<PAGE> 1
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:
[ ] Premliminary 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 sec.240.14a-11(c) or sec.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:
(5) Total fee paid:
[ ] 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:
(4) Date Filed:
(Amended by Sec Act Rel No. 7331; Exch Act Rel No. 37692, eff. 10/7/96.)
<PAGE> 2
HERITAGE COMMERCE CORP
April 12, 2000
Dear Shareholder:
We are pleased to enclose our 1999 Annual Report and Form 10K, Notice of
2000 Annual Meeting, Proxy Statement and Form of Proxy.
You are cordially invited to attend the 2000 Annual Meeting of
Shareholders, which will be held at 3:30 p.m. on Thursday, May 18, 2000, 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,
<TABLE>
<S> <C>
/s/ Brad L. Smith /s/ John E. Rossell III
Brad L. Smith John E. Rossell III
Chairman of the Board President and Chief Executive Officer
</TABLE>
<PAGE> 3
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 18, 2000, at 3:30 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:
<TABLE>
<S> <C>
Frank G. Bisceglia P. Michael Hunt
James R. Blair John W. Larsen
Arthur C. Carmichael, Jr. Louis ("Lon") O. Normandin
Richard L. Conniff Jack L. Peckham
William J. Del Biaggio, Jr. Robert W. Peters
Anneke Dury Humphrey P. Polanen
Tracey A. Enfantino John E. Rossell III
Glenn A. George Kirk M. Rossmann
Robert P. Gionfriddo Brad L. Smith
</TABLE>
2. 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, 2000.
3. 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 3, 2000 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 to 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 of these by-laws. 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 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 for in
this paragraph was followed with respect to the nomination of the proposed
nominee.
<PAGE> 4
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 12, 2000
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.
<PAGE> 5
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 18, 2000, at 3:30
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 12, 2000.
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, the ratification of the Board's selection of independent accountants,
and in favor of 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 18 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 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, 2000.
3. To consider and transact such other business as may properly be brought
before the meeting.
VOTING SECURITIES
Shareholders of record as of the close of business on April 3, 2000
("Record Date") will be entitled to notice of and to vote at the Meeting. As of
such date, the Company had 7,034,557 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
<PAGE> 6
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, 18, 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 18 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. Ratification of the selection of Deloitte &
Touche LLP as Commerce Corp's auditors requires 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 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.
2
<PAGE> 7
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 18.
The Bylaws of Commerce Corp provide the procedure for nomination 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.
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 18 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.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, BUSINESS
POSITION WITH DIRECTOR EXPERIENCE DURING PAST FIVE
NAME AGE COMMERCE CORP SINCE YEARS AND OTHER INFORMATION
---- --- -------------- -------- ------------------------------
<S> <C> <C> <C> <C>
Frank G. Bisceglia............ 54 Director 1994 Senior Vice
President -- Investments
Portfolio Manager at Paine
Webber, an independent, full
service securities firm.
James R. Blair................ 55 Director 1994 President of Renco Properties,
Inc., a real estate development
company.
Arthur C. Carmichael, Jr. .... 59 Director 1994 Managing Director of Valley
Global Insurance Brokers from
May 1999 to present; and
Chairman, Willis Corroon of San
Jose, an insurance brokerage
firm from April 1988 to May
1999.
Richard L. Conniff............ 53 Director, 1998 President and CEO, Heritage Bank
President and East Bay, a wholly-owned
CEO of subsidiary of Heritage Commerce
Heritage Bank Corp, since 1998; from 1997 to
East Bay 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.
</TABLE>
3
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, BUSINESS
POSITION WITH DIRECTOR EXPERIENCE DURING PAST FIVE
NAME AGE COMMERCE CORP SINCE YEARS AND OTHER INFORMATION
---- --- -------------- -------- ------------------------------
<S> <C> <C> <C> <C>
William J. Del Biaggio, 59 Director 1994 Chairman of MED-COR Health
Jr. ........................ Information Systems, Inc., a
release of information and staff
outsourcing company, since 1996;
and President of Heritage
Beverage Company, a beverage
importer-brokerage firm, since
1994.
Anneke Dury................... 55 Director 1994 Independent Financial Consultant
for various Santa Clara County
technology companies.
Tracey Enfantino.............. 39 Director 1994 General Manager of Environmental
Systems, Inc., a mechanical
contracting company.
Glenn A. George............... 69 Director 1994 Chairman of the Board of Joseph
George Distributor, a wine
distribution firm.
Robert P. Gionfriddo.......... 54 Director 1994 Consultant to Heritage Commerce
Corp since July 1999; Founder/
Director of Internet Home
Services, DBA eHome.com since
August 1999; Executive Vice
President, Heritage Bank of
Commerce from 1994 to July 1999.
P. Michael Hunt............... 56 Director 1994 President, Hunt & Associates
Business Services, Inc., an
employee benefits, life
insurance and retirement
planning firm.
John W. Larsen................ 65 Director 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 through 1996.
Louis ["Lon"] O. Normandin.... 65 Director 1994 Owner and President of Normandin
Chrysler-Plymouth Jeep.
Jack L. Peckham............... 58 Director 1994 President and CEO of Lightspeed
Semiconductor since January
1998; Vice President/General
Manager of Atmel Corporation, a
semiconductor manufacturing
company from 1985 to 1998.
Robert W. Peters.............. 60 Director 1994 Private investor in technology
companies.
Humphrey P. Polanen........... 50 Director 1994 Chairman and CEO, Internet
Venture Partners, since 1999;
President and CEO, Trustworks
Systems, an internet security
company, from February 1998 to
1999; General Manager, Network
Security Products Group, Sun
Microsystems, a computer systems
company, from 1997 to February
1998; and General Manager,
Internet Commerce Group, Sun
Microsystems, from 1995 to 1997.
</TABLE>
4
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, BUSINESS
POSITION WITH DIRECTOR EXPERIENCE DURING PAST FIVE
NAME AGE COMMERCE CORP SINCE YEARS AND OTHER INFORMATION
---- --- -------------- -------- ------------------------------
<S> <C> <C> <C> <C>
John E. Rossell III........... 52 Director, 1994 President and CEO of Heritage
President and Commerce Corp since 1997; and
CEO President and CEO of Heritage
Bank of Commerce since 1994.
Kirk M. Rossmann.............. 52 Director 1994 Chief Executive Officer of B/T
Management Group, LLC since
1996; and from 1975 to 1996,
President of American Welding
Supply, an industrial and
electronic industrial gas
supplier.
Brad L. Smith................. 50 Chairman, 1999 President and CEO of Heritage
Director, Bank South Valley, a wholly
President and owned subsidiary of Heritage
CEO of Commerce Corp, since January
Heritage Bank 2000; President of South Valley
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.
</TABLE>
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.
EXECUTIVE OFFICERS OF COMMERCE CORP
Set forth below is certain information with respect to the Executive
Officers of Commerce Corp.
<TABLE>
<CAPTION>
NAME AGE POSITION OFFICER SINCE
---- --- -------- -------------
<S> <C> <C> <C>
John E. Rossell III.................. 52 President and Chief Executive 1994
Officer/ Heritage Bank of Commerce
Richard L. Conniff................... 53 President and Chief Executive 1998
Officer/ Heritage Bank East Bay
Kenneth A. Corsello.................. 49 Executive Vice President and Chief 1995
Credit Officer
Lawrence D. McGovern................. 45 Executive Vice President and Chief 1998
Financial Officer
Kenneth B. Silveira.................. 55 Executive Vice President/ Operations 1994
and Administration
Brad L. Smith........................ 50 President and Chief Executive 1999
Officer/ Heritage Bank South Valley
</TABLE>
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
and 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.
5
<PAGE> 10
Kenneth B. Silveira has served as Executive Vice President/Operations and
Administration of Heritage Bank of Commerce since December 1997 and of Heritage
Commerce Corp since 1998. He served as Senior Vice President/Operations and
Administration of Heritage Bank of Commerce from 1994 to 1997. From 1965 to 1993
Mr. Silveira served as Vice President and Branch Manager, as Secretary of the
Corporate Pricing Committee, and as Division Controller at Bank of America.
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.
<TABLE>
<CAPTION>
SHARES PERCENT
RELATIONSHIP WITH BENEFICIALLY OWNED EXERCISABLE OF CLASS
NAME OF BENEFICIAL OWNER(1) COMMERCE CORP. (2), (3) OPTIONS (3)
--------------------------- ------------------- ------------------ ----------- --------
<S> <C> <C> <C> <C>
Frank G. Bisceglia................. Director 112,102(4) 34,861 1.6%
James R. Blair..................... Director 56,347(5) 29,143 0.8
Arthur C. Carmichael, Jr........... Director 79,189(6) 29,143 1.1
Richard L. Conniff................. Director 39,695(7) 32,175 0.6
William J. Del Biaggio, Jr......... Director 168,615(8) 34,861 2.4
Anneke Dury........................ Director 40,929(9) 30,461 0.6
Tracey A. Enfantino................ Director 48,555(10) 29,143 0.7
Glenn A. George.................... Director 122,814(11) 13,506 1.7
Robert P. Gionfriddo............... Director 235,177(12) 135,780 3.3
P. Michael Hunt.................... Director 70,914(13) 29,143 1.0
John W. Larsen..................... Director 14,571(14) 7,971 0.2
Louis ("Lon") O. Normandin......... Director 140,146(15) 29,143 2.0
Jack L. Peckham.................... Director 200,660(16) 29,143 2.8
Robert W. Peters................... Director 169,386(17) 3,300 2.4
Humphrey P. Polanen................ Director 68,592(18) 34,861 1.0
John E. Rossell III................ President, 162,763(19) 157,781 2.3
Chief Executive
Officer & Director
Kirk M. Rossmann................... Director 81,805(20) 29,143 1.2
Brad L. Smith...................... Chairman & Director 41,570(21) 34,237 0.6
All directors and executive
officers as a group (21 in
number*)......................... 1,972,838 809,827 25.1%
</TABLE>
- ---------------
(1)As used throughout this Proxy Statement, the terms "Officer" and "Executive
Officer" refer to the President and Chief Executive Officer of Heritage Bank
of Commerce, Heritage Bank East Bay, and Heritage Bank South Valley; the
Executive Vice President and Chief Credit Officer; the Executive Vice
President/Operations and Administration; and the Executive Vice President and
Chief Financial Officer.
6
<PAGE> 11
- ---------------
* Included in the total, but not individually listed, are three executive
officers, whose combined beneficial ownership totals 119,008 shares and
exercisable options (which equals approximately 1.7 percent of class).
(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 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 Gift to Minors Act, 50,024 shares
as one of two trustees of the Bisceglia Family Trust, and 10,147 shares
held in a personal Individual Retirement Account.
(5) Includes 13,252 shares held in a personal Individual Retirement Account,
12,952 shares held as trustee for the Blair Family Trust, and 1,000 shares
held in the Blair Family Investments LLC.
(6) Includes 41,915 shares held in a personal Individual Retirement Account,
5,535 shares held as trustee of the Arthur and Jean Carmichael Living
Trust, 1,298 shares held as trustee for Jennifer M. Carmichael, and 1,298
shares held as trustee for Arthur C. Carmichael, III.
(7) Includes 6,563 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 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.
(9) Includes 6,068 shares held in a personal Individual Retirement Account.
(10) Includes 17,986 shares held in the Environmental Systems, Inc. of
California Profit Sharing Plan, of which she is one of three trustees.
(11) Includes 86,406 shares held as one of two trustees for the George and
Noelle Trust, 21,863 shares held in personal Individual Retirement
Accounts, and 1,039 shares held by Joseph George Distributor, Inc., of
which he is Chairman of the Board.
(12) Includes 60,290 shares held in a personal Individual Retirement Account.
(13) Includes 19,556 shares held in a personal Individual Retirement Account and
22,215 shares held in the Hunt Family Trust.
(14) Includes 6,600 shares held as one of two trustees for the Larsen Family
Trust.
(15) Includes 111,003 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 166,086 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 4,339 shares held in a personal Individual Retirement Account.
7
<PAGE> 12
(20) Includes 28,584 shares held in a personal Individual Retirement Account,
5,500 shares as trustee for Rossmann Family Trust, and 4,286 shares held as
custodian for Ty Rossmann under the Uniform Gift to Minors Act.
(21) Includes 7,333 shares held in a personal Individual Retirement Account.
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 and Heritage Bank South Valley,
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, Tracey A. Enfantino, P. Michael Hunt, John W. Larsen, Louis ("Lon") O.
Normandin, Jack L. Peckham and Robert W. Peters.
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 Audit Committee met four times during 1999.
PERSONNEL AND PLANNING COMMITTEE
The members of the Personnel and Planning Committee are Robert W. Peters,
Committee Chairman, Frank G. Bisceglia, Arthur C. Carmichael, Jr., Richard L.
Conniff, William Del Biaggio, Jr., Tracey A. Enfantino, P. Michael Hunt, Jack L.
Peckham, and John E. Rossell III.
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
8
<PAGE> 13
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 five times
during 1999.
LOAN COMMITTEE
The members of the Loan Committee are Frank G. Bisceglia, Committee
Chairman, James R. Blair, Arthur C. Carmichael, Jr., William J. Del Biaggio,
Jr., Glenn A. George, Robert P. Gionfriddo, Louis O. ("Lon") Normandin, Robert
W. Peters, and Kirk M. Rossmann. 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 twenty-eight times during 1999.
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 P. Gionfriddo, Robert W. Peters and John E.
Rossell, III.
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 twelve times during 1999.
The Company and its subsidiary Banks do not have executive or nominating
committees. The Board of Directors performs the functions of these committees.
During 1999, the Company's Board of Directors held eleven regular meetings
and four special meetings. Except for James R. Blair, Arthur C. Carmichael, Jr.,
Humphrey P. Polanen, and Kirk M. Rossmann, 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 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, 1999 all Section 16(a)
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During 1999 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.
On July 12, 1999 Commerce Corp entered into a twelve-month consulting
contract with former executive officer Robert P. Gionfriddo. Pursuant to the
terms of the contract, Mr. Gionfriddo receives $13,300 per month as a business
development consultant.
9
<PAGE> 14
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.
EXECUTIVE COMPENSATION
The following information is furnished with respect to each executive
officer of the Company whose aggregate cash compensation during 1999 exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
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)
--------------------------- ---- --------- -------- --------------- ---------- -------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John E. Rossell............... 1999 $175,000 $71,600 $ 9,000 -- 3,300 -- --
President and CEO 1998 162,500 44,000 11,287 -- 6,600 -- --
Heritage Bank of Commerce 1997 150,000 42,000 8,550 -- 4,950 -- --
Robert P. Gionfriddo (4)...... 1999 $ 71,150 $50,000 $ 5,275 -- 3,300 -- $60,000
Executive Vice President 1998 135,000 42,900 11,576 -- 6,600 -- 20,000
1997 127,500 41,850 9,042 -- 4,950 -- 20,000
Richard L. Conniff............ 1999 $132,000 $38,500 $ 6,000 -- 3,300 -- --
President and CEO 1998 84,000 -- 4,000 -- 56,100 -- --
Heritage Bank East Bay
Kenneth A. Corsello........... 1999 $101,000 $35,200 $ 7,623 -- -- -- --
Executive Vice President/ 1998 100,000 18,000 7,623 -- -- -- --
Chief Credit Officer 1997 95,229 23,257 7,469 -- -- -- --
Lawrence D. McGovern.......... 1999 $128,000 $24,300 $29,942 -- -- -- --
Executive Vice President/ 1998 57,300 -- 16,587 -- 49,500 -- --
Chief Financial Officer
Kenneth B. Silveira........... 1999 $ 85,500 $27,500 $ 4,800 -- -- -- --
Executive Vice President/ 1998 81,300 14,252 4,800 -- -- -- --
Operations and.............. 1997 77,000 13,251 5,392 -- 1,650 -- --
Administration
Brad L. Smith................. 1999 $175,000 $ 6,600 $ 6,000 -- 3,300 -- --
President and CEO 1998 -- -- -- -- 82,500 -- --
Heritage Bank South Valley
</TABLE>
- ---------------
(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, and moving
expenses paid.
(3) Amounts shown are contractual obligations paid to Mr. Gionfriddo based on
compensation agreements reached with Commerce Corp in previous years.
(4) Mr. Gionfriddo's employment as Executive Vice President and Chief Business
Development Officer ceased in July 1999. Commerce Corp and Mr. Gionfriddo
entered into a twelve-month contract on July 12, 1999 pursuant to which Mr.
Gionfriddo acts as a business development consultant for Commerce Corp.
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
10
<PAGE> 15
officers named above did not, for the fiscal year ended December 31, 1999,
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.
The following table shows options granted in 1999 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
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------
% OF TOTAL
OPTIONS
GRANTED TO EXERCISE
EMPLOYEES IN OR BASE GRANT DATE
OPTIONS FISCAL PRICE EXPIRATION PRESENT
NAME GRANTED YEAR ($/SH) DATE VALUE $(1)
---- ------- ------------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
John E. Rossell............................... 3,300 3.5 $14.09 12/16/09 $26,000
President and CEO
Heritage Bank of Commerce
Richard L. Conniff............................ 3,300 3.5 $14.09 12/16/09 $26,000
President and CEO
Heritage Bank East Bay
Robert P. Gionfriddo.......................... 3,300 3.5 $14.09 12/16/09 $26,000
Director
Brad L. Smith................................. 3,300 3.5 $14.09 12/16/09 $26,000
President and CEO
Heritage Bank South Valley
</TABLE>
- ---------------
(1) In accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was used to estimate the Grant Date
Present Value assuming (i) an expected volatility of 39%; (ii) a risk-free
interest rate of 5.5%; and (iii) an option term of 7 years. This is a
theoretical value for stock options. The actual value of the options will
depend on the market value of Common Stock when the options are exercised.
The following table delineates options exercised by executive officers
named in the Summary Compensation Table and the values of unexercised options at
December 31, 1999:
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
AT YEAR END OPTIONS AT YEAR END
------------------- -------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------ ------------------- -------------------
<S> <C> <C> <C> <C>
John E. Rossell.................. -- -- 157,781/ -- $1,648,000/ --
Richard L. Conniff............... -- -- 29,700/29,700 $ 125,000/153,000
Kenneth A. Corsello.............. -- -- 47,018/ 1,057 $ 499,000/ 10,000
Robert P. Gionfriddo............. 22,000 $327,250 135,781/ -- $1,405,000/ --
Lawrence D. McGovern............. -- -- 19,800/29,700 $ 102,000/153,000
Kenneth B. Silveira.............. -- -- 42,465/ 1,544 $ 458,000/ 11,000
Brad L. Smith.................... -- -- 23,925/61,875 $ 59,000/173,000
</TABLE>
11
<PAGE> 16
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 employee
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. Commerce Corp does not presently provide any
matching contributions to the Plan. 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 in lieu of paying cash bonuses. 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 Bank on December 31.
Awards under the Stock Ownership Plan generally vest over four years. During
1999, Commerce Corp contributed $250,000 to the Stock Ownership Plan, with
contributions to John E. Rossell III, Richard L. Conniff, Kenneth A. Corsello,
Lawrence D. McGovern, Kenneth B. Silveira, and Brad L. Smith totaling $6,600,
$5,500, $4,200, $5,300, $3,500, and $6,600, respectively. These amounts are
included in the Summary Compensation Table in the column entitled "Bonus."
EMPLOYMENT CONTRACTS
John E. Rossell III, Commerce Corp's President and CEO, is employed under
the terms of a written three-year employment contract dated January 1, 1999
which, among other terms, provides for the following: combined wages of $175,000
per year, with an annual review for salary increase; bonuses based upon the
performance of the Company, awarded in the sole discretion of the Board of
Directors; a car allowance; insurance; and severance compensation and benefits
in the event Commerce Corp terminates Mr. Rossell's employment without cause.
Richard L. Conniff, Heritage Bank East Bay President and CEO, is employed
under the terms of a written three-year employment contract dated January 1,
1999 which provides for the following as of December 31, 1999: 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. 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 as of
December 31, 1999: base salary of $135,000 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, President and CEO of Heritage Bank South Valley, and
Chairman of the Board of Heritage Commerce Corp is employed under the terms of a
written three-year employment contract dated January 1, 1999 which provides for
the following as of December 31, 1999: base salary of $175,000 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.
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
12
<PAGE> 17
executive officers who participate in the Plan and intends to use the cash
values of those policies ($9,273,000 and $5,399,000 at December 31, 1999 and
1998, respectively) to pay the retirement obligations that accrue pursuant to
the Plan. The Company's total accrued pension obligation was $395,000 and
$55,000 as of December 31, 1999 and 1998, 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
John E. Rossell III, Richard L. Conniff, Kenneth A. Corsello, Robert P.
Gionfriddo, Lawrence D. McGovern, Kenneth B. Silveira, and Brad L. Smith are
$108,000, $48,000, $48,000, $78,000, $68,000, $24,000, 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 the cash value of the
underlying insurance policy).
DIRECTOR FEES AND DIRECTOR FEE DEFERRAL PLAN
During 1999, Commerce Corp paid retainers of $1,250 per month each to two
directors for their services during 1999, for a total of $30,000. In June 1997,
the Board approved a director compensation program, effective July 1, 1997, that
extended a plan previously adopted by the Board to include all non-executive
officer directors. The plan 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 1999 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 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, nine of the directors have elected to defer their fees. For the
years 1997, 1998, and 1999, Commerce Corp accrued expenses of $70,000 and
$134,000, and $42,000 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.
13
<PAGE> 18
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. 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. Stock options are generally
awarded in June or July. Compensation for a newly hired executive may be
established by the Committee at a special meeting.
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
/s/ Frank Bisceglia
Arthur C. Carmichael, Jr.
Richard L. Conniff
William J. Del Biaggio, Jr.
Tracey A. Enfantino
P. Michael Hunt
Jack L. Peckham
Robert W. Peters, Chairman
John E. Rossell III
14
<PAGE> 19
PERFORMANCE GRAPH
The following graph compares the stock performance of Heritage Bank of
Commerce from December 31, 1994 to January 31, 1998 and of Commerce Corp from
February 1, 1998 to December 31, 1999, 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 indices 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*
<TABLE>
<CAPTION>
NASDAQ STOCK NASDAQ BANK HERITAGE
MARKET STOCKS COMMERCE CORP S & P 500 S & P BANK PROXY
------------ ----------- ------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
12/31/94 100.00 100.00 100.00 100.00 100.00
12/31/95 141.33 149.00 108.67 137.58 157.46
12/31/96 173.89 196.73 137.44 169.17 215.15
12/31/97 213.07 329.39 285.96 225.60 323.15
12/31/98 300.25 327.11 363.95 290.08 357.44
12/31/99 542.43 314.42 416.08 351.12 306.69
</TABLE>
- ---------------
* Results shown on the graph are not necessarily indicative of future
performance
SIGNIFICANT LITIGATION
To the best of the Company's knowledge, there are no pending or threatened
legal proceedings to which the Company is a party, which may have a materially
adverse effect on the Company's financial condition, results of operations or
cash flows.
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 EIGHTEEN NOMINEES SET FORTH HEREIN TO SERVE UNTIL THE NEXT ANNUAL MEETING OF
THE SHAREHOLDERS AND UNTIL THEIR RESPECTIVE SUCCESSORS SHALL BE ELECTED AND
QUALIFIED: FRANK G. BISCEGLIA, JAMES R. BLAIR, ARTHUR C. CARMICHAEL, JR.,
RICHARD L. CONNIFF, WILLIAM J. DEL BIAGGIO, JR., ANNEKE DURY, TRACEY A.
ENFANTINO, GLENN A. GEORGE, ROBERT P. GIONFRIDDO, P. MICHAEL HUNT, JOHN W.
LARSEN, LOUIS ("LON") O. NORMANDIN,
15
<PAGE> 20
JACK L. PECKHAM, ROBERT W. PETERS, HUMPHREY P. POLANEN, JOHN E. ROSSELL III,
KIRK M. ROSSMANN AND BRAD L. SMITH. IF NO INSTRUCTION IS GIVEN, THE BOARD OF
DIRECTORS INTENDS TO VOTE FOR EACH NOMINEE LISTED.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
At the 2000 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, 2000 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 2000
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.
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 2001 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 14, 2000 in a
form that complies with applicable regulations. Shareholder proposals may not be
included in the Proxy Statement for the 2001 Annual Meeting or presented at the
shareholder meeting unless certain conditions are met. Shareholder proposals are
subject to regulation under Federal securities laws.
HERITAGE COMMERCE CORP
/s/ Rebecca A. Levey
Rebecca A. Levey
Corporate Secretary
San Jose, California
April 12, 2000
16
<PAGE> 21
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, John E. Rossell III and
William J. Del Biaggio, Jr. 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 18, 2000 at 3:30 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:
Frank G. Bisceglia
James R. Blair
Arthur C. Carmichael, Jr.
Richard L. Conniff
William J. Del Biaggio, Jr.
Anneke Dury
Tracey A. Enfantino
Glenn A. George
Robert P. Gionfriddo
P. Michael Hunt
John W. Larsen
Louis O. ("Lon") Normandin
Jack L. Peckham
Robert W. Peters
Humphrey P. Polanen
John E. Rossell III
Kirk M. Rossmann
Brad L. Smith
2. 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, 2000.
[ ] FOR ratification of Deloitte & Touche LLP as Commerce Corp's auditors.
[ ] AGAINST ratification of Deloitte & Touche LLP as Commerce Corp's auditors.
[ ] ABSTAIN.
3. To consider and transact such other business as may properly be brought
before the meeting.
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.
<PAGE> 22
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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: , 2000.
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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)
