<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
COMMERCE BANCORP, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / 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:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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"PRELIMINARY COPY"
COMMERCE BANCORP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders
(the "Annual Meeting") of Commerce Bancorp, Inc. ("Bancorp") will be held at the
Commerce University, 17000 Horizon Way at Springdale Road, Mount Laurel, New
Jersey, on Tuesday, June 17, 1997, at 5:30 P.M., local time, and at any
adjournment or postponement thereof, to consider and act upon the following
matters as more fully described in the annexed Proxy Statement:
1. To elect Directors;
2. To approve the amendment of Bancorp's Restated Certificate of
Incorporation to increase the number of shares of Common Stock that
Bancorp is authorized to issue by 30,000,000 shares and the number of
shares of Preferred Stock that Bancorp is authorized to issue by
5,000,000 shares;
3. To approve the Commerce Bancorp, Inc. 1997 Employee Stock Option Plan;
and
4. To act upon such other matters as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed April 30, 1997 as the record date for
determination of shareholders entitled to vote at the Annual Meeting. Only
shareholders of record at the close of business on that date will be entitled to
receive notice of, and to vote at, the Annual Meeting.
You are cordially invited to attend the Annual Meeting in person.
Whether or not you expect to attend the Annual Meeting in person, you are urged
to sign and date the enclosed Proxy and promptly return it in the envelope
provided for that purpose.
By Order of the Board of Directors
ROBERT C. BECK,
Secretary
May 5, 1997
<PAGE>
COMMERCE BANCORP, INC.
COMMERCE ATRIUM
1701 ROUTE 70 EAST
CHERRY HILL, NEW JERSEY 08034-5400
PROXY STATEMENT
This Notice of Annual Meeting, Proxy Statement and enclosed Proxy are
being furnished to shareholders of Commerce Bancorp, Inc. ("Bancorp") in
conjunction with the solicitation of proxies by the Board of Directors of
Bancorp for use at Bancorp's 1997 Annual Meeting of Shareholders to be held on
Tuesday, June 17, 1997, at 5:30 P.M., local time, at the Commerce University,
17000 Horizon Way at Springdale Road, Mount Laurel, New Jersey (the "Annual
Meeting"), and at any adjournment or postponement thereof. The approximate date
upon which this Proxy Statement and the accompanying form of Proxy will be first
sent, given or otherwise made available to Bancorp's shareholders is May 5,
1997.
The expense of the proxy solicitation will be borne by Bancorp. In
addition to solicitation by mail, proxies may be solicited in person or by
telephone by directors, officers or employees of Bancorp and its subsidiaries
without additional compensation. Bancorp is required to pay the reasonable
expenses incurred by recordholders of Bancorp Common Stock who are brokers,
dealers, banks or voting trustees, or their nominees, for mailing proxy material
and annual shareholder reports to the beneficial owners of Bancorp Common Stock
they hold of record, upon request of such recordholders.
The Board of Directors of Bancorp has fixed the close of business on
April 30, 1997, as the date for determining holders of record of Bancorp Common
Stock, par value $1.5625 per share (the "Common Stock"), and Bancorp Series C
ESOP Cumulative Convertible Preferred Stock, no par value per share ("Series C
ESOP Preferred Stock"), entitled to receive notice of, and to vote at, the
Annual Meeting. On that date, there were 15,633,730 shares of Common Stock
outstanding and 417,000 shares of Series C ESOP Preferred Stock outstanding.
Each holder of Common Stock and Series C ESOP Preferred Stock, voting together
and not as separate classes, is entitled to cast one vote for each share held of
record on that date. All Series C ESOP Preferred Stock is held of record by
Bancorp's Employee Stock Ownership Plan Trust ("ESOP Trust"). See "Series C ESOP
Preferred Stock" and "Employee Stock Ownership Plan."
The holders of a majority of the aggregate outstanding shares of
Bancorp Common Stock and Series C ESOP Preferred Stock, present either in person
or by proxy, will constitute a quorum for the transaction of business at the
Annual Meeting. Pursuant to the New Jersey Business Corporation Act ("NJBCA"),
abstentions and broker non-votes (which may occur if a beneficial owner of stock
where shares are held in a brokerage or bank account fails to provide the broker
or bank voting instructions as to such shares) will be counted solely for the
purpose of determining whether a quorum is present.
If the enclosed form of Proxy is properly marked, signed, and returned
in time to be voted at the Annual Meeting and not revoked, the shares
represented by the Proxy will be voted in accordance with the instructions
marked thereon. Signed Proxies not marked to the contrary will be voted (i)
"FOR" the election of all nominees for director; (ii) "FOR" the amendment to
Bancorp's Restated Certificate of Incorporation to increase the number of shares
of Common Stock that Bancorp is authorized to issue by 30,000,000 shares and the
number of shares of Preferred Stock that Bancorp is authorized to issue by
5,000,000 shares; and (iii) "FOR" the approval of the Commerce Bancorp, Inc.
1997 Employee Stock Option Plan. Sending in a signed Proxy will not affect a
shareholders' right to attend the Annual Meeting and vote in person, since the
Proxy is revocable.
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Any Bancorp shareholder giving a Proxy may revoke it at any time before
it is voted by (i) giving written notice of such revocation, signed in the same
manner as the Proxy, to Bancorp's Secretary, (ii) executing a new Proxy and
returning it to the Secretary of Bancorp prior to the voting of the first Proxy
at the Annual Meeting, or (iii) attending the Annual Meeting and voting in
person (although attendance at the Annual Meeting will not in and of itself
constitute revocation of a Proxy).
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SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
Common Stock
The following table sets forth, as of April 30, 1997, the beneficial
ownership of Bancorp's Common Stock by (i) each director and nominee for
director of the Company, (ii) each of the executive officers of the Company
named in the Summary Compensation Table and (iii) all the directors, nominees
for directors, and executive officers of the Company as a group. No person is
known by the Company to own beneficially more than 5% of the Company's
outstanding Common Stock. Unless otherwise specified, all persons listed below
have sole voting and investment power with respect to their shares.
COMMON STOCK
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Name of Beneficial Number of Shares Percent of Class
Owner or Beneficially Beneficially
Identity of Group Owned(1)(2) Owned(2)
- ------------------ ---------------- -----------------
David Baird, IV . . . . . . . . . . . . . . 74,788(3) *
Robert C. Beck . . . . . . . . . . . . . . 118,055(4) *
Jack R Bershad . . . . . . . . . . . . . . 46,904(5) *
Joseph E. Buckelew . . . . . . . . . . . . 157,142(6) 1.01%
Vernon W. Hill, II . . . . . . . . . . . . 610,418(7) 3.87
C. Edward Jordan, Jr . . . . . . . . . . . 189,437(8) 1.20
Morton N. Kerr . . . . . . . . . . . . . . 51,062(9) *
Steven M. Lewis . . . . . . . . . . . . . . 133,010(10) *
Daniel J. Ragone . . . . . . . . . . . . . 57,401(11) *
Joseph T. Tarquini, Jr . . . . . . . . . . 176,130(12) 1.13
Peter M. Musumeci, Jr . . . . . . . . . . . 162,302(13) 1.03
Robert D. Falese, Jr . . . . . . . . . . . 56,792(14) *
Dennis M. DiFlorio . . . . . . . . . . . . 107,742(15) *
All Directors, Nominees for
Directors and Executive Officers
of the Company as a Group (14 Persons) 1,923,567(16) 11.81%
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*less than 1%
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(1) The securities "beneficially owned" are determined in accordance with
the definitions of "beneficial ownership" as set forth in the regulations of the
Securities and Exchange Commission and, accordingly, may include securities
owned by or for, among others, the wife and/or minor children of the individual
and any other relative who has the same residence as such individual as well as
other securities as to which the individual has or shares voting or investment
power or has the right to acquire under outstanding stock options within 60 days
after April 30, 1997. Beneficial ownership may be disclaimed as to certain of
the securities.
(2) The figures in these columns do not reflect the shares of Common
Stock issuable upon conversion of the Series C ESOP Preferred Stock. As of April
30, 1997, each share of Series C ESOP cumulative convertible Preferred Stock was
convertible into 1.4774 shares of Common Stock.
(3) Includes 7,140 shares of Common Stock issuable upon the exercise of
stock options granted under the Company's 1989 Stock Option Plan for
Non-Employee Directors.
(4) Includes 7.278 shares of Common Stock issuable upon the exercise of
stock options granted under the Company's 1989 Stock Option Plan for
Non-Employee Directors.
(5) Includes 18,540 shares of Common Stock held by Mr. Bershad's wife and
10,024 shares of Common Stock issuable upon the exercise of stock options
granted to Mr. Bershad under the Company's 1989 Stock Option Plan for
Non-Employee Directors.
(6) Includes 3,150 shares of Common Stock held by Mr. Buckelew's wife,
1,653 shares held by Buckelew & Lane Investments and 2,263 shares of Common
Stock issuable upon the exercise of stock options granted under the Company's
1989 Stock Option Plan for Non-Employee Directors. Mr. Buckelew is a partner of
Buckelew & Lane Investments.
(7) Includes 35,826 shares held by Site Development Inc., 18,547 shares
held by the wife of Mr. Hill, 50,291 shares held by S. J. Dining, Inc., 47,562
shares held by U.S. Restaurants, Inc., 44,472 shares held by J.V. Properties,
12,354 shares held by Business Interiors, Inc., 42,501 shares held by the Hill
Family Trust and 4,699 shares allocated to Mr. Hill by the Company's ESOP. Mr.
Hill is the Chairman of the Board of Site Development, Inc., a shareholder of S.
J. Dining, Inc., a shareholder of U.S. Restaurants, Inc., a partner in J.V.
Properties, a co-trustee and beneficiary of the Hill Family Trust and a
co-trustee and beneficiary of the Company's ESOP Trust. Business Interiors, Inc.
is a company owned by Mr. Hill's wife. This amount also includes 155,757 shares
of Common Stock issuable upon the exercise of stock options granted to Mr. Hill
under the Company's 1984 and 1994 Employee Stock Option Plans. This amount does
not include 3,324 shares of Series C ESOP Preferred Stock allocated to Mr. Hill
by the Company's ESOP nor does it include any unallocated shares of Common Stock
or Series C ESOP Preferred Stock held by the Company's ESOP.
(8) Includes 116,766 shares of Common Stock issuable upon the exercise of
stock options granted to Mr. Jordan under the Company's 1984 and 1994 Employee
Stock Option Plans, 3,434 shares allocated to Mr. Jordan by the Company's ESOP,
of which Mr. Jordan is a co-trustee and beneficiary, and 1,214 shares held in
trust for Mr. Jordan's minor children. This amount does not include 3,150 shares
of Series C ESOP Preferred Stock allocated to Mr. Jordan by the Company's ESOP
nor does it include any unallocated shares of Common Stock or Series C ESOP
Preferred Stock held by the Company's ESOP.
(9) Includes 147 shares of Common Stock held by Mr. Kerr's wife, 48,141
shares held by the Markeim-Chalmers, Inc. Pension Plan and 2,152 shares of
Common Stock issuable upon the exercise of stock
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options granted to Mr. Kerr under the Company's 1989 Stock Option Plan for
Non-Employee Directors. Markeim-Chalmers, Inc. is a company owned by Mr. Kerr.
(10) Includes 50,291 shares held by S. J. Dining, Inc., 47,562 shares
held by U.S. Restaurants, Inc. and 10,024 shares of Common Stock issuable upon
the exercise of stock options granted to Mr. Lewis under the Company's 1989
Stock Option Plan for Non-Employee Directors. Mr. Lewis is President of S. J.
Dining, Inc. and President of U.S. Restaurants, Inc. This amount also includes
1,968 shares held in trust for Mr. Lewis' minor children.
(11) Includes 16,352 shares held by Mr. Ragone's wife, 13,249 shares held
jointly with Mr. Ragone's wife and 1,863 shares of Common Stock issuable upon
the exercise of stock options granted to Mr. Ragone under the Company's 1989
Stock Option Plan for Non-Employee Directors.
(12) Includes 14,071 shares held by Mr. Tarquini's wife, 15,913 shares
held by The Tarquini Organization Profit Sharing Plan, 2,315 shares held by The
Tarquini Foundation and 10,024 shares of Common Stock issuable upon the exercise
of stock options granted to Mr. Tarquini under the Company's 1989 Stock Option
Plan for Non-Employee Directors. Mr. Tarquini is the President of The Tarquini
Organization.
(13) Includes 32,055 shares held jointly with Mr. Musumeci's wife,
126,966 shares of Common Stock issuable upon the exercise of stock options
granted to Mr. Musumeci under the Company's 1984 and 1994 Stock Option Plans,
2,984 shares of Common Stock allocated to Mr. Musumeci under the Company's ESOP.
This amount does not include 3,148 shares of Series C ESOP Cumulative
Convertible Preferred Stock allocated to Mr. Musumeci by the Company's ESOP.
(14) Includes 52,911 shares of Common Stock issuable upon the exercise of
stock options granted to Mr. Falese under the Company's 1984 and 1994 Stock
Option Plans and 111 shares of Common Stock allocated to Mr. Falese under the
Company's ESOP. This amount also includes 72 shares held by Mr. Falese's wife
and 2,548 shares held by her in trust for their minor daughter. This amount does
not include 1,236 shares of Series C ESOP Cumulative Convertible Preferred Stock
allocated to Mr. Falese under the Company's ESOP.
(15) Includes 94,030 shares of Common Stock issuable upon the exercise of
stock options granted to Mr. DiFlorio under the Company's 1984 and 1994 Stock
Option Plans and 817 shares of Common Stock allocated to Mr. DiFlorio under the
Company's ESOP. This amount does not include 2,143 shares of Series C ESOP
Cumulative Convertible Preferred Stock allocated to Mr. DiFlorio under the
Company's ESOP.
(16) Includes an aggregate of 634,307 shares of Common Stock issuable
upon the exercise of stock options granted to directors and certain executive
officers of the Company under the Company's Stock Option Plans.
Series C ESOP Preferred Stock
As of April 30, 1997, all of the 417,000 shares of the Series C ESOP
Preferred Stock outstanding were held of record by the Company's ESOP Trust.
Additionally, as of such date, the ESOP Trust held of record 75,266 shares of
Common Stock. As of April 30, 1997, 231,815 shares of Series C ESOP Preferred
Stock, and all of the shares of Common Stock held by the ESOP Trust were
allocated to individual participant accounts. See "Employee Stock Ownership
Plan." If all of the unallocated shares of Series C ESOP Preferred Stock held of
record by the ESOP Trust as of April 30, 1997, were converted into Common Stock,
the
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<PAGE>
unallocated shares of Common Stock the ESOP Trust would hold of record would be
1.69% of the Common Stock.
ELECTION OF DIRECTORS
The Bylaws of Bancorp provide that Bancorp's business shall be managed by
a Board of not less than five nor more than twenty-five directors and that
within these limits the number of directors shall be as established by
resolution of a majority of the full Board of Directors. The Board of Directors
by resolution has set the number of persons to be elected to the Board of
Directors at the Annual Meeting at ten.
The election of directors will be determined by a plurality vote and the
ten nominees receiving the most "FOR" votes will be elected. Shares may be voted
"FOR" or withheld from each nominee. Shares that are withheld and broker
non-votes (which may occur if a beneficial owner of stock where shares are held
in a brokerage or bank account fails to provide the broker or bank voting
instructions as to such shares) will have no effect on the outcome of the
election because directors will be elected by a plurality of the shares voted
for directors.
The Board of Directors unanimously recommends a vote "FOR" the election
as directors of the nominees named herein.
The Board of Directors has designated the ten persons listed below to be
nominees for election as directors. All of the nominees are currently members of
the Board, and each of them has consented to serve if elected. Bancorp has no
reason to believe that any of the nominees will be unavailable for election;
however, if any nominee becomes unavailable for any reason, the Board of
Directors may designate a substitute nominee, or the number of directors to be
elected at the Annual Meeting will be reduced accordingly. Directors of Bancorp
hold office for one year and until their respective successors have been duly
elected and qualified.
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The following information regarding Bancorp's nominees is based, in part,
on information furnished by the nominees.
<TABLE>
<CAPTION>
Name Age Positions with Bancorp and Subsidiaries
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<S> <C> <C>
Vernon W. Hill, II 51 Chairman and President of Bancorp; Chairman and President of Commerce
NJ; Chairman and President of Commerce PA; Chairman of Commerce
Shore
C. Edward Jordan, Jr. 53 Executive Vice President and Director of Bancorp; Executive Vice President
and Director of Commerce NJ
Robert C. Beck 61 Secretary and Director of Bancorp; Secretary and Director of Commerce NJ
David Baird, IV 60 Director of Bancorp and Commerce NJ
Jack R Bershad 66 Director of Bancorp, Commerce NJ and Commerce PA
Joseph E. Buckelew 68 Director of Bancorp and Commerce Shore; Chairman of Commerce
National Insurance Services, Inc.
Morton N. Kerr 66 Director of Bancorp and Commerce NJ
Steven M. Lewis 47 Director of Bancorp, Commerce NJ and
Commerce PA
Daniel J. Ragone 69 Director of Bancorp and Commerce NJ
Joseph T. Tarquini, Jr. 61 Director of Bancorp and Commerce NJ
</TABLE>
Mr. Hill, a director of Commerce NJ since 1973 and Bancorp since 1982,
has been Chairman and/or President of Commerce NJ since 1973 and Chairman and
President of Bancorp since 1982. Mr. Hill has been Chairman of the Board and/or
President of Site Development, Inc., Cherry Hill, New Jersey, a developer of
real estate, since 1968. Mr. Hill has been Chairman of the Board of Directors of
Commerce PA from June 1984 to June 1986 and from January 1987 to the present,
President of Commerce PA since June 1994, a director of Commerce
Bank/Harrisburg, Camp Hill, Pennsylvania since 1985, and the Chairman of
Commerce Shore since January, 1989.
Mr. Jordan, a director of Commerce NJ since 1974 and Bancorp since
1982, has been Executive Vice President of Commerce NJ since 1974 and Executive
Vice President of Bancorp since 1982.
Mr. Beck, a director of Commerce NJ since 1973 and Bancorp since 1982,
has been Secretary of Commerce NJ since 1973 and Secretary of Bancorp since
1982. Mr. Beck has been a partner of the law firm of Parker, McCay & Criscuolo,
Marlton, New Jersey since 1987.
Mr. Baird, a director of Bancorp and Commerce NJ since 1988, has been
President of Haddonfield Lumber Company, Inc., Cherry Hill, New Jersey since
1962.
Mr. Bershad, a director of Commerce PA since 1984 and Bancorp and
Commerce NJ since 1987, has been a partner of the law firm of Blank Rome Comisky
& McCauley, Philadelphia, Pennsylvania and Cherry Hill, New Jersey, since 1964
and its Chairman since 1990.
Mr. Buckelew has been a director of Bancorp and Chairman of the Board
of Commerce National Insurance Services, Inc., the wholly-owned insurance
brokerage subsidiary of Bancorp, since November, 1996
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and has been a director of Commerce Shore since 1993. Mr. Buckelew was the
President of Morales, Potter & Buckelew, Inc. t/a Buckelew & Associates, Toms
River, New Jersey from 1959 to November 1996, when this insurance agency was
acquired by Bancorp.
Mr. Kerr, a director of Commerce NJ since 1973 and Bancorp since 1982,
has been President of Markeim-Chalmers, Inc., Realtors, Cherry Hill, New Jersey,
since 1965.
Mr. Lewis, a director of Commerce PA since 1984 and a director of
Bancorp and Commerce NJ since 1988, has been President of U.S. Restaurants,
Inc., Blue Bell, Pennsylvania since 1985 and President of S. J. Dining, Inc.
since 1986.
Mr. Ragone, a director of Commerce NJ since 1981 and Bancorp since
1982, has been Chairman of the Board and President of Ragone, Raible, Lacatena &
Beppel, C.P.A., Haddonfield, New Jersey, or its predecessor firms, since 1960.
Mr. Tarquini, a director of Commerce NJ since 1973 and Bancorp since
1982, has been President of The Tarquini Organization, A.I.A., Camden, New
Jersey, since 1980. Prior thereto, he had been a partner in its predecessor
firms.
Director Compensation
Directors of Bancorp and Commerce NJ were paid an annual fee of $10,000
plus $750 for each meeting of the Board of Directors attended in 1996 and will
be paid the same annual fee and meeting fee for each meeting of the Board of
Directors attended in 1997. When meetings of the Board of Directors of Bancorp
and Commerce NJ occur on the same day, only one fee is paid. Directors of
Commerce PA are paid a fee of $300 for each meeting of the Board of Directors
and committee meeting attended. Directors of Commerce Shore are paid a fee of
$400 for each meeting of the Board of Directors and committee meeting attended.
No fees are paid to directors who are also operating officers of Bancorp,
Commerce NJ, Commerce PA or Commerce Shore. Each director of Bancorp is provided
with $100,000 of permanent life insurance.
A retirement plan for outside directors, i.e., directors who are not
officers or employees of Bancorp on the date their service as a Bancorp director
ends, provides that outside directors with five or more years of service as a
Bancorp director are entitled to receive annually, for ten years or the number
of years served as a director, whichever is less, commencing upon such
director's attainment of age 65 and retirement from the Bancorp Board or upon
such director's disability, payments equal to the highest 1099 Compensation (as
such term is defined in the plan) in effect at any time during the five year
period immediately preceding such director's retirement or, if earlier, death or
disability. This plan further provides that, in the event a director dies before
receiving all benefits to which he or she is entitled, such director's surviving
spouse is entitled to receive all benefits not received by the deceased director
commencing upon such director's death. Upon a change in control of Bancorp, the
plan provides that each director then sitting on the Bancorp Board,
notwithstanding the length of time served as a director, becomes entitled to
receive annually, for ten years, or twice the number of years served as a
director, whichever is less, payments equal to the higher of the director's 1099
Compensation at the time of the director's termination of Board service and the
highest 1099 Compensation in effect at any time during the five year period
immediately preceding the change in control commencing on the latest to occur of
the termination of the director's Board service, attainment of age 65 or any
date designated by the director at any time and from time to time. The
definition of "change in control" for purposes of this plan parallels the
definition of that term contained in the Employment Agreements discussed on page
[ ] of this Proxy Statement. This plan became effective January 1, 1993, as
amended.
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<PAGE>
1989 Stock Option Plan For Non-Employee Directors
Effective April 24, 1989 (and as amended in 1994), Bancorp adopted the
1989 Stock Option Plan for Non-Employee Directors (the "1989 Plan") which
provides for the purchase of a total of not more than 221,619 shares (as
adjusted for all stock splits and dividends through April 30, 1997) of Bancorp
Common Stock by members of the Boards of Directors of Bancorp and its subsidiary
corporations. Options granted pursuant to the 1989 Plan may be exercised
beginning on the earlier to occur of (i) one year after the date of their grant
or (ii) a "change in control" of Bancorp, as such term is defined in the 1989
Plan.
Each non-employee director of Bancorp or any Bancorp subsidiary
corporation who on or after May 1, 1989 is elected or reelected as a director of
Bancorp or any subsidiary corporation at any annual or special meeting of
shareholder(s) of Bancorp or any Bancorp subsidiary corporation will, as of the
date of such election or reelection, automatically be granted an option to
purchase 500 shares of Bancorp's Common Stock; however, no non-employee director
may receive an option or options to purchase more than 1,000 shares of Common
Stock in any one calendar year. The maximum number of shares of Bancorp Common
Stock as to which options may be granted to any non-employee director under the
1989 Plan is 10,000 shares.
The 1989 Plan is administered by the Board of Directors of Bancorp,
including non-employee directors. Options granted under the 1989 Plan are not
"incentive stock options" as defined in Section 422 of the Internal Revenue Code
of 1986, as amended. Option prices are intended to equal 100% of the fair market
value of Bancorp's Common Stock on the date of the election or re-election of
the non-employee directors.
For the year ended December 31, 1996, Messrs. Baird, Beck, Bershad,
Kerr, Lewis, Ragone and Tarquini each received options under the 1989 Plan to
purchase 1,050 shares of Bancorp Common Stock (as adjusted to reflect the 5%
stock dividend declared on December 19, 1996) and Mr. Buckelew received an
option under the 1989 Plan to purchase 525 shares of Bancorp Common Stock (as
adjusted to reflect the 5% stock dividend declared on December 19, 1996). Such
options were not exercisable in 1996.
Meetings and Committees of the Board of Directors
During 1996, there were 13 meetings of the Board of Directors of
Bancorp. The Board of Directors of Bancorp has established an Audit and
Compliance Committee and a Personnel Committee but does not have a standing
Nominating Committee. In addition, each of Bancorp's three subsidiary banks,
Commerce Bank, N.A., Cherry Hill, New Jersey ("Commerce NJ"), Commerce
Bank/Pennsylvania, N.A., Philadelphia, Pennsylvania ("Commerce PA") and Commerce
Bank/Shore, N.A. ("Commerce Shore") has various committees of their respective
boards.
Information with respect to the committees of the Board of Directors of
Bancorp is set forth below.
Audit and Compliance Committee
The Audit and Compliance Committee reviews Bancorp's and its
wholly-owned subsidiary banks' financial statements, accounting procedures and
methods employed in connection with audit programs. It serves as the principal
liaison between the Board of Directors and Bancorp's independent certified
public accountants. In addition, this committee makes recommendations to the
Board of Directors concerning the selection of Bancorp's independent certified
public accountants. Robert C. Beck, Daniel J. Ragone, Joseph T. Tarquini, Jr.,
Thomas J. Maher (a director of Commerce PA) and Daniel M. Monroe (a director of
Commerce Shore)
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<PAGE>
are the current members of the Audit and Compliance Committee. During 1996,
there were five meetings of the Audit and Compliance Committee.
Personnel Committee
The Personnel Committee reviews and recommends the levels of
compensation of Commerce NJ's, Commerce PA's and Commerce Shore's executive
officers and administers Bancorp's Employee Stock Option Plans. Morton N. Kerr,
Daniel J. Ragone and Jack R Bershad are the current members of the Personnel
Committee. During 1996, there was one meeting of the Personnel Committee. The
report of the Personnel Committee with respect to 1996 compensation is set forth
on page [ ] of this Proxy Statement.
Attendance
In 1996, each of Bancorp's directors and nominees for directors
attended more than 75% of the aggregate of the total number of meetings of the
Board of Directors and all committees of which they were members of Bancorp,
Commerce NJ, Commerce PA and Commerce Shore, as the case may be.
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<PAGE>
EXECUTIVE OFFICERS
The executive officers of Bancorp and its banking subsidiaries, as of
April 30, 1997, are set forth below.
<TABLE>
<CAPTION>
Position with Bancorp, Commerce NJ,
Commerce PA, and Commerce Shore;
Name Age Principal Occupation
---- --- -----------------------------------
<S> <C> <C>
Vernon W. Hill, II 51 Chairman and President of Bancorp since 1982; Chairman
and/or President of Commerce NJ since 1973; Chairman of
Commerce PA from June 1984 to June 1986 and from January
1987 to present; President of Commerce PA from June 1994
to present; Chairman of Commerce Shore since 1989.
C. Edward Jordan, Jr. 53 Executive Vice President and Director of Bancorp since 1982;
Executive Vice President and Director of Commerce NJ since
1974.
Peter M. Musumeci, Jr. 46 Executive Vice President and Senior Credit Officer of Bancorp
since 1986 and Treasurer and Assistant Secretary of Bancorp
since 1984; Executive Vice President of Commerce NJ since
1986; Director of Commerce PA since 1987 and Commerce
Shore since 1989.
Robert D. Falese, Jr. 50 Executive Vice President and Senior Loan Officer of
Commerce NJ since 1992. From 1990 to 1992, Mr. Falese
was President and Chief Executive Officer of Sterling Bank,
Mount Laurel, New Jersey.
Dennis M. DiFlorio 43 Executive Vice President of Commerce NJ since January,
1996. Prior thereto Mr. DiFlorio was Senior Vice President
of Commerce NJ since 1988.
David Wojcik 44 Senior Vice President of Bancorp since 1988.
</TABLE>
-11-
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table is a summary of certain information concerning the
compensation during the last three fiscal years awarded or paid to, or earned
by, Bancorp's chief executive officer and each of Bancorp's other four most
highly compensated executive officers during Bancorp's last fiscal year.
<TABLE>
<CAPTION>
Long Term
Compensation
-------------
Securities
ANNUAL COMPENSATION Other Underlying All
- ------------------------------------------------------------------------------ Annual Stock Option Other
Name/Title Year Salary Bonus Compensation(1) Grants(2) Compensation
---------- ---- ------ ----- --------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Vernon W. Hill, II 1996 $480,000 $150,000 $62,377 138,075 $37,381(3)
Chairman of the Board, 1995 441,000 125,000 50,779 34,729 37,925
and President of Bancorp; 1994 390,000 150,000 50,244 - 0 - 36,653
Chairman of the Board,
and President of Commerce NJ and
Commerce PA; Chairman of
Commerce Shore
C. Edward Jordan, Jr. 1996 $240,000 $60,000 43,050 $29,654(3)
Executive Vice President of 1995 225,000 60,000 23,153 30,269
Bancorp; Executive Vice 1994 215,000 75,000 - 0 - 28,868
President of Commerce NJ
Peter M. Musumeci, Jr. 1996 $240,000 $60,000 43,050 $26,423(3)
Executive Vice President and Senior 1995 225,000 60,000 23,153 26,757
Credit Officer, Treasurer and 1994 200,000 75,000 - 0 - 24,763
Assistant Secretary of Bancorp;
Executive Vice President
of Commerce NJ
Robert D. Falese, Jr. 1996 $240,000 $80,000 48,300 $15,908(3)
Executive Vice President and Senior 1995 225,000 75,000 23,153 15,319
Loan Officer of Commerce NJ 1994 200,000 75,000 - 0 - 14,041
Dennis M. DiFlorio 1996 $200,000 $80,000 48,300 $10,609(3)
Executive Vice President of 1995 175,000 75,000 23,153 10,760
Commerce NJ 1994 140,000 60,000 - 0 - 8,363
</TABLE>
- ------------------------
(1) The total in this column reflects personal use of a company car (1996,
$4,517; 1995, $5,389; 1994, $5,389), expense allowances (1996,
$50,600); 1995, $36,600; 1994, $36,600) and country club dues (1996,
$7,260; 1995, $8,790; 1994, $8,255). The value of such other annual
compensation did not exceed the lesser of $50,000 or 10% of salary and
bonus for any individual in any year except Mr.
Hill.
(2) The stock option grants reflected in this column have been adjusted for
the 5% stock dividends declared on December 19, 1996, January 2, 1996,
December 13, 1994 and January 19, 1994. The original grant was adjusted
based on the unexercised option shares outstanding on the date of the
stock dividend.
-12-
<PAGE>
(3) The totals in this column reflect (i) premiums on life insurance (for
1996, Mr. Hill, $25,128; Mr. Jordan, $18,218; and Mr. Musumeci,
$14,275, for 1995, Mr. Hill, $25,613; Mr. Jordan, $18,685; and Mr.
Musumeci, $14,516 and for 1994, Mr. Hill, $26,116; Mr. Jordan, $19,089;
and Mr. Musumeci, $14,741); (ii) long-term disability policies (for
1996, Mr. Hill, $5,179; Mr. Jordan, $5,074; Mr. Musumeci, $5,074; Mr.
Falese, $8,834; and Mr. DiFlorio, $3,535, for 1995, Mr. Hill, $4,738;
Mr. Jordan, $4,010; Mr. Musumeci, $4,667; Mr. Falese, $7,745; and Mr.
DiFlorio, $3,186 and for 1994, Mr. Hill $4,738; Mr. Jordan, $3,980; Mr.
Musumeci, $4,223; Mr. Falese, $8,242 and Mr. DiFlorio, $2,742); and
(iii) contributions to Bancorp's ESOP (in 1996, $7,074 each for all
five individuals, in 1995, $7,574 each for all five individuals and in
1994, $5,799 each for all five individuals).
Employment Agreements
Mr. Hill's Employment Agreement provides that he will be employed by
Bancorp and Commerce NJ as Chairman of the Board, President and Chief Executive
Officer for a term of five years effective January 1, 1992, provided that on
each January 1 thereafter the Employment Agreement shall be automatically
renewed and extended for a new five year term unless either Bancorp or Hill
gives the other at least ninety days prior written notice of their desire to
terminate the Agreement, in which event the term will have four years remaining.
Under the terms of the Employment Agreement, Mr. Hill's "base salary"
shall not be less than $550,000. The Employment Agreement provides that Mr. Hill
will participate in any benefit or compensation programs in effect which are
generally made available from time to time to executive officers of Bancorp and
provides for all other fringe benefits as in effect from time to time which are
generally available to Bancorp's salaried officers including, without
limitation, medical and hospitalization coverage, life insurance coverage and
disability coverage.
The Employment Agreement requires Bancorp to compensate Mr. Hill for
the balance of the term of the Employment Agreement at a rate equal to seventy
percent of his annual base salary if he becomes permanently disabled (as defined
in the Employment Agreement) during the term and to pay Mr. Hill's designated
beneficiary a lump sum death benefit if he dies during the term in an amount
equal to three times his average annual base salary in effect during the
twenty-four months immediately preceding his death.
The Employment Agreement allows Mr. Hill to terminate his employment
with Bancorp upon a change in control of Bancorp (as defined in the Employment
Agreement) and if within three years of such change in control, without Mr.
Hill's consent, among other things, the nature and scope of his authority with
Bancorp or a surviving or acquiring person are materially reduced to a level
below that which he enjoyed on January 1, 1992. If Mr. Hill terminates his
employment because of a change in control, he will be entitled to a lump sum
severance payment equal to four times his average annual base salary in effect
during the twenty-four month period immediately preceding such termination
(provided that such payment does not constitute a "parachute payment" under
Section 280G of the Internal Revenue Code of 1986, as amended, and in the event
such payment would constitute a "parachute payment", such lump sum severance
payment shall be reduced so as to not constitute a "parachute payment"), and the
continuation of certain benefits including medical, hospitalization and life
insurance. The Employment Agreement contains a non-competition covenant for Mr.
Hill should his employment with Bancorp be terminated under certain
circumstances.
The Employment Agreements for Messrs. Jordan and Musumeci are
substantially similar to that of Mr. Hill's except that: Mr. Jordan will serve
as Executive Vice President/Chief Financial Officer of Bancorp
-13-
<PAGE>
and Commerce NJ, and Mr. Musumeci will serve as Executive Vice President/Senior
Credit Officer of Bancorp and Commerce NJ. The term of each Employment Agreement
is three years and the lump sum death benefit is each equal to two times their
respective average annual base salary in effect during the twenty-four month
period preceding death. Mr. Jordan's "base salary" under his Employment
Agreement is $260,000 and Mr. Musumeci's "base salary" under his Employment
Agreement is $265,000.
Employee Stock Option Plans
Effective April 14, 1984, Bancorp adopted the Commerce Bancorp, Inc.
Incentive Stock Option Plan (the "1984 Plan") which provided for the purchase of
a total of not more than 1,384,212 shares of Bancorp Common Stock (as adjusted
for all stock splits and stock dividends through April 30, 1997) by officers and
key employees. No further options may be granted under the 1984 Plan. As of
April 30, 1997, 576,626 options (as adjusted for all stock splits and stock
dividends through April 30, 1997) remain outstanding under the 1984 Plan.
Options granted under the 1984 Plan were intended to constitute "incentive stock
options" as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
Effective May 24, 1994, Bancorp adopted the Commerce Bancorp, Inc. 1994
Employee Stock Option Plan (the "1994 Plan") which provided for the purchase of
a total of not more than 1,157,051 shares of Bancorp Common Stock (as adjusted
for all stock splits and stock dividends through April 30, 1997) by officers and
key employees. Pursuant to the 1994 Plan, stock options may be granted which
qualify under the Code as incentive stock options as well as stock options that
do not qualify as incentive stock options. All officers and key employees of
Bancorp or any current or future subsidiary corporation are eligible to receive
options under the 1994 Plan. As of April 30, 1997, 1,039,105 options (as
adjusted for all stock splits and stock dividends through April 30, 1997) had
been granted under the 1994 Plan and 117,946 options (as adjusted for all stock
splits and stock dividends through April 30, 1997) were available for grant.
Options may continue to be granted under the 1994 Plan through December 31,
2003. If the Commerce Bancorp, Inc. 1997 Employee Stock Option Plan proposed in
this Proxy Statement is approved no further options will be granted under the
1994 Plan.
The purpose of the 1984 Plan and 1994 Plan were to provide additional
incentive to employees of Bancorp by encouraging them to invest in Bancorp's
Common Stock and thereby acquire a proprietary interest in Bancorp and an
increased personal interest in Bancorp's continued success and progress.
Both the 1984 and 1994 Plan are administered by the Personnel Committee
("Committee") which is appointed by the Board of Directors and consists only of
Directors who are not eligible to receive options under the either Plan. The
Committee determines, among other things, which officers and key employees
receive an option or options under the either Plan, the type of option
(incentive stock options or non-qualified stock options, or both in the case of
1994 Plan) to be granted, the number of shares subject to each option, the rate
of option exercisability, and, subject to certain other provisions to be
discussed below, the option price and duration of the option. There was no limit
on the number of shares for which options could have been granted to any single
employee under the 1984 Plan, except that incentive stock options first
exercisable by an employee in any one year under the 1984 Plan (and all other
plans of Bancorp) may not exceed $100,000 in value (determined at the time of
grant). Under the 1994 Plan no individual may be granted, in any calendar year,
a number of options that is more than 100,000 and incentive stock options first
exercisable by an employee in any one year under the 1994 Plan (and all other
plans of Bancorp) may not exceed $100,000 in value (determined at the time of
grant). The Committee may, in its discretion, modify or amend any of the option
terms hereafter described, provided that if an incentive option is granted, the
option as modified or amended continues to be an incentive stock option.
-14-
<PAGE>
In the event of any change in the capitalization of Bancorp, such as by
stock dividend, stock split or what the Board of Directors deems in its sole
discretion to be similar circumstances, the aggregate number and kind of shares
which may be issued under the 1984 Plan and 1994 Plan will be appropriately
adjusted in a manner determined in the sole discretion of the Board of
Directors. Reacquired shares of Bancorp's Common Stock, as well as unissued
shares, may be used for the purpose of the 1994 Plan. Common Stock of Bancorp
subject to options which have terminated unexercised, either in whole or in
part, will be available for future options granted under the 1994 Plan. The
option price for options issued under the 1994 Plan must be at least equal to
100% of the fair market value of the Common Stock as of the date the option is
granted.
Options granted pursuant to the 1984 Plan and/or 1994 Plan are not
exercisable until one year after the date of grant and then are exercisable
pursuant to a schedule based on years of service or option holding period.
Options granted under the 1984 Plan are not transferable other than by
will or by the laws of descent and distribution. Options granted under the 1984
Plan had a term of ten years subject to earlier termination in the event of
termination of employment, death, or disability. The 1984 Plan provided that
during the lifetime of an optionee, his option is exercisable only by him and
only while employed by Bancorp or a subsidiary or within (i) three months after
his retirement, or (ii) three months after he otherwise ceases to be so
employed, to the extent the option was exercisable on the last day of
employment. For these purposes, retirement means termination of employment by an
optionee who has attained age 65. If an optionee retires due to disability, his
options may be exercised within twelve months of his retirement date. If an
optionee dies within a period during which his option could have been exercised
by him, his option may be exercised within one year of his death (unless the
option earlier terminates) by those entitled under his will or the laws of
descent and distribution, but only to the extent the option was exercisable by
him immediately prior to his death.
Under the 1994 Plan but not the 1984 Plan, in the event of a "change in
control" of Bancorp, as defined in the 1994 Plan, each optionee may exercise the
total number of shares then subject to the option. The Committee has the
authority to provide for a different rate of option exercisability for any
optionee.
Under the 1994 Plan, unless terminated earlier by the option's terms,
incentive stock options expire ten years after the date they are granted and
non-qualified stock options expire ten years after the date they are granted.
Options terminate three months after the date on which employment is terminated
(whether such termination be voluntary or involuntary), other than by reason of
death or disability. The option terminates one year from the date of termination
due to death or disability (but not later than the scheduled termination date).
Options granted pursuant to the 1994 Plan are not transferable, except by will
or the laws of descent and distribution in the event of death. During an
optionee's lifetime, the option is exercisable only by the optionee, including,
for this purpose, the optionee's legal guardian or custodian in the event of
disability.
During 1996, Bancorp granted stock options to purchase an aggregate of
689,616 shares (as adjusted for all stock splits and stock dividends through
April 30, 1997) of Bancorp's Common Stock at $19.95 and $27.74 per share (as
adjusted for all stock splits and stock dividends through April 30, 1997) under
the 1994 Plan. During 1996, a total of 81,254 options were exercised under the
1984 Plan and 1994 Plan.
-15-
<PAGE>
Stock Options Grant Tables
The following table sets forth certain information regarding options
granted during 1996 to each of the executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1996
----------------------------
Number of % of Total
Securities Options Grant
Underlying Granted Date
Options to Employees Exercise Expiration Present
Name Granted(1) in Last Fiscal Year Price(1) Date Value (2)
- ---- ---------- ------------------- --------- ------ ---------
<S> <C> <C> <C> <C> <C>
Vernon W. Hill, II 33,075 19.6% $ 19.95 January 1, 2006 $140,569
105,000 27.74 December 17, 2006 537,600
C. Edward Jordan, Jr. 22,050 6.1% 19.95 January 1, 2006 93,713
21,000 27.74 December 17, 2006 107,520
Peter M. Musumeci, Jr. 22,050 6.1% 19.95 January 1, 2006 93,713
21,000 27.74 December 17, 2006 107,520
Robert D. Falese, Jr. 22,050 6.9% 19.95 January 1, 2006 93,713
26,250 27.74 December 17, 2006 134,400
Dennis M. DiFlorio 22,050 6.9% 19.95 January 1, 2006 93,713
26,250 27.74 December 17, 2006 134,400
</TABLE>
- -----------------------------
(1) The stock option grants and exercise price reflected in these columns have
been adjusted for the 5% stock dividends declared on January 2, 1996 and
December 19, 1996.
(2) In accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was chosen to estimate the grant date
present value of the options set forth in this table. Bancorp's use of this
model should not be construed as an endorsement of its accuracy at valuing
options. All stock option valuation models, including the Black-Scholes
model, required a prediction about future movement of the stock price. The
assumptions used in the model were expected volatility of .230 to .278,
risk-free rate of return of 6.25% to 6.35%, dividend yield of 4%, and
weighted average expected life of four years. The real value of the options
in this table depends upon the actual performance of Bancorp's Common Stock
during the applicable period.
-16-
<PAGE>
The following table sets forth certain information regarding individual
exercises of stock options during 1996 by each of the executive officers named
in the Summary Compensation Table.
<TABLE>
<CAPTION>
AGGREGATED STOCK OPTION EXERCISES IN 1996 AND YEAR-END STOCK OPTION VALUES
Number of Securities
Shares Underlying Unexercised Value of Unexercised in the
Acquired on Value Stock Options at Money Stock Options
Name Exercise Realized Year-End 1996 (1) at Year-End 1996
---- -------- -------- ----------------- ----------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Vernon W. Hill, II -- -- 122,690 138,075 $2,236,909 $767,197
C. Edward Jordan, Jr. -- -- 108,176 43,050 2,029,560 330,562
Peter M. Musumeci, Jr. 9,308 $95,267 104,919 43,050 1,954,357 330,562
Robert D. Falese, Jr. -- -- 41,887 63,386 737,938 675,882
Dennis M. DiFlorio -- -- 71,806 48,300 1,338,606 349,944
</TABLE>
- -------------------------
(1) The stock options reflected in this column have been adjusted for the 5%
stock dividend declared on December 19, 1996.
Employee Stock Ownership Plan
Effective January 1, 1989, Bancorp's Board of Directors established the
Commerce Bancorp, Inc. Employee Stock Ownership Plan ("ESOP") as a restatement
of Bancorp's Stock Bonus Plan. Employees of Bancorp and its subsidiaries are
eligible to participate in the ESOP if they are at least 21 years of age and
have completed at least 1,000 hours of service to Bancorp or its subsidiaries
during the twelve-month period beginning on the date of hire or during any
subsequent calendar year. Participants are 100% vested in their accounts under
the ESOP upon death, total disability, a complete discontinuance of
contributions by Bancorp, termination of the ESOP, and a partial termination of
the ESOP where a participant is involved in that termination. Except as provided
above, generally, participants are 20% vested after 3 years of credited service,
increasing by 20% for each additional year of credited service so that
participants are 100% vested in their accounts under the ESOP after seven years
of credited service with Bancorp or a subsidiary.
Subject to limitations contained in the Code, contributions by Bancorp
to the ESOP are deductible for federal income tax purposes. Except as described
below, such contributions are determined annually by Bancorp's Board of
Directors at its discretion. Contributions may consist either of shares of
Bancorp's stock, or cash, which may be invested by the trustees of the ESOP's
trust in shares of Bancorp's stock or to provide funds to pay principal or
interest on any indebtedness incurred by the ESOP in purchasing shares.
Contributions by Bancorp are allocated as of the close of each plan year among
accounts of participants in the ESOP. Each participant's account is credited
with that portion of contributions by Bancorp as such participant's compensation
(as defined in the ESOP) bears to all participants' compensation.
In January 1990, the ESOP Trust purchased 417,000 shares of Series C
ESOP Preferred Stock ("ESOP Shares") from Bancorp for an aggregate purchase
price of $7,500,000. The ESOP Trust borrowed the purchase price for the ESOP
Shares from an unaffiliated bank, which loan was refinanced with another
unaffiliated bank in 1994 (the "Loan"). The Loan is guaranteed by Bancorp and
its subsidiaries, and is
-17-
<PAGE>
secured by the pledge of the ESOP Shares obtained with the proceeds of the Loan.
Bancorp has agreed to contribute to the ESOP amounts sufficient to permit the
ESOP to make principal and interest payments on the Loan. Pursuant to the loan
agreement with the ESOP's bank lender, a portion of the ESOP Shares pledged by
the ESOP for repayment of the Loan will be released from the pledge according to
a formula based on the portion of principal and interest which has been repaid
each year. As of December 31, 1996, the outstanding principal balance on the
Loan was $3,333,000.
The co-trustees of the ESOP are Vernon W. Hill, II and C. Edward Jordan,
Jr. Each participant may direct the trustees of the ESOP's trust as to the
manner in which shares of voting stock allocated to his account are to be voted.
Each participant in the ESOP will become entitled to direct the trustees as to
the voting of the ESOP Shares which are released from the pledge and which are
allocated to his account under the ESOP. The enclosed form of Proxy also serves
as the voting instruction card for the trustees of the ESOP with respect to the
shares of Common Stock and ESOP Shares which have been allocated to the accounts
of participants under the ESOP. Shares which have not been allocated to the
account of any participant will be voted by the co-trustees in accordance with
such procedures as Bancorp, as the Plan Administrator, shall direct. Shares
which have been allocated to the accounts of participants but for which no
voting directions are received will be voted as the trustees direct in the
exercise of their independent judgment. See "Series C ESOP Preferred Stock." For
the plan year ended December 31, 1996, Bancorp contributed $885,000 to the ESOP.
Supplemental Executive Retirement Plan
Effective January 1, 1992, Bancorp established a Supplemental Executive
Retirement Plan ("SERP") for certain designated executives in order to provide
supplemental retirement income if Bancorp's ESOP and Social Security retirement
benefits fall below sixty percent of average annual compensation at the time of
retirement. Average annual compensation is defined as the average of the actual
annual compensation paid to the executive by Bancorp during the period of three
consecutive years which produces the highest such average during the ten year
period ending with termination of employment. The SERP is unfunded, is not a
qualified plan under the Code and benefits are paid directly by Bancorp. Messrs.
Hill, Jordan, Musumeci, Falese and DiFlorio have been designated to participate
in the SERP.
Certain Transactions
Certain directors and executive officers of Bancorp, Commerce NJ,
Commerce PA and Commerce Shore, certain of their immediate family members and
certain corporations or organizations with which they are affiliated have had
and expect to continue to have loan and other banking transactions with Commerce
NJ, Commerce PA and Commerce Shore. All such loans and other banking
transactions were made in the ordinary course of business, were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions for unrelated parties, and
did not involve more than the normal risk of uncollectibility or present other
unfavorable features.
The Board of Directors of Bancorp approves all transactions in which an
officer or director of Bancorp or any of its subsidiaries has an interest. In
the case of a transaction involving a director of Bancorp, such director does
not vote on the transaction.
Mr. Kerr, a director and nominee for director of Bancorp, is the
President of Markeim-Chalmers, Inc. which in 1996 received $195,000 in fees for
real estate related services, primarily real estate appraisals.
-18-
<PAGE>
Messrs. Beck and Bershad, directors and nominees for directors of
Bancorp, are members of law firms which Bancorp and its subsidiaries have
retained during Bancorp's last fiscal year and which Bancorp and its
subsidiaries intend to retain during its current fiscal year.
Commerce NJ leases the ground for five of its branch offices from
limited partnerships in which Mr. Hill is a partner or in which a corporation
owned by Mr. Hill is a partner. Pursuant to the terms of the ground leases,
Commerce NJ has constructed its own buildings and pays annual rent from $24,000
to $60,000 per lease for the first five years increasing to $30,000 to $91,253
for the last five years of each lease. These leases which have expiration dates
of 2004 to 2010, are each renewable for four additional terms of five years
each.
Bancorp leases land to a limited partnership partially comprised of the
directors of Commerce PA and Bancorp including Messrs. Bershad, Hill and Lewis
and a corporation owned by Mr. Hill. The term of the lease is 25 years. The
minimum annual lease payments to be received by Bancorp are $51,700 for the
first five years, $53,300 for years 6-10, $55,300 for years 11-15, $57,300 for
years 16-20 and $59,300 for years 21-25. The limited partnership has constructed
an office building on the site, and Commerce PA has leased part of the building
for 15 years for a branch office, with options to renew for three successive
five-year periods. The annual rent for that portion of the building is $91,000
for years 1-5, $100,000 for years 6-10, and $110,000 for years 11-15.
Management believes that the rental paid or received for each of the
foregoing leases is comparable to the rental which they would have to pay to or
would have received from, as the case may be, and that the option prices are
comparable to or more favorable than those that could have been obtained or
received from, non-affiliated parties in similar commercial transactions for
similar locations, assuming that such locations were available.
During 1996, Commerce NJ, Commerce PA and Commerce Shore obtained
interior design, facilities management and general contractor services in the
amount of $526,000 from a business corporation of which Shirley Hill, wife of
Vernon W. Hill, II, is a principal shareholder and the president. Additionally,
during 1996 the business received commissions of $990,000 on furniture and
facility purchases made directly by Commerce NJ, Commerce PA and Commerce Shore.
These expenditures related primarily to the furnishing and related design
services of the opening and/or refurbishing of certain offices during the
period. In the opinion of management, such expenses were substantially
equivalent to those that would have been paid to unaffiliated companies for
similar furniture and services.
REPORT OF THE PERSONNEL COMMITTEE
The Personnel Committee of the Board of Directors of Bancorp is composed
of outside non-employee directors. Bancorp's compensation package for its
executive officers consists of base salary, annual performance bonus, annual
stock option grants and various broad based employee benefits including
contributions under Bancorp's ESOP. Management recommendations of base salary
levels, annual performance bonuses and stock option grants are reviewed by the
Personnel Committee and submitted to the full Board of Directors for approval.
-19-
<PAGE>
The objective of Bancorp's executive compensation is to enhance
Bancorp's long-term profitability by providing compensation that will attract
and retain superior talent, reward performance and align the interests of the
executive officers with the long term interests of the shareholders of Bancorp.
The Company has employment agreements with Messrs. Hill, Jordan and
Musumeci which were effective January 1, 1992. See "Employment Agreements."
Base salary levels for Bancorp's executive officers are competitively
set relative to companies in peer businesses. In reviewing base salaries, the
Committee also takes into account individual experience and performance.
Bancorp's annual performance bonuses are intended to provide a direct
cash incentive to executive officers and other key employees to maximize
Bancorp's profitability. Financial performance is compared against budgets as
well as peer businesses.
Stock options are intended to encourage officers and other key employees
to remain employed by Bancorp by providing them with a long term interest in
Bancorp's overall performance as reflected by the performance of the market of
Bancorp's Common Stock. In granting stock options, the Personnel Committee takes
into account prior stock option grants and considers the executive's level of
compensation and past contributions to Bancorp.
Vernon W. Hill, II was Bancorp's Chairman, President and Chief Executive
Officer for 1996. Mr. Hill's base salary is set competitively relative to other
chief executive officers in financial service companies in Bancorp's market
area. In determining Mr. Hill's base salary as well as annual performance bonus,
the Committee reviewed independent compensation data and Bancorp's performance
as compared against budgets and peer businesses. As with Bancorp's other
executive officers, Mr. Hill's total compensation involves certain subjective
judgments and is not based solely upon any specific objective criteria or
weighting.
The Personnel Committee and Bancorp are considering the future impact on
executive compensation, and whether certain changes should be made as a result,
of Section 162(m) of the Code which became effective January 1, 1994. This
provision generally denies a deduction for Federal income tax purposes for
compensation in excess of $1.0 million for persons named in the Proxy Statement,
except for compensation that is performance-based and for compensation that is
paid pursuant to certain contracts entered into prior to February, 1993. Bancorp
believes that the limitation will have no material effect on it in 1997.
PERSONNEL COMMITTEE
Morton N. Kerr
Daniel J. Ragone
Jack R Bershad
-20-
<PAGE>
Personnel Committee Interlocks and Insider Participation
The Personnel Committee members are Morton N. Kerr, Daniel J. Ragone
and Jack R Bershad.
Mr. Kerr, a director and nominee for director of Bancorp, is the
President of Markeim-Chalmers, Inc. which in 1996 received $195,000 in fees for
real estate related services, primarily real estate appraisals.
Mr. Bershad, a director and nominee for director of Bancorp, is a member
of a law firm which Bancorp and its subsidiaries have retained during Bancorp's
last fiscal year and which Bancorp and its subsidiaries intend to retain during
its current fiscal year. See "Certain Transactions."
Financial Performance
The graph below shows a comparison of the cumulative return experienced
by Bancorp's shareholders over the years 1992 through 1996, the KBW Eastern
Regional Index and the S&P 500 Index assuming an investment of $100 in each at
December 31, 1991 and the reinvestment of dividends. In September, 1996,
Bancorp's Common Stock commenced trading on The New York Stock Exchange.
Therefore, Bancorp feels that the NASDAQ Bank Index and the NASDAQ Composite
Index used in last year's Proxy Statement are no longer representative but that
the KBW Eastern Regional Index, which is a market-capitalization-weighted stock
index combining stock price information from twelve of the largest bank holding
companies in the Eastern United States and the S&P 500 Index are more
representative.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Commerce Bancorp, KBW Eastern Regional Index, S&P 500 Index
Year-End 1992 to Year-End 1996
<TABLE>
<CAPTION>
NASDAQ
Commerce S&P 500 KBW Eastern NASDAQ Composite
Year Bancorp Index Regional Index Bank Index Index
---- ------- ----- -------------- ---------- -----
<S> <C> <C> <C> <C> <C>
1991 100.0 100.0 100.0 100.0 100.0
1992 179.1 107.6 139.1 145.9 116.4
1993 203.5 116.5 144.0 168.9 133.6
1994 275.5 120.0 127.8 169.2 130.6
1995 330.8 165.1 217.0 253.1 184.7
1996 534.3 203.0 297.6 333.4 227.2
</TABLE>
-21-
<PAGE>
PROPOSAL TO APPROVE AN AMENDMENT TO BANCORP'S RESTATED CERTIFICATE
OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
AND PREFERRED STOCK WHICH BANCORP IS AUTHORIZED TO ISSUE
The Board of Directors of Bancorp has determined that it is advisable to
increase the number of shares of Common Stock which Bancorp is authorized to
issue by 30,000,000 shares to a total of 50,000,000 shares and the number of
shares of Preferred Stock which Bancorp is authorized to issue by 5,000,000
shares to a total of 10,000,000 shares. The Restated Certificate of
Incorporation currently provided that Bancorp is authorized to issue 20,000,000
shares of Common Stock and 5,000,000 shares of Preferred Stock.
As of April 30, 1997, there were 15,733,889 issued shares of Common
Stock, of which 100,159 were treasury shares. Of the unissued 4,226,111 shares,
1,683,546 shares of Common Stock were reserved for issuance under Bancorp's 1984
and 1994 Employee Stock Option Plans, 253,459 shares of Common Stock were
reserved for issuance under Bancorp's Dividend Reinvestment and Stock Purchase
Plan, 616,099 shares of Common Stock were reserved for issuance upon conversion
of the Series C ESOP Preferred Stock and 198,067 shares of Common Stock were
reserved for issuance under Bancorp's 1989 Stock Option Plan for Non-Employee
Directors, leaving 1,514,940 shares of Common Stock unreserved and available for
issuance. If the proposed amendment is approved and becomes effective, a total
of 31,514,940 shares of Common Stock will be unreserved and available for
issuance. All outstanding and reserved shares have been adjusted to reflect all
stock splits and stock dividends through April 30, 1997.
As of April 30, 1997, there were 417,000 shares of Series C ESOP
Preferred Stock outstanding. Under Bancorp's Restated Certificate, the Board of
Directors is authorized, without further shareholder action, to provide for the
issuance of the Preferred Stock in one or more series, with such designations,
dividends, number of shares, relative rights (including, without limitation,
voting rights, conversion rights, redemption rights and/or liquidation rights),
preferences and limitations as shall be set forth in resolutions providing for
the issuance thereof adopted by the Board of Directors. If the proposed
amendment is approved and becomes effective, a total of 8,583,000 shares of
Preferred Stock will be unreserved and available for issuance.
The increase in authorized shares will not effect shareholders' equity
in Bancorp or the capital or surplus account of Bancorp.
Except as set forth above, Bancorp has no present plans for the newly
authorized shares of Common Stock and Preferred Stock; however, in the judgment
of the Board of Directors, the increase in authorized Common Stock and Preferred
Stock will provide Bancorp with greater flexibility in meeting future stock
needs without the delay and expense involved in holding a special meeting of
shareholders to authorize the issuance of such shares. Such shares could be used
for future financings, acquisitions, employee benefit plans, stock splits, stock
dividends, or other proper corporate purposes. Changes to benefit and
compensation programs such as the proposed 1997 Commerce Bancorp, Inc. Employee
Stock Option Plan, if approved, will require the use of additional shares of
Common Stock.
Shares will have no preemptive rights with respect to such additional
authorized shares of Common Stock and Preferred Stock and such shares may be
issued solely upon the action of Bancorp's Board of Directors for any proper
corporate purpose determined by the Board without further authorization from the
shareholders except where because of particular circumstances under which any
such shares will be issued, shareholder approval is required by law and/or the
rules of The New York Stock Exchange. However, the issuance of such additional
shares of Common Stock and Preferred Stock may adversely affect current
shareholders. See "Anti-takeover Provisions and Management Implications" below.
These additional shares
-22-
<PAGE>
of Common Stock, when issued, will have the same rights as Bancorp's presently
authorized shares of Common Stock.
If the recommendation of the Board of Directors is approved, the first
sentence of Article Fifth of Bancorp's Restated Certificate of Incorporation
will be amended to read as follows:
"FIFTH: The aggregate number of shares which the corporation shall have
authority to issue shall be 60,000,000 shares of which 50,000,000 shares shall
be common stock with a par value of $1.5625 per share and of which 10,000,000
shares shall be preferred stock without par value."
The affirmative vote of a majority of the votes cast by the holders of
shares entitled to vote thereon is necessary for adoption of this proposal to
amend Bancorp's Restated Certificate of Incorporation. For purposes of
determining the votes cast, only those votes "FOR" or "AGAINST" are included.
Pursuant to the NJBCA, abstentions and brokers non-votes (which may occur if a
beneficial owner of stock where shares are held in a brokerage or bank account
fails to provide the broker or bank voting instructions as to such shares) will
be counted solely for the purpose of determining whether a quorum is present.
The Board of Directors unanimously recommends that the shareholders vote
"FOR" this proposal.
The financial statements contained in Bancorp's 1996 Annual Report and
Form 10-K are incorporated herein by reference in connection with the proposed
Amendment of the Articles; however, the 1996 Annual Report and Form 10-K are not
otherwise to be deemed or considered to be Proxy solicitation material.
"Anti-Takeover" Provisions and Management Implications
Bancorp's Restated Certificate of Incorporation requires the affirmative
vote of the holders of at least 80% of the outstanding capital stock of Bancorp
entitled to vote thereon in order to permit the consummation of any of the
following transactions: (i) any merger or consolidation of Bancorp with or into
any other corporation, or (ii) any sale, lease, exchange or other disposition of
all of the assets of Bancorp to or with any other corporation, person or other
entity. The 80% voting requirement does not, however, apply to any transaction
approved by the Board of Directors of Bancorp prior to the consummation thereof.
As previously set forth, Bancorp's Restated Certificate of Incorporation also
provides for the issuance of up to 5,000,000 shares of Preferred Stock
(10,000,000 shares of Preferred Stock if the proposed amendment to Bancorp's
Restated Certificate of Incorporation is approved by shareholders), the rights,
preferences and limitations of which in most circumstances may be determined by
the Board of Directors of Bancorp without further authorization from the
shareholders.
The provisions in the Restated Certificate of Incorporation relating to
the 80% voting requirements and the issuance of Preferred Stock may have the
effect not only of discouraging tender offers or other stock acquisitions but
also of deterring existing shareholders from making management changes.
Issuances of Preferred Stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could make it more difficult
for a third party to secure a majority of outstanding voting stock. Similarly,
absent the 80% voting requirement provision relating to mergers and dispositions
of assets, the transactions described above could be consummated upon the
favorable vote of the holders of a majority of the votes cast by holders of
shares entitled to vote thereon.
-23-
<PAGE>
Accordingly, these provisions (together with the proposed amendment to
Bancorp's Restated Certificate of Incorporation to increase its authorized
shares of Common Stock and Preferred Stock) may enhance the possibility that a
potential bidder for control of Bancorp will be required to act through
arm's-length negotiation with respect to such major transactions as a merger,
consolidation or purchase of substantially all the assets of Bancorp. Such
provisions may also have the effect of discouraging tender offers or other stock
acquisitions, giving management of Bancorp power to reject certain transactions
which might be desired by the owners of a majority of Bancorp's voting
securities. These provisions could also be deemed to benefit incumbent
management to the extent they deter such offers by persons who would wish to
make changes in management or exercise control over management. Bancorp has no
present plans to adopt any other "anti-takeover" provisions. The Board of
Directors of Bancorp does not presently know of a third party that plans to make
an offer to acquire Bancorp through a tender offer, merger or purchase of
substantially all the assets of Bancorp.
APPROVAL OF THE COMMERCE BANCORP, INC.
1997 EMPLOYEE STOCK OPTION PLAN
The Board of Directors of Bancorp adopted the Commerce Bancorp, Inc.
1997 Employee Stock Option Plan, subject to approval by the shareholders of
Bancorp (the "1997 Plan"). Pursuant to the 1997 Plan, stock options may be
granted which qualify under the Code as incentive stock options as well as stock
options that do not qualify as incentive stock options. All officers and key
employees of Bancorp or any current or future subsidiary corporation are
eligible to receive options under the 1997 Plan. As of April 30, 1997, no
options had been granted under the 1997 Plan.
The Board believes that the 1997 Plan will advance the interest of
Bancorp and its shareholders by strengthening Bancorp's ability to attract,
retain and motivate officers and key employees. The 1997 Plan is intended to
replace the 1994 Plan. See "Employee Stock Option Plans." The 1997 Plan is being
submitted to Bancorp shareholders for their approval in order to grant incentive
stock options, to be eligible to qualify for certain tax deductions for
compensation paid to its executive officers under ss. 162(m) of the Code and to
meet the shareholder approval requirements of The New York Stock Exchange.
The affirmative vote of the holders of a majority of the votes cast by
the holders of shares entitled to vote thereon is necessary to approve the 1997
Plan. For purposes of determining the votes cast, only those votes "FOR" or
"AGAINST" are included. Pursuant to the NJBCA, abstentions and brokers non-votes
(which may occur if a beneficial owner of stock where shares are held in a
brokerage or bank account fails to provide the broker or bank voting
instructions as to such shares) will be counted solely for the purpose of
determining whether a quorum is present.
The Board of Directors unanimously recommends that you vote "FOR"
approval of the 1997 Plan.
Set forth below is a summary of the provisions of the 1997 Plan. This
summary is qualified and ampli fied in its entirety by the detailed provisions
of the text of the actual 1997 Plan set forth as Exhibit "A" to this Proxy
Statement, all of which is incorporated herein.
-24-
<PAGE>
Purpose
The purpose of the 1997 Plan is to provide additional incentive to
employees of Bancorp by encouraging them to invest in Bancorp's Common Stock and
thereby acquire a proprietary interest in Bancorp and an increased personal
interest in Bancorp's continued success and progress.
Administration
The 1997 Plan is administered by the Personnel Committee ("Committee")
which is appointed by the Board of Directors and consists only of Directors who
are not eligible to receive options under the 1997 Plan. The Committee
determines, among other things, which officers and key employees receive an
option or options under the 1997 Plan, the type of option (incentive stock
options or non-qualified stock options, or both) to be granted, the number of
shares subject to each option, the rate of option exercisability, and, subject
to certain other provisions to be discussed below, the option price and duration
of the option. No individual may be granted a number of options that is more
than 50% of the total number of shares of Commerce Common Stock authorized for
issuance under the 1997 Plan and incentive stock options first exercisable by an
employee in any one year under the 1997 Plan (and all other plans of Bancorp)
may not exceed $100,000 in value (determined at the time of grant).
The Committee may, in its discretion, modify or amend any of the option
terms hereafter described, provided that if an incentive option is granted under
the 1997 Plan, the option as modified or amended continues to be an incentive
stock option.
Aggregate Number of Shares
The aggregate number of shares which may be issued upon the exercise of
options under the 1997 Plan is 2,500,000 shares of Common Stock. In the event of
any change in the capitalization of Bancorp, such as by stock dividend, stock
split or what the Board of Directors deems in its sole discretion to be similar
circumstances, the aggregate number and kind of shares which may be issued under
the Plan will be appropriately adjusted in a manner determined in the sole
discretion of the Board of Directors. Reacquired shares of Bancorp's Common
Stock, as well as unissued shares, may be used for the purpose of the 1997 Plan.
Common Stock of Bancorp subject to options which have terminated unexercised,
either in whole or in part, will be available for future options granted under
the 1997 Plan.
Option Price
The option price for options issued under the 1997 Plan must be at least
equal to 100% of the fair market value of the Common Stock as of the date the
option is granted. As of April 30, 1997 the closing sale price of the Common
Stock on The New York Stock Exchange was $[ ].
Payment
Payment of the option price on exercise of options granted under the
1997 Plan may be made in (a) cash, (b) (unless prohibited by the Committee)
Bancorp Common Stock which will be valued by the Secretary of Bancorp at its
fair market value or (c) (unless prohibited by the Committee) any combination of
cash and Common Stock of Bancorp valued as provided in clause (b).
-25-
<PAGE>
Under the terms of the Plan, the Board has interpreted the provision of
the 1997 Plan which allows payment of the option price in Common Stock of
Bancorp to permit the "pyramiding" of shares in successive exercises. Thus, an
optionee could initially exercise an option in part, acquiring a small number of
shares of Common Stock, and immediately thereafter effect further exercises of
the option, using the Common Stock acquired upon earlier exercises to pay for an
increasingly greater number of shares received on each successive exercise. This
procedure could permit an optionee to pay the option price by using a single
share of Common Stock or a small number of shares of Common Stock to acquire a
number of shares of Common Stock having an aggregate fair market value equal to
the excess of (a) the fair market value (as determined above) of all shares to
which the option relates over (b) the aggregate exercise price under the option.
A vote in favor of this Proposal is also a vote in favor of this interpretation.
Exercisability
Except as otherwise described below, none of the options granted under
the 1997 Plan may be exercised during the first year after the date granted.
Thereafter, each optionee may exercise options held more than one year based
upon years of service or option holding period, whichever is sooner, pursuant to
the following schedule:
<TABLE>
<CAPTION>
Option Holding
Years of Service Period
---------------- ---------------
<S> <C> <C> <C>
Less than 3 years 25% 0-1 year 0%
More than 3 years and less
than 6 years 50% 1-2 years 25%
More than 6 years and less
than 8 years 75% 2-3 years 50%
3-4 years 75%
More than 8 years 100% More than 4 years 100%
</TABLE>
In the event of a "change in control" of Bancorp, as defined in the 1997
Plan, each optionee may exercise the total number of shares then subject to the
option. The Committee has the authority to provide for a different rate of
option exercisability for any optionee.
Option Expiration and Termination
Unless terminated earlier by the option's terms both incentive stock
options and non-qualified stock options expire ten years after the date they are
granted.
Options terminate three months after the date on which employment is
terminated (whether such termination be voluntary or involuntary), other than by
reason of death of disability. Options terminate one year from the date of
termination due to death or disability (but not later than the scheduled
termination date).
Transferability
Options granted pursuant to the 1997 Plan are not transferable, except
(i) by the will or the laws of descent and distribution in the event of death,
and (ii) the Committee has the authority to provide for the transferability of
non-qualified options. During an optionee's lifetime, the option is exercisable
only by the optionee, including, for this purpose, the optionee's legal guardian
or custodian in the event of disability and the optionee's transferee to the
extent permitted by the Committee with respect to non-qualified stock options.
-26-
<PAGE>
Amendment or Termination; Plan Expiration
Bancorp's Board of Directors has the right at any time, and from time to
time, to modify, amend, suspend or terminate the 1997 Plan, without shareholder
approval, except to the extent that shareholder approval of the 1997 Plan
modification or amendment is required by the Code, to permit the granting of
incentive stock options under the 1997 Plan. Any such action will not affect
options previously granted. If the Board of Directors voluntarily submits a
proposed modification, amendment, suspension or termination for shareholder
approval, such submission will not require any future modifications, amendments,
suspensions or terminations (whether or not relating to the same provision or
subject matter) to be similarly submitted for shareholder approval.
ERISA Compliance
The 1997 Plan is not subject to any provisions of the Employee
Retirement Income Security Act of 1974, as amended.
Federal Income Tax Consequences
THE FOLLOWING INFORMATION IS NOT INTENDED TO BE A COMPLETE DISCUSSION OF
THE FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE 1997 PLAN AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), AND THE REGULATIONS ADOPTED PURSUANT THERETO. THE
PROVISIONS OF THE CODE DESCRIBED IN THIS SECTION INCLUDE CURRENT TAX LAW ONLY
AND DO NOT REFLECT ANY PROPOSALS TO REVISE CURRENT TAX LAW.
Incentive Stock Options
Generally, under the Code, an optionee will not realize taxable income
by reason of the grant or the exercise of an incentive stock option ("Incentive
Option") (see, however, discussion of Alternative Minimum Tax below). If an
optionee exercises an Incentive Option and does not dispose of the shares until
the later of (i) two years from the date the option was granted and (ii) one
year from the date of exercise, the entire gain, if any, realized upon
disposition of such shares will be taxable to the optionee as long-term capital
gain, and Bancorp will not be entitled to any deduction. If an optionee disposes
of the shares within the period of two years from the date of grant or one year
from the date of exercise (a "disqualifying disposition"), the optionee
generally will realize ordinary income in the year of disposition and Bancorp
will receive a corresponding deduction, in an amount equal to the excess of (1)
the lesser of (a) the amount, if any, realized on the disposition and (b) the
fair market value of the shares on the date the option was exercised (or such
later date, if applicable, as described below in "Non-Qualified Options", if the
optionee is a "16(b) Person" who has not made an "83(b) Election," as such terms
are defined in "Non-Qualified Options" below) over (2) the option price. Any
additional gain realized on the disposition will be long-term or short-term
capital gain and any loss will be long-term or short-term capital loss. The
optionee will be considered to have disposed of a share if he sells, exchanges,
makes a gift of or transfers legal title to the share (except transfers, among
others, by pledge, on death or to a spouse). If the disposition is by sale or
exchange, the optionee's tax basis will equal the amount paid for the share plus
any ordinary income realized as a result of the disqualifying disposition.
The exercise of an Incentive Option may subject the optionee to the
alternative minimum tax. The amount by which the fair market value of the shares
purchased at the time of the exercise (or such later date, if applicable, as
described below in "Non-Qualified Options", if the optionee is a 16(b) Person
who has not
-27-
<PAGE>
made an 83(b) Election) exceeds the option exercise price is an adjustment for
purposes of computing the so-called alternative minimum tax. In the event of a
disqualifying disposition of the shares in the same taxable year as exercise of
the Incentive Option, no adjustment is then required for purposes of the
alternative minimum tax, but regular income tax, as described above, may result
from such disqualifying disposition. Effective January 1, 1994, the Revenue
Reconciliation Act of 1994 replaced the 24% alternative minimum tax rate on
individuals with a two-tier alternative minimum tax rate having an initial rate
of 26% and a second-tier rate of 28% on alternative minimum taxable income over
$175,000.
An optionee who surrenders shares as payment of the exercise price of
his Incentive Option generally will not recognize gain or loss on his surrender
of such shares. The surrender of shares previously acquired upon exercise of an
Incentive Option in payment of the exercise price of another Incentive Option,
is, however, a "disposition" of such stock. If the incentive stock option
holding period requirements described above have not been satisfied with respect
to such stock, such disposition will be a disqualifying disposition that may
cause the optionee to recognize ordinary income as discussed above.
Under the Code, all of the shares received by an optionee upon exercise
of an Incentive Option by surrendering shares will be subject to the incentive
stock option holding period requirements. Of those shares, a number of shares
(the "Exchange Shares") equal to the number of shares surrendered by the
optionee will have the same tax basis for capital gains purposes (increased by
any ordinary income recognized as a result of an disqualifying disposition of
the surrendered shares if they were incentive stock option shares) and the same
capital gains holding period as the shares surrendered. For purposes of
determining ordinary income upon a subsequent disqualifying disposition of the
Exchange Shares, the amount paid for such shares will be deemed to be the fair
market value of the shares surrendered. The balance of the shares received by
the optionee will have a tax basis (and a deemed purchase price) of zero and a
capital gains holding period beginning on the date of exercise. The Incentive
Option holding period for all shares will be the same as if the option had been
exercised for cash.
Non-Qualified Options
Generally, there will be no federal income tax consequences to either
the optionee or the Company on the grant of Non-Qualified Options pursuant to
the 1997 Plan. On the exercise of a Non-Qualified Option, the optionee (except
as described below) has taxable ordinary income equal to the excess of the fair
market value of the shares acquired on the exercise date over the option price
of the shares. Bancorp will be entitled to a federal income tax deduction
(subject to the limitations contained in Section 162) in an amount equal to such
excess, provided that Bancorp complies with applicable withholding rules.
However, special rules apply where stock is registered under the Exchange Act
and the optionee is an officer, director or 10% or greater shareholder of
Bancorp subject to potential liability under Section 16(b) of the Exchange Act
for so-called "short-swing" profits (a "16(b) Person") in connection with
certain purchases and sales, or sales and purchases, of Bancorp's stock within a
period of six months.
A 16(b) Person will be required to recognize income (i) on the date of
exercise (in the event of exercise after six months from the date of grant) or
(ii) in the event of exercise on or before six months of the date of grant, (A)
the date of exercise (in the case of options granted on or after November 1,
1996 by the entire board of directors or a committee of non-employee directors
as defined in Section 16(b)), or (B) six months after the date of grant with
respect to options not described in (ii) (A) above. A 16(b) Person can be
certain of recognizing income on the exercise date by making an election not
later than 30 days following the exercise date to have the income determined as
of the date of exercise (an "83(b) Election"), in which case Bancorp's deduction
will also be determined as of the exercise date.
-28-
<PAGE>
Upon the sale of stock acquired by exercise of a Non-Qualified Option,
optionees will realize long-term or short-term capital gain or loss depending
upon their holding period for such stock. Under current law, net capital gains
(net long term capital gain less net short term capital loss) is subject to a
maximum rate of 28%. Capital losses are deductible only to the extent of capital
gains for the year plus $3,000 for individuals.
An optionee who surrenders shares in payment of the exercise price of a
Non-Qualified Option will not recognize gain or loss with respect to the shares
so delivered unless such shares were acquired pursuant to the exercise of an
Incentive Option and the delivery of such shares is a disqualifying disposition.
See "Federal Income Tax Consequences - Incentive Stock Options." The optionee
will recognize ordinary income on the exercise of the Non-Qualified Option as
described above. Of the shares received in such an exchange, that number of
shares equal to the number of shares surrendered have the same tax basis and
capital gains holding period as the shares surrendered. The balance of shares
received will have a tax basis equal to their fair market value on the date of
exercise and the capital gains holding period will begin on the date of exercise
(or such later date, as described above, if the optionee is a 16(b) Person who
has not made an 83(b) Election, and such later date is applicable).
Limitation on Bancorp's Deduction
Section 162(m) of the Code will generally limit to $1.0 million
Bancorp's federal income tax deduction for compensation paid in any year to its
chief executive officer and its four highest paid executive officers, to the
extent that such compensation is not "performance based." Under Treasury
regulations, a stock option will, in general, qualify as "performance based"
compensation if it (i) has an exercise price of not less than the fair market
value of the underlying stock on the date of grant, (ii) is granted under a plan
that limits the number of shares for which options may be granted to an employee
during a specified period, which plan is approved by a majority of the
shareholders entitled to vote thereon, and (iii) is granted and administered by
a compensation committee consisting solely of at least two independent
directors. If a stock option to an executive referred to above is not
"performance based", the amount that would otherwise be deductible by Bancorp in
respect of such stock option will be disallowed to the extent that the
executive's aggregate non-performance based compensation paid in the relevant
year exceeds $1.0 million.
-29-
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires Bancorp's directors and
executive officers, and persons who own more than 10% of a registered class of
Bancorp's equity securities, to file with the Securities and Exchange Commission
("SEC") reports about their beneficial ownership of Common Stock and other
equity securities of Bancorp. All such persons are required by SEC regulation to
furnish Bancorp with copies of all Section 16(a) reports they file.
Based solely on review of the copies of such reports furnished to
Bancorp and written representations that no other reports were required during
the fiscal year ended December 31, 1996, Bancorp believes all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than 10% beneficial owners were timely complied with.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Bancorp's independent auditors during the most recent year were Ernst &
Young LLP, 2001 Market Street, Philadelphia, PA 19103. Based upon the
recommendation of the Audit Committee, the Board of Directors has selected Ernst
& Young LLP to be Bancorp's independent auditors for 1997. The selection of
Bancorp's independent auditors is not being submitted to shareholders because
there is no legal requirement to do so. A representative of Ernst & Young LLP is
expected to be present at the Annual Meeting and to have the opportunity to make
a statement, if he desires to do so, and to be available to respond to
appropriate questions.
-30-
<PAGE>
SHAREHOLDER PROPOSALS
Proposals from shareholders intended to be presented at the 1998 Annual
Meeting must be received by Bancorp for inclusion in Bancorp's proxy statement
by February 1, 1998.
OTHER MATTERS
Bancorp is not currently aware of any matters which will be brought
before the Annual Meeting (other than procedural matters) which are not referred
to in the enclosed Notice of Annual Meeting. Nevertheless, the enclosed Proxy
confers discretionary authority to vote with respect to those matters described
in Rule 14a- 4(c) under the Exchange Act, including matters that the Board of
Directors does not know, a reasonable time before proxy solicitation, are to be
presented at the Annual Meeting. If any such matters are presented at the Annual
Meeting, then the persons named in the enclosed Proxy will vote in accordance
with their best judgment.
A COPY OF BANCORP'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 WILL BE FURNISHED
WITHOUT CHARGE TO ANY SHAREHOLDER UPON WRITTEN REQUEST TO C. EDWARD JORDAN, JR.,
EXECUTIVE VICE PRESIDENT, COMMERCE BANCORP, INC., COMMERCE ATRIUM, 1701 ROUTE 70
EAST, CHERRY HILL, NEW JERSEY, 08034-5400.
By Order of the Board of Directors
ROBERT C. BECK
Secretary
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<PAGE>
EXHIBIT "A"
COMMERCE BANCORP, INC.
1997 EMPLOYEE STOCK OPTION PLAN
1. Purpose of Plan
The purpose of the 1997 Employee Stock Option Plan (the
"Plan") is to provide additional incentive to officers and other key employees
of Commerce Bancorp, Inc. ("Commerce") and each present or future parent or
subsidiary corporation by encouraging them to invest in shares of common stock,
par value $1.5625 per share ("Common Stock"), of Commerce and thereby acquire a
proprietary interest in Commerce and an increased personal interest in
Commerce's continued success and progress, to the mutual benefit of officers,
employees and shareholders.
2. Aggregate Number of Shares
2,500,000 shares of Commerce Common Stock shall be the
aggregate number of shares which may be issued under this Plan. Notwithstanding
the foregoing, in the event of any change in the outstanding shares of the
Common Stock of Commerce by reason of a stock dividend, stock split, combination
of shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Personnel Committee (defined in Section
4(a)), deems in its sole discretion to be similar circumstances, the aggregate
number and kind of shares which may be issued under this Plan shall be
appropriately adjusted in a manner determined in the sole discretion of the
Personnel Committee. Reacquired shares of Commerce Common Stock, as well as
unissued shares, may be used for the purpose of this Plan. Shares of Commerce
Common Stock subject to options which have terminated unexercised, either in
whole or in part, shall be available for future options granted under this Plan.
No individual may receive options under the Plan for more than 50% of the total
number of shares of Commerce Common Stock authorized for issuance under this
Plan.
3. Class of Persons Eligible to Receive Options
All officers and key employees of Commerce and of any present
or future Commerce parent or subsidiary corporation are eligible to receive an
option or options under this Plan. The individuals who shall, in fact, receive
an option or options shall be selected by the Personnel Committee, in its sole
discretion, except as otherwise specified in Section 4 hereof.
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4. Administration of Plan
(a) This Plan shall be administered by the Personnel Committee
("Committee") appointed by Commerce's Board of Directors provided, however, that
at the option of the Board of Directors, the Plan may be administered by the
Board of Directors of Commerce at any time and from time to time. The Committee
shall consist of a minimum of three members of the Board of Directors, each of
whom shall be a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3)
under the Securities Exchange Act of 1934, as amended or any future
corresponding rule, except that the failure of the Committee or of the Board of
Directors for any reason to be composed solely of Non-Employee Directors shall
not prevent an option from being considered granted under this Plan. The
Committee, in addition to its other authority and subject to the provisions of
this Plan, shall determine which individuals shall be granted an option or
options, whether the option shall be an Incentive Stock Option or a
Non-Qualified Stock Option (as such terms are defined in Section 5(a)), the
number of shares to be subject to each of the options, the time or times at
which the options shall be granted, the rate of option exercisability, and,
subject to Section 5 hereof, the price at which each of the options is
exercisable and the duration of the option. The term "Committee," as used in
this Plan and the options granted hereunder, refers to the Committee or to the
Board of Directors, if the Board elects to administer the Plan as provided
above.
(b) The Committee shall adopt such rules for the conduct of
its business and administration of this Plan as it considers desirable. A
majority of the members of the Committee shall constitute a quorum for all
purposes. The vote or written consent of a majority of the members of the
Committee on a particular matter shall constitute the act of the Committee on
such matter. The Committee shall have the right to construe the Plan and the
options issued pursuant to it, to correct defects and omissions and to reconcile
inconsistencies to the extent necessary to effectuate the Plan and the options
issued pursuant to it, and such action shall be final, binding and conclusive
upon all parties concerned. No member of the Committee or the Board of Directors
shall be liable for any act or omission (whether or not negligent) taken or
omitted in good faith, or for the exercise of any authority or discretion
granted in connection with the Plan to the Committee or the Board of Directors,
or for the acts or omissions of any other members of the Committee or the Board
of Directors. Subject to the numerical limitations on Committee membership set
forth in Section 4(a) hereof, the Board of Directors may at any time appoint
additional members of the Committee and may at any time remove any member of the
Committee with or without cause. Vacancies in the Committee, however caused, may
be filled by the Board of Directors, if it so desires.
5. Incentive Stock Options and Non-Qualified Stock Options
(a) Options issued pursuant to this Plan may be either
Incentive Stock Options granted pursuant to Section 5(b) hereof or Non-Qualified
Stock Options granted pursuant to Section 5(c) hereof, as determined by the
Committee. An "Incentive Stock Option" is an option which satisfies all of the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") and the regulations thereunder, and a "Non-Qualified Stock Option"
is an option which either does not satisfy all of those requirements or the
terms of the option provide that it will not be treated
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as an Incentive Stock Option. The Committee may grant both an Incentive Stock
Option and a Non-Qualified Stock Option to the same person, or more than one of
each type of option to the same person. The option price for Incentive Stock
Options issued under this Plan shall be equal at least to the fair market value
(as defined below) of Commerce's Common Stock on the date of the grant of the
option as determined by the Committee in accordance with its interpretation of
the requirements of Section 422 of the Code and the regulations thereunder. The
option price for Non-Qualified Stock Options issued under this Plan shall also
be equal to at least the fair market value (as defined below) of Commerce's
Common Stock on the date of the grant of the option as determined by the
Committee. If an Incentive Stock Option is granted to an individual who, at the
time the option is granted, owns stock possessing more than 10 percent of the
total combined voting power of all shares of stock of Commerce or any parent or
subsidiary corporation of Commerce (a "10% Shareholder"), the option price shall
not be less than 110 percent of the fair market value of Commerce's Common Stock
on the date of grant of the option and such option shall not be exercisable
after the expiration of five years from the date the option is granted, all as
more fully set forth in Section 422 of the Code and the regulations promulgated
thereunder. The fair market value of Commerce's Common Stock on any particular
date shall mean the last reported sale price of a share of Commerce's Common
Stock on any stock exchange on which such stock is then listed or admitted to
trading, or on the NASDAQ National Market System, on such date, or if no sale
took place on such day, the last such date on which a sale took place, or if the
Common Stock is not then quoted on the NASDAQ National Market System, or listed
or admitted to trading on any stock exchange, the average of the bid and asked
prices in the over-the-counter market on such date, or if none of the foregoing,
a price determined in good faith by the Committee to equal the fair market value
per share of the Common Stock.
(b) Subject to the authority of the Committee set forth in
Section 4(a) hereof, Incentive Stock Options issued pursuant to this Plan shall
be issued substantially in the form set forth in Appendix I hereof, which form
is hereby incorporated by reference and made a part hereof, and shall contain
substantially the terms and conditions set forth therein. Incentive Stock
Options shall not be exercisable after the expiration of ten years (five years
in the case of 10% Shareholders) from the date such options are granted, unless
terminated earlier under the terms of the option. At the time of the grant of an
Incentive Stock Option hereunder, the Committee may, in its discretion, modify
or amend any of the option terms contained in Appendix I for any particular
optionee, provided that the option as modified or amended satisfies the
requirements of Section 422 of the Code and the regulations thereunder. Each of
the options granted pursuant to this Section 5(b) is intended, if possible, to
be an "Incentive Stock Option" as that term is defined in Section 422 of the
Code and the regulations thereunder. In the event this Plan or any option
granted pursuant to this Section 5(b) is in any way inconsistent with the
applicable legal requirements of the Code or the regulations thereunder for an
Incentive Stock Option, this Plan and such option shall be deemed automatically
amended as of the date hereof to conform to such legal requirements, if such
conformity may be achieved by amendment.
(c) Subject to the authority of the Committee set forth in
Section 4(a) hereof, Non-Qualified Stock Options issued pursuant to this Plan
shall be issued substantially in the form set forth in Appendix II hereof, which
form is hereby incorporated by reference and made a part hereof, and shall
contain substantially the terms and conditions set forth therein. Non-Qualified
Stock Options
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shall expire ten years after the date they are granted, unless terminated
earlier under the option terms. At the time of granting a Non-Qualified Stock
Option hereunder, the Committee may, in its discretion, modify or amend any of
the option terms contained in Appendix II for any particular optionee,
including, without limitation, the extent of the assignability and/or
transferability of such option.
(d) Neither Commerce nor any of its current or future parent,
subsidiaries or affiliates, nor their officers, directors, shareholders, stock
option plan committees, employees or agents shall have any liability to any
optionee in the event: (i) an option granted pursuant to Section 5(b) hereof
does not qualify as an "Incentive Stock Option" as that term is used in Section
422 of the Code and the regulations thereunder; (ii) any optionee does not
obtain the tax treatment pertaining to an Incentive Stock Option; or (iii) any
option granted pursuant to Section 5(c) hereof is an "Incentive Stock Option."
6. Modification, Amendment, Suspension and Termination
Options shall not be granted pursuant to this Plan after the
expiration of ten years from the date the Plan is adopted by the Board of
Directors of Commerce. The Board of Directors reserves the right at any time,
and from time to time, to modify or amend this Plan in any way, or to suspend or
terminate it, effective as of such date, which date may be either before or
after the taking of such action, as may be specified by the Board of Directors;
provided, however, that such action shall not affect options granted under the
Plan prior to the actual date on which such action occurred. If a modification
or amendment of this Plan is required by the Code or the regulations thereunder
to be approved by the shareholders of Commerce in order to permit the granting
of "Incentive Stock Options" (as that term is defined in Section 422 of the Code
and regulations thereunder) pursuant to the modified or amended Plan, such
modification or amendment shall also be approved by the shareholders of Commerce
in such manner as is prescribed by the Code and the regulations thereunder. If
the Board of Directors voluntarily submits a proposed modification, amendment,
suspension or termination for shareholder approval, such submission shall not
require any future modifications, amendments, suspensions or terminations
(whether or not relating to the same provision or subject matter) to be
similarly submitted for shareholder approval.
7. Effectiveness of Plan
This Plan shall become effective on the date of its adoption
by Commerce's Board of Directors, subject however to approval by the holders of
Commerce Common Stock in the manner as prescribed in the Code and the
regulations thereunder. Options may be granted under this Plan prior to
obtaining shareholder approval, provided such options shall not be exercisable
before such shareholder approval is obtained.
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8. General Conditions
(a) Nothing contained in this Plan or any option granted
pursuant to this Plan shall confer upon any employee the right to continue in
the employ of Commerce or any present or future parent, affiliated or subsidiary
corporation or interfere in any way with the rights of Commerce or any present
or future parent, affiliated or subsidiary corporation to terminate his
employment in any way.
(b) Corporate action constituting an offer of stock for sale
to any employee under the terms of the options to be granted hereunder shall be
deemed complete as of the date when the Committee authorizes the grant of the
option to the employee, regardless of when the option is actually delivered to
the employee or acknowledged or agreed to by him.
(c) The terms "parent corporation" and "subsidiary
corporation" as used throughout this Plan, and the options granted pursuant to
this Plan, shall (except as otherwise provided in the option form) have the
respective meanings ascribed to such terms when contained in Section 422(b) of
the Code and the regulations thereunder, and Commerce shall be deemed to be the
grantor corporation for purposes of applying such meanings.
(d) References in this Plan to the Code shall be deemed to
also refer to the corresponding provisions of any future United States revenue
law.
(e) The use of the masculine pronoun shall include the
feminine gender whenever appropriate.
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APPENDIX I
INCENTIVE STOCK OPTION
To: ___________________________________________________________________________
Name
___________________________________________________________________________
Address
Date of Grant: ___________________________________
You are hereby granted an option, effective as of the date hereof, to
purchase ______ shares of Common Stock, par value $1.5625 per share, ("Common
Stock") of Commerce Bancorp, Inc. ("Commerce") at a price of _____ per share
pursuant to the Commerce 1997 Employee Stock Option Plan (the "Plan") adopted by
the Commerce Board of Directors effective __________, 1997. Your option price is
intended to equal at least the fair market value of Commerce Common Stock as of
the date hereof; provided, however, that if, at the time this option is granted,
you own stock possessing more than 10% of the total combined voting power of all
shares of stock of Commerce or any parent or subsidiary corporation of Commerce
(a "10% Shareholder"), your option price is intended to be at least 110% of the
fair market value of Commerce Common Stock as of the date hereof.
Except as provided below, no option may be exercised within one year
from the date of grant. Options held more than one year may be exercised based
upon years of service or option holding period, whichever is sooner, pursuant to
the following schedule:
<TABLE>
<CAPTION>
Years of Service Option Holding Period
---------------- ---------------------
<S> <C> <C> <C>
Less than 3 years - 25% 0-1 year - 0%
More than 3 years and less than
6 years - 50% 1-2 years - 25%
More than 6 years and less than
8 years - 75% 2-3 years - 50%
3-4 years - 75%
More than 8 years - 100% More than four years - 100%
</TABLE>
This option shall terminate and is not exercisable after the expiration
of ten years from the date of its grant (five years from the date of grant if,
at the time of the grant, you are a 10% Shareholder) (the
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<PAGE>
"Scheduled Termination Date"), except as hereafter provided. To the extent this
option does not quality as an incentive stock option for any reason, it shall be
considered a non-qualified stock option.
In the event of a "change of control" (as hereafter defined) of
Commerce, your option may, from and after the date of the change of control (but
in no event later than the Scheduled Termination Date), and notwithstanding the
second paragraph of this option, be exercised for up to 100% of the total number
of shares then subject to the option minus the number of shares previously
purchased upon exercise of the option (as adjusted for any changes in the
outstanding Commerce Common Stock by reason of a stock dividend, stock split,
combination of shares, recapitalization, merger, consolidation, transfer of
assets, reorganization, conversion or what the Committee deems in its sole
discretion to be similar circumstances).
A "change of control" shall be deemed to have occurred upon the
happening of any of the following events:
1. A change within a twelve-month period in a majority of the
members of the board of directors of Commerce;
2. A change within a twelve-month period in the holders of
more than 50% of the outstanding voting stock of Commerce; or
3. Any other event deemed to constitute a "change in control"
by the Board of Directors.
You may exercise your option by giving written notice to the Secretary
of Commerce on forms supplied by Commerce at its then principal executive
office, accompanied by payment of the option price for the total number of
shares you specify that you wish to purchase. The payment may be in any of the
following forms: (a) cash, which may be evidenced by a check and includes cash
received from a stock brokerage firm in a so-called "cashless exercise"; (b)
(unless prohibited by the Committee) certificates representing shares of Common
Stock of Commerce, which will be valued by the Secretary of Commerce at the fair
market value per share of Commerce Common Stock (as determined in accordance
with the Plan) on the last trading day immediately preceding the date of
delivery of such certificates to Commerce, accompanied by an assignment of the
stock to Commerce; or (c) (unless prohibited by the Committee) any combination
of cash and Common Stock of Commerce valued as provided in clause (b). Any
assignment of stock shall be in a form and substance satisfactory to the
Secretary of Commerce, including guarantees of signature(s) and payment of all
transfer taxes if the Secretary deems such guarantees necessary or desirable or
determines that such taxes are due and payable.
Your option will, to the extent not previously exercised by you,
terminate three months after the date on which your employment by Commerce or a
Commerce parent or subsidiary corporation is terminated, whether such
termination is voluntary or not, other than by reason of disability as defined
in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations thereunder, or death, in which case your option
will terminate one year from the date of termination of employment due to
disability or death (but in no event later than the Scheduled Termination Date).
After
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<PAGE>
the date your employment is terminated, as aforesaid, you may exercise this
option only for the number of shares which you had a right to purchase and did
not purchase on the date your employment terminated. If you are employed by a
Commerce subsidiary corporation, your employment shall be deemed to have
terminated on the date your employer ceases to be a Commerce subsidiary
corporation, unless you are on that date transferred to Commerce or another
Commerce subsidiary corporation. Your employment shall not be deemed to have
terminated if you are transferred from Commerce to a Commerce subsidiary
corporation, or vice versa, or from one Commerce subsidiary corporation to
another Commerce subsidiary corporation.
Anything in this option to the contrary notwithstanding, your option
will terminate immediately if your employment is terminated for cause (as
determined by Commerce in its sole and absolute discretion). Your employment
shall be deemed to have been terminated for cause if you are terminated due to,
among other reasons, (i) your willful misconduct or gross negligence, (ii) your
material breach of any agreement with Commerce or (iii) your failure to render
satisfactory services to Commerce.
If you die while employed by Commerce or a Commerce parent or
subsidiary corporation, your legatee(s), distributee(s), executor(s) or
administrator(s), as the case may be, may, at any time within one year after the
date of your death (but in no event later than the Scheduled Termination Date),
exercise the option as to any shares which you had a right to purchase and did
not purchase during your lifetime. If your employment with Commerce or a
Commerce parent or subsidiary corporation is terminated by reason of your
becoming disabled (within the meaning of Section 22(e)(3) of the Code and the
regulations thereunder), you or your legal guardian or custodian may at any time
within one year after the date of such termination (but in no event later than
the Scheduled Termination Date), exercise the option as to any shares which you
had a right to purchase and did not purchase prior to such termination. Your
legatee, distributee, executor, administrator, guardian or custodian must
present proof of his authority satisfactory to Commerce prior to being allowed
to exercise this option.
In the event of any change in the outstanding shares of the Common
Stock of Commerce by reason of a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Committee deems in its sole discretion to
be similar circumstances, the number and kind of shares subject to this option
and the option price of such shares shall be appropriately adjusted in a manner
to be determined in the sole discretion of the Committee.
This option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of Commerce. Commerce reserves the right
not to deliver to you the shares purchased by virtue of the exercise of this
option during any period of time in which Commerce deems, in its sole
discretion, that such delivery would violate a federal, state, local or
securities exchange rule, regulation or law.
Notwithstanding anything to the contrary contained herein, this option
is not exercisable until all the following events occur and during the following
periods of time:
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(a) Until the Plan pursuant to which this option is granted is
approved by the shareholders of Commerce in the manner prescribed by the Code
and the regulations thereunder;
(b) Until this option and the optioned shares are approved
and/or registered with such federal, state and local regulatory bodies or
agencies and securities exchanges as Commerce may deem necessary or desirable;
or
(c) During any period of time in which Commerce deems that the
exercisability of this option, the offer to sell the shares optioned hereunder,
or the sale thereof, may violate a federal, state, local or securities exchange
rule, regulation or law, or may cause Commerce to be legally obligated to issue
or sell more shares than Commerce is legally entitled to issue or sell.
(d) Until you have paid or made suitable arrangements to pay
(which may include payment through the surrender of Common Stock, unless
prohibited by the Committee) (i) all federal, state and local income tax
withholding required to be withheld by Commerce in connection with the option
exercise and (ii) the employee's portion of other federal, state and local
payroll and other taxes due in connection with the option exercise.
(e) Until Commerce has registered its Common Stock under the
Securities Exchange Act of 1934, as amended.
The following two paragraphs shall be applicable if, on the
date of exercise of this option, the Common Stock to be purchased pursuant to
such exercise has not been registered under the Securities Act of 1933, as
amended, and under applicable state securities laws, and shall continue to be
applicable for so long as such registration has not occurred:
(a) The optionee hereby agrees, warrants and represents that
he will acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to Commerce to the effect that the
proposed transaction will be exempt from such registration. The optionee shall
execute such instruments, representations, acknowledgements and agreements as
Commerce may, in its sole discretion, deem advisable to avoid any violation of
federal, state, local or securities exchange rule, regulation or law.
(b) The certificates for Common Stock to be issued to the
optionee hereunder shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
applicable state securities laws. The shares have been acquired for
investment and may not be offered, sold, transferred, pledged or
otherwise disposed of without an effective registration statement under
the Securities Act
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<PAGE>
of 1933, as amended, and under any applicable state securities laws or
an opinion of counsel acceptable to Commerce that the proposed
transaction will be exempt from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
laws or upon receipt of any opinion of counsel acceptable to Commerce that said
registration is no longer required.
The sole purpose of the agreements, warranties, representations and
legend set forth in the two immediately preceding paragraphs is to prevent
violations of the Securities Act of 1933, as amended, and any applicable state
securities laws.
It is the intention of Commerce and you that this option shall, if
possible, be an "Incentive Stock Option" as that term is used in Section 422 of
the Code and the regulations thereunder. In the event this option is in any way
inconsistent with the legal requirements of the Code or the regulations
thereunder for an "Incentive Stock Option," this option shall be deemed
automatically amended as of the date hereof to conform to such legal
requirements, if such conformity may be achieved by amendment.
This option shall be subject to the terms of the Plan in effect on the
date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this option and the terms of the Plan in effect on the date of this option,
the terms of the Plan shall govern. This option constitutes the entire
understanding between Commerce and you with respect to the subject matter hereof
and no amendment, modification or waiver of this option, in whole or in part,
shall be binding upon Commerce unless in writing and signed by the President of
Commerce. This option and the performances of the parties hereunder shall be
construed in accordance with and governed by the laws of the State of New
Jersey.
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Please sign the copy of this option and return it to Commerce's
Secretary, thereby indicating your understanding of and agreement with its terms
and conditions.
COMMERCE BANCORP, INC.
By:_________________________________
I hereby acknowledge receipt of a copy of the foregoing stock option
and, having read it, hereby signify my understanding of, and my agreement with,
its terms and conditions.
_______________________________________ ____________________________________
(Signature) (Date)
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<PAGE>
APPENDIX II
NON-QUALIFIED STOCK OPTION
To: ___________________________________________________________________________
Name
___________________________________________________________________________
Address
Date of Grant: ___________________________________
You are hereby granted an option, effective as of the date hereof, to
purchase ______ shares of Common Stock, par value $1.5625 per share ("Common
Stock"), of Commerce Bancorp, Inc. ("Commerce") at a price of _____ per share
pursuant to the Commerce 1997 Employee Stock Option Plan (the "Plan") adopted by
the Commerce Board of Directors effective __________, 1997.
Except as provided below, no option may be exercised within one year
from the date of grant. Options held more than one year may be exercised based
upon years of service or option holding period, whichever is sooner, pursuant to
the following schedule:
<TABLE>
<CAPTION>
Years of Service Option Holding Period
---------------- ---------------------
<S> <C> <C> <C>
Less than 3 years - 25% 0-1 year - 0%
More than 3 years and less than
6 years - 50% 1-2 years - 25%
More than 6 years and less than
8 years - 75% 2-3 years - 50%
3-4 years - 75%
More than 8 years - 100% More than four years - 100%
</TABLE>
This option shall terminate and is not exercisable after the expiration
of ten years from the date of its grant (the "Scheduled Termination Date"),
except as hereafter provided.
In the event of a "change of control" (as hereafter defined) of
Commerce, your option may, from and after the date of the change of control (but
in no event later than the Scheduled Termination Date), and notwithstanding the
second paragraph of this option, be exercised for up to 100% of the total number
of shares then subject to the option minus the number of shares previously
purchased upon exercise of the option (as adjusted for any changes in the
outstanding Commerce Common Stock by reason of a stock dividend, stock split,
combination of shares, recapitalization, merger, consolidation, transfer of
assets,
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<PAGE>
reorganization, conversion or what the Committee deems in its sole discretion to
be similar circumstances).
A "change of control" shall be deemed to have occurred upon the
happening of any of the following events:
1. A change within a twelve-month period in a majority of the
members of the board of directors of Commerce;
2. A change within a twelve-month period in the holders of
more than 50% of the outstanding voting stock of Commerce; or
3. Any other event deemed to constitute a "change in control"
by the Board of Directors.
You may exercise your option by giving written notice to the Secretary
of Commerce on forms supplied by Commerce at its then principal executive
office, accompanied by payment of the option price for the total number of
shares you specify that you wish to purchase. The payment may be in any of the
following forms: (a) cash, which may be evidenced by a check and includes cash
received from a stock brokerage firm in a so-called "cashless exercise"; (b)
(unless prohibited by the Committee) certificates representing shares of Common
Stock of Commerce, which will be valued by the Secretary of Commerce at the fair
market value per share of Commerce's Common Stock (as determined in accordance
with the Plan) on the last trading day immediately preceding the date of
delivery of such certificates to Commerce, accompanied by an assignment of the
stock to Commerce; or (c) (unless prohibited by the Committee) any combination
of cash and Common Stock of Commerce valued as provided in clause (b). Any
assignment of stock shall be in a form and substance satisfactory to the
Secretary of Commerce, including guarantees of signature(s) and payment of all
transfer taxes if the Secretary deems such guarantees necessary or desirable or
determines that such taxes are due and payable.
Your option will, to the extent not previously exercised by you,
terminate three months after the date on which your employment by Commerce or a
Commerce parent or subsidiary corporation is terminated, whether such
termination is voluntary or not, other than by reason of disability as defined
in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations thereunder, or death, in which case your option
will terminate one year from the date of termination of employment due to
disability or death (but in no event later than the Scheduled Termination Date).
After the date your employment is terminated, as aforesaid, you may exercise
this option only for the number of shares which you had a right to purchase and
did not purchase on the date your employment terminated. If you are employed by
a Commerce subsidiary corporation, your employment shall be deemed to have
terminated on the date your employer ceases to be a Commerce subsidiary
corporation, unless you are on that date transferred to Commerce or another
Commerce subsidiary corporation. Your employment shall not be deemed to have
terminated if you are transferred from Commerce to a Commerce subsidiary
corporation, or vice versa, or from one Commerce subsidiary corporation to
another Commerce subsidiary corporation.
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<PAGE>
Anything in this option to the contrary notwithstanding, your option
will terminate immediately if your employment is terminated for cause (as
determined by Commerce in its sole and absolute discretion). Your employment
shall be deemed to have been terminated for cause if you are terminated due to,
among other reasons, (i) your willful misconduct or gross negligence, (ii) your
material breach of any agreement with Commerce or (iii) your failure to render
satisfactory services to Commerce.
If you die while employed by Commerce or a Commerce parent or
subsidiary corporation, your legatee(s), distributee(s), executor(s) or
administrator(s), as the case may be, may, at any time within one year after the
date of your death (but in no event later than the Scheduled Termination Date),
exercise the option as to any shares which you had a right to purchase and did
not purchase during your lifetime. If your employment with Commerce or a
Commerce parent or subsidiary corporation is terminated by reason of your
becoming disabled (within the meaning of Section 22(e)(3) of the Code and the
regulations thereunder), you or your legal guardian or custodian may at any time
within one year after the date of such termination (but in no event later than
the Scheduled Termination Date), exercise the option as to any shares which you
had a right to purchase and did not purchase prior to such termination. Your
legatee, distributee, executor, administrator, guardian or custodian must
present proof of his authority satisfactory to Commerce prior to being allowed
to exercise this option.
In the event of any change in the outstanding shares of the Common
Stock of Commerce by reason of a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Committee deems in its sole discretion to
be similar circumstances, the number and kind of shares subject to this option
and the option price of such shares shall be appropriately adjusted in a manner
to be determined in the sole discretion of the Committee.
Unless specifically authorized by the Committee, this option is not
transferable otherwise than by will or the laws of descent and distribution, and
is exercisable during your lifetime only by you, including, for this purpose,
your legal guardian or custodian in the event of disability. Until the option
price has been paid in full pursuant to due exercise of this option and the
purchased shares are delivered to you, you do not have any rights as a
shareholder of Commerce. Commerce reserves the right not to deliver to you the
shares purchased by virtue of the exercise of this option during any period of
time in which Commerce deems, in its sole discretion, that such would violate a
federal, state, local or securities exchange rule, regulation or law.
Notwithstanding anything to the contrary contained herein, this option
is not exercisable until all the following events occur and during the following
periods of time:
(a) Until the Plan pursuant to which this option is granted is
approved by the shareholders of Commerce in the manner prescribed by the Code
and the regulations thereunder;
(b) Until this option and the optioned shares are approved
and/or registered with such federal, state and local regulatory bodies or
agencies and securities exchanges as Commerce may deem necessary or desirable;
or
A-14
<PAGE>
(c) During any period of time in which Commerce deems that the
exercisability of this option, the offer to sell the shares optioned hereunder,
or the sale thereof, may violate a federal, state, local or securities exchange
rule, regulation or law, or may cause Commerce to be legally obligated to issue
or sell more shares than Commerce is legally entitled to issue or sell.
(d) Until you have paid or made suitable arrangements to pay
(which may include payment through the surrender of Common Stock, unless
prohibited by the Committee) (i) all federal, state and local income tax
withholding required to be withheld by Commerce in connection with the option
exercise and (ii) the employee's portion of other federal, state and local
payroll and other taxes due in connection with the option exercise.
(e) Until Commerce has registered its Common Stock under the
Securities Exchange Act of 1934, as amended.
The following two paragraphs shall be applicable if, on the
date of exercise of this option, the Common Stock to be purchased pursuant to
such exercise has not been registered under the Securities Act of 1933, as
amended, and under applicable state securities laws, and shall continue to be
applicable for so long as such registration has not occurred:
(a) The optionee hereby agrees, warrants and represents that
he will acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to Commerce to the effect that the
proposed transaction will be exempt from such registration. The optionee shall
execute such instruments, representations, acknowledgements and agreements as
Commerce may, in its sole discretion, deem advisable to avoid any violation of
federal, state, local or securities exchange rule, regulation or law.
(b) The certificates for Common Stock to be issued to the
optionee hereunder shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
applicable state securities laws. The shares have been acquired for
investment and may not be offered, sold, transferred, pledged or
otherwise disposed of without an effective registration statement under
the Securities Act of 1933, as amended, and under any applicable state
securities laws or an opinion of counsel acceptable to Commerce that
the proposed transaction will be exempt from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
laws or upon receipt of any opinion of counsel acceptable to Commerce that said
registration is no longer required.
A-15
<PAGE>
The sole purpose of the agreements, warranties, representations and
legend set forth in the two immediately preceding paragraphs is to prevent
violations of the Securities Act of 1933, as amended, and any applicable state
securities laws.
It is the intention of Commerce and you that this option shall not be
an "Incentive Stock Option" as that term is used in Section 422 of the Code and
the regulations thereunder.
This option shall be subject to the terms of the Plan in effect on the
date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this option and the terms of the Plan in effect on the date of this option,
the terms of the Plan shall govern. This option constitutes the entire
understanding between Commerce and you with respect to the subject matter hereof
and no amendment, modification or waiver of this option, in whole or in part,
shall be binding upon Commerce unless in writing and signed by the President of
Commerce. This option and the performances of the parties hereunder shall be
construed in accordance with and governed by the laws of the State of New
Jersey.
Please sign the copy of this option and return it to Commerce's
Secretary, thereby indicating your understanding of and agreement with its terms
and conditions.
COMMERCE BANCORP, INC.
By:_______________________________
I hereby acknowledge receipt of a copy of the foregoing stock option and, having
read it, hereby signify my understanding of, and my agreement with, its terms
and conditions.
______________________________________ _________________________
(Signature) (Date)
A-16
<PAGE>
"PRELIMINARY COPY"
PROXY
This Proxy is solicited on behalf of the Board of Directors
COMMERCE BANCORP, INC.
The undersigned hereby appoints Morton N. Kerr and Daniel J. Ragone and
each of them, as proxies of the undersigned, each with power to act without the
other and with power of substitution, and hereby authorizes each of them to
represent and vote, as designated on the other side, all the shares of stock of
Commerce Bancorp. Inc. (the "Company") which the undersigned is entitled to
vote, standing in the name of the undersigned with all powers which the
undersigned would possess if present, at the Annual Meeting of Shareholders of
the Company to be held on June 17, 1997 or any postponement or adjournment
thereof. The undersigned hereby directs the Proxy to be voted as indicated on
the reverse side.
(Continued, and to be marked, dated and signed, on the other side)
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS Please mark
DIRECTED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTE your votes as
"FOR" THE ELECTION OF THE NOMINEES LISTED BELOW AND "FOR" indicated in
PROPOSALS 2 ANMD 3. DISCRETIONAY AUTHORITY IS CONFERRED this example
HEREBY AS TO CERTAIN MATTERS DESCRIBED IN THE COMPANY'S
PROXY STATEMENT. [X]
1. For the election of the following
nominees to the Board of Directors for
the ensuing year: Vernon W. Hill, II,
David Baird, IV, Robert C. Beck, Jack R.
Bershad, Joseph E. Buckelew, C. Edward
Jordan, Jr., Morton N. Kerr, Steven M.
Lewis, Daniel J. Ragone and Joseph T.
Tarquini, Jr.
FOR all nominees listed above (except
as marked to the contrary) [ ]
WITHHOLD AUTHORITY to vote for all
nominees listed above [ ]
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nomminee's name in the space provided below:
_____________________________________________________________________________
2. To approve the amendment of the Company's Restated
Certificate of Incorporation to increase the
number of shares of Common Stock that Bancorp
is authorized to issue by 30,000,000 shares
and the number of shares of Preferred
Stock that Bancorp is authorized to For Against Abstain
issue by 5,000,000 shares. [ ] [ ] [ ]
3. To approve the Commerce Bancorp, Inc.
1997 Employee Stock Option Plan. [ ] [ ] [ ]
4. To act upon such other matters as may
properly come before the Annual Meeting
or any adjournment or postponement thereof.
<PAGE>
A majority of such attorneys and proxies, or their substitutes at the Annual
Meeting, or any postponements or adjournments thereof, may exercise all of
the powers hereby given. Any proxy to vote any of the shares, with respect to
which the undersigned is or would be entitled to vote, heretofore given to any
person or persons other than the persons named above, is revoked.
IN WITNESS WHEREOF, the undersigned has signed and sealed this proxy and
hereby acknowledges receipt of the Company's 1996 Annual Report to Shareholders
and a copy of the Notice of the 1997 Annual Meeting of Shareholders and
Proxy Statement in reference thereto both dated in May, 1997.
Dated: _________________________________________________________________, 1997
______________________________________________________________________________
(Shareholder(s) Signature)
______________________________________________________________________________
(L.S.)
Printed name of Shareholder
______________________________________________________________________________
(L.S.)
Printed name of Shareholder
NOTE: Signature should correspond with name appearing on stock certificate(s).
When signing in a fiduciary or representative capacity, sign full title as such.
Where more than one owner, each should sign.
Please sign, date and return this
proxy card promptly using the enclosed envelope.
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
