<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File Number 0-12874
COMMERCE BANCORP, INC.
(Exact name of Registrant as specified in its charter)
New Jersey 22-2433468
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1701 Route 70 East, Cherry Hill, NJ 08034-5400 08034-5400
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 751-9000
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $1.5625 par value
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
Indicate by check mark whether the Registrant (i) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (ii) has been subject to such
filing requirements for the past 90 days.
YES X NO
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<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of
Registrant is $445,607,000.(1)
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of stock, as of the latest practicable date.
Common Stock, $1.5625 Par Value 15,683,032
(Title of Class) No. of Shares Outstanding
as of 4/28/97
Series C ESOP Cumulative 417,000
Convertible Preferred stock No. of Shares Outstanding
(Title of Class) as of 4/28/97
DOCUMENTS INCORPORATED BY REFERENCE
Parts II and IV incorporate certain information by reference from the
Registrant's Annual Report to Shareholders for the fiscal year ended December
31, 1996 (the "Annual Report").
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(1) The aggregate dollar amount of the voting stock set forth equals the number
of shares of the Registrant's common stock outstanding, reduced by the amount of
Registrant's common stock held by officers, directors and shareholders owning in
excess of 10% of the Registrant's common stock, multiplied by the last sale
price for the Registrant's common stock on April 28, 1997. The information
provided shall in no way be construed as an admission that any officer, director
or 10% shareholder in the Registrant may be deemed an affiliate of the
Registrant or that he is the beneficial owner of the shares reported as being
held by him, and any such inference is hereby disclaimed. The information
provided herein is included solely for the record-keeping purposes of the
Securities and Exchange Commission.
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EXPLANATORY NOTE
This Amendment No. 1 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1996, as filed with the Securities and
Exchange Commission on March 28, 1996 (the "1996 10-K"), is being filed to
provide the disclosure required by Items 10 through 13 of Form 10-K which the
Registrant had incorporated into the 1996 10-K by reference to its Proxy
Statement for the Registrant's 1997 Annual Meeting of Shareholders. Since the
Registrant will not file its definitive Proxy Statement within 120 days after
the end of the fiscal year covered by the 1996 10-K, the information required by
Items 10 through 13 of Form 10-K is accordingly set forth below.
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT.
Directors
Directors of Commerce Bancorp, Inc. ("Bancorp" or the "Company") hold
office for one year and until their respective successors have been duly elected
and qualified. The following information regarding Bancorp's directors is based,
in part, on information furnished by the directors.
<TABLE>
<CAPTION>
Name Age Positions with Bancorp and Subsidiaries
- ---- --- ----------------------------------------
<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.
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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 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
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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 (as
such term is defined in this plan), 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. This plan became effective January 1, 1993, as amended.
1989 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 28, 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
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(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.
Executive Officers
The executive officers of Bancorp and its banking subsidiaries, as of
April 28, 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, Chief Financial Officer 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>
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.
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<PAGE>
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.
ITEM 11. 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 and 1995 225,000 60,000 23,153 30,269
Chief Financial Officer of 1994 215,000 75,000 - 0 - 28,868
Bancorp; Executive Vice
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 - 8,368
</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
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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.
(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, $4,362; 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
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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 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 28, 1997) by officers and
key employees. No further options may be granted under the 1984 Plan. As of
April 28, 1997, 576,626 options (as adjusted for all stock splits and stock
dividends through April 28, 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 28, 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 28, 1997, 1,039,105 options (as
adjusted for all stock splits and stock dividends through April 28, 1997) had
been granted under the 1994 Plan and 117,946 options (as adjusted for all stock
splits and stock dividends through April 28, 1997) were available for grant.
Options may continue to be granted under the 1994 Plan through December 31,
2003.
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 either Plan. The
Committee determines, among other things, which officers and key employees
receive an option or options under 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
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any of the option terms hereafter described, provided that if an incentive
option is granted, the option as modified or amended continues to be an
incentive stock option.
In the event of any change in the capitalization of Bancorp, such as by
stock dividend, stock split or what the Board of Directors deems in its sole
discretion to be similar circumstances, the aggregate number and kind of shares
which may be issued under the 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 28, 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 28, 1997) under
the 1994 Plan. During 1996, a total of 81,254 options were exercised under the
1984 Plan and 1994 Plan.
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Stock Option 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 rates 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.
-11-
<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.
AGGREGATED STOCK OPTION EXERCISES IN 1996 AND YEAR-END STOCK OPTION VALUES
<TABLE>
<CAPTION>
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
-12-
<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. 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.
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.
-13-
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of April 28, 1997, the beneficial
ownership of Bancorp's Common Stock by (i) each director of the Company, (ii)
each of the executive officers of the Company named in the Summary Compensation
Table and (iii) all the 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.
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------------------------
Name of Beneficial Number of Shares Percent of
Owner or Beneficially Class
Identity of Group Owned(1)(2) Beneficially Owned(2)
- -------------------- ---------------- ----------------------
<S> <C> <C>
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) 3.85
C. Edward Jordan, Jr. . . . . . . . . . . . 183,437 (8) 1.16
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) 1.12
Peter M. Musumeci, Jr . . . . . . . . . . . 162,302 (13) 1.03
Robert D. Falese, Jr. . . . . . . . . . . . 56,792 (14) *
Dennis M. DiFlorio. . . . . . . . . . . . . 107,742 (15) *
All Directors and Executive Officers
of the Company as a Group (14 Persons) 1,917,567 (16) 11.73%
- -----------------------------
</TABLE>
*less than 1%
(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 28, 1997. Beneficial ownership may be disclaimed as to certain of
the securities.
-14-
<PAGE>
(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
28, 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 3,153 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 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.
-15-
<PAGE>
(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 and
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 28, 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 28, 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. If all of the unallocated shares
of Series C ESOP Preferred Stock held of record by the ESOP Trust as of April
28, 1997, were converted into Common Stock, the unallocated shares of Common
Stock the ESOP Trust would hold of record would be 1.69% of the Common Stock.
-16-
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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.
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.
-17-
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange of 1934, the Registrant has duly caused this Amendment No. 1 to its
Annual Report of Form 10-K for the year ended December 31, 1996 to be signed on
its behalf by the undersigned thereunto duly authorized.
COMMERCE BANCORP, INC.
Date: April 28, 1997 By: /s/ Douglas J. Pauls
-----------------------------
Douglas J. Pauls
Vice President and Controller
-18-
