President and
Chief Operating Officer; the Executive Vice President and Chief Credit
Officer; and the Executive Vice President and Chief Financial Officer.
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SHARES
BENEFICIALLY PERCENT
RELATIONSHIP WITH OWNED EXERCISABLE OF CLASS
NAME OF BENEFICIAL OWNER(1) COMMERCE CORP (2),(3) OPTIONS (3)
--------------------------- ----------------- ------------ ----------- ----------
Richard L. Conniff........................ President, COO, & 53,527(7) 43,007 0.4%
Director
Kenneth A. Corsello....................... Executive Vice 48,779(8) 703 0.4%
President & CCO
William J. Del Biaggio, Jr. .............. Director 168,615(9) 34,861 1.5%
Anneke Dury............................... Director 43,727(10) 9,900 0.4%
Kurt G. Hammerstrom....................... Director 142,790(11) 6,330 1.3%
John W. Larsen............................ Director 17,606(12) 11,006 0.2%
Roy E. Lave............................... Director 112,411(13) 14,123 1.0%
Lawrence D. McGovern...................... Executive Vice 33,825(14) 32,175 0.3%
President & CFO
Louis O. ("Lon") Normandin................ Director 140,146(15) 14,850 1.3%
Jack L. Peckham........................... Director 200,660(16) 29,143 1.8%
Robert W. Peters.......................... Director 226,086(17) 3,300 2.0%
Humphrey P. Polanen....................... Director 68,592(18) 34,861 0.6%
Brad L. Smith............................. Chairman, CEO, & 63,128(19) 55,795 0.6%
Director
Howard J. Weiland......................... Director 83,288(20) 14,123 0.8%
All directors and executive officers as a group (17 in
number).................................................... 1,830,668 368,948 16.4%
- ---------------
(1) The address for all persons is c/o Heritage Commerce Corp, 150 Almaden
Boulevard, San Jose, California, 95113.
(2) Subject to applicable community property laws and shared voting and
investment power with a spouse, the persons listed have sole voting and
investment power with respect to such shares unless otherwise noted. Listed
amounts reflect (i) a ten percent stock dividend which was paid on February
26, 1996 to shareholders of record as of February 5, 1996, (ii) a five
percent stock dividend which was paid on February 26, 1997 to shareholders
of record as of February 5, 1997, (iii) a three for two stock split which
was paid on August 15, 1997 to shareholders of record as of August 1, 1997,
(iv) a three for two stock split which was paid on February 19, 1999 to
shareholders of record as of February 5, 1999, and (v) a ten percent stock
dividend paid on February 21, 2000 to shareholders of record as of February
7, 2000.
(3) Includes shares beneficially owned (including options exercisable within 60
days of the Record Date, as shown in the "Exercisable Options" column),
both directly and indirectly together with associates.
(4) Includes 73,475 shares held as Trustee of the Barton Revocable Trust and
71,978 shares held in a Sep IRA.
(5) Includes 4,286 shares held as trustee of the Edith Lico Simoni Trust, 6,392
shares as custodian for Thomas J. Bisceglia and 6,392 shares as custodian
for Laura M. Bisceglia under the Uniform Gifts to Minors Act, 53,000 shares
as one of two trustees of the Bisceglia Family Trust, and 10,300 shares
held in a personal Individual Retirement Account.
(6) Includes 13,252 shares held in a personal Individual Retirement Account,
12,952 shares held as trustee for the Blair Family Trust, and 3,000 shares
held in the Blair Family Investment's LLC.
(7) Includes 9,563 shares held in a personal individual retirement account and
957 shares held by his wife Sandra Conniff in a personal individual
retirement account.
(8) Includes 410 shares held in a personal Individual Retirement Account.
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(9) Includes 68,268 shares held in a personal Individual Retirement Account,
59,770 shares as one of two trustees of the Del Biaggio Family Trust, and
5,716 shares held in the name of Helen N. Del Biaggio, his wife.
(10) Includes 6,068 shares held in a personal Individual Retirement Account and
27,759 shares held as Trustee for the Dury Revocable Trust.
(11) Includes 134,200 shares held individually and 2,260 shares held in the name
of Hillary H. Hammerstrom, his daughter.
(12) Includes 6,600 shares held as one of two trustees for the Larsen Family
Trust.
(13) Includes 74,197 shares held in the Roy E. Lave Profit Sharing Plan and
24,091 shares held in the Lave Revocable Trust.
(14) Includes 1,650 shares held in a personal Individual Retirement Account.
(15) Includes 125,296 shares as trustee of the Louis and Margaret Normandin
Trust.
(16) Includes 171,517 shares as one of two trustees for the Peckham Revocable
Trust.
(17) Includes 222,786 shares as one of two trustees for the Robert and Carolyn
Peters Trust.
(18) Includes 11,381 shares held in a personal Individual Retirement Account and
623 shares held by Azieb Nicodimos, his wife.
(19) Includes 7,333 shares held in a personal Individual Retirement Account.
(20) Includes 69,165 shares held as Community Property.
INDEBTEDNESS OF MANAGEMENT
Some of Commerce Corp's directors and executive officers, as well as their
immediate family and associates, are customers of, and have had banking
transactions with, the banking subsidiaries of Commerce Corp (i.e., Heritage
Bank of Commerce, Heritage Bank East Bay, Heritage Bank South Valley, and Bank
of Los Altos, collectively referred to herein as the "Banks") in the ordinary
course of business, and the Banks expect to have such ordinary banking
transactions with these persons in the future. In the opinion of management of
Commerce Corp and the Banks, all loans and commitments to lend included in such
transactions were made in the ordinary course of business on the same terms,
including interest rates and collateral, as those prevailing for comparable
transactions with other persons of similar creditworthiness, and do not involve
more than the normal risk of collectability or present other unfavorable
features. Loans to individual directors and officers must comply with the Banks'
lending policies and statutory lending limits. In addition, prior approval of
the Banks' Boards of Directors is required for all such loans.
COMMITTEES OF THE BOARD OF DIRECTORS
OF HERITAGE COMMERCE CORP
AUDIT COMMITTEE
The members of the Audit Committee are Humphrey P. Polanen, Committee
Chairman, John W. Larsen, Louis ("Lon") O. Normandin, Jack L. Peckham, Robert W.
Peters, and Howard J. Weiland, Committee Vice-Chairman.
The principal duties of the Audit Committee are the following: (i)
recommend the firm of independent certified public accountants for appointment
by the Board; (ii) meet with the independent certified public accountants to
review and approve the scope of their audit engagement and the fees related to
such work; (iii) meet with Commerce Corp's financial management, internal audit
management and independent certified public accountants to review matters
relating to internal accounting controls, the internal audit program, accounting
practices and procedures and other matters relating to the financial condition
of Commerce Corp and its subsidiaries; and (iv) periodically report to the Board
any conclusions or recommendations that the Audit Committee may have with
respect to such matters. The Board of Directors has adopted
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a written charter for the Audit Committee. A copy of Commerce Corp's Audit
Committee Charter is included as Annex C to this Proxy Statement. The Audit
Committee met three times during 2000.
PERSONNEL AND PLANNING COMMITTEE
The members of the Personnel and Planning Committee are Robert W. Peters,
Committee Chairman, Hugh P. Barton, Frank G. Bisceglia, Richard L. Conniff,
William J. Del Biaggio, Jr., Roy E. Lave, Jack L. Peckham, and Brad L. Smith.
The principal duties of the Personnel and Planning Committee are (i) the
selection, recruitment and performance evaluation of executive personnel; (ii)
making recommendations to the Board regarding the salary, benefits and incentive
compensation to be paid to executive officers of the Company and its subsidiary
banks; (iii) the development of corporate-wide compensation and benefits
policies; (iv) the development of the Company's personnel policies; (v) the
Company's compliance with laws and regulations pertaining to personnel,
compensation and employment matters; (vi) the development and presentation to
the Board for approval of the Company's mission statement and strategic plan;
(vii) the development of employee training and internal communications programs;
and (viii) in cooperation with the Company's Loan Committee, the development of
social responsibility programs and policies, including, but not limited to,
policies designed to ensure the Company's compliance with all state and federal
laws and regulations pertaining to equal employment opportunity, equal credit
opportunity and the Company's efforts to meet the credit needs of the
communities in which the Company and its subsidiaries do business. The Personnel
and Planning Committee met four times during 2000.
LOAN COMMITTEE
The members of the Loan Committee are Frank G. Bisceglia, Committee
Chairman, James R. Blair, Richard L. Conniff, Kenneth A. Corsello, William J.
Del Biaggio, Jr., Roy E. Lave, Louis O. ("Lon") Normandin, and Brad L. Smith.
The Loan Committee is responsible for the approval and supervision of loans and
the development of the Company's loan policies and procedures. The Loan
Committee met thirty-seven times during 2000.
FINANCE AND INVESTMENT COMMITTEE
The members of the Finance and Investment Committee are Anneke Dury,
Committee Chairwoman, Frank G. Bisceglia, James R. Blair, Richard L. Conniff,
William J. Del Biaggio, Jr., Robert W. Peters, Brad L. Smith, and Howard J.
Weiland.
The Finance and Investment Committee is responsible for the development of
policies and procedures related to liquidity and asset-liability management,
supervision of the Company's investments and preparation of the Company's annual
budget. The Finance and Investment Committee met thirteen times during 2000.
The Company and its subsidiary Banks do not have executive or nominating
committees. The Board of Directors performs the functions of these committees.
During 2000, the Company's Board of Directors held eleven regular meetings
and two special meetings. Except for James R. Blair, Louis O. ("Lon") Normandin,
Jack L. Peckham, Robert W. Peters, and Humphrey P. Polanen, each director
attended at least 75 percent of the aggregate of: (1) the total number of
meetings of the Board of Directors; and (2) the total number of meetings of
board committees on which that director served.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Commerce
Corp's directors and executive officers, and persons who own more than ten
percent of a registered class of Commerce Corp's equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and reports
of
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changes in ownership of common stock and other equity securities of Commerce
Corp Officers, directors and greater than ten percent shareholders are required
by SEC regulations to furnish Commerce Corp with copies of all Section 16(a)
forms they file.
To Commerce Corp's knowledge, based solely on review of the copies of such
reports furnished to Commerce Corp and written representations that no other
reports were required, during the year ended December 31, 2000; all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten percent beneficial owners were complied with, except as follows: Directors
Frank G. Bisceglia and Robert W. Peters each filed one Form 4 Statement of
Changes in Beneficial Ownership with the Securities and Exchange Commission
after the date upon which the filing was due.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During 2000 Commerce Corp paid a director, William J. Del Biaggio, Jr.,
$65,000 in connection with the terms of a consulting agreement pursuant to which
Mr. Del Biaggio assisted with business development activities for Commerce
Corp's subsidiary banks.
There are no other existing or proposed material transactions between
Commerce Corp and any of Commerce Corp's directors, executive officers, nominees
for election as a director, or the immediate family or associates of any of the
foregoing persons.
CHANGE IN CONTROL
Management is not aware of any arrangements, including the pledge by any
person of shares of Commerce Corp, the operation of which may at a subsequent
date result in a change in control of Commerce Corp.
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EXECUTIVE COMPENSATION
The following information is furnished with respect to each executive
officer of the Company whose aggregate cash compensation during 2000 exceeded
$100,000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------------------- -------------------------------
AWARDS
--------------------- PAYOUTS
RESTRICTED -------
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) COMPENSATION(2) AWARDS SARS PAYOUTS COMPENSATION(3)
--------------------------- ---- --------- -------- --------------- ---------- -------- ------- ---------------
John E. Rossell............... 2000 $ 97,600 $57,000 $14,400 -- -- -- $422,000
President and CEO 1999 175,000 71,600 9,000 -- 3,300 -- --
Heritage Commerce Corp 1998 162,500 44,000 11,287 -- 6,600 -- --
Richard L. Conniff............ 2000 $150,000 $61,500 $ 7,600 -- -- -- --
President and COO 1999 132,000 38,500 6,000 -- 3,300 -- --
Heritage Commerce Corp 1998 84,000 -- 4,000 -- 56,100 -- --
Kenneth A. Corsello........... 2000 $114,200 $35,400 $ 6,600 -- 6,000 -- --
Executive Vice President/ 1999 100,000 35,200 7,623 -- -- -- --
Chief Credit Officer 1998 100,000 18,000 7,623 -- -- -- --
Lawrence D. McGovern.......... 2000 $139,700 $38,200 $ 7,900 -- -- -- --
Executive Vice President/ 1999 128,000 24,300 29,942 -- -- -- --
Chief Financial Officer 1998 57,300 -- 16,587 -- 49,500 -- --
Kenneth B. Silveira........... 2000 $ 86,400 $32,600 $11,000 -- -- -- --
Executive Vice President/ 1999 85,500 27,500 4,800 -- -- -- --
Operations and
Administration 1998 81,300 11,000 4,800 -- -- -- --
Brad L. Smith................. 2000 $175,000 $62,100 $11,400 -- -- -- --
Chairman and CEO 1999 175,000 6,600 6,000 -- 3,300 -- --
Heritage Commerce Corp 1998 -- -- -- -- 82,500 -- --
- ---------------
(1) Amounts shown include cash and non-cash compensation earned and received by
executive officers.
(2) Amounts include an automobile allowance pursuant to the terms of each
executive officer's employment, payments for unused vacation, moving
expenses paid, and insurance benefits.
(3) Amounts shown are contractual obligations paid to Mr. Rossell based on
compensation agreements reached with Commerce Corp in previous years.
Commerce Corp pays the cost of premiums on life insurance policies insuring
all employees, including executive officers, in amounts approximately two times
their annual salaries. The policies are payable to the officer's designated
beneficiary(ies). In addition, Commerce Corp provides certain incidental
personal benefits to executive officers. The incremental cost to Commerce Corp
of providing such benefits to the executive officers named above did not, for
the fiscal year ended December 31, 2000, exceed ten percent of the compensation
to such officers.
STOCK OPTION PLAN
In 1994 the Board of Directors adopted the Heritage Bank of Commerce 1994
Tandem Stock Option Plan ("Plan") in order to promote the long-term success of
the Bank and the creation of shareholder value. In 1998 the Plan was restated
and adopted by Commerce Corp as the successor corporation to Heritage Bank of
Commerce. The Plan authorizes Commerce Corp to grant stock options to officers,
employees and directors of Commerce Corp and its affiliates.
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The following table shows options granted in 2000 to executive officers
named in the Summary Compensation Table. The grant date present value dollar
amount was computed in accordance with Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation."
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------------------------------------------------
% OF TOTAL
OPTIONS EXERCISE
GRANTED TO OR BASE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR ($/SH) DATE VALUE $(1)
---- ------- ------------ -------- ---------- ----------
Kenneth A. Corsello......................... 6,000 2.44% $9.00 12/21/2010 $26,000
- ---------------
(1) In accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was used to estimate the Grant Date
Present Value assuming (i) an expected volatility of 35%; (ii) a risk-free
interest rate of 5.7%; and (iii) an option term of 7 years. This is a
theoretical value for stock options. The actual value of the options will
depend on the market value of Common Stock when the options are exercised.
The following table delineates options exercised by executive officers
named in the Summary Compensation Table and the values of unexercised options at
December 31, 2000:
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
AT YEAR END OPTIONS AT YEAR END
SHARES ------------------- -------------------
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- -------------- ----------- ------------------- -------------------
Richard L. Conniff................. -- -- 37,125/22,275 $14,861/$12,164
Kenneth A. Corsello................ -- -- 48,117/5,959 $287,917/$5,601
Lawrence D. McGovern............... -- -- 27,225/22,275 $14,861/$12,164
John E. Rossell.................... 118,138 $779,441 N/A N/A
Brad L. Smith...................... -- -- 44,550/41,250 N/A
Kenneth B. Silveira................ -- -- 43,612/397 $266,359/$97
401(k) PLAN
The Board of Directors has established an employee benefit plan under
Section 401(k) of the Internal Revenue Code of 1986. The purpose of the 401(k)
plan is to encourage employees to save for retirement. Eligible employees may
make contributions to the plan subject to the limitations of Section 401(k) of
the Internal Revenue Code of 1986. The Plan trustees administer the Plan.
EMPLOYEE STOCK OWNERSHIP PLAN
In 1997, Heritage Bank of Commerce initiated an employee stock ownership
plan ("Stock Ownership Plan"). The Stock Ownership Plan was subsequently adopted
by Commerce Corp as the successor corporation to Heritage Bank of Commerce. The
Stock Ownership Plan allows Commerce Corp, at its option, to purchase shares of
Commerce Corp Common Stock on the open market and award those shares to certain
employees. To be eligible to receive an award of shares under the Stock
Ownership Plan, an employee must have worked at least 1,000 hours during the
year and must be employed by the Company on December 31. Awards under the Stock
Ownership Plan generally vest over four years. During 2000, Commerce Corp
contributed $250,000 to the Stock Ownership Plan, with contributions to Richard
L. Conniff, Kenneth A. Corsello, Lawrence D. McGovern, Kenneth B. Silveira, and
Brad L. Smith totaling $4,500, $3,400, $4,200, $2,600, and $5,100, respectively.
These amounts are included in the Summary Compensation Table in the column
entitled "Bonus."
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EMPLOYMENT CONTRACTS
Richard L. Conniff, Commerce Corp President and Chief Operating Officer, is
employed under the terms of a written three-year employment contract dated
January 1, 1999 which provides for the following: a current base salary of
$200,000 per year; bonuses paid based upon the performance of Commerce Corp
awarded in the sole discretion of the Board of Directors; a car allowance;
insurance; and severance compensation benefits in the event Commerce Corp
terminates Mr. Conniff's employment without cause.
Lawrence D. McGovern, Commerce Corp's Executive Vice President and Chief
Financial Officer, is employed under the terms of a written three-year
employment contract dated July 16, 1998 which provides for the following: a
current base salary of $150,000 per year; bonuses paid based upon the
performance of Commerce Corp, awarded in the sole discretion of the Board of
Directors; a car allowance; insurance; and severance compensation benefits in
the event Commerce Corp terminates Mr. McGovern's employment without cause.
Brad L. Smith, Chairman of the Board and Chief Executive Officer of
Commerce Corp, is employed under the terms of a written three-year employment
contract dated January 1, 1999 which provides for the following: a current base
salary of $220,000 per year; bonuses paid based upon the performance of Commerce
Corp, awarded in the sole discretion of the Board of Directors; a car allowance;
insurance; and severance compensation benefits in the event Commerce Corp
terminates Mr. Smith's employment without cause.
Pursuant to the terms of a written employment agreement between Commerce
Corp and John E. Rossell III, Mr. Rossell received severance compensation in the
amount of $422,000 upon termination of his employment on June 16, 2000. This
amount is set forth in the Summary Compensation Table in the column labeled "All
Other Compensation."
SUPPLEMENTARY RETIREMENT PLAN FOR DIRECTORS, INCLUDING EXECUTIVE OFFICERS
During 1999, the Company converted its existing nonqualified key executive
officer and director defined contribution retirement and death benefit plan to a
defined benefit plan ("Plan"). The Plan is unsecured and unfunded and there are
no Plan assets. The Company has purchased insurance on the lives of the
directors and executive officers who participate in the Plan and intends to use
the cash values of those policies ($15,983,000 and $12,219,000 at December 31,
2000 and 1999, respectively) to pay the retirement obligations that accrue
pursuant to the plan. The Company's total accrued pension obligation was
$2,125,000 and $510,000 as of December 31, 2000 and 1999, respectively. The
formula by which benefits are determined for the executive officers and
directors who participate in the Plan is based on a combination of the
individual's position within the Company, their age at the time when their
retirement benefits become fully vested, and the amount of their benefits
available under the previous plan. The estimated annual benefits payable upon
retirement at normal retirement age for Richard L. Conniff, Kenneth A. Corsello,
Lawrence D. McGovern, and Brad L. Smith are $62,000, $48,000, $68,000, and
$92,000, respectively. The death benefit for participants in the Plan is an
endorsement to the individual's beneficiaries of 80% of the net-at-risk
insurance amount (i.e., the amount of the death benefit in excess of cash value
of the underlying insurance policy).
Upon termination of the employment of John E. Rossell III in June 2000,
Commerce Corp accelerated the vesting of the retirement benefits payable to Mr.
Rossell under the Plan. Upon retirement at age 62, Mr. Rossell will receive
estimated annual retirement benefits of $108,000.
DIRECTOR FEES AND DIRECTOR FEE DEFERRAL PLAN
During 2000, Commerce Corp paid retainers to two directors for their
services during 2000, for a total of $23,465. Fees are paid to directors
pursuant to a director compensation program, which allocates fees among
participating directors based on the extent and nature of each director's
committee memberships, attendance, and/or that director's chairmanship of one of
the various committees of the Board. The total annual cost of the program for
2000 was approximately $130,000.
An option of the director compensation program is the deferral of fees
("Deferral Plan"). Under the Deferral Plan, a participating director may defer
up to 100% of their board fees into the Deferral Plan for up to
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ten years from the date of the first deferral. Amounts deferred earn interest at
the rate of 8% per annum. The director may elect a distribution schedule of up
to ten years, with interest accruing (at the same 8%) on the declining balance.
A participating director is eligible to begin receiving benefits upon
retirement.
Commerce Corp has purchased life insurance policies on the lives of
directors who have agreed to participate in the Deferral Plan. It is expected
that the earnings on these policies will offset the cost of the program. In
addition, Commerce Corp will receive death benefit payments upon the death of
the director. The proceeds will permit Commerce Corp to "complete" the Deferral
Plan as the director originally intended if the director dies prior to the
completion of the Deferral Plan. The disbursement of deferred fees is
accelerated at death and commences one month after the director dies.
In the event of the director's disability prior to attainment of his
benefit eligibility date, the director may request that the Board permit him to
receive an immediate disability benefit equal to the annualized value of the
director's deferral account.
To date, eight of the directors have elected to defer their fees. For the
years 1998, 1999, and 2000, Commerce Corp recorded expenses of $134,000,
$42,000, and $67,000, respectively, to account for its obligation to pay
deferred fees.
COMPENSATION COMMITTEE REPORT
The Personnel and Planning Committee, acting as a compensation committee in
accordance with applicable requirements, has provided the following report to
the Board of Directors of Commerce Corp.
REPORT ON SENIOR EXECUTIVE COMPENSATION
BY THE PERSONNEL AND PLANNING COMMITTEE OF THE BOARD OF DIRECTORS
The Report of the Personnel and Planning Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent that Commerce Corp
specifically incorporates the information contained in the report by reference,
and shall not otherwise be deemed filed under such acts.
Commerce Corp's general compensation strategy for senior executive officers
is to pay annual and long term compensation which is competitive with executives
in similar positions at peer group companies, taking into appropriate account
Commerce Corp's forward progress, its overall financial condition and its
performance relative to companies in similar circumstances. In determining
compensation levels, Commerce Corp obtains salary survey information regarding
executive salary levels for comparable companies through many sources, including
banking industry associates and independent compensation consultants.
Additionally, Commerce Corp ties incentive compensation levels to financial
performance goals of Commerce Corp.
The compensation policy of Commerce Corp is designed to attract and retain
highly qualified personnel and to provide meaningful incentives for measurable
performance. The components of executive compensation include base salary, an
incentive bonus plan, non-plan bonuses, stock options and a supplemental
executive retirement plan.
Commerce Corp's senior executive compensation is determined by the
Personnel and Planning Committee of the Board of Directors and by the Board
itself. Brad L. Smith, Commerce Corp's Chairman and Chief Executive Officer, and
Richard L. Conniff, Commerce Corp's President and Chief Operating Officer, are
currently members of both the Board of Directors and the Personnel and Planning
Committee, but do not participate in matters related to executive compensation.
The Committee meets a minimum of four times per year. Salaries and other
compensation are reviewed annually. Any significant increases or other changes
to compensation or benefits are approved by the Board of Directors. Incentive
bonus awards are determined by the Committee in January or February and
recommended to the full Board for immediate action. Compensation for a newly
hired executive may be established by the Committee at a special meeting.
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In its discretion, Commerce Corp pays annual incentive bonuses to its
senior executives after receiving a recommendation to do so by the Personnel and
Planning Committee of the Board. The decision to pay, and the amount of payment,
is based upon an assessment of the institution's performance in the context of
the plan and with reference to the executive's base wages, as well as to peer
group patterns.
HERITAGE COMMERCE CORP DIRECTORS
PERSONNEL AND PLANNING COMMITTEE
Hugh P. Barton
Frank G. Bisceglia
Richard L. Conniff
William J. Del Biaggio, Jr.
Roy E. Lave
Jack L. Peckham
Robert W. Peters, Chairman
Brad L. Smith
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PERFORMANCE GRAPH
The following graph compares the stock performance of Heritage Bank of
Commerce from December 31, 1995 to January 31, 1998 and of Commerce Corp from
February 1, 1998 to December 31, 2000, to the performance of several specific
industry indices. For the Company's 1998 proxy statement, the performance of the
S&P 500 and S&P Regional Bank indicies were used as comparisons to the Company's
stock performance. Management believes that a performance comparison to the
Nasdaq Stock Index and the Nasdaq Bank Stocks provide meaningful information and
has therefore included those comparisons in the following graph.
HERITAGE COMMERCE CORP STOCK PRICE PERFORMANCE*
[PERFORMANCE GRAPH]
--------------------------------------------------------------------------------------
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
--------------------------------------------------------------------------------------
Nasdaq Stock Market 100.00 122.71 149.25 208.40 386.77 234.81
Nasdaq Bank Stocks 100.00 126.16 206.38 182.09 167.55 192.14
Heritage Commerce
Corp 100.00 126.47 263.16 334.92 382.79 243.42
S&P 500 100.00 120.26 157.56 199.57 238.54 214.36
S&P Bank Proxy 100.00 137.28 193.82 202.67 171.13 195.58
--------------------------------------------------------------------------------------
- ---------------
* Results shown on the graph are not necessarily indicative of future
performance
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS INTENDS TO VOTE ALL PROXIES HELD BY IT IN FAVOR OF
ELECTION OF EACH OF THE NOMINEES. YOU ARE URGED TO VOTE FOR PROPOSAL 1: TO ELECT
THE FIFTEEN NOMINEES SET FORTH HEREIN TO SERVE UNTIL THE NEXT ANNUAL MEETING OF
THE SHAREHOLDERS AND UNTIL THEIR RESPECTIVE SUCCESSORS SHALL BE ELECTED AND
QUALIFIED: HUGH P. BARTON, FRANK G. BISCEGLIA, JAMES R. BLAIR, RICHARD L.
CONNIFF, WILLIAM J. DEL BIAGGIO, JR., ANNEKE DURY, KURT G. HAMMERSTROM, JOHN W.
LARSEN, ROY E. LAVE, LOUIS ("LON") O. NORMANDIN, JACK L. PECKHAM, ROBERT W.
PETERS, HUMPHREY P. POLANEN, BRAD L. SMITH, AND HOWARD J. WEILAND. IF NO
INSTRUCTION IS GIVEN, THE BOARD OF DIRECTORS INTENDS TO VOTE FOR EACH NOMINEE
LISTED.
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PROPOSAL 2
ELIMINATION OF CUMULATIVE VOTING
The California General Corporation Law permits California corporations with
widely traded securities, such as Commerce Corp, to provide, with the approval
of their shareholders, for majority rule voting in electing directors in lieu of
cumulative voting.
The Board of Directors believes that cumulative voting is not an
appropriate method of corporate governance for Commerce Corp. For a discussion
of the reasons for the Board's conclusion, please see the discussion below under
"Reasons for the Proposed Amendment." Accordingly, the Board of Directors has
adopted and is submitting for shareholder approval, an amendment to Commerce
Corp's Articles of Incorporation (the "Articles") which, if approved by the
shareholders, would provide for majority rule voting in electing Commerce Corp's
directors by eliminating cumulative voting commencing with the next Annual
Meeting of Commerce Corp. The text of the proposed amendment to the Articles is
set forth in Annex A to this Proxy Statement.
A description of mandatory cumulative and majority rule voting and a
summary of the reasons for the Board's recommendation of the proposed amendment
and certain other considerations concerning the proposed amendment are set forth
below.
MANDATORY CUMULATIVE VOTING AND MAJORITY RULE VOTING
Mandatory cumulative voting in the election of directors may currently be
invoked by any shareholder of Commerce Corp complying with statutory notice
requirements. Under cumulative voting, holders of shares of Commerce Corp's
Common Stock are entitled to a number of votes per share equal to the number of
directors to be elected and all directors are voted upon simultaneously. Holders
of shares may cast all of their votes for a single director candidate or
distribute them among two or more director candidates.
As a consequence of cumulative voting, shareholders representing a
relatively small number of the voting shares have the power to nominate and
elect one or more directors. For example, if, as in the case of Commerce Corp,
fifteen directors are to be elected at an annual meeting, a shareholder or group
of shareholders holding one vote more than 6.25% of the voting shares could
nominate and elect one director by cumulating and casting their fifteen votes
per share only for their single candidate. This is so even if shareholders
holding just under 93.75% of the voting shares are opposed to the election of
that candidate and cast their vote to elect fifteen other director candidates.
With majority rule voting, a nominee could not be elected without a
majority of shareholder votes. Under majority rule voting, shareholders are
entitled to only one vote per share in the election of directors and each
director is voted upon separately. Consequently, through majority rule voting,
the only director candidates who could be elected are those who receive support
from a majority of the shares voting, and the shareholders holding in excess of
50% of the voting shares would be able to elect all of the directors.
REASONS FOR THE PROPOSED AMENDMENT
The Board of Directors believes that approval of the proposed amendment is
in the best interests of Commerce Corp and its shareholders.
The Board of Directors believes that every director of a publicly-held
corporation should represent the interests of a majority of shareholders. It
believes that directors elected by a minority shareholder or group of
shareholders through cumulative voting are likely to be partisans of the
particular interest group that elected them rather than representatives of a
majority of shareholders. Such partisanship could disrupt the management of
Commerce Corp and prevent it from operating in the most effective manner.
Further, the election of directors who view themselves as representing or
answerable to a particular minority constituency could introduce an element of
discord on the Board of Directors, impair the ability of the directors to work
effectively and discourage qualified independent individuals from serving as
directors. By providing for
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majority rule voting in electing directors, approval of the proposed amendment
will help ensure that each director acts in the best interests of a majority of
shareholders rather than the best interest of a minority shareholder or group of
shareholders. Implementation of majority rule voting will increase the ability
of all of the holders of a large number of shares of Common Stock to elect all
of the directors of Commerce Corp.
OTHER EFFECTS
Approval of the proposed amendment may render more difficult any attempt by
a holder or group of holders of a significant number of voting shares, but less
than a majority, to monitor, change or influence the management or policies of
Commerce Corp. In addition, under certain circumstances, the proposed amendment,
along with other measures that may be viewed as having anti-takeover effects,
may discourage an unfriendly acquisition or business combination involving
Commerce Corp that a shareholder might consider to be in such shareholder's best
interest, including an unfriendly acquisition or business combination that might
result in a premium over the market price for the shares held by the
shareholder. For example, the proposed amendment may discourage the accumulation
of large minority shareholdings (as a prelude to an unfriendly acquisition or
business combination proposal or otherwise) by persons who would not effect that
acquisition without being assured of representation on the Board of Directors.
Approval of the proposed amendment requires the favorable vote of the
holders of a majority of the outstanding shares of Commerce Corp's Common Stock
entitled to vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS BELIEVES THAT THE ADVANTAGES OF THE PROPOSED
AMENDMENT IMPLEMENTING MAJORITY RULE VOTING GREATLY OUTWEIGH THE POSSIBLE
DISADVANTAGES OF THE AMENDMENT. ACCORDINGLY, THE BOARD OF DIRECTORS HAS APPROVED
THE PROPOSED AMENDMENT AND RECOMMENDS APPROVAL BY SHAREHOLDERS.
PROPOSAL 3
CLASSIFICATION OF BOARD OF DIRECTORS
The shareholders are being asked to approve an amendment to Commerce Corp's
Bylaws providing for classification of the Board of Directors into three
classes, each consisting of a number of directors equal as nearly as practicable
to one-third the total number of directors. If this Proposal 3 is approved each
class of directors will be subject to election every third year and will serve
for a three-year term. Currently, all of Commerce Corp's directors are elected
each year for a one-year term.
The Board of Directors believes that this amendment to the Bylaws is in the
best interests of Commerce Corp and its shareholders. Board classification will
help lend continuity and stability to the management of Commerce Corp. Following
adoption of the classified board structure, at any given time at least
two-thirds of the members of the Board of Directors will generally have had
prior experience as directors of Commerce Corp. The Board believes that this
will facilitate long-range planning, strategy and policy and will have a
positive impact on customer and employee loyalty. Commerce Corp has not
historically had problems with either the continuity or stability of its Board
of Directors.
In anticipation of the possible approval of this Proposal 3, the Board of
Directors has, for purposes of initial implementation, designated three classes
of directors for election at the Annual Meeting. If this Proposal 3 is approved,
Class I will be elected initially for a one-year term expiring at the 2002
Annual Meeting of Shareholders; Class II will be elected initially for a
two-year term expiring at the 2003 Annual Meeting of Shareholders; and Class III
will be elected for a three-year term expiring at the Annual Meeting of
Shareholders to be held in the year 2004; and, in each case, until their
successors are duly elected and qualified. Commencing with the Annual Meeting of
Shareholders scheduled to occur in May 2002, directors
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elected to Class I would serve for a three-year term and until their successors
are duly elected and qualified, subject to any decrease in the total number of
authorized directors, as described above. Subsequently in years 2003 and 2004,
directors elected to Class II and Class III, respectively, would also be elected
for a three-year term and until their successors are duly elected and qualified.
Classification of the Board of Directors is permitted by Section 301.5 of
the California Corporations Code. Under Section 301.5, a qualifying California
corporation, such as Commerce Corp, may divide its board of directors into two
or three classes, with one-half or one-third of the directors, respectively,
elected at each annual meeting (or as near to one-half or one-third as
practicable). The authorized number of directors must be not less than six in
the case of a two-class board and not less than nine in the case of a
three-class board. Classified boards of directors are permitted under the
corporate law of a majority of states, and Commerce Corp believes that well over
one-half of Fortune 500 companies provide for classified boards.
The text of the proposed amendment to the Bylaws is set forth in Annex B to
this Proxy Statement.
EFFECT OF CLASSIFICATION OF BOARD
If adopted, the classification of the Board will apply to every subsequent
election of directors for so long as at least six directors are authorized under
Commerce Corp's Bylaws, Commerce Corp continues to be eligible under state law
to maintain a classified board, and the classification provision is not amended.
Commerce Corp's Bylaws provide that the Board of Directors shall consist of not
less than 11 and not more than 21 directors, with the exact number of directors
currently set at 15. So long as the Board continues to consist of at least nine
authorized directors, and Commerce Corp continues to be eligible under state law
to maintain a classified board, after initial implementation of the classified
Board, directors will serve for a term of three years rather than one year, and
one-third of the directors (or as near to one-third as practicable) will be
elected each year.
In the event that the number of directors increases, the increase will be
apportioned by the Board among the classes of directors to make each class as
nearly equal in number as possible. If the number of authorized directors is
decreased to at least six but less than nine, the directors will be apportioned
by the Board between two classes, each consisting of one-half of the directors
or as close an approximation as possible, directors will serve for a term of two
years, and one-half the directors (or as near to one-half as practicable) will
be elected each year. In any event, a decrease in the number of directors cannot
shorten the term of any incumbent director. Vacancies in the Board created by
any resignation, removal or other reason, or by an increase in the size of the
Board, may be filled for the remainder of the term by the vote of the majority
of the directors remaining in office or by the vote of holders of a majority of
the outstanding shares of Commerce Corp's Common Stock.
Under California law, members of the Board of Directors may be removed by
the Board of Directors for cause (defined to be a felony conviction or court
declaration of unsound mind), by the shareholders without cause or by court
order for fraudulent or dishonest acts or gross abuse of authority or
discretion. In the case of a board of directors that is not classified, no
director may be removed by the shareholders if the votes cast against such
removal (or, if done by written consent, the votes eligible to be cast by the
non-consenting shareholders) would have been sufficient to elect such director
if voted cumulatively at an election at which the same total number of votes
were cast (or, if the action is taken by written consent, all shares entitled to
vote were voted) and the entire number of directors authorized at the time of
the director's most recent election were then being elected (the "Relevant
Number of Directors"). In the case of classified boards, the Relevant Number of
Directors is (i) the number of directors elected at the most recent Annual
Meeting of shareholders or, if greater, (ii) the number sought to be removed. It
should be noted that this removal provision applies equally to corporations that
permit cumulative voting and to those that do not.
OTHER EFFECTS
Public companies are potentially subject to attempts by various individuals
and entities to acquire significant minority positions in the company with the
intent either of obtaining actual control of the company
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by electing their own slate of directors, or of achieving some other goal, such
as the repurchase of their shares by the company at a premium. Public companies
also are potentially subject to inadequately priced or coercive bids for control
through majority share ownership. These prospective acquirors may be in a
position to elect a company's entire board of directors through a proxy contest
or otherwise, even though they do not own a majority of the company's
outstanding shares at the time. If this proposal is approved, a majority of
Commerce Corp's directors could not be removed by those persons until two annual
meetings of shareholders have occurred, unless the removal was for cause and the
requisite vote was obtained. By providing this additional time to the Board of
Directors and eliminating the possibility of rapid removal of the Board, the
directors of Commerce Corp will have the necessary time to most effectively
satisfy their responsibility to the Commerce Corp shareholders to evaluate any
proposal and to assess and develop alternatives without the pressure created by
the threat of imminent removal. In addition, this proposal, by providing that
directors will serve three-year terms rather than one-year terms, will enhance
continuity and stability in the composition of Commerce Corp's Board of
Directors and in the policies formulated by the Board. The Board believes that
this, in turn, will permit it to more effectively represent the interests of all
shareholders, including responding to demands or actions by any shareholder or
group. Following adoption of the classified board structure, at any given time
at least two-thirds of the members of the Board of Directors will generally have
had prior experience as directors of Commerce Corp. The Board believes that this
will facilitate long-range planning, strategy and policy and will have a
positive impact on customer and employee loyalty. Commerce Corp has not
historically had problems with either the continuity or stability of its Board
of Directors.
The classification of the Board of Directors will have the effect of making
it more difficult to replace incumbent directors. So long as the Board is
classified into three classes, a minimum of three annual meetings of
shareholders would generally be required to replace the entire Board, absent
intervening vacancies. While the proposal is not intended as a
takeover-resistive measure in response to a specific threat, it may discourage
the acquisition of large blocks of Commerce Corp's shares by causing it to take
longer for a person or group of persons who acquire a block of shares to effect
a change in management.
If this proposal is approved and implemented, a shareholder or group of
shareholders seeking to replace a majority of the directors on the Board will
generally need to influence the voting of at least a majority of the outstanding
shares at two consecutive annual meetings. In addition, Commerce Corp has other
corporate attributes that may also have the effect of helping Commerce Corp to
resist an unfriendly acquisition. These include existing provisions in Commerce
Corp's Articles of Incorporation and Bylaws eliminating, subject to specified
exceptions, the liability of directors for monetary damages and the proposed
provision eliminating cumulative voting; provisions in the Articles and Bylaws
providing for indemnification of directors and officers; and provisions in the
Bylaws requiring advance notice of nomination of a candidate for election to the
Board of Directors of Commerce Corp when the nomination is made by a person
other than the Board.
This proposal is not in response to any attempt to acquire control of
Commerce Corp. However, the Board believes that adopting this proposal is
prudent, advantageous and in the best interests of shareholders because it will
give the Board more time to fulfill its responsibilities to shareholders, and it
will provide greater assurance of continuity and stability in the composition
and policies of the Board of Directors. The Board also believes the advantages
outweigh any disadvantage relating to discouraging potential acquirors from
attempting to obtain control of Commerce Corp.
Approval of the proposed amendment requires the favorable vote of the
holders of a majority of the outstanding shares of Commerce Corp's Common Stock.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS BELIEVES THAT THE ADVANTAGES OF THE PROPOSED
AMENDMENT CLASSIFYING THE BOARD OF DIRECTORS FOR PURPOSES OF THE ELECTION OF
DIRECTORS GREATLY OUTWEIGH THE POSSIBLE DISADVANTAGES OF THE AMENDMENT.
ACCORDINGLY, THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSED
AMENDMENT AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS APPROVE IT.
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SUMMARY OF POTENTIAL EFFECT OF PROPOSALS 2 AND 3
If Proposals 2 and 3 are both approved and implemented, a shareholder or
group of shareholders seeking to replace a majority of the directors on the
Board will generally need to influence the voting of at least a majority of the
outstanding shares at three consecutive annual meetings. In addition, Commerce
Corp has other corporate attributes that may also have the effect of helping
Commerce Corp to resist an unfriendly acquisition. These include provisions in
Commerce Corp's Articles eliminating the ability of shareholders to take action
by written consent of the shareholders; provisions in Commerce Corp's Articles
and Bylaws eliminating, subject to certain exceptions, the liability of
directors for monetary damages; provisions in the Bylaws and agreements
providing for indemnification of directors and officers; and benefit plans for
directors, executives and key employees that accelerate benefits upon a change
in control of Commerce Corp.
The Proposals are not in response to any attempt to acquire control of
Commerce Corp, nor is Commerce Corp aware of any such attempt.
PROPOSAL 4
INCREASE IN THE NUMBER OF SHARES
AVAILABLE FOR GRANTS OF STOCK OPTIONS
At present Commerce Corp has reserved 2,261,260 shares of Common Stock for
issuance under the Heritage Commerce Corp Restated 1994 Tandem Stock Option Plan
(the "Plan"). This number includes shares issued upon exercise of options.
Proposal 4 provides for an increase of 500,000 shares reserved under the Plan,
so that the total number of shares reserved, including shares previously issued
upon exercise of options, will be 2,761,260.
The purpose of the Plan is to promote the long-term success of Commerce
Corp and the creation of shareholder value. The Plan authorizes Commerce Corp to
grant options that qualify as incentive stock options ("ISOs") under the
Internal Revenue Code of 1986 and nonqualified stock options ("NSOs") to key
employees of Commerce Corp and its affiliated companies. Nonemployee directors
are only eligible to receive NSOs.
The Plan currently sets aside 2,261,260 authorized, but unissued, shares of
Commerce Corp's Common Stock for grant at not less than the greater of $3.50
share or an amount per share that approximates the fair market value of Commerce
Corp's Common Stock on the date each option is granted. In addition, if an ISO
is granted to an officer or key employee of Commerce Corp who, at the time of
the grant, owns more than 10 percent of Commerce Corp's Common Stock, the
exercise price of the options must be not less than the greater of $3.85 share
or 110 percent of the fair market value of Commerce Corp's Common Stock at the
time the option is granted. On April 2, 2001, the closing sale price of Commerce
Corp's Common Stock as reported on Nasdaq was $9.25 per share.
All options granted expire not later than ten years from the date of grant.
To the extent that the aggregate fair market value of stock with respect to
which ISOs are exercisable for the first time by any individual during any
calendar year exceeds $100,000, such options are treated as NSOs. The Personnel
and Planning Committee, a committee appointed by the Board, administers the
Plan.
Neither the optionee nor Commerce Corp will incur any federal tax
consequences as a result of the grant of an option. The optionee will have no
taxable income upon exercising an ISO (except that the alternative minimum tax
may apply), and Commerce Corp will receive no deduction when an ISO is
exercised. Upon exercising an NSO, the optionee generally must recognize
ordinary income equal to the "spread" between the exercise price and the fair
market value of Commerce Corp's Common Stock on the date of exercise, and
Commerce Corp will be entitled to a business expense deduction for the same
amount. In the case of an employee, the option spread at the time an NSO is
exercised is subject to income tax withholding, but the optionee generally may
elect to satisfy the withholding tax obligation by having shares of Common Stock
withheld from those purchased under the NSO. The tax treatment of a disposition
of option shares acquired under the Plan depends on how long the shares have
been held and on whether such shares were acquired by
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exercising an ISO or by exercising an NSO. Commerce Corp will not be entitled to
a deduction in connection with a disposition of option shares, except in the
case of a disposition of shares acquired under an ISO before the applicable ISO
holding period has been satisfied.
As of April 2, 2001, options to purchase 1,471,882 shares have been granted
by the Board of Directors and are outstanding, and options to purchase an
additional 725,636 shares have been exercised by option holders, leaving 63,742
shares of the 2,261,260 shares now authorized currently available for further
grants of options. The Board of Directors is seeking shareholder approval to
increase the number of options authorized under the Plan in order to ensure that
sufficient options will be available to adequately compensate Commerce Corp's
employees and directors as the Company expands its business and adds additional
employees. The Board therefore requests that the shareholders authorize the
issuance of up to an additional 500,000 options, which would bring the total
number of options available under the Plan to 563,742. The Board has not yet
determined that it will allocate the additional options authorized by this
proposal to any particular individuals or groups of individuals among those
otherwise eligible to receive grants of options.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS INTENDS TO VOTE ALL PROXIES HELD BY IT IN FAVOR OF
INCREASING THE NUMBER OF SHARES AVAILABLE FOR GRANTS OF OPTIONS UNDER THE PLAN.
YOU ARE URGED TO VOTE FOR PROPOSAL 4: TO APPROVE THE INCREASE IN THE NUMBER OF
SHARES AVAILABLE FOR GRANTS OF OPTIONS UNDER THE HERITAGE COMMERCE CORP RESTATED
1994 TANDEM STOCK OPTION PLAN.
PROPOSAL 5
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
At the 2001 Annual Meeting of Shareholders, the following resolution will
be subject to ratification by a simple majority vote of the shares represented
at the meeting:
RESOLVED, that the selection of Deloitte & Touche LLP as the independent
certified public accountants of Heritage Commerce Corp for the fiscal year
ending December 31, 2001 is hereby ratified.
If ratification is not achieved, the selection of an independent certified
public accountant will be reconsidered and made by the Board of Directors. Even
if the selection is ratified, the Board of Directors reserves the right and, in
its discretion, may direct the appointment of any other independent certified
public accounting firm at any time if the Board decides that such a change would
be in the best interests of the Corporation and its shareholders.
The services provided Deloitte & Touche LLP include the examination and
reporting of the financial status of Commerce Corp. These services have been
furnished at customary rates and terms. There are no existing direct or indirect
agreements or understandings that fix a limit on current or future fees for
these audit services.
A representative of Deloitte & Touche LLP is expected to attend the 2001
Annual Meeting of Shareholders. The representative will have the opportunity to
make a statement, if desired, and is expected to be available to respond to
shareholder inquiries.
AUDIT COMMITTEE REPORT
In accordance with its written charter adopted by Heritage Commerce Corp's
Board of Directors (Board), the Heritage Commerce Corp Audit Committee
(Committee) assists the Board in fulfilling its responsibility for oversight of
the quality and integrity of the accounting, auditing, and financial reporting
practices of the Company. During fiscal 2000, the Committee met three times, and
the Committee chair, as
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representative of the Committee, discussed the interim financial information
contained in each quarterly earnings announcement with the CFO, controller and
independent auditors prior to public release.
In discharging its oversight responsibility as to the audit process, the
Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and the Company that
might bear on the auditors' independence consistent with Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees,"
discussed with the auditors any relationships that may impact their objectivity
and independence and satisfied itself as to the auditors' independence. The
Committee also discussed with management, the internal auditors and the
independent auditors the quality and adequacy of the Company's internal controls
and the internal audit function's organization, responsibilities, budget and
staffing and concurred in the appointment of a new director of internal audit.
The Committee reviewed with both the independent and the internal auditors their
audit plans, audit scope, and identification of audit risks.
The Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements. The Committee also discussed the results of the
internal audit examinations.
The Committee reviewed the audited financial statements of the Company as
of and for fiscal year ended December 31, 2000 with management and the
independent auditors. Management has the responsibility for the preparation of
the Company's financial statements and the independent auditors have the
responsibility for the examination of those statements.
Based on the above-mentioned review and discussion with management and the
independent auditors, the Committee recommended to the Board that the Company's
audited financial statements be included in its Annual Report on Form 10-K for
the fiscal year ended December 31, 2000, for filing with the Securities and
Exchange Commission. The Committee also recommended the reappointment, subject
to shareholder approval, of the independent auditors and the Board concurred in
such recommendation.
March 22, 2001 Humphrey P. Polanen, Chairman
Howard J. Weiland, Vice Chairman
John W. Larsen
Louis O. "Lon" Normandin
Jack L. Peckham
Robert W. Peters
PRINCIPAL ACCOUNTING FIRM FEES
Aggregate fees billed to the company for the fiscal year ending 2000 by the
Company's principal accounting firm, Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu, and their respective affiliates (collectively,
"Deloitte"):
Audit Fees.................................................. $206,340
Financial Information Systems
Design and Implementation Fees............................ $ -0-(b)
All Other Fees.............................................. $288,085(a)(b)
- ---------------
(a) Includes fees for tax consulting, permitted internal audit outsourcing, and
other non-audit services.
(b) The audit committee has considered whether the provision of these services
is compatible with maintaining the principal accountant's independence.
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RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS INTENDS TO VOTE ALL PROXIES HELD BY IT IN FAVOR OF
APPROVING THE RATIFICATION OF DELOITTE & TOUCHE LLP AS COMMERCE CORP'S AUDITORS
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2001 (UNLESS THE SHAREHOLDERS DIRECT
OTHERWISE). YOU ARE URGED TO VOTE FOR PROPOSAL 5: TO RATIFY THE BOARD'S
SELECTION OF DELOITTE & TOUCHE LLP TO SERVE AS COMMERCE CORP'S AUDITORS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 2001.
OTHER BUSINESS
If any matters not referred to in this Proxy Statement come before the
meeting, including matters incident to the conduct of the meeting, the proxy
holders will vote the shares represented by proxies in accordance with their
best judgment. Management is not aware of any other business to come before the
meeting and, as of the date of the preparation of this Proxy Statement, no
shareholder has submitted to management any proposal to be acted upon at the
meeting.
SHAREHOLDER PROPOSALS
Under certain circumstances, shareholders are entitled to present proposals
at shareholders' meetings, provided that the proposal is presented in a timely
manner and in a form that complies with applicable regulations. Any shareholder
proposals intended to be presented for consideration at the 2002 Annual Meeting
of Shareholders, and to be included in Commerce Corp's Proxy Statement for that
meeting, must be received by Commerce Corp no later than December 18, 2001 in a
form that complies with applicable regulations. Shareholder proposals may not be
included in the Proxy Statement for the 2002 Annual Meeting or presented at the
shareholder meeting unless certain conditions are met. Shareholder proposals are
subject to regulation under Federal securities laws.
A copy of Commerce Corp's annual report on Form 10-K (excluding exhibits)
is being sent to shareholders along with this Proxy Statement. To obtain an
additional copy without charge, please contact Rebecca Levey at (408) 947-6900.
HERITAGE COMMERCE CORP
/s/ Rebecca A. Levey
Rebecca A. Levey
Corporate Secretary
San Jose, California
April 17, 2001
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ANNEX A
TEXT OF PROPOSED AMENDMENT TO ARTICLES OF INCORPORATION
The Articles of Incorporation of this Company shall be amended by adding
thereto a new Article Seven, which shall read as set forth below:
ARTICLE VII
No holder of any class of stock of the corporation shall be entitled to
cumulate votes at any election of directors of the corporation.
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ANNEX B
TEXT OF PROPOSED AMENDMENT TO BYLAWS
Section 2.9 of the Bylaws of the Company shall be amended in its entirety
to read as follows:
SECTION 2.9 -- NOMINATION, CLASSIFICATION, ELECTION AND TERM OF OFFICE.
(a) Nomination for election of directors may be made by the Board of
Directors or by any holder of any outstanding class of capital stock of the
Corporation entitled to vote for the election of directors. Notice of intention
to make any nominations shall be made in writing and shall be delivered or
mailed to the President of the Corporation not less than 21 days nor more than
60 days prior to any meeting of shareholders called for the election of
directors; provided, however, that if less than 21 days' notice is given to
shareholders, such notice of intention to nominate shall be mailed or delivered
to the President of the Corporation not later than the close of business on the
tenth day following the day on which the notice of such meeting is sent by third
class mail (if permitted by law), no notice of intention to make nominations
shall be required. Such notification shall contain the following information to
the extent known to the notifying shareholder:
(a) the name and address of each proposed nominee;
(b) the principal occupation of each proposed nominee;
(c) the number of shares of capital stock of the Corporation owned by
each proposed nominee;
(d) the name and residence address of the notifying shareholder, and
(e) the number of shares of capital stock of the Corporation owned by
the notifying shareholder.
(f) the number of shares of capital stock of any bank, bank holding
company, savings and loan association or other depository institution owned
beneficially by the nominee or by the notifying shareholder and the
identities and locations of any such institutions.
(g) whether the proposed nominee has ever been convicted of or pleaded
nolo contendere to any criminal offense involving dishonesty or breach of
trust, filed a petition in bankruptcy or been adjudged bankrupt.
(h) a statement regarding the nominee's compliance with Section 2.3 of
these Bylaws.
Nominations not made in accordance herewith may, in the discretion of the
Chairman of the meeting, be disregarded and upon the Chairman's instructions,
the inspectors of election can disregard all votes cast for each such nominee. A
copy of this paragraph shall be set forth in a notice to shareholders of any
meeting at which directors are to be elected.
(b) In the event that the authorized number of directors shall be fixed at
nine (9) or more, the Board of Directors shall be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist of
one-third of the directors or as close an approximation as possible. The initial
term of office of the directors of Class I shall expire at the annual meeting to
be held during fiscal year 2002, the initial term of office of the directors of
Class II shall expire at the annual meeting to be held during fiscal 2003 and
the initial term of office of the directors of Class III shall expire at the
annual meeting to be held during fiscal year 2004. At each annual meeting,
commencing with the annual meeting to be held during fiscal year 2002, each of
the successors to the directors of the class whose term shall have expired at
such annual meeting shall be elected for a term running until the third annual
meeting next succeeding his or her election and until his or her successor shall
have been duly elected and qualified.
In the event that the authorized number of directors shall be fixed with at
least six but less than nine, the Board of Directors shall be divided into two
classes, designated Class I and Class II. Each class shall consist of one-half
of directors or as close an approximation as possible. At each annual meeting,
each of the successors to the directors of the class whose term shall have
expired at such annual meeting shall be elected for a term running until the
second annual meeting next succeeding his or her election and until his or her
successor shall have been duly elected and qualified.
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Notwithstanding the rule that the classes shall be as nearly equal in
number of directors as possible, in the event of any change in the authorized
number of directors, each director then continuing to serve as such shall
nevertheless continue as a director of the class of which he or she is a member
until the expiration of his or her current term, or his or her prior death,
resignation or removal.
At each annual election, the directors chosen to succeed those whose terms
then expire shall be of the same class as the directors they succeed, unless, by
reason of any intervening changes in the authorized number of directors, the
Board of Directors shall designate one or more directorships whose term then
expires as directorships of another class in order more nearly to achieve
equality of number of directors among the classes.
This section may only be amended or repealed by approval of the Board of
Directors and the outstanding shares (as defined in Section 152 of the
California General Corporation Law) voting as a single class, notwithstanding
Section 903 of the California General Corporation Law.
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ANNEX C
HERITAGE COMMERCE CORP
AND SUBSIDIARY BANKS
BOARD OF DIRECTORS
AUDIT COMMITTEE CHARTER
APPROVED MARCH 22, 2001
TABLE OF CONTENTS
1. Purpose and Mission Statement
2. Objectives
3. Audit Committee Charter
4. Internal Audit and Risk Management
5. Duties of the Internal Audit Function
6. Certification of All On and Off Balance Sheet Asset
and Liabilities.
7. Internal Audit Outsourcing Arrangements
8. External Audit Program
9. Exhibits
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I. PURPOSE
The Board of Directors of Heritage Commerce Corp (HCC) under its fiduciary
duties has established an Audit Committee. The Committee assists the Board in
fulfilling its responsibility for oversight of the quality and integrity of the
accounting, auditing, internal control and financial reporting practices of the
company. It may also have such other duties that may, from time to time, be
assigned to it by the Board.
The primary purpose of this policy is to provide the Audit Committee of HCC
and its subsidiary banks, the authority to perform its fiduciary
responsibilities of safeguarding the assets of the institution, ensure adherence
to Board Policies and ensure quality and reliability of information reporting.
The Audit Committee may engage independent third party services to audit,
investigate and perform operational reviews of activities and financial
statements of the company and its subsidiaries.
II. MISSION STATEMENT
The mission of the Audit Committee is to provide the most effective
risk-focused internal control system, a highly effective audit program, and to
provide sufficient resources in a cost effective manner, and to adequately and
independently test the reliability of administrative and financial reporting of
HCC and its Subsidiary banks.
III. AUDIT COMMITTEE CHARTER
The Boards of Heritage Commerce Corp and its subsidiary banks have adopted
this Audit Committee Charter. The Committee shall annually review and reassess
this charter and recommend any proposed changes to the Board for approval.
Membership
- The Committee shall consist entirely of outside directors who are
independent of management.
- The Committee shall not be less than three and more than six members.
- Each committee member shall meet the independence and financial literacy
requirements for serving on audit committees, and at least one member
shall have accounting or related financial management expertise, all as
set forth in the applicable rules of the state and federal banking laws
and NASDAQ/ American Stock Exchange.
- Non-voting advisory members shall consist of the Chairperson of
subsidiary bank Audit Committees, Chief Executive Officers, Chief
Financial Officer and the Audit Liaison Officer. Bank officers,
independent public accountants, operations and loan review
representatives and regulatory examiners will attend as deemed necessary
by the Chairperson.
- The Board of Directors shall appoint the Chairperson, Vice Chairperson
and each member of the Committee.
- All Committee members shall serve a term of one year unless re-appointed
by the Board of Directors. In the event of a vacancy, an outside director
will be appointed to fill the vacancy.
- Fifty percent of the voting members at any given meeting shall constitute
and qualify as a quorum. A quorum of voting members must exist to conduct
the meeting.
- The Audit Committee shall meet quarterly or as called by the Chairperson.
- The Committee shall report to the full Board at its regularly scheduled
meetings and provide the Board with written minutes of its meetings.
Audit Committee Responsibilities
Audit Committee responsibilities will include, but are not limited to, the
following:
- The Committee shall maintain free and open communication with the
independent auditors, the internal auditors and company management.
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- In discharging its oversight role, the Committee is empowered to
investigate any matter relating to the Company's accounting, auditing,
internal control or financial reporting practices brought to its
attention, with full access to all Company books, records, facilities and
personnel.
- The Committee may engage highly competent, certified public accounting
firms to audit the consolidated financial statement of the holding
company and its subsidiary banks and to provide other attestation
services requiring independence.
- The Committee will ensure that qualified personnel with diversified
banking and internal audit expertise and experience perform the internal
audit and loan review functions.
- Review and approve the scope and coverage of any audit engagement,
regulatory examinations, and loans and operations review.
- Review audit plans, risk assessment, management letter, responses and
follow-up to audit and examination findings.
- Review audited financial statements and discusses them with management
and independent auditors (Statement of Auditing Standards No 61.) Review
periodic reports from the Compliance and Bank Secrecy Act Officers.
- Issue annually, a report to be included in the Company's proxy statement
as required by the rules of the Securities and Exchange Commission.
- Ensure that management replies in writing to the recommendations
contained in each audit report within 30 days or such other reasonable
time necessary to provide adequate response.
- Review the Audit Follow-up Log of all audit reports issued. The Log
should be updated at least quarterly and summarize management responses
and corrective action plans.
- The Committee shall direct a follow up audit, where necessary, to
adequately address significant areas of concern. The follow up shall be
performed within six months of the audit.
- The Committee may meet in a closed session with auditors without the
presence of senior management.
- The Committee shall review and formally accept annually, the audited
consolidated financial statements of HCC and its subsidiary banks
prepared by certified public accountants in accordance with generally
accepted accounting principles.
- Discuss with management and/or the Company's general counsel, any legal
matters (including the status of pending litigation) that may have a
material impact on the Company's financial statements, and any material
reports or inquiries from regulatory or governmental agencies.
IV. INTERNAL AUDIT
The internal audit policy statement provides guidelines and sound practices
for the Audit Department to follow in order to effectively manage the internal
audit function. The Audit Liaison Officer will oversee the internal audit
function and report directly to the Board's Audit Committee.
Responsibilities include but are not limited to the following:
- Assist Board's Audit Committee and Senior Management in effective
discharge of their responsibilities by providing them with independent
analysis, appraisal and recommendations regarding the activities of the
Holding Company and its subsidiary banks.
- Coordinate upcoming audits and regulatory examinations with outside
auditors and regulatory agencies.
- Ensure implementation of risk-focused internal control system and
effective certification program to promote operational efficiency and
adherence to internal policies.
- Conduct operations audit, loan review and special investigations when
appropriate, to detect the presence, absence and/or extent of fraud,
embezzlement, or willful manipulation of funds and records.
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- Maintain the independent nature of the audit function by ensuring that
neither the auditor nor his staff initiates or approves accounting
transactions of any nature, or administers or supervises any bank
operational function.
- Assess the competency, independence, and objectivity of the outside
service provider as it relates to assignments to be performed.
- Strictly guard the confidentiality of audit reports, audit files and
findings, audit schedules, HCC records, Subsidiary Bank's/Client
relationships, and HCC data in general.
V. CERTIFICATION OF ON AND OFF BALANCE SHEET ITEMS
Certification is a process of reconciling, verifying and confirming
accounting records and administrative processes to ensure protection of assets,
dual control, segregation of duties and other internal control systems are in
place.
The Audit Committee of the Heritage Commerce Corp and its subsidiary banks
establishes this policy as a necessary tool of an effective internal control
structure.
- All general ledger accounts or group of similar accounts are to be
periodically certified in accordance with established certification
procedures.
- Non general ledger accounts including certain administrative procedures
are to be certified according to established procedures.
- Certification of general ledger accounts shall be evidenced by
reconciliation to the general ledger with appropriate supporting
documentation and certified correct by a reviewer.
- Certification of On and Off Balance Sheet items are to be performed on
any day of the month; however, the date shall vary within 5 working days
of the previous month to maintain an element of surprise.
- All stale items (90 days and over) are to be properly researched and
referred to the Controller for charge-off, unless the said items are in
process of collection.
- Each Department Manager is responsible for completing the certification
of his/her area or bank.
- Audit Liaison Officer is to oversee the company-wide certification
process.
- Respective Department Managers are to forward one copy of the
certification schedule to the Audit Liaison Officer each month.
VI. DUTIES OF THE INDEPENDENT INTERNAL AUDIT FIRMS
- Design and implement a risk assessment program to effectively assess risk
exposures of the areas audited.
- Perform a risk-focused audit of the institutions' operations and
activities.
- Verify and determine compliance with adopted policies, plans, procedures,
and applicable banking laws and regulation, including generally accepted
accounting principles.
- Review internal control systems in place to safeguard assets and other
intangibles and verify existence and value of assets and liabilities.
- Review operational efficiency of the HCC and its banks, to ensure that
the resources are employed efficiently and in a cost-effective manner.
Identify and analyze operating weaknesses and recommend corrective action
measures.
- Review loans, credit administration and analysis of loan and lease losses
reserve.
- Communicate the results of the internal audits, both positive and
negative, in writing including management response to the appropriate
levels of management and the Audit Committee.
- Participate on a consultative basis in the planning stages of new
policies, procedures, and control systems for new product offerings and
for new laws and regulation.
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VII. INTERNAL AUDIT OUTSOURCING ARRANGEMENTS
All outsourcing arrangements shall be evidenced by a written contract,
i.e., engagement letter. Minimum requirements of engagement letter are as
follows:
- The engagement shall set the scope and frequency of work to be performed
by the vendor.
- It shall set manner and frequency of reporting to Audit Committee about
the status of the engagement.
- Establish the requisite protocol for changing the terms of the service
engagement, i.e. expansion of coverage if material issues are found.
- Specify that the internal audit reports are the property of the
institution, that the institution will be provided with any copies of the
related work papers it deems necessary, and that the Audit Liaison
Officer will have reasonable and timely access to the work papers
prepared by the vendor.
- Specify the locations of the internal audit reports and the related work
papers.
- The regulatory examiners will be granted access to the internal audit
reports and related work papers prepared by the vendor if needed, through
the Audit Liaison Officer.
- Prescribe the method for determining who bears the cost of consequential
damages arising from errors, omissions and negligence.
- That the vendors shall not perform management functions, make management
decisions, or act or appear to act, in a capacity equivalent to that of
an employee of HCC and its subsidiaries. Nothing in this section
prohibits value-added audit.
INTERNAL AUDIT SCHEDULE
The audit period shall generally be from January 1st to December 31, the
Company's fiscal year end. The audit plan and schedule shall be rotating,
although an element of surprise should be maintained. The schedule will be
driven by risk assessment results, internal and external audit findings and
conclusions, as well as regulatory examinations.
Audit Cycle shall be as follows:
1. High Risk/or Less than Satisfactory Rating.......... 12 months Maximum
2. Moderate Risk/ Satisfactory:........................ 18 months Maximum
3. Low Risk Areas/ Satisfactory:....................... 24 months Maximum
4. Board Policies, irrespective of the risk rating:.... 12 months
The scope of an internal audit will be sufficient to test compliance with
adopted policy and procedures; appraise the soundness and adequacy of
accounting, operating, and other administrative controls, and to detect
irregularities from proof detail or reconcilement.
The Internal audit firm will have access to any area or records as deemed
necessary.
RATINGS
The Banks/Department/Function shall be rated after a thorough analysis and
review of its functions and activities in accordance with Board policies,
adherence to internal accounting and administrative control procedures, as well
as applicable laws and regulation. The ratings are defined as follows:
1. Strong: The Banks/Department/Function is in substantial compliance with
applicable policies and procedures.
2. Satisfactory: The Banks/Department/Function is in compliance with
policies and procedures. Any weaknesses are minor and can be handled in
a routine manner.
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3. Needs Improvement: The Banks/Department/Function, although generally in
compliance with policies and procedures, has certain deficiencies that
should be improved. Typically, more than one significant weakness is
noted.
4. Unsatisfactory: The Banks/Department/Function is in substantial
noncompliance with policies and procedures. Violations of laws and
regulations are noted. The problem may range from severe to critical
and, as such, will expose the bank to financial losses if left
uncorrected.
REPORTS
The Internal audit firm shall prepare, review and provide written audit
reports to be submitted to the Audit Committee. The internal audit firm shall
routinely discuss preliminary findings with the appropriate levels of management
to ascertain correctness of facts, and to give management the opportunity to
clarify. An exit review will be held with senior management and the Audit
Liaison Officer. The written report, including the management response, will be
provided to the Audit Committee within a reasonable time frame not to exceed 45
days from date of the completion of audit.
VIII. EXTERNAL AUDIT
A strong internal auditing function establishes the proper control
environment and promotes accuracy and efficiency in the company. An external
auditing program complements this function by providing an objective outside
view of the HCC and its subsidiary banks' operations. Heritage Commerce Corp and
its banks are committed to maintaining a sound external-auditing program. The
Audit Committee of the Board of Directors will engage the external auditors
annually. An engagement letter will be accepted and it must be sufficient in
scope to render an opinion on the consolidated financial statement of the
Heritage Commerce Corp and its subsidiaries.
OUTLOOK
In view of Heritage Commerce Corp's continued expansion, the holding
company and its banks may be subject to Section 36 of the Federal Deposit
Insurance Act, as implemented by 12 CFR, Part 363. This law requires each
depository institution with $500 million or more in total assets at the
beginning of its fiscal year to file with the appropriate federal banking agency
the following documents:
(a) An audited financial statement
(b) A management report and,
(c) Independent public accountant's attestation concerning both the
effectiveness of the institution's internal controls for financial
reporting and its compliance with designated safety and soundness laws.
A copy of the audited consolidated financial statements of the holding
company will be submitted to the appropriate regulatory agency on behalf of the
affiliated banks to satisfy this requirement.
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REVOCABLE PROXY - HERITAGE COMMERCE CORP
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of Heritage Commerce Corp ("Commerce Corp") hereby
nominates, constitutes and appoints Brad L. Smith, Richard L. Conniff, and each
of them, the attorney, agent and proxy of the undersigned, with full power of
substitution, to vote at the Annual Meeting of Shareholders of the Company to be
held at the Company's offices, 150 Almaden Boulevard, San Jose, California, on
May 24, 2001 at 3:00 p.m. and any adjournment thereof, as fully and with the
same force and effect as the undersigned might or could do if present, as
follows:
1. To elect as directors the nominees set forth below:
[ ] FOR all nominees listed (except as marked to the contrary below).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
Instruction: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name below:
Hugh P. Barton
Frank G. Bisceglia
James R. Blair
Richard L. Conniff
William J. Del Biaggio, Jr.
Anneke Dury
Kurt G. Hammerstrom
John W. Larsen
Roy E. Lave
Louis O. ("Lon") Normandin
Jack L. Peckham
Robert W. Peters
Humphrey P. Polanen
Brad L. Smith
Howard J. Weiland
2. To amend Commerce Corp's Articles of Incorporation to eliminate the
availability of cumulative voting in the election of Commerce Corp's
directors.
[ ] FOR approval of an amendment to Commerce Corp's Articles of Incorporation to
eliminate the availability of cumulative voting in the election of Commerce
Corp's directors.
[ ] AGAINST approval of an amendment to Commerce Corp's Articles of
Incorporation to eliminate the availability of cumulative voting in the election
of Commerce Corp's directors.
[ ] ABSTAIN
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3. To amend Commerce Corp's Bylaws to provide for classification of the Board
of Directors into three classes for purposes of the election of directors.
[ ] FOR approval of an amendment to Commerce Corp's Bylaws to provide for
classification of the Board of Directors into three classes for purposes of the
election of directors.
[ ] AGAINST approval of an amendment to Commerce Corp's Bylaws to provide for
classification of the Board of Directors into three classes for purposes of the
election of directors.
[ ] ABSTAIN
4. To amend Commerce Corp's 1994 Tandem Stock Option Plan to increase the
number of shares available for grants of stock options.
[ ] FOR approval of an amendment to Commerce Corp's 1994 Tandem Stock Option
Plan to increase the number of shares available for grants of stock options.
[ ] AGAINST approval of an amendment to Commerce Corp's 1994 Tandem Stock Option
Plan to increase the number of shares available for grants of stock options.
[ ] ABSTAIN
5. To ratify the Board of Directors' selection of Deloitte & Touche LLP,
independent certified public accountants, to serve as the Company's auditors for
the fiscal year ending December 31, 2001.
[ ] FOR ratification of Deloitte & Touche LLP as Commerce Corp's auditors.
[ ] AGAINST ratification of Deloitte & Touche LLP as Commerce Corp's auditors.
[ ] ABSTAIN.
6. To consider and transact such other business as may properly be brought
before the meeting.
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This Proxy will be voted as directed by the Shareholder or, if no instructions
are given by the Shareholder, the Proxy Holders will vote "FOR" each of the
foregoing proposals.
If any other business is presented at said meeting, this Proxy shall be
voted in accordance with the recommendations of the Board of Directors.
When signing as attorney, executor, officer, administrator, trustee or
guardian, please give full title. If more than one trustee, all should sign. All
joint owners must sign.
I / we do [ ] do not [ ] expect to attend this meeting.
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NUMBER OF SHARES
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED
PRIOR TO ITS EXERCISE.
Dated: ________________________________, 2001.
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SIGNATURE OF SHAREHOLDER(S)
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(PRINT NAME)
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SIGNATURE OF SHAREHOLDER(S)
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(PRINT NAME)