<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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
COMMERCE BANCORP, INC.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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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):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
[GRAPHIC OMITTED]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders (the
"Annual Meeting") of Commerce Bancorp, Inc. ("Bancorp") will be held at The
Mansion on Main Street, Kresson and Evesham Roads, Voorhees, New Jersey, on
Monday, June 29, 1998, at 4:00 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 Commerce Bancorp, Inc. 1998 Stock Option Plan for
Non-Employee Directors; and
3. 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 May 12, 1998 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 20, 1998
<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" or the
"Company") in conjunction with the solicitation of proxies by the Board of
Directors of Bancorp for use at Bancorp's 1998 Annual Meeting of Shareholders
to be held on Monday, June 29, 1998, at 4:00 P.M., local time, at The Mansion
on Main Street, Kresson and Evesham Roads, Voorhees, 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
20, 1998.
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 May
12, 1998, as the date for determining holders of record of Bancorp Common
Stock, par value $1.5625 per share (the "Common Stock") entitled to receive
notice of, and to vote at, the Annual Meeting. On that date, there were
18,011,327 shares of Common Stock outstanding. Each holder of Common Stock is
entitled to cast one vote for each share held of record on that date.
The holders of a majority of the aggregate outstanding shares of Common
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 and (ii) "FOR" the approval of the Commerce
Bancorp, Inc. 1998 Stock Option Plan for Non-Employee Directors. 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.
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).
1
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of May 12, 1998, 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.
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------------------
Name of Number of Shares Percent of
Beneficial Owner or Beneficially Class
Identity of Group Owned(1) Beneficially Owned(1)
----------------- -------- ---------------------
<S> <C> <C>
David Baird, IV ................................................... 79,691(2) *
Robert C. Beck .................................................... 125,001(3) *
Jack R Bershad .................................................... 39,868(4) *
Joseph E. Buckelew ................................................ 175,307(5) *
Vernon W. Hill, II ................................................ 755,773(6) 4.14
C. Edward Jordan, Jr. ............................................. 218,590(7) 1.21
Morton N. Kerr .................................................... 52,404(8) *
Steven M. Lewis ................................................... 159,358(9) *
Daniel J. Ragone .................................................. 59,660(10) *
William A. Schwartz, Jr ........................................... 13,588(11) *
Joseph T. Tarquini, Jr ............................................ 185,490(12) 1.03
Frank C. Videon, Sr. .............................................. 60,725(13) *
Peter M. Musumeci, Jr ............................................. 141,237(14) *
Robert D. Falese, Jr .............................................. 87,179(15) *
Dennis M. DiFlorio ................................................ 141,003(16) *
All Directors, Nominees for Directors and Executive Officers of the
Company as a Group (17 Persons) .................................. 2,352,835(17) 12.49
</TABLE>
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* 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 May 12, 1998. Shares
subject to outstanding stock options which an individual has the right to
acquire within 60 days after May 12, 1998 are deemed to be outstanding for
the purpose of computing the percentage of outstanding securities of the
class owned by such individual or any group including such individual
only. Beneficial ownership may be disclaimed as to certain of the
securities.
(2) Includes 8,541 shares of Common Stock issuable upon the exercise of stock
options granted under the Company's 1989 Stock Option Plan for
Non-Employee Directors.
(3) Includes 8,686 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 14,318 shares of Common Stock held by Mr. Bershad's wife and
11,575 shares of Common Stock issuable upon the exercise of stock options
granted under the Company's 1989 Stock Option Plan for Non-Employee
Directors.
2
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(5) Includes 3,308 shares of Common Stock held by Mr. Buckelew's wife, 1,736
shares held by Buckelew & Lane Investments and 2,376 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.
(6) Includes 37,617 shares held by Site Development Inc., 19,474 shares held
by the wife of Mr. Hill, 52,805 shares held by S. J. Dining, Inc., 49,940
shares held by U.S. Restaurants, Inc., 46,695 shares held by J.V.
Properties, 12,971 shares held by InterArch, Inc., 44,626 shares held by
the Hill Family Trust and 10,681 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. InterArch, Inc., is a company owned by Mr.
Hill's wife. This amount also includes 272,182 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 any unallocated shares of Common Stock held by the Company's ESOP
as to which Mr. Hill is a co-trustee.
(7) Includes 144,655 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, 9,069 shares allocated to Mr. Jordan by the
Company's ESOP, of which Mr. Jordan is a co-trustee and beneficiary, and
1,664 shares held in trust for Mr. Jordan's minor children. This amount
does not include any unallocated shares of Common Stock held by the
Company's ESOP as to which Mr. Jordan is a co-trustee.
(8) Includes 154 shares of Common Stock held by Mr. Kerr's wife, 50,548 shares
held by the Markeim-Chalmers, Inc. Pension Plan and 1,050 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.
(9) Includes 52,805 shares held by S. J. Dining, Inc., 49,940 shares held by
U.S. Restaurants, Inc. and 11,575 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 2,506 shares held in trust for Mr. Lewis' minor children.
(10) Includes 19,167 shares held by Mr. Ragone's wife, 13,386 shares held
jointly with Mr. Ragone's wife and 3,007 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.
(11) Includes 263 shares held by Mr. Schwartz's wife, 5,359 shares held jointly
with Mr. Schwartz's wife and 6,315 shares of Common Stock issuable upon
the exercise of stock options granted to Mr. Schwartz under the Company's
1989 Stock Option Plan for Non-Employee Directors.
(12) Includes 14,774 shares held by Mr. Tarquini's wife, 16,708 shares held by
The Tarquini Organization Profit Sharing Plan, 1,785 shares held by The
Tarquini Foundation and 11,575 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 20,773 shares held jointly with Mr. Videon's wife, 6,000 shares
held by Mr. Videon's wife, 9,428 shares held by Frank C. Videon, Inc.,
Profit Sharing Trust, 2,879 shares held by Videon Chevrolet Profit Sharing
Plan, 10,777 shares held by the Videon Dodge, Inc., Employee Profit
Sharing Trust, 5,556 shares held by the Frank C. Videon Funeral Home
Profit Sharing Plan, 2,228 shares held in Trust for Mr. Videon's minor
grandchildren and 3,424 shares of Common Stock issuable upon the exercise
of stock options granted to Mr. Videon under the Company's 1989 Stock
Option Plan for Non-Employee Directors. Mr. Videon is president of Frank
C. Videon, Inc., Vice President of Videon Chevrolet, President of Videon
Dodge, Inc., and Owner of Videon Funeral Home.
(14) Includes 62,832 shares held jointly with Mr. Musumeci's wife, 69,511
shares of Common Stock issuable upon the exercise of stock options granted
to Mr. Musumeci under the Company's 1984 and 1994 Employee Stock Option
Plans and 8,583 shares of Common Stock allocated to Mr. Musumeci under the
Company's ESOP.
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<PAGE>
(15) Includes 71,825 shares of Common Stock issuable upon the exercise of stock
options granted to Mr. Falese under the Company's 1984 and 1994 Employee
Stock Option Plans and 1,516 shares of Common Stock allocated to Mr.
Falese under the Company's ESOP, 9,736 shares held by Mr. Falese's wife,
653 shares held jointly with Mr. Falese's wife, 2,675 shares held by Mr.
Falese's wife in trust for their minor daughter.
(16) Includes 102,489 shares of Common Stock issuable upon the exercise of
stock options granted to Mr. DiFlorio under the Company's 1984 and 1994
Employee Stock Option Plans and 4,748 shares of Common Stock allocated to
Mr. DiFlorio under the Company's ESOP.
(17) Includes an aggregate of 846,023 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.
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 twelve.
The election of directors will be determined by a plurality vote and the
twelve nominees receiving the most "FOR" votes will be elected. Shares may be
voted "FOR" or withheld from each nominee. 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 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 twelve 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.
4
<PAGE>
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
---- --- ---------------------------------------
<S> <C> <C>
Vernon W. Hill, II ................ 52 Chairman and President of Bancorp; Chairman and President
of Commerce NJ; Chairman and President of Commerce PA;
Chairman of Commerce Shore and Commerce North
C. Edward Jordan, Jr. ............. 54 Executive Vice President and Director of Bancorp; Executive
Vice President and Director of Commerce NJ; Director of
Commerce PA
Robert C. Beck .................... 62 Secretary and Director of Bancorp; Secretary and Director
of Commerce NJ; Director of Commerce PA
David Baird, IV ................... 61 Director of Bancorp, Commerce NJ and Commerce PA
Jack R Bershad .................... 67 Director of Bancorp, Commerce NJ and Commerce PA
Joseph E. Buckelew ................ 69 Director of Bancorp, Commerce Shore and Commerce PA;
President of Commerce Shore; Chairman of Commerce
National Insurance Services, Inc.
Morton N. Kerr .................... 67 Director of Bancorp, Commerce NJ and Commerce PA
Steven M. Lewis ................... 48 Director of Bancorp, Commerce NJ and Commerce PA
Daniel J. Ragone .................. 70 Director of Bancorp, Commerce NJ and Commerce PA
William A. Schwartz, Jr. .......... 57 Director of Bancorp, Commerce NJ and Commerce PA
Joseph T. Tarquini, Jr. ........... 62 Director of Bancorp, Commerce NJ and Commerce PA
Frank C. Videon Sr. ............... 75 Director of Bancorp, Commerce NJ and Commerce PA
</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 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, Chairman of Commerce Shore since January, 1989 and
Chairman of Commerce North since January, 1997.
Mr. Jordan, a director of Commerce NJ since 1974, Bancorp since 1982 and
Commerce PA since June, 1997, 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, Bancorp since 1982 and
Commerce PA since June, 1997, 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 and Commerce
PA since June, 1997, 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 LLP, Philadelphia, Pennsylvania and Cherry Hill, New Jersey, since
1964 and its Chairman since 1990.
5
<PAGE>
Mr. Buckelew has been a director of Bancorp and Chairman 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 and Commerce NJ and Commerce PA since June, 1997. Mr. Buckelew
was elected President of Commerce Shore in 1998. 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, Bancorp since 1982 and
Commerce PA since June, 1997, 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, Bancorp since 1982 and
Commerce PA since June, 1997, has been Chairman and President of Ragone,
Raible, Lacatena & Beppel, C.P.A., Haddonfield, New Jersey, and its predecessor
firms, since 1960.
Mr. Schwartz, a director of Commerce PA since 1984 and a director of
Bancorp and Commerce NJ since June, 1997, has been Chairman, President and
Chief Executive Officer of U.S. Vision, Glendora, New Jersey, or its
predecessor firms, since 1967.
Mr. Tarquini, a director of Commerce NJ since 1973, Bancorp since 1982 and
Commerce PA since June, 1997, 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.
Mr. Videon, a director of Commerce PA since 1991 and a director of Bancorp
and Commerce NJ since June, 1997, has been the owner of Frank C. Videon Funeral
Home, Broomall, Pennsylvania, since 1982.
Director Compensation
Directors of Bancorp, Commerce NJ and Commerce PA were paid an annual fee
of $10,000 plus $750 for each meeting of the Board of Directors and committee
meeting attended in 1997 and will be paid the same annual fee and meeting fee
for each meeting of the Board of Directors and committee meeting attended in
1998. When meetings of the Board of Directors of Bancorp, Commerce NJ and
Commerce PA occur on the same day, only one fee is paid. Directors of Commerce
Shore are paid a fee of $400 for each meeting of the Board of Directors and
committee meeting attended, and directors of Commerce North are paid a fee of
$300 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, Commerce Shore or Commerce North. 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 11 of this Proxy Statement. This plan became
effective January 1, 1993, as amended.
6
<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 232,700 shares (as
adjusted for all stock splits and dividends through May 12, 1998) 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. No further options may be granted under the 1989 Plan. See
"APPROVAL OF THE 1998 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS."
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 was, as of the
date of such election or reelection, automatically granted an option to
purchase 500 shares of Bancorp's Common Stock; however, no non-employee
director could 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 could be granted to any non-employee
director under the 1989 Plan was 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 were 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, 1997, Messrs. Baird, Beck, Bershad, Kerr,
Lewis, Ragone, Schwartz, Tarquini and Videon 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 16, 1997). Such options were
not exercisable in 1997.
Meetings and Committees of the Board of Directors
During 1997, there were 13 meetings of the Board of Directors of Bancorp.
The Board of Directors of Bancorp has established an Audit Committee, an
Oversight Committee and a Personnel Committee but does not have a standing
Nominating Committee. In addition, each of Bancorp's four subsidiary banks,
Commerce Bank, N.A., Cherry Hill, New Jersey ("Commerce NJ"), Commerce
Bank/Pennsylvania, N.A., Philadelphia, Pennsylvania ("Commerce PA"), Commerce
Bank/Shore, N.A. ("Commerce Shore") and Commerce Bank/North ("Commerce North")
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 Committee
The Audit 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 auditors. In addition, this
committee makes recommendations to the Board of Directors concerning the
selection of Bancorp's independent auditors. Daniel J. Ragone and Joseph T.
Tarquini, Jr. are the current members of the Audit Committee. During 1997,
there were four meetings of the Audit Committee.
Oversight Committee
The Oversight Committee reviews compliance matters at Bancorp and its
banking subsidiaries, and reports to Bancorp's Audit Committee. Daniel J.
Ragone, Joseph T. Tarquini, Jr., Joseph A. Haynes (Director of Commerce North)
and Daniel M. Monroe (Director of Commerce Shore) are the current members of
the Oversight Committee. During 1997, there were four meetings of the Oversight
Committee.
7
<PAGE>
Personnel Committee
The Personnel Committee reviews and recommends the levels of compensation
of Commerce NJ's, Commerce PA's, Commerce Shore's and Commerce North'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 1997, there was one meeting of the Personnel
Committee. The report of the Personnel Committee with respect to 1997
compensation is set forth on page 16 of this Proxy Statement.
Attendance
In 1997, 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, Commerce Shore and Commerce North, as the case may be.
8
<PAGE>
EXECUTIVE OFFICERS
The executive officers of Bancorp and its banking subsidiaries, as of May
12, 1998, are set forth below.
<TABLE>
<CAPTION>
Position with Bancorp, Commerce NJ, Commerce PA,
Commerce Shore and Commerce North
Name Age Principal Occupation
---- --- ------------------------------------------------
<S> <C> <C>
Vernon W. Hill, II ............. 52 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 and Commerce North since 1997.
C. Edward Jordan, Jr. .......... 54 Executive Vice President and Director of Bancorp since
1982; Executive Vice President and Director of Commerce
NJ since 1974; Director of Commerce PA since 1997.
Peter M. Musumeci, Jr. ......... 47 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 Shore since 1989.
Robert D. Falese, Jr. .......... 51 Executive Vice President and Senior Loan Officer of Commerce
NJ since 1992.
Dennis M. DiFlorio ............. 44 Executive Vice President of Commerce NJ since January,
1996; Director of Commerce North since 1997. Prior
thereto Mr. DiFlorio was Senior Vice President of Commerce
NJ since 1988.
David Wojcik ................... 45 Senior Vice President of Bancorp since 1988.
Thomas J. Sukay ................ 44 Senior Vice President of Bancorp since 1989.
</TABLE>
9
<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
Annual Compensation Compensation
--------------------------------------------------- --------------
Securities
Other Underlying All
Annual Stock Option Other
Name/Title Year Salary Bonus Compensation(1) Grants(2) Compensation(3)
- --------------------------------- ------ ----------- ----------- ----------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Vernon W. Hill, II 1997 $550,000 $150,000 $67,213 105,000 $32,265
Chairman and President of 1996 480,000 150,000 62,377 144,979 37,381
Bancorp; Chairman and President 1995 441,000 125,000 50,779 36,465 37,925
of Commerce NJ and Commerce
PA; Chairman of Commerce
Shore and Commerce North
C. Edward Jordan, Jr. 1997 $260,000 $ 25,000 5,250 $24,336
Executive Vice President of 1996 240,000 60,000 45,203 29,654
Bancorp; Executive Vice 1995 225,000 60,000 24,310 30,269
President of Commerce NJ
Peter M. Musumeci, Jr. 1997 $265,000 $ 60,000 21,000 $20,751
Executive Vice President and 1996 240,000 60,000 45,203 26,426
Senior Credit Officer, 1995 225,000 60,000 24,310 26,757
Treasurer and Assistant
Secretary of Bancorp; Executive
Vice President of Commerce NJ
Robert D. Falese, Jr. 1997 $275,000 $ 80,000 26,250 $ 7,056
Executive Vice President and 1996 240,000 80,000 50,715 15,908
Senior Loan Officer of 1995 225,000 75,000 24,310 15,319
Commerce NJ
Dennis M. DiFlorio 1997 $275,000 $ 80,000 26,250 $ 7,056
Executive Vice President of 1996 200,000 80,000 50,715 10,609
Commerce NJ 1995 175,000 75,000 24,310 10,760
</TABLE>
- ------------
(1) The total in this column reflects personal use of a company car (1997,
$4,517; 1996, $4,517; 1995, $5,389), expense allowances (1997, $54,996;
1996, $50,600; 1995, $36,600) and country club dues (1997, $7,700; 1996,
$7,260; 1995, $8,790). 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 16, 1997, December 19, 1996,
January 2, 1996 and December 13, 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 1997,
Mr. Hill, $24,032; Mr. Jordan, $17,344; and Mr. Musumeci, $13,738; for
1996, Mr. Hill, $25,128; Mr. Jordan, $18,218; and Mr. Musumeci, $14,275;
and for 1995, Mr. Hill, $25,613; Mr. Jordan, $18,685; and Mr. Musumeci,
$14,516); (ii) long-term disability policies (for 1997, Mr. Hill $2,355;
Mr. Jordan, $1,114; Mr. Musumeci, $1,135; Mr. Falese, $1,178; and Mr.
DiFlorio, $1,178; for 1996, Mr. Hill, $5,179; Mr. Jordan, $4,362; Mr.
Musumeci, $5,074; Mr. Falese, $8,834; and Mr. DiFlorio, $3,535; and for
1995, Mr. Hill, $4,738; Mr. Jordan, $4,010; Mr. Musumeci, $4,667; Mr.
Falese, $7,745; and Mr. DiFlorio, $3,186); and (iii) contributions to
Bancorp's ESOP (in 1997, $5,878 each for all five individuals; in 1996,
$7,074 each for all five individuals; and in 1995, $7,574 each for all
five individuals).
10
<PAGE>
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 $620,000. 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, Musumeci, Falese and
DiFlorio are substantially similar to that of Mr. Hill's except that: Mr.
Jordan will serve as Executive Vice President of Bancorp and Commerce NJ, Mr.
Musumeci will serve as Executive Vice President/Senior Credit Officer of
Bancorp and Commerce NJ, Mr. Falese will serve as Executive Vice President and
Senior Loan Officer of Bancorp and Commerce NJ, and Mr. DiFlorio will serve as
Executive Vice President 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 $250,000, Mr. Musumeci's "base salary" under his
Employment Agreement is $280,000, Mr. Falese's "base salary" under his
Employment Agreement is $300,000 and Mr. DiFlorio's "base salary" under his
Employment Agreement is $300,000.
Employee Stock Option Plans
Effective April, 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 1,415,623 shares of Bancorp Common Stock (as
adjusted for all stock splits and stock dividends through May 12, 1998) by
officers and key employees. 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"). No further options may
be granted under the 1984 Plan. As of May 12, 1998, 405,741 options (as
adjusted for all stock splits and stock dividends through May 12, 1998) remain
outstanding under the 1984 Plan.
Effective May, 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 1,214,904 shares of Bancorp Common
11
<PAGE>
Stock (as adjusted for all stock splits and stock dividends through May 12,
1998) 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. No further
options may be granted under the 1994 Plan. As of May 12, 1998, 927,418 options
(as adjusted for all stock splits and stock dividends through May 12, 1998)
remain outstanding under the 1994 Plan.
Effective May, 1997, Bancorp adopted the Commerce Bancorp, Inc. 1997
Employee Stock Option Plan (the "1997 Plan") which provides for the purchase of
a total of not more than 2,625,000 shares of Bancorp Common Stock (as adjusted
for all stock splits and stock dividends through May 12, 1998) by officers and
key employees. 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 May 12, 1998, 723,911 options (as adjusted
for all stock splits and stock dividends through May 12, 1998) had been granted
under the 1997 Plan and 1,901,089 options (as adjusted for all stock splits and
stock dividends through May 12, 1998) were available for grant. Options may
continue to be granted under the 1997 Plan through December 31, 2006.
(The 1984 Plan, 1994 Plan and 1997 Plan are collectively referred to as
the "Employee Plans.")
The purpose of the Employee Plans 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.
The Employee Plans 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 Employee Plans. The
Committee determines, among other things, which officers and key employees
receive an option or options under the Employee Plans, 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. Under the 1997 Plan, no individual
may be granted a number of options that is more than 50% of the total number of
shares of Bancorp 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 Employee 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.
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 Employee Plans 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. 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.
Options granted pursuant to the Employee Plans 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. Under the 1994
Plan and 1997 Plan, but not the 1984 Plan, in the event of a "change in
control" of Bancorp, as defined in the 1994 Plan and 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.
Options granted under the 1984 Plan and 1994 Plan are not transferable
other than by will or by the laws of descent and distribution. Except as
otherwise authorized by the Committee with respect to non-qualified stock
options only, options granted pursuant to the 1997 Plan are not transferable,
except by will or the laws of descent and distribution in the event of death.
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,
12
<PAGE>
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 and 1997 Plan, 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 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). 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, except that under the 1997 Plan, if specifically permitted
by the Committee or the Board of Directors, non-qualified stock options are
transferrable.
During 1997, Bancorp granted stock options to purchase an aggregate of
605,745 shares (as adjusted for all stock splits and stock dividends through
May 12, 1998) of Bancorp's Common Stock at $44.41 per share (as adjusted for
all stock splits and stock dividends through May 12, 1998) under the 1997 Plan.
During 1997, a total of 308,392 options were exercised under the 1984 Plan and
1994 Plan.
Stock Option Tables
The following table sets forth certain information regarding options
granted during 1997 to each of the executive officers named in the Summary
Compensation Table.
INDIVIDUAL OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
Number of % of Total
Securities Options
Underlying Granted Grant Date
Options to Employees Exercise Expiration Present
Name Granted(1) in Fiscal Year Price(1) Date Value (2)
- -------------------------------- ------------ ---------------- ---------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
Vernon W. Hill, II ............. 105,000 17.3% $ 44.41 December 16, 2007 $1,096,200
C. Edward Jordan, Jr. .......... 5,250 0.9% 44.41 December 16, 2007 54,810
Peter M. Musumeci, Jr. ......... 21,000 3.5% 44.41 December 16, 2007 219,240
Robert D. Falese, Jr. .......... 26,250 4.3% 44.41 December 16, 2007 274,050
Dennis M. DiFlorio ............. 26,250 4.3% 44.41 December 16, 2007 274,050
</TABLE>
- ------------
(1) The stock option grants and exercise price reflected in these columns have
been adjusted for the 5% stock dividends declared on December 16, 1997.
(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, require a prediction about future movement of the
stock price. The assumptions used in the model were the options exercise
price, the price of Bancorp Common Stock on the date of option grant,
expected volatility of .289, risk-free rate of return of 5.59%, dividend
yield of 3%, 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.
13
<PAGE>
The following table sets forth certain information regarding individual
exercises of stock options during 1997 by each of the executive officers named
in the Summary Compensation Table.
AGGREGATED STOCK OPTION EXERCISES IN 1997 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 1997 (1) at Year-End 1997
- ------------------------- ------------- ------------ ------------------------------ -----------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Vernon W. Hill, II ...... 1,532 $ 40,782 272,194 105,000 $8,046,578 $437,653
C. Edward Jordan, Jr. ... 13,457 280,770 144,657 5,250 4,758,367 21,883
Peter M. Musumeci, Jr. .. 81,766 1,839,807 69,513 21,000 1,960,521 87,531
Robert D. Falese, Jr. ... 2,500 62,813 81,727 57,686 2,630,029 953,985
Dennis M. DiFlorio ...... 9,075 319,156 116,771 26,250 3,686,220 109,413
</TABLE>
- ------------
(1) The stock options reflected in this column have been adjusted for the 5%
stock dividend declared on December 16, 1997.
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
Cumulative Convertible 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 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, 1997, the outstanding principal balance on the Loan was
$2,308,000.
Effective March 1, 1998, the Trustees of the ESOP exercised their right to
convert all 417,000 ESOP Shares held by the ESOP into 646,904 shares of Bancorp
Common Stock. As of May 12, 1998, the ESOP Trust held of record 722,531 shares
of Common Stock. As of May 12, 1998, approximately 523,600 shares of Common
Stock held by the ESOP Trust were allocated to individual participant accounts.
The unallocated shares of common stock the ESOP held of record as of May 12,
1998 was approximately 1.11% of Bancorp's Common Stock.
14
<PAGE>
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 shares of Common Stock 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 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, 1997, Bancorp contributed $1,177,000 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, Commerce Shore and Commerce North, 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, Commerce Shore and Commerce North.
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 1997 received $183,000 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.
Bancorp leases from limited partnerships in which Mr. Hill is a partner or
in which a corporation owned by Mr. Hill is a partner under separate operating
lease agreements the land on which it has constructed ten branch offices. The
aggregate annual rental under these leases for 1997 was approximately $375,000.
These leases expire periodically through 2017 but are renewable through 2037.
Aggregate annual rentals escalate to $501,000 in 2007.
Bancorp leases land to a limited partnership partially comprised of the
directors of Bancorp including Messrs. Bershad, Hill and Lewis and a
corporation owned by Mr. Hill. The initial lease term is 25 years, with two
successive 10-year options. As of December 31, 1997, the future minimum lease
payments to be received by Bancorp amount to approximately $55,000 for each of
the next two years and $432,000 thereafter for the remainder of the initial
lease term. In accordance with the provision of the land lease, the limited
partnership constructed and owns the office building located on the land.
Commerce PA leases the building as a branch facility. The initial lease term
expires in 2010.
15
<PAGE>
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 1997, Commerce NJ, Commerce PA, Commerce Shore and Commerce North
obtained interior design, facilities management and general contractor services
in the amount of $916,000 from a business corporation of which Shirley Hill,
wife of Vernon W. Hill, II, is a principal shareholder and the president.
Additionally, during 1997 the business received commissions of $1,464,000 on
furniture and facility purchases made directly by Commerce NJ, Commerce PA,
Commerce Shore and Commerce North. 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.
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, Musumeci,
Falese and DiFlorio which were effective January 1, 1992 for Messrs. Hill,
Jordan and Musumeci, and January 1, 1998 for Messrs. Falese and DiFlorio. 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
Personnel 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 1997. 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.
16
<PAGE>
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
annual compensation in excess of $1.0 million for executive officers named in
the "Summary Compensation Table" contained in this Proxy Statement, except for
certain 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
1998.
PERSONNEL COMMITTEE
Morton N. Kerr
Daniel J. Ragone
Jack R Bershad
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 1997 received $183,000 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."
17
<PAGE>
Financial Performance
The graph below shows a comparison of the cumulative return experienced by
Bancorp's shareholders over the years 1993 through 1997, the KBW Eastern
Regional Sub-Index and the S&P 500 Index assuming an investment of $100 in each
at December 31, 1992 and the reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Commerce Bancorp, KBW Eastern Regional Sub-Index, S&P 500 Index
Year-End 1993 to Year-End 1997
Compare 5-Year Cumulative Total Return
Among Provident American Corporation
NASDAQ Market Index and Peer Group Index
Dollars
600 |-------------------------------------------------------------------------|
| |
| |
500 |-------------------------------------------------------------------------|
| *|
| |
400 |-------------------------------------------------------------------------|
| o|
| |
300 |----------------------------------------------------------*--------------|
| +|
| o |
200 |--------------------------------------------*----------------------------|
| * +o + |
| + |
100 |*+o----------*+o-------------o-------------------------------------------|
| |
| |
0 |--------------|--------------|--------------|-------------|--------------|
1992 1993 1994 1995 1996 1997
* Commerce Bancorp + S & P 500 Index o Eastern Regional Sub-Index
Comparison of Five Year Cumulative Total Return
Eastern
Comparison S&P 500 Regional
Bancorp Index Sub-Index
------------------------------------------------------
1992 100 100 100
1993 113.64 110.08 104.29
1994 153.82 111.53 92.58
1995 184.73 153.44 157.16
1996 298.33 188.67 215.46
1997 495.66 251.62 344.93
18
<PAGE>
APPROVAL OF THE 1998 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
On March 17, 1998, Bancorp's Board of Directors adopted the 1998 Stock
Option Plan for Non-Employee Directors (the "1998 Plan"). Under the 1988 Plan,
members of the Board of Directors of Bancorp and its current and future
subsidiary corporations (i.e. any corporation in which Bancorp owns, directly
or indirectly, fifty percent or more of the outstanding voting power of all
classes of stock of such corporation at the time of election or reelection of
such director) who are not also employees of Bancorp or its subsidiary
corporations will be entitled to receive options to purchase Bancorp Common
Stock. Currently, non-employee directors are not eligible to receive options to
purchase Bancorp Common Stock under any of Bancorp's Employee Plans. See
"Executive Compensation". Previously non-employee directors were eligible to
receive options to purchase Bancorp Common Stock under Bancorp's 1989 Stock
Option Plan for Non-Employee Directors. However, no further options may be
granted under this 1989 Plan, and the 1998 Plan is intended to replace the 1989
Plan.
The Board of Directors of Bancorp believes that the 1998 Plan will advance
the interests of Bancorp and its shareholders by strengthening the ability of
Bancorp and its subsidiary corporations to attract, retain and motivate members
of their respective Boards of Directors who are not also employees. The 1998
Plan is being submitted to Bancorp shareholders for their approval in order to
meet the shareholder approval requirements of The New York Stock Exchange.
The Board of Directors unanimously recommends that you vote "FOR" approval
of the 1998 Plan.
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 1998
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.
Set forth below is a summary of the provisions of the 1998 Plan. This
summary is qualified in its entirety by the detailed provisions of the text of
the actual 1998 Plan set forth as Exhibit "A" to this Proxy Statement, all of
which is incorporated herein.
Purpose of the 1998 Plan
The purpose of the 1998 Plan is to provide additional incentive to members
of the Board of Directors of Bancorp and its subsidiary corporations who are
not also employees by encouraging them to invest in Bancorp's Common Stock and
thereby acquire a further proprietary interest in Bancorp and an increased
personal interest in Bancorp's continued success and progress. The Board of
Directors believes that stock options are an important aid in attracting,
retaining and compensating, non-employee directors of the respective Board of
Bancorp and its subsidiary corporations.
Administration
The 1998 Plan will be administered by the Board of Directors of Bancorp,
including non-employee directors. The Board of Directors of Bancorp, in their
sole discretion, may grant options under the 1998 Plan to non-employee
directors and determine the number of shares subject to each option, the rate
of option exercisability and, subject to certain other provisions discussed
below, the option price and the duration of the options. Under the 1998 Plan,
the board has the right to adopt such rules of conduct of its business and the
administration of the 1998 Plan as it considers desirable. A majority of the
members of the Board of Directors will constitute a quorum for all purposes and
the vote or written consent of a majority of the members of the Board of
Directors on a particular matter will constitute the act of the Board of
Directors on such matter. The Board of Directors has the exclusive right to
construe the 1998 Plan and the options issued pursuant to it, to correct
defects and omissions and to reconcile inconsistencies to the extent necessary
to effectuate the purpose of the 1998 Plan and the options issued pursuant to
it. No member of the Board of Directors of Bancorp will 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 1998
Plan to the Board of Directors, or for the acts or omissions of any other
members of the Board of Directors.
19
<PAGE>
Under the 1998 Plan, the Board of Directors of Bancorp has the right to
any time, and from time to time, to modify or amend the 1998 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; however, such action will not affect options granted under
the 1998 Plan prior to the actual date on which such action occurred. If the
Board of Directors voluntarily submits a proposed modification, amendment,
suspension or termination of the 1998 Plan for shareholder approval, such
submission will not require any further modifications, amendments (whether or
not relating to the same provision or subject matter), suspensions or
terminations to be similarly submitted for shareholder approval, unless
otherwise required by law. Options may not be granted pursuant to the 1998 Plan
after the expiration of five years from and after the adoption of the 1998 Plan
by Bancorp's shareholders at the Annual Meeting.
Aggregate Number of Shares
The aggregate number of shares which may be issued upon the exercise of
options under the 1998 Plan is 400,000 shares of Bancorp Common Stock. In the
event of any change in 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 1998 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 1998 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 1998 Plan.
Exercisability, Option Price, Expiration and Payment
Options granted pursuant to the 1998 Plan may be exercised in whole, or
from time to time in part, beginning on the earlier to occur of (i) one year
after the date of their grant or (ii) a "change in control" of the Company, as
such term is defined in the 1998 Plan.
The option price for options issued under the 1998 Plan will be equal to
the fair market value of Bancorp Common Stock on the date the option is granted
by the Board of Directors. Fair market value of Bancorp Common Stock will be
determined by the Board of Directors.
Unless terminated earlier by the option's terms, options granted under the
1998 Plan will expire ten years after the date they are granted.
Payment of the option price on exercise of options granted under the 1998
Plan may be made in cash, Bancorp Common Stock which will be valued at the last
sale price of Bancorp Common Stock in trading on the New York Stock Exchange on
the last trading day preceding the delivery of such certificates to Bancorp or
a combination of both. Under the terms of the 1998 Plan, the Board has
interpreted the provisions of the 1998 Plan which allows payment of the option
price in Common Stock of Bancorp to permit "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.
Termination of Services; Death and Disability
All unexercised options will terminate three months following the date an
optionee ceases to be a director of Bancorp or any subsidiary corporation by
death, disability, resignation or removal (whether for cause or otherwise),
whether or not such termination is voluntary, but in no event later than ten
years from the date the option is granted. An optionee (or such optionee's
legal guardian or custodian) holding an option who ceases to be a director of
Bancorp or any Bancorp subsidiary corporation because of a disability must
exercise the option within three months after he ceases to be a director (but
in no event later than ten years from the date the option is granted), or the
option will terminate.
20
<PAGE>
The legatee(s), distributee(s), executor or administrator of a deceased
optionee who could have exercised an option while alive may exercise such
option at any time within three months following the optionee's death (but in
no event later than ten years from the date the option is granted), or the
option will terminate.
A director of a subsidiary corporation of Bancorp shall be deemed to have
been removed as a director on the date such company ceases to be a Bancorp
subsidiary unless such optionee is also a director of Bancorp or another
Bancorp subsidiary corporation, or on that date such optionee becomes a
director of Bancorp or another Bancorp subsidiary corporation. A director shall
not be deemed to have been removed as director if he ceases being a director of
Bancorp or a Bancorp subsidiary corporation but is, or on that date becomes, a
director of a Bancorp subsidiary corporation or Bancorp, as the case may be.
Transferability
Unless specifically authorized by the Board of Directors of Bancorp,
options granted pursuant to the 1998 Plan are not transferrable, except by the
laws of descent and distribution in the event of death, and may be exercised by
an optionee, or by an optionee's legal guardian in the event of disability, as
provided above.
Amendment or Termination
Bancorp's Board of Directors has the right at any time, and from time to
time, to modify, amend, suspend or terminate the 1998 Plan. Any such action
will not affect options previously granted.
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 1998 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.
Options granted pursuant to the 1998 Plan will be non-qualified stock
options. A non-qualified stock option is an option which does not satisfy the
requirements of Section 422 of the Code. Generally, there will be no federal
income tax consequences to either the optionee or Bancorp on the grant of
non-qualified options pursuant to the 1998 Plan. On the exercise of a
non-qualified option, the optionee 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 in an amount equal to such excess.
Upon the sale of stock acquired by exercise of a non-qualified option,
optionees will realize long-term, mid-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%. The reduced rate (20%) of tax on certain net
capital gains added to the Code by the Taxpayer Relief Act of 1997 requires a
holding period of more than 18 months. 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. The optionee will recognize ordinary income on the exercise of
the non-qualified stock 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.
21
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1997, 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 1998. 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.
SHAREHOLDER PROPOSALS
Proposals from shareholders intended to be presented at the 1999 Annual
Meeting must be received by Bancorp for inclusion in Bancorp's proxy statement
by February 1, 1999.
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, 1997 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
22
<PAGE>
EXHIBIT "A"
COMMERCE BANCORP, INC.
1998 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. Purpose of Plan:
The purpose of the 1998 Stock Option Plan for Non-Employee Directors (the
"Plan") contained herein is to enhance the ability of Commerce Bancorp, Inc.
and its current and future subsidiaries (collectively the "Companies") to
attract, retain and motivate members of their respective Boards of Directors
and to provide additional incentive to members of their respective Boards of
Directors by encouraging them to invest in shares of Commerce Bancorp, Inc.
(the "Company") common stock and thereby acquire a proprietary interest in the
Company and an increased personal interest in the Companies' continued success
and progress, to the mutual benefit of directors, employees and stockholders.
2. Aggregate Number of Shares:
400,000 shares of the Company's common stock, par value $1.5625 per share
("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 capitalization of the Company, such as by stock dividend, stock split,
combination of shares, recapitalization, merger, consolidation, transfer of
assets, reorganization, conversion or what the Board of Directors of the
Company 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
Board of Directors of the Company. Reacquired shares of the Company's Common
Stock, as well as unissued shares, may be used for the purpose of this Plan.
Common Stock of the Company subject to options which have terminated
unexercised, either in whole or in part, shall be available for future options
granted under this Plan.
3. Participation:
The Board of Directors of the Company, in their sole discretion, may grant
options to purchase shares of the Company's Common Stock to Directors who at
the time of such grant are not an employee of the Company or any Company
subsidiary corporation. The Board of Directors shall, in addition to its other
authority and subject to the provisions of this Plan, determine the number of
shares to be subject to each option granted pursuant to this Section 3, the
time or times at which such options shall be granted and subject to Section 5
hereof, the price at which each of the options is exercisable.
4. Administration of Plan:
This Plan shall be administered by the Board of Directors of the Company.
The Board of Directors of the Company 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 Board of Directors of the Company shall
constitute a quorum for
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<PAGE>
all purposes. The vote or written consent of a majority of the members of the
Board of Directors of the Company on a particular matter shall constitute the
act of the Board of Directors of the Company on such matter. The Board of
Directors of the Company shall have the exclusive 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 purpose of
this 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
Board of Directors of the Company 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 Board
of Directors, or for the acts or omissions of any other members of the Board of
Directors.
5. Non-Qualified Stock Options, Option Price and Term:
(a) Options issued pursuant to this Plan shall be non-qualified stock
options. A non-qualified stock option is an option which does not satisfy the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"). The option price for the non-qualified stock options issued under
this Plan shall be equal to the fair market value, as determined in good faith
by the Board of Directors of the Company, of the Company's Common Stock on the
date of the grant of the option.
(b) 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. At the time of granting a non-qualified stock
option hereunder, the Board of Directors may, in its discretion, amend or
supplement any of the option terms contained in Appendix I for a particular
optionee including, without limitation, the extent of the assignability and/or
transferability of such option. Options shall expire ten years after the date
they are granted, unless terminated earlier as provided herein.
6. Modification, Amendment, Suspension and Termination:
Options shall not be granted pursuant to this Plan after the expiration of
five years from and after the date this Plan is approved by the stockholders of
the Company. The Board of Directors of the Company 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 of the Company; provided, however, that such action shall not affect
options granted under the Plan prior to the actual date on which such action
occurred. If the Board of Directors voluntarily submits a proposed
modification, amendment, suspension or termination for stockholder approval,
such submission shall not require any future modifications, amendments (whether
or not relating to the same provision or subject matter), suspensions or
terminations to be similarly submitted for stockholder approval.
7. Effectiveness of Plan:
This Plan shall become effective on the date of its adoption by the
Company's Board of Directors, subject however to approval by the holders of the
Company's Common Stock. Options may be granted under this Plan prior to
obtaining stockholder approval, provided such options shall not be exercisable
until stockholder approval is obtained.
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<PAGE>
8. General Conditions:
(a) Nothing contained in this Plan or any option granted pursuant to this
Plan shall confer upon any director the right to continue as a director of any
of the Companies or interfere in any way with the rights of the Companies to
terminate him as a director.
(b) Corporate action constituting an offer of stock for sale to any
director under the terms of the options to be granted hereunder shall be deemed
complete as of the date when the actions of the stockholder(s) in electing or
reelecting a non-employee director are completed or when the Board of Directors
authorizes the grant of the option to such non-employee director, as the case
may be, regardless of when the option is actually delivered to the non-employee
director or acknowledged or agreed to by him.
(c) The term "subsidiary corporation" as used throughout this Plan shall
mean a corporation in which the Company owns, directly or indirectly, shares of
stock representing fifty percent or more of the outstanding voting power of all
classes of stock of such corporation at the time of the granting of an option
under this Plan.
(d) The use of the masculine pronoun shall include the feminine gender
whenever appropriate.
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<PAGE>
APPENDIX I
NON-QUALIFIED STOCK OPTION
To: ____________________________________________________________________________
Name
________________________________________________________________________________
Address
Date: _________________________________________
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. (the "Company") at a price of $ per share
pursuant to the Company's 1998 Stock Option Plan for Non-Employee Directors
(the "Plan").
Your option may first be exercised on and after the earlier to occur of
(i) one year from the date of its grant or (ii) a "change in control" of the
Company, as hereinafter defined, but not before that time. On and after the
earlier to occur of (i) one year from the date your option is granted or (ii) a
"change in control" of the Company, and prior to ten years from the date of its
grant, your option may be exercised in whole, or from time to time in part, for
up to the total whole number of shares then subject to the option minus the
number of shares previously purchased by exercise of the option (as
appropriately adjusted for stock dividends, stock splits, combination of
shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion and what the Board of Directors of the Company deems
in its sole discretion to be similar circumstances). No fractional shares shall
be issued or delivered. This option shall terminate and is not exercisable
after the expiration of ten years from the date of its grant, except if
terminated earlier as hereafter provided.
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 the Company;
2. A change within a twelve-month period in the holders of more than 50%
of the outstanding voting stock of the Company; 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
the Company on forms supplied by the Company 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: (i) cash which may be evidenced by a check and includes cash
received from a stock brokerage firm in a so-called "cashless exercise"; (ii)
(unless prohibited by the Board of Directors) certificates representing Common
Stock of the Company which will be valued by the Secretary of the Company at
the last sale price of a share of the Company's Common Stock in trading as
reported by the New York Stock Exchange on the last trading day immediately
preceding the delivery of such certificates to the Company or as may be
otherwise made available, accompanied by an assignment of the stock to the
Company; or (iii) (unless prohibited by the Board of Directors) any combination
of cash and Common Stock of the Company valued as provided in clause (ii). Any
assignment of stock shall be in a form and substance satisfactory to the
Secretary of the Company, including guarantees of signature(s) if he deems such
guarantees necessary or desirable and payment of all transfer taxes.
Your option will, to the extent not previously exercised by you, terminate
three months after the date on which you cease to be a director of the Company
or a subsidiary corporation by death, disability, resignation or removal
(whether for cause or otherwise), but in no event later than ten years from the
date this option is granted, whether such termination be voluntary or not.
After the date you cease to be a director, 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 you ceased to be a director. If you are a director of a Company
subsidiary corporation, your directorship shall be deemed to have terminated on
the date such company ceases to be a Company subsidiary corporation, unless you
are also a director of the Company or another Company subsidiary corporation,
or on that date became a
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<PAGE>
director of the Company or another Company subsidiary corporation. Your
directorship shall not be deemed to have terminated if you cease being a
director of the Company or a Company subsidiary corporation but are or
concurrently therewith become a director of the Company or another Company
subsidiary corporation.
Unless specifically authorized by the Board of Directors, this option is
not transferable by you otherwise than by will or the laws of descent and
distribution and is exercisable, during your lifetime, only by you. If you die
while a director of the Company or a Company subsidiary corporation, your
legatee(s), distributee(s), executor or administrator, as the case may be, may,
at any time within three months after the date of your death (but in no event
later than ten years from the date this option is granted), exercise the option
as to any shares which you had a right to purchase and did not purchase during
your lifetime. If your directorship with the Company or a Company subsidiary
corporation is terminated by reason of your becoming disabled, you or your
legal guardian or custodian may at any time within three months after the date
of such termination (but in no event later than 10 years from the date this
option is granted), exercise the option as to any shares which you had a right
to purchase and did not purchase prior to such termination. Your executor,
administrator, guardian or custodian must present proof of his authority
satisfactory to the Company prior to being allowed to exercise this option.
In the event of any change in the capitalization of the Company, such as
by stock dividend, stock split, combination of shares, recapitalization,
merger, consolidation, transfer of assets, reorganization, conversion or what
the Board of Directors of the Company deems in its sole discretion to be
similar circumstances, the number and kind of shares subject to this option and
the option price for such shares will be appropriately adjusted in a manner to
be determined in the sole discretion of the Board of Directors of the Company.
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 stockholder of the Company. The Company reserves the right not to
deliver to you the shares purchased by virtue of exercise of this option during
any period of time in which the Company deems, in its sole discretion, that
such delivery may not be consummated without violating 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:
(1) 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 the Company may deem necessary or desirable.
(2) During any period of time in which the Company 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 the Company to be
legally obligated to issue or sell more shares than the Company is legally
entitled to issue or sell.
(3) Until you have paid or made suitable arrangements to pay (which may
include payment through the surrender of Common Stock), (i) all federal,
state and local income tax withholding required to be withheld by the
Company in connection with the option exercise and (ii) your portion of
other federal, state and local payroll and other taxes due in connection
with the option exercise.
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 the Company to the
effect that the proposed transaction will be
A-5
<PAGE>
exempt from such registration. The optionee shall execute such instruments,
representations, acknowledgments and agreements as the Company 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 the Company 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 the Company 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 the Company 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 the Company 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 the Company unless in writing and signed by the
Chief Executive Officer of the Company. 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 the Company's
Secretary, thereby indicating your understanding of and agreement with its
terms and conditions.
COMMERCE BANCORP, INC.
(SEAL)
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-6
<PAGE>
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 29, 1998 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 +
MAP
From Philadelphia/Center City: 30 minutes. Take Ben Franklin Bridge to Route 70
East. Follow on Route 70 East to Route 73 South. Follow 73 South to Evesham
Road. Turn right on Evesham Road. Follow 1 1/2 miles, turn left into Main Street
Complex. Entrance is on the left.
From Philadelphia International Airport: 40 minutes. Take Walt Whitman Bridge to
42 South to 295 North to Route 561 (Voorhees Exit). Follow on Route 561 to
Evesham Road. Turn left on Evesham Road. Follow 1 1/2 miles, turn right into
Main Street Complex. Entrance is on left.
From Northeast Philadelphia: 30 minutes. Take Tacony Palmyra Bridge to Route 73
South. Turn right on Evesham Road. Follow 1 1/2 miles, turn left into Main
Street Complex. Entrance is on left.
From New Jersey/New York area: 1 hour and 15 minutes. Take New Jersey Turnpike
South to Exit 4. Follow to Route 73 South. Turn right on Evesham Road. Follow 1
1/2 miles, turn left into Main Street Complex. Entrance is on left.
From Delaware, Baltimore: 60 minutes. Delaware Memorial Bridge to 295 North.
Follow to Exit 32 (Haddonfield, Voorhees, Gibbsboro). Turn right on Route 561.
Follow 2 miles to Evesham Road. Turn left onto Evesham Road (Mobil Station on
left). Follow 2 miles, turn right into Main Street Complex. Entrance is on left.
From Atlantic City: 50 minutes. Take Atlantic City Expressway to Route 73 North
Exit (Tacony Palmyra Bridge). Proceed on Route 73 North, around Berlin Circle,
go 2 miles. Turn left on Kresson Road. Follow to second light, Evesham Road.
Turn left on Evesham Road and left into Main Street Complex. Entrance is on
left.
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES LISTED
BELOW AND "FOR" PROPOSAL 2. DISCRETIONARY AUTHORITY IS CONFERRED HEREBY
AS TO CERTAIN MATTERS DESCRIBED IN THE COMPANY'S PROXY STATEMENT.
Please mark | X |
your votes as
indicated in
this example
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, William A. Schwartz, Jr., Joseph T.
Tarquini, Jr. and Frank C. Videon, Sr.
FOR all nominees listed above (except as
marked to the contrary) [ ]
WITHHOLD AUTHORITY to vote for all nominees
listed above [ ]
2. To approve the Commerce Bancorp, Inc. 1998 Stock Option Plan for
Non-Employee Directors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To act upon such other matters as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
_______________________________________________________________________________
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 1997 Annual Report to Shareholders and a
copy of the Notice of the 1998 Annual Meeting of Shareholders and Proxy
Statement in reference thereto both dated in May, 1998.
Dated: ________________________________________________________________, 1998
________________________________________________________________________________
(Shareholder(s) Signature)
________________________________________________________________________________
(LS.)
Printed Name of Shareholder
________________________________________________________________________________
(LS.)
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 +
COMMERCE BANCORP, INC.
ANNUAL SHAREHOLDER'S MEETING
Monday, June 29, 1998
4:00 P.M.
THE MANSION ON MAIN STREET
KRESSON AND EVESHAM ROADS
VOORHEES, NEW JERSEY 08043
(609) 751-6060
