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 ss.240.14a-12
COMMERCE BANCORP, INC.
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1)Title of each class of securities to which transaction applies:
N/A
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(2)Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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COMMERCE BANCORP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the 2003 Annual Meeting of Shareholders
(the "Annual Meeting") of Commerce Bancorp, Inc. ("Bancorp") will be held at
Commerce University, 17000 Horizon Way, Mt. Laurel, New Jersey, on Tuesday, May
20, 2003, at 5:30 P.M., local time to consider and act upon the following
matters as more fully described in the annexed proxy statement:
1. To elect directors;
2. To approve amendments to the Bancorp 1998 Stock Option Plan for
Non-Employee Directors that will (i) increase the number of
shares issuable under this plan by 500,000 shares and (ii) extend
the time period for which options may be granted under this plan
by five years; 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 April 1, 2003 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
April 21, 2003
COMMERCE BANCORP, INC.
COMMERCE ATRIUM
1701 ROUTE 70 EAST
CHERRY HILL, NEW JERSEY 08034-5400
PROXY STATEMENT
This Notice of Annual Meeting, proxy statement and enclosed proxy are
being furnished to shareholders of Commerce Bancorp, Inc. ("Bancorp") in
conjunction with the solicitation of proxies by the board of directors of
Bancorp for use at Bancorp's 2003 Annual Meeting of Shareholders to be held on
Tuesday, May 20, 2003, at 5:30 P.M., local time, at Commerce University, 17000
Horizon Way, Mt. Laurel, New Jersey, (the "Annual Meeting"), and at any
adjournment or postponement thereof. The approximate date upon which this proxy
statement and the accompanying form of proxy will be first sent, given or
otherwise made available to Bancorp's shareholders is April 21, 2003.
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 may engage the services of a proxy
soliciting firm. Bancorp is required to pay the reasonable expenses incurred by
recordholders of Bancorp common stock who are brokers, dealers, banks or voting
trustees, or their nominees, for mailing proxy material and annual shareholder
reports to the beneficial owners of Bancorp common stock they hold of record,
upon request of such recordholders.
The board of directors of Bancorp has fixed the close of business on
April 1, 2003, as the date for determining holders of record of Bancorp common
stock entitled to receive notice of, and to vote at, the Annual Meeting. On that
date, there were 68,797,955 shares of Bancorp common stock outstanding. Each
holder of Bancorp 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
Bancorp 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
(described below) will be counted for the purpose of determining whether a
quorum is present.
Under the NJBCA, abstentions or a withholding of authority are not
counted as votes cast for the purpose of electing directors and, therefore, will
have no effect on the outcome of the vote on the election of directors at the
Annual Meeting. However, under applicable New York Stock Exchange ("NYSE")
rules, abstentions will be counted as votes cast for the purpose of approving
the amendments to the 1998 Stock Option Plan for Non-Employee Directors (the
"1998 Plan") and, therefore, will have the legal effect of an "AGAINST" vote in
connection with the vote on such amendments at the Annual Meeting.
Brokers who hold shares for the accounts of their clients may vote such
shares either as directed by their clients or in their own discretion if
permitted by the applicable stock exchange or other organization of which they
are members. Members of the NYSE are permitted to vote their clients' shares in
their own discretion as to the election of directors and certain other "routine"
matters (presently including the proposed amendments to the 1998 Plan) if the
clients have not timely furnished voting instructions prior to the Annual
Meeting. However, if a presently proposed NYSE rule shall become effective as of
the date of the Annual Meeting, brokers will not be permitted to vote their
clients' shares without obtaining voting instructions with respect to the
amendments to the 1998 Plan because such amendments may be deemed to be
material. When a broker votes a client's shares on some but not all of the
proposals at a meeting, the omitted votes are referred to as "broker non-votes."
Broker non-votes are not counted as votes cast.
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
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marked thereon. Signed proxies not marked to the contrary will be voted "FOR"
the election of all nominees for director and "FOR" the approval of the
amendments to the 1998 Plan.
Any Bancorp shareholder giving a proxy may revoke it at any time before
it is voted by (i) giving written notice of such revocation, signed in the same
manner as the proxy, to Bancorp's Secretary, (ii) executing a new proxy and
returning it to the Secretary of Bancorp prior to the voting of the first proxy
at the Annual Meeting, or (iii) attending the Annual Meeting and voting in
person (although attendance at the Annual Meeting will not in and of itself
constitute revocation of a proxy).
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SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
Common Stock
The following table sets forth, as of April 1, 2003, the beneficial
ownership of Bancorp's common stock by (i) each person who is known by Bancorp
to be the beneficial owner of more than 5% of Bancorp's common stock, (ii) each
director and nominee for director of Bancorp, (iii) each of the executive
officers of Bancorp named in the Summary Compensation Table and (iv) all the
directors and executive officers of Bancorp as a group. Unless otherwise
specified, all persons listed below have sole voting and investment power with
respect to their shares. The address of Mr. Hill is c/o Commerce Bancorp, Inc.,
Commerce Atrium, 1701 Route 70 East, Cherry Hill, New Jersey 08034.
Name of Number of Shares Percent of
Beneficial Owner or Beneficially Class
Identity of Group Owned(1) (2) Beneficially Owned(1) (2)
-------------------------------------------------- -------------------- ---------------------------
Robert C. Beck................................... 394,346(3) *
Jack R Bershad................................... 135,085(4) *
Joseph E. Buckelew............................... 654,572(5) *
Donald T. DiFrancesco............................ 8,440(6) *
Vernon W. Hill, II............................... 3,576,221(7) 5.05%
Morton N. Kerr................................... 50,710(8) *
Steven M. Lewis.................................. 502,016(9) *
George E. Norcross, III.......................... 1,022,355(10) 1.47%
Daniel J. Ragone................................. 203,107(11) *
William A. Schwartz, Jr.......................... 83,840(12) *
Joseph T. Tarquini, Jr........................... 551,150(13) *
Frank C. Videon, Sr.............................. 207,839(14) *
Dennis M. DiFlorio............................... 792,168(15) 1.14%
Robert D. Falese, Jr............................. 410,152(16) *
Peter M. Musumeci, Jr............................ 467,449(17) *
All Directors, and Executive Officers
of Bancorp, as a Group (18 Persons)......... 9,607,995(18) 13.03%
FMR Corp.
82 Devonshire Street
Boston, MA 02109............................ 6,542,552(19) 9.51%
Gilder, Gangon, Howe & Co. LLC
1775 Broadway, 26th Floor
NY, NY 10019................................ 4,295,181(20) 6.24%
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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 ("SEC") and, accordingly, may
include securities owned by or for, among others, the wife and/or minor
children of the individual and any other relative who has the same
residence as such individual as well as other securities as to which the
individual has or shares voting or investment power or has the right to
acquire under outstanding stock options within 60 days after April 1, 2003.
Shares subject to outstanding stock options which an individual has the
right to acquire within 60 days after April 1, 2003 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.
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(2) The figures in these columns do not reflect the shares of Bancorp common
stock issuable upon the conversion of the 5.95% Convertible Trust Preferred
Securities (the "trust preferred securities") issued by Commerce Capital
Trust II on March 11, 2002. Messrs. Bershad, Buckelew, DiFlorio, Hill,
Ragone and Videon beneficially own 3,000, 10,000, 2,000, 8,000, 2,000 and
8,000 trust preferred securities, respectively, and the directors and
executive officers of Bancorp, as a group (18 persons), beneficially own
35,000 trust preferred securities. Each trust preferred security is
convertible at any time on or after the occurrence of the events described
below and prior to 5:00 p.m., New York City time, on the business day
immediately preceding the date of repayment of such trust preferred
security, whether at stated maturity (i.e. March 11, 2032) or upon
redemption, at the option of the holder thereof, into shares of Bancorp
common stock at an initial conversion ratio of 0.9478 shares of Bancorp
common stock for each trust preferred security, subject to adjustment under
certain circumstances. The trust preferred securities are convertible into
shares of Bancorp common stock if: (a) the closing sale price of Bancorp
common stock for at least 20 trading days in a period of 30 consecutive
trading days ending on the last trading day of any calendar quarter
beginning with the quarter ending June 30, 2002 is more than 110% of the
trust preferred securities conversion price then in effect on the last day
of such calendar quarter, (b) the assigned credit rating by Moody's of the
trust preferred securities is at or below Bal, (c) the trust preferred
securities are called for redemption (which may occur on or prior to March
11, 2032), or (d) specified corporate transactions have occurred as set
forth in the Indenture dated March 11, 2002 between Bancorp and The Bank of
New York, as Debenture Trustee. The trust preferred securities are not
currently convertible.
(3) Includes 1,108 shares of Bancorp common stock held by Mr. Beck's wife and
98,658 shares of Bancorp common stock issuable upon the exercise of stock
options granted under Bancorp's 1989 and 1998 Stock Option Plans for
Non-Employee Directors.
(4) Includes 29,356 shares of Bancorp common stock held by Mr. Bershad's wife
and 64,206 shares of Bancorp common stock issuable upon the exercise of
stock options granted under Bancorp's 1989 and 1998 Stock Option Plans for
Non-Employee Directors.
(5) Includes 158,488 shares of Bancorp common stock held by Mr. Buckelew's
wife, 4,778 shares of Bancorp common stock held by Buckelew & Lane
Investments, 3,273 shares of Bancorp common stock allocated to Mr.
Buckelew's account under Bancorp's 401(k) Plan and 150,000 shares of
Bancorp common stock issuable upon the exercise of stock options granted
under Bancorp's Employee Plans, as defined on page 15. Mr. Buckelew is a
partner of Buckelew & Lane Investments.
(6) Includes 1,826 shares of Bancorp common stock held jointly with Mr.
DiFrancesco's wife, 614 shares of Bancorp common stock held by Mr.
DiFrancesco's wife and 5,000 shares of Bancorp common stock issuable upon
the exercise of stock options granted under Bancorp's 1998 Stock Option
Plan for Non-Employee Directors.
(7) Includes 103,680 shares of Bancorp common stock held by Site Development
Inc., 43,936 shares of Bancorp common stock held by Mr. Hill's wife,
145,542 shares of Bancorp common stock held by S. J. Dining, Inc., 148,666
shares of Bancorp common stock held by U.S. Restaurants, Inc., 116,621
shares of Bancorp common stock held by J.V. Properties, 35,748 shares of
Bancorp common stock held by InterArch, Inc., 154,904 shares held by
InterArch, Inc. Profit Sharing Plan, 122,786 shares of Bancorp common stock
held by the Hill Family Trust, 111,688 shares held by the Hill Family
Foundation, 4,410 shares of Bancorp common stock held by Galloway National
Golf Club and 36,641 shares of Bancorp common stock allocated to Mr. Hill's
account under Bancorp's 401(k) Plan. 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, a trustee of the Hill
Family Foundation, and a principal equity holder of Galloway National Golf
Club. InterArch, Inc., is a company owned by Mr. Hill's wife and Mrs. Hill
is a trustee of the InterArch, Inc. Profit Sharing Plan. This amount also
includes 1,972,214 shares of Bancorp common stock issuable upon the
exercise of stock options granted to Mr. Hill under Bancorp's Employee
Plans.
(8) Includes 45,710 shares of Bancorp common stock held by the
Markeim-Chalmers, Inc. Pension Plan and 5,000 shares of Bancorp common
stock issuable upon the exercise of stock options granted under Bancorp's
1998 Stock Option Plan for Non-Employee Directors. Mr. Kerr is a trustee of
the Markeim-Chalmers, Inc. Pension Plan.
(9) Includes 18,104 shares of Bancorp common stock held jointly with Mr. Lewis'
wife, 145,542 shares of Bancorp common stock held by S. J. Dining, Inc.,
148,666 shares of Bancorp common stock held by U.S. Restaurants, Inc. and
62,826 shares of Bancorp common stock issuable upon the exercise of stock
options granted to Mr. Lewis under
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Bancorp's 1989 and 1998 Stock Option Plans for Non-Employee Directors. Mr.
Lewis is President of S. J. Dining, Inc. and President of U.S. Restaurants,
Inc. This amount also includes 12,656 shares of Bancorp common stock held
in trust for Mr. Lewis' minor children.
(10) Includes 331,889 shares of Bancorp common stock held jointly with Mr.
Norcross' wife, 1,250 shares of Bancorp common stock held by Mr. Norcross'
wife, 634 shares of Bancorp common stock held as custodian for Mr.
Norcross' minor children, 157,490 shares of Bancorp common stock held under
a grantor trust for Mr. Norcross' minor children, 15,451 shares of Bancorp
common stock allocated to Mr. Norcross's account under Bancorp's 401(k)
Plan and 516,808 shares of Bancorp common stock issuable upon the exercise
of stock options granted to Mr. Norcross under Bancorp's Employee Plans.
(11) Includes 51,866 shares of Bancorp common stock held by Mr. Ragone's wife,
19,025 shares of Bancorp common stock held jointly with Mr. Ragone's wife
and 64,152 shares of Bancorp common stock issuable upon the exercise of
stock options granted to Mr. Ragone under Bancorp's 1989 and 1998 Stock
Option Plans for Non-Employee Directors.
(12) Includes 6,623 shares of Bancorp common stock held by Mr. Schwartz's wife,
27,445 shares of Bancorp common stock held jointly with Mr. Schwartz's wife
and 47,386 shares of Bancorp common stock issuable upon the exercise of
stock options granted to Mr. Schwartz under Bancorp's 1989 and 1998 Stock
Option Plans for Non-Employee Directors.
(13) Includes 454,328 shares of Bancorp common stock held by JCT Associates,
L.P., 4,696 shares of Bancorp common stock held by The Tarquini Foundation
and 92,126 shares of Bancorp common stock issuable upon the exercise of
stock options granted to Mr. Tarquini under Bancorp's 1989 and 1998 Stock
Option Plans for Non-Employee Directors. Mr. Tarquini is the General
Partner of JCT Associates, L.P., and a trustee of The Tarquini Foundation.
(14) Includes 49,772 shares of Bancorp common stock held jointly with Mr.
Videon's wife, 18,187 shares of Bancorp common stock held by Mr. Videon's
wife, 15,709 shares held by the Frank C. Videon, Inc., Profit Sharing
Trust, 9,080 shares of Bancorp common stock held by the Videon Chevrolet
Profit Sharing Plan, 32,883 shares of Bancorp common stock held by the
Videon Dodge, Inc. Employee Profit Sharing Trust, 17,551 shares of Bancorp
common stock held by the Frank C. Videon Funeral Home Profit Sharing Plan,
26,919 shares of Bancorp common stock held in Trust for Mr. Videon's
grandchildren and 37,738 shares of Bancorp common stock issuable upon the
exercise of stock options granted to Mr. Videon under Bancorp's 1989 and
1998 Stock Option Plans for Non-Employee Directors. Mr. Videon is a trustee
for each of the above-referenced Plans and/or Trusts.
(15) Includes 25,638 shares held by Mr. DiFlorio's wife, 644,056 shares of
Bancorp common stock issuable upon the exercise of stock options granted to
Mr. DiFlorio under Bancorp's Employee Plans and 17,231 shares of Bancorp
common stock allocated to Mr. DiFlorio's account under Bancorp's 401(k)
Plan.
(16) Includes 280,066 shares of Bancorp common stock issuable upon the exercise
of stock options granted to Mr. Falese under Bancorp's Employee Plans,
10,001 shares of Bancorp common stock allocated to Mr. Falese's account
under Bancorp's 401(k) Plan, 1,930 shares of Bancorp common stock held by
Mr. Falese's wife and 903 shares of Bancorp common stock held jointly with
Mr. Falese's wife.
(17) Includes 194,435 shares of Bancorp common stock held jointly with Mr.
Musumeci's wife, 5,320 shares held by the Peter/Linda Musumeci Foundation,
238,266 shares of Bancorp common stock issuable upon the exercise of stock
options granted to Mr. Musumeci under Bancorp's Employee Plans and 28,774
shares of Bancorp common stock allocated to Mr. Musumeci's account under
Bancorp's 401(k) Plan. Mr. Musumeci is a trustee of the Peter/Linda
Musumeci Foundation.
(18) Includes an aggregate of 4,934,946 shares of Bancorp common stock issuable
upon the exercise of stock options granted to directors and executive
officers of Bancorp under Bancorp's 1989 and 1998 Stock Option Plans for
Non- Employee Directors and Bancorp's Employee Plans.
(19) Based upon a Schedule 13G filed with the SEC on February 13, 2003, the
shares of Bancorp common stock shown in the table as beneficially owned by
FMR Corp. are beneficially owned as follows: Fidelity Management & Research
Company, 5,451,859 shares; Fidelity Management Trust Company, 544,180
shares; Fidelity International Limited, 536,885 shares and Geode Capital
Management, LLC, 9,628 shares. According to the Schedule 13G, FMR
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Corp. and related entities have sole voting power over 1,077,043 shares and
sole dispositive power over 6,542,552 shares of the shares reported as
beneficially owned. The Schedule 13G indicates that Edward C. Johnson 3d,
Chairman and a shareholder of FMR Corp. and Abigail Johnson, a director and
a shareholder of FMR Corp., may also be considered beneficial owners of
these shares.
(20) Based upon a Schedule 13G filed with the SEC on February 12, 2003, the
shares of Bancorp common stock shown in the table as beneficially owned by
Gilder, Gagnon, Howe & Co. LLC are beneficially owned as follows: shares
held in customer accounts, 3,623,871; shares held in accounts owned by the
partners and their families; 641,585, and shares held in the profit-sharing
plan, 29,725. According to the Schedule 13G, Gilder, Gagnon, Howe & Co. has
the sole voting power over 29,725 shares and shared dispositive power over
4,295,181 shares of the shares reported as beneficially owned.
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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 at twelve the number of persons to be elected to the board
of directors at the Annual Meeting.
Pursuant to the NJBCA, 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 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.
Unless directed otherwise, the persons named on the enclosed proxy intend to
vote such proxy "for" the election of the listed nominees or, in the event of
the inability of any of the nominees to serve for any reason, for the election
of such other person as the board of directors may designate to fill the
vacancy. Directors of Bancorp hold office for one year and until their
respective successors have been duly elected and qualified.
The following information regarding Bancorp's nominees is based, in
part, on information furnished by the nominees.
Name Age Positions with Bancorp and Subsidiaries
------------------------------------------------- ------- --------------------------------------------------------------------
Vernon W. Hill, II.............................. 57 Chairman and President of Bancorp; Chairman and President of
Commerce NJ; Chairman of Commerce PA, Commerce Shore, Commerce
North and Commerce Delaware
Robert C. Beck.................................. 67 Secretary and Director of Bancorp and Commerce NJ
Jack R Bershad.................................. 72 Director of Bancorp and Commerce NJ
Joseph E. Buckelew.............................. 74 Director of Bancorp, Commerce NJ and Commerce Shore; President of
Commerce Shore; Vice Chairman of Commerce Insurance Services, Inc.
Donald T. DiFrancesco........................... 58 Director of Bancorp and Commerce NJ
Morton N. Kerr.................................. 72 Director of Bancorp and Commerce NJ
Steven M. Lewis................................. 53 Director of Bancorp and Commerce NJ
George E. Norcross, III......................... 47 Director of Bancorp and Commerce NJ; Chairman and Chief Executive
Officer of Commerce Insurance Services, Inc.
Daniel J. Ragone................................ 75 Director of Bancorp and Commerce NJ
William A. Schwartz, Jr......................... 62 Director of Bancorp and Commerce NJ
Joseph T. Tarquini, Jr.......................... 67 Director of Bancorp and Commerce NJ
Frank C. Videon, Sr............................. 80 Director of Bancorp and Commerce NJ
Mr. Hill, a director of Commerce NJ since 1973 and Bancorp since 1982,
has been Chairman and/or President of Commerce NJ since 1973 and Chairman and
President of Bancorp since 1982. Mr. Hill has been Chairman of Commerce PA from
June 1984 to June 1986 and from January 1987 to the present, Chairman of
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Commerce Shore since January 1989, Chairman of Commerce North since January 1997
and Chairman of Commerce Delaware since October 1999.
Mr. Beck, a director of Commerce NJ since 1973 and Bancorp since 1982,
has been Secretary of Commerce NJ since 1973 and Secretary of Bancorp since
1982. Mr. Beck has been a partner of the law firm of Parker, McCay & Criscuolo,
Marlton, New Jersey, since 1987.
Mr. Bershad, a director of Bancorp and Commerce NJ since 1987, is a
retired partner of the law firm of Blank Rome LLP, Philadelphia, Pennsylvania
and Cherry Hill, New Jersey, and was a partner in such firm from 1964 to 2002.
Mr. Buckelew, a director of Bancorp since November 1996, Commerce Shore
since 1993 and Commerce NJ since June 1997, has been Vice Chairman of Commerce
Insurance Services, Inc. since November 2000 and President of Commerce Shore
since 1998. Mr. Buckelew was Chairman of Commerce Insurance Services, Inc. from
November 1996 through November 2000.
Mr. DiFrancesco, a director of Bancorp and Commerce NJ since March
2002, was the Acting Governor of New Jersey from January 31, 2001 through
January 8, 2002, served as the President of the New Jersey Senate from 1992
through January 31, 2001 and has been a partner in the law firm of DiFrancesco,
Bateman, Coley, Yospin, Kunzman, Davis & Lehrer, P.C., Warren, New Jersey, from
1992 through January 31, 2001 and from January 8, 2002 to present.
Mr. Kerr, a director of Commerce NJ since 1973 and Bancorp since 1982,
has been Chairman of Markeim-Chalmers, Inc., Realtors, Cherry Hill, New Jersey,
a real estate company, since 1965 and Markeim-Chalmers, Inc., Appraisal Firm,
Cherry Hill, New Jersey, from 1965 through August 1, 2002 on which date Mr. Kerr
resigned from the appraisal company and divested his interest in such company.
Mr. Lewis, 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., Blue Bell, Pennsylvania, since 1986.
Mr. Norcross, a director of Bancorp and Commerce NJ since March 2002,
has been the Chairman and Chief Executive Officer of Commerce Insurance
Services, Inc. since November 2000. Mr. Norcross was the President and Chief
Executive Officer of Commerce Insurance Services, Inc. from November 1996
through November 2000.
Mr. Ragone, a director of Commerce NJ since 1981 and Bancorp since
1982, was the former Chairman and/or President of Ragone, Raible, Lacatena &
Beppel, C.P.A., Haddonfield, New Jersey, and its predecessor firms from 1960 to
1996.
Mr. Schwartz, a director of Bancorp and Commerce NJ since June 1997,
has been Chairman, President and Chief Executive Officer of U.S. Vision, Inc.,
Glendora, New Jersey, an optical retailer, or its predecessor firms, since 1967.
Mr. Tarquini, a director of Commerce NJ since 1973 and Bancorp since
1982, was the Chairman and/or President of The Tarquini Organization, A.I.A.,
Camden, New Jersey, from 1980 to 2000.
Mr. Videon, a director of Bancorp and Commerce NJ since June 1997, was
the owner of Frank C. Videon Funeral Home, Broomall, Pennsylvania, from 1982 to
2002. Mr. Videon currently serves as a consultant to the Frank C. Videon Funeral
Home.
Director Compensation
Directors of Bancorp and Commerce NJ were paid an annual fee of $20,000
plus $1,000 for each meeting of the board of directors and committee meeting
attended in 2002 and will be paid an annual fee of $25,000 and a
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meeting fee of $1,000 for each meeting of the board of directors and committee
meeting attended in 2003. When meetings of the board of directors of Bancorp and
Commerce NJ occur on the same day, only one fee is paid. In addition, beginning
in 2003, the Chairman of the Audit Committee and the Chairman of the Nominating
and Governance Committee will each receive an additional annual fee of $25,000
and the Chairman of the Compensation Committee will receive an additional annual
fee of $12,500. Directors of Commerce PA, Commerce Shore, Commerce North and
Commerce Delaware were paid a fee of $500 for each meeting of the board of
directors and committee meeting attended in 2002 and will be paid the same
meeting fee for each meeting of the board of directors and committee meeting
attended in 2003. No fees are paid to directors who are also officers of Bancorp
or its subsidiaries. Each director of Bancorp is provided with $100,000 of
permanent life insurance.
A retirement plan for Bancorp's directors who are not officers or
employees of Bancorp on the date their service as a Bancorp director ends
("outside director"), 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
15 of this proxy statement. This plan became effective January 1, 1993, as
amended.
1989 and 1998 Stock Option Plans 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 641,379 shares of Bancorp
common stock (as adjusted for all stock splits and dividends through April 1,
2003) 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. As of April 1,
2003, options to purchase 80,114 shares of Bancorp common stock (as adjusted for
all stock splits and stock dividends through April 1, 2003) were outstanding
under the 1989 Plan.
Effective June 29, 1998 (and as amended in 1998), Bancorp adopted the
1998 Plan which provides for the purchase of a total of not more than 1,102,500
shares of Bancorp common stock (as adjusted for all stock splits and dividends
through April 1, 2003) by members of the boards of directors of Bancorp or its
subsidiary corporations and other persons who are not employees of Bancorp or
its subsidiary corporations. Options may be granted under the 1998 Plan through
June 29, 2003. Under the 1998 Plan, members of the boards of directors of
Bancorp or 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 and other persons who are not employees
of Bancorp or its subsidiary corporations are entitled to receive options to
purchase Bancorp common stock. Options granted prior to January 1, 2003,
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 Bancorp, as such term is defined in the
1998 Plan.
9
Options granted after January 1, 2003 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 and then are exercisable ratably over
four years or (ii) a "change in control" of Bancorp. As of April 1, 2003,
options to purchase 1,100,124 shares of Bancorp common stock (as adjusted for
all stock splits and stock dividends through April 1, 2003) had been granted
under the 1998 Plan and 2,376 shares of Bancorp common stock (as adjusted for
all stock splits and stock dividends through April 1, 2003) were available for
issuance under the 1998 Plan. SEE "APPROVAL OF AMENDMENTS TO THE 1998 STOCK
OPTION PLAN FOR NON-EMPLOYEE DIRECTORS."
Both the 1989 Plan and 1998 Plan are administered by the board of
directors of Bancorp, including non-employee directors. Options granted under
the 1989 Plan and/or 1998 Plan are not "incentive stock options" as defined in
Section 422 of the Internal Revenue Code of 1986, as amended. Option prices are
intended to equal 100% of the fair market value of Bancorp's common stock on the
date of option grant. The board of directors of Bancorp, in their sole
discretion, may grant options under the 1998 Plan to non-employee directors or
to other persons who are not employees of Bancorp or its subsidiaries and
determine the number of shares subject to each option, the rate of option
exercisability, and subject to certain limitations, the option price and the
duration of the options. Unless terminated earlier by the option's terms,
options granted under the 1989 Plan and/or 1998 Plan expire ten years after the
date they are granted. For the year ended December 31, 2002, options to purchase
the following shares of Bancorp common stock were granted to the following
Bancorp directors under the 1998 Plan: Messrs. Beck, 5,000; Bershad, 5,000;
DiFrancesco, 5,000; Kerr, 5,000; Lewis, 5,000; Ragone, 5,000; Schwartz, 5,000;
Tarquini, 5,000; and Videon, 5,000. Such options were not exercisable in 2002.
Meetings and Committees of the Board of Directors
During 2002, there were 12 meetings of the board of directors of
Bancorp. The board of directors of Bancorp has established an Audit Committee,
an Oversight Committee, a Compensation Committee and a Nominating and Governance
Committee. In addition, each of Bancorp's five subsidiary banks, Commerce Bank,
N.A., Cherry Hill, New Jersey ("Commerce NJ"), Commerce Bank/Pennsylvania, N.A.,
Devon, Pennsylvania ("Commerce PA"), Commerce Bank/Shore, N.A., Toms River, New
Jersey ("Commerce Shore"), Commerce Bank/Delaware, N.A., Wilmington, Delaware
("Commerce Delaware") and Commerce Bank/North, Ramsey, New Jersey ("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 the financial statements, accounting
procedures and methods employed in connection with audit programs of Bancorp and
its wholly-owned subsidiary banks. It serves as the principal liaison between
the board of directors and Bancorp's independent auditors. This committee
engages Bancorp's independent auditors and approves the professional services
provided by the independent auditors. The Audit Committee also reviews the
independence of the Company's independent auditors. Daniel J. Ragone, Chairman,
Frank C. Videon, Sr. and Joseph T. Tarquini, Jr. are the current members of the
Audit Committee. During 2002, there were four meetings of the Audit Committee.
Bancorp's board of directors adopted an Audit Committee Charter on May 16, 2000,
a copy of which was attached as Appendix A to the proxy statement relating to
the 2001 Annual Meeting of Shareholders. Each member of the Audit Committee is
independent under applicable NYSE listing standards.
10
Oversight Committee
The Oversight Committee, which is comprised of independent,
non-employee directors, reviews compliance matters at Bancorp and its banking
subsidiaries, and reports to Bancorp's Audit Committee. Daniel J. Ragone, Frank
C. Videon, Sr., 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 2002, there were four meetings of the
Oversight Committee.
Compensation Committee
The Compensation Committee, which is comprised of independent,
non-employee directors, reviews and recommends the compensation of Bancorp's
Chief Executive Officer and the policies regarding compensation of Bancorp's and
its subsidiaries other executive officers, and administers Bancorp's Employee
Plans. Morton N. Kerr, Chairman, Daniel J. Ragone and Jack R Bershad are the
current members of the Compensation Committee. During 2002, there was one
meeting of the Compensation Committee. The report of the Compensation Committee
with respect to 2002 compensation is set forth on page 20 of this proxy
statement.
Nominating and Governance Committee
In August 2002, Bancorp established a Nominating and Governance
Committee, which is comprised of independent non-employee directors. The
Nominating and Governance Committee considers and recommends to the board of
directors nominees for election to the board of directors. The committee also is
charged with developing corporate governance guidelines for Bancorp and
recommending to the board of directors corporate governance practices generally.
The committee, like the full board and management, is aware of the significance
of the recently enacted Sarbanes-Oxley Act. The committee is monitoring the
rules and guidelines currently being issued by the SEC and the NYSE. Jack R
Bershad, Chairman, Frank C. Videon, Sr. and Joseph T. Tarquini, Jr. are the
current members of the Nominating and Governance Committee. The Nominating and
Governance Committee will consider nominees recommended by Bancorp shareholders.
Any recommendations should be submitted in writing to the Secretary at Bancorp's
corporate offices. During 2002, there were four meetings of the Nominating and
Governance Committee.
Attendance
In 2002, each of Bancorp's directors and nominees for director attended
more than 75% of the total number of meetings of the board of directors and all
committees of which they were members of Bancorp and its subsidiary banks, as
the case may be.
11
REPORT OF THE AUDIT COMMITTEE
The Audit Committee met with management to review and discuss the
audited financial statements. The Audit Committee also conducted discussions
with Bancorp's independent auditors, Ernst & Young LLP, regarding the matters
required by the Statement on Auditing Standards No. 61. As required by
Independence Standards Board Standard No. 1, "Independence Discussion with Audit
Committees," the Audit Committee has discussed with and received the required
written disclosures and a confirming letter from Ernst & Young LLP regarding its
independence and has discussed with Ernst & Young LLP its independence. The
Audit Committee has also considered whether the provision of non-audit services
by the independent auditors to Bancorp is compatible with maintaining the
auditors' independence. Based upon the review and discussions referred to above,
the Audit Committee recommended to the board of directors that the audited
financial statements be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2002.
This Audit Committee Report and information regarding the Audit
Committee contained in the paragraph preceding the Report shall not be deemed
incorporated by reference in any document previously or subsequently filed with
the SEC that incorporates by reference all or any portion of this proxy
statement, except to the extent that Bancorp specifically requests that the
Report or information be specifically incorporated by reference. The Audit
Committee's considerations and discussions referred to above do not assure that
the audit of Bancorp's financial statements for the year ended December 31, 2002
has been carried out in accordance with generally accepted auditing standards,
that the financial statements are presented in accordance with generally
accepted accounting principles or that Bancorp's auditors are in fact
"independent."
In July 2002, Congress passed the Sarbanes-Oxley Act, a wide-ranging
law that requires, among other things, the adoption of enhanced corporate
governance procedures by publicly held companies. As a result of the Act, the
particular duties and responsibilities of the Audit Committee have considerably
expanded. The committee has reviewed all provisions of the Act that pertain to
it and to the accounting and auditing function of Bancorp generally, and is
actively monitoring the implementing regulations and interpretative guidelines
that are being issued under the Act by the SEC and the NYSE. When this
regulatory implementation process has been completed, the committee will
recommend to the full board of directors appropriate changes to the committee's
charter, clarifying both new and pre-existing duties.
AUDIT COMMITTEE
Daniel J. Ragone
Frank C. Videon, Sr.
Joseph T. Tarquini, Jr.
12
SENIOR OFFICERS
The senior officers of Bancorp, as of April 1, 2003, are set forth
below.
Positions with Bancorp and/or its Subsidiaries
Name Age Principal Occupation
----------------------------------------------------------------------------------------------------------------------
Vernon W. Hill, II.......................... 57 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; Chairman of Commerce Shore
since 1989, Commerce North since 1997, and Commerce
Delaware since 1999.
Peter M. Musumeci, Jr....................... 52 Executive Vice President and Senior Credit Officer of
Bancorp and Commerce NJ since 1986; Treasurer and
Assistant Secretary of Bancorp since 1984; Director of
Commerce Shore since 1989.
Robert D. Falese, Jr........................ 56 Executive Vice President and Senior Loan Officer of
Bancorp and Commerce NJ since 1992.
Dennis M. DiFlorio.......................... 49 Executive Vice President of Bancorp and Commerce NJ
since January 1996; Director of Commerce North since
1997.
C. Edward Jordan, Jr........................ 59 Executive Vice President of Bancorp and Commerce NJ
since 1982.
Douglas J. Pauls............................ 44 Chief Financial Officer of Bancorp since March 2002;
Senior Vice President of Bancorp since January 1999.
Prior thereto Mr. Pauls was the Chief Accounting
Officer of Bancorp from October 1995 to March 2002.
13
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 and/or its
subsidiaries' other four most highly compensated executive officers during 2002.
Annual Compensation Long Term Compensation
------------------------------------------------------------- -------------------------------
Securities
Underlying All Other
Other Annual Stock Option Compensation
Name/Title Year Salary Bonus Compensation(1) Grants (2) (3)
-------------------------------- ------- ----------- ---------- ------------------ ------------- ------------
Vernon W. Hill, II............ 2002 $1,500,000 $750,000 $154,339 150,000 $16,249
Chairman and President 2001 1,250,000 500,000 123,614 200,000 33,116
of Bancorp and Commerce 2000 800,000 250,000 93,020 30,072
NJ; Chairman of Commerce PA,
Commerce Shore, Commerce
North, and Commerce
Delaware
Peter M. Musumeci............. 2002 $400,000 $100,000 40,000 $11,206
Executive Vice President and 2001 360,000 100,000 50,000 22,167
Senior Credit Officer of 2000 330,000 75,000 19,001
Bancorp and Commerce NJ;
Treasurer and Assistant
Secretary of Bancorp
Robert D. Falese, Jr.......... 2002 $550,000 150,000 75,000 $21,527
Executive Vice President and 2001 500,000 150,000 100,000 17,901
Senior Loan Officer of 2000 375,000 100,000 14,414
Bancorp and Commerce NJ
Dennis M. DiFlorio............ 2002 $550,000 $150,000 75,000 $9,843
Executive Vice President of 2001 500,000 150,000 100,000 8,174
Bancorp and Commerce NJ 2000 375,000 100,000 4,783
George E. Norcross, III 2002 $750,000 $300,000 $76,127 100,000 $14,130
Chairman and Chief Executive 2001 600,000 200,000 100,000 7,004
Officer of Commerce 2000 500,000 150,000 3,349
Insurance Services, Inc.
-----------------------------------
(1) The total in this column reflects personal use of a company car (for 2002,
Mr. Hill, $3,020; Mr. Norcross $4,800; for 2001, Mr. Hill, $4,518; and for
2000, Mr. Hill, $4,518), expense allowances (for 2002, Mr. Hill, $147,917;
Mr. Norcross, $69,167; for 2001, Mr. Hill, $117,086; and for 2000, Mr.
Hill, $86,632) and country club dues (for 2002, Mr. Hill, $3,402; Mr.
Norcross $2,160; for 2001, Mr. Hill, $2,010; and for 2000, Mr. Hill,
$1,870). 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 for Mr. Hill and Mr. Norcross in 2002.
(2) The stock option grants reflected in this column have been adjusted for the
2 for 1 stock split declared on November 21, 2001. The original grant was
adjusted based on the unexercised option shares outstanding on the date of
the stock split.
(3) The totals in this column reflect (i) premiums on life insurance (for 2002,
Mr. Hill, $3,096; Mr. Musumeci, $1,383; and Mr. Norcross, $9,130; for 2001,
Mr. Hill, $21,446; Mr. Musumeci, $12,540; and Mr. Norcross, $3,130; and for
2000, Mr. Hill, $22,129; Mr. Musumeci, $12,851; and Mr. Norcross, $3,130);
(ii) long-term disability policies (for 2002, Mr. Hill, $8,153; Mr.
Musumeci, $6,208; Mr. Falese, $16,527; and Mr. DiFlorio, $4,843; and; for
2001, Mr. Hill, $7,796; Mr. Musumeci, $5,800; Mr. Falese, $14,027; and Mr.
DiFlorio, $4,300; and for 2000, Mr. Hill, $7,724; Mr. Musumeci, $5,931; Mr.
Falese, $14,195; and Mr. DiFlorio, $4,564); (iii) contributions to
Bancorp's ESOP (in 2001, $165 each for all five individuals; and in 2000,
$219 each for all five individuals); and (iv) contributions to Bancorp's
401(k) (for 2002, Mr. Hill, $5,000; Mr. Musumeci, $3,615; Mr. Falese,
$5,000; Mr. DiFlorio, $5,000; and Mr. Norcross, $5,000; and for 2001, Mr.
Hill, $3,709; Mr. Musumeci, $3,662; Mr. Falese, $3,709; Mr. DiFlorio,
$3,709; and Mr. Norcross, $3,709).
14
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 Mr. Hill's employment agreement shall be automatically
renewed and extended for a new five year term unless either Bancorp or Mr. Hill
gives the other at least 90 days prior written notice of their desire to
terminate Mr. Hill's employment agreement, in which event the term will have
four years remaining.
Under the terms of Mr. Hill's employment agreement, Mr. Hill's "base
salary" shall not be less than $2,000,000. Mr. Hill's 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.
Mr. Hill's employment agreement requires Bancorp to compensate Mr. Hill
for the balance of the term of his employment agreement at a rate equal to
seventy percent of his annual base salary if he becomes permanently disabled (as
defined in Mr. Hill's 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 24 months immediately preceding his death.
Mr. Hill's employment agreement allows Mr. Hill to terminate his
employment with Bancorp upon a change in control of Bancorp (as defined in Mr.
Hill's 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 24 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. Mr. Hill's 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. Musumeci, Falese, DiFlorio and
Norcross are substantially similar to that of Mr. Hill's except that: Mr.
Musumeci will serve as Executive Vice President and 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, Mr. DiFlorio will serve as
Executive Vice President of Bancorp and Commerce NJ, and Mr. Norcross will serve
as Chief Executive Officer of Commerce Insurance Services, Inc. The term of each
employment agreement is three years and the lump sum death benefit is in each
case equal to two times the respective average annual base salary in effect
during the 24 month period preceding death. Mr. Musumeci's "base salary" under
his employment agreement is $450,000, Mr. Falese's "base salary" under his
employment agreement is $650,000, Mr. DiFlorio's "base salary" under his
employment agreement is $650,000, Mr. Norcross' "base salary" under his
employment agreement is $850,000.
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 3,901,811 shares of Bancorp common stock (as adjusted
for all stock splits and stock dividends through April 1, 2003) by officers and
key employees of Bancorp or its subsidiary corporations. 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
15
"Code"). No further options may be granted under the 1984 Plan. As of April 1,
2003, options to purchase 225,292 shares of Bancorp common stock (as adjusted
for all stock splits and stock dividends through April 1, 2003) were 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 3,348,579 shares of Bancorp common stock (as adjusted
for all stock splits and stock dividends through April 1, 2003) by officers and
key employees of Bancorp or its subsidiary corporations. 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 April 1,
2003, options to purchase 1,284,471 shares of Bancorp common stock (as adjusted
for all stock splits and stock dividends through April 1, 2003) were 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 17,235,156 shares of Bancorp common stock (as adjusted
for all stock splits and stock dividends through April 1, 2003) by officers and
key employees of Bancorp or its subsidiary corporations. Pursuant to the 1997
Plan, stock options may be granted which qualify under the Code as incentive
stock options as well as stock options that do not qualify as incentive stock
options. All officers and key employees of Bancorp or any current or future
subsidiary corporation are eligible to receive options under the 1997 Plan. As
of April 1, 2003, options to purchase 14,197,174, shares of Bancorp common stock
(as adjusted for all stock splits and stock dividends through April 1, 2003) had
been granted under the 1997 Plan and 3,037,442 shares of Bancorp common stock
(as adjusted for all stock splits and stock dividends through April 1, 2003)
were available for issuance under the 1997 Plan. 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 and its subsidiary corporations 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 Compensation 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 Compensation
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. In addition, 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 Compensation Committee may, in its
discretion, modify or amend any of the option terms herein described, provided
that if an incentive stock 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 Bancorp common stock as of the date the option is granted.
16
Options granted prior to January 1, 2003 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. Options granted after January 1, 2003 pursuant to the Employee Plans are
not exercisable until one year after the date of grant and then are exercisable
ratably over four years. 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 Compensation 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 Compensation 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, the
option is exercisable only by the optionee and only while employed by Bancorp or
a subsidiary or within (i) three months after the optionee's retirement, or (ii)
three months after the optionee 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, the optionee's
options may be exercised within twelve months of the optionee's retirement date.
If an optionee dies within a period during which the optionee's option could
have been exercised by the optionee, the option may be exercised within one year
of the optionee's death (unless the option earlier terminates) by those entitled
to do so under the optionee's will or the laws of descent and distribution, but
only to the extent the option was exercisable by the optionee immediately prior
to the optionee's 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
Compensation Committee or the board of directors, non-qualified stock options
are transferable.
During 2002, Bancorp granted stock options to purchase an aggregate of
1,963,320 shares of Bancorp's common stock (as adjusted for all stock splits and
stock dividends through April 1, 2003) at an exercise price of $40.40 per share
(as adjusted for all stock splits and stock dividends through April 1, 2003)
under the 1997 Plan. During 2002, a total of 1,014,391 options were exercised
under the Employee Plans.
17
Stock Option Tables
The following table sets forth certain information regarding options
granted during 2002 to each of the executive officers named in the Summary
Compensation Table.
Individual Option Grants in Fiscal 2002 Grant Date Value
-------------------------------------------------------------- -----------------------------
Number of % of Total s
Securities Options Black-Scholes
Underlying Granted to Grant Date
Options Employees in Exercise Present Black-Schole
Name Granted Fiscal Year Price Expiration Date Value(1) Value(1)
---------------------------- ------- ----------- -------------- ----------------- ------------- ------------
Vernon W. Hill, II.......... 150,000 7.6% $ 40.12 February 4, 2012 $1,555,500 $10.37
Peter M. Musumeci, Jr....... 40,000 2.0% 40.12 February 4, 2012 414,800 10.37
Robert D. Falese, Jr........ 75,000 3.8% 40.12 February 4, 2012 10.37
777,750
Dennis M. DiFlorio.......... 75,000 3.8% 40.12 February 4, 2012 10.37
777,750
George E. Norcross, III..... 100,000 5.1% 40.12 February 4, 2012 1,037,000 10.37
----------------------------
(1) In accordance with SEC 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
expected volatility of .304, risk-free rate of return of 4.41%, dividend
yield of 2.50%, and weighted average expected life of 4.75 years. The real
value of the options in this table depends upon the actual performance of
Bancorp's common stock during the applicable period.
The following table sets forth certain information regarding individual
exercises of stock options during 2002 by each of the executive officers named
in the Summary Compensation Table.
AGGREGATED STOCK OPTION EXERCISES IN 2002 AND
YEAR-END STOCK OPTION VALUES
Shares Number of Securities Underlying Value of Unexercised In-the-
Acquired on Value Unexercised Stock Options at Money Stock Options at Year-end
Name Exercise Realized Year-End 2002(1) 2002(2)
------------------------- ------------ ------------- -------------------------------- -------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Vernon W. Hill, II 0 $0 2,021,454 0 $51,134,904 $0
Peter M. Musumeci, Jr. 20,778 710,295 238,266 0 4,348,330 0
Robert D. Falese, Jr. 34,780 1,227,784 502,248 0 10,373,119 0
Dennis M. DiFlorio 0 0 644,056 0 15,665,491 0
George E. Norcross, III 0 0 516,808 0 9,179,358 0
----------------------------
(1) Includes stock options held as of December 31, 2002 and which were
exercisable on or within 60 days of December 31, 2002.
(2) Represents the difference between $43.19, the closing price of Bancorp
common stock on December 31, 2002, as reported on the NYSE, and the
exercise price of in-the-money options, multiplied by the number of
exercisable or unexercisable options held, as applicable.
Employee Stock Ownership Plan
Effective January 1, 2002, the Commerce Bancorp, Inc. Employee Stock
Ownership Plan ("ESOP") was merged into the Commerce Bancorp, Inc. 401(k)
Retirement Plan ("401(k) Plan").
As of December 31, 2002, the ESOP Trust held of record 1,630,000 shares
of Bancorp common stock (as adjusted for all stock splits and stock dividends
through April 1, 2003). In connection with the merger, shares of Bancorp common
stock were allocated to each of the individual participant accounts in the
401(k) Plan.
18
For the Plan Year ended December 31, 2002, Bancorp made no contribution
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 equal to a 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 and/or its
subsidiaries 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, Musumeci, Falese, DiFlorio
and Norcross have been designated to participate in the SERP.
Certain Transactions
Certain directors and executive officers of Bancorp and its
subsidiaries and 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 Bancorp's
subsidiary banks. 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.
Currently, the board of directors of Bancorp approves all related party
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. Going forward,
Bancorp will comply with any and all approval requirements adopted by the NYSE
related to transactions between Bancorp and its officers, directors and other
affiliates.
Mr. Kerr was the Chairman of Markeim-Chalmers, Inc., Appraisal Firm
which in 2002 received approximately $289,000 in fees for real estate related
services, primarily real estate appraisals. In August 2002, Mr. Kerr severed his
relationship with this appraisal firm.
Messrs. Beck and DiFrancesco are members and Mr. Bershad was a member
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.
Management believes that the real estate related fees and legal fees
paid for the foregoing services is comparable to those which they would have
paid to non-affiliated parties for similar services.
Bancorp leases the land on which it has constructed seventeen branch
offices from limited partnerships in which Mr. Hill is a partner or in which a
corporation owned by Mr. Hill is a partner, or from the Hill Family Trust under
separate operating lease agreements (with purchase options). The aggregate
annual rental under these leases for 2002 was approximately $1.1 million. These
leases expire periodically beginning 2004 but are renewable through 2040. In
August 2002, Mr. Hill agreed not to participate in any future real estate
transactions involving Bancorp and its subsidiaries.
During the first quarter of 2002, Bancorp purchased all of the limited
partnership interests of a limited partnership comprised of certain of the
directors of Bancorp including Messrs. Bershad, Hill and Lewis and a corporation
owned by Mr. Hill. Prior thereto, Bancorp leased land to the limited partnership
and, in accordance with the provision of a land lease, the limited partnership
constructed and owned an office building located on the land that was leased to
Commerce PA as a branch facility.
Management believes that the rental paid or received for each of the
foregoing leases and the price paid for the limited partnership interests is and
was comparable to the rental which they would have to pay to or would
19
have received from, as the case may be, and that the option prices and the price
paid for the limited partnership interests are and were 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 2002, Bancorp subsidiaries obtained architectural design and
facilities management services from a business corporation of which Shirley
Hill, wife of Mr. Hill, is a principal shareholder and the president. Bancorp
spent approximately $4.6 million in 2002 for such services and related costs.
Additionally, during 2002 this business received additional revenues for project
management of approximately $3.5 million on furniture and facility purchases
made directly by Bancorp's subsidiary banks. These expenditures related
primarily to the furnishing and related design services of the opening and/or
refurbishing of certain offices during the period. Management believes such
expenses were substantially equivalent to those that would have been paid to
unaffiliated companies for similar furniture and services. Bancorp has utilized
the design and facilities services of Mrs. Hill's company for over 25 years. In
the fall of 2002, the Board approved the transfer, without cost, into Bancorp of
the project management services which Mrs. Hill's company previously provided to
Bancorp. Mrs. Hill's company will continue to provide architectural and design
services on a fee basis, subject to the Audit and Oversight Committees' prior
review and approval.
During 2002, Bancorp and its subsidiaries utilized the facilities of
Galloway National Golf Club in the amount of approximately $451,000. Mr. Hill is
a principal equity holder of Galloway National Golf Club. Management believes
such expenses were substantially equivalent to those that would have been paid
to unaffiliated companies for utilization of their facilities.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation 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. Management
recommendations of base salary levels, annual performance bonuses and stock
option grants are reviewed by the Compensation 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.
Bancorp has employment agreements with Messrs. Hill, Musumeci, Falese,
DiFlorio and Norcross which were effective January 1, 1992 for Messrs. Hill, and
Musumeci, January 1, 1998 for Messrs. Falese and DiFlorio, and October 1, 1996
for Mr. Norcross. See "EXECUTIVE COMPENSATION -- Employment Agreements."
Base salary levels for Bancorp's executive officers are competitively
set relative to companies in peer businesses. In reviewing base salaries, the
Compensation 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
Bancorp's common stock. In granting stock options, the Compensation Committee
takes into account prior stock option grants and considers the executive's level
of compensation and past contributions to Bancorp.
20
Vernon W. Hill, II was Bancorp's Chairman and President (chief
executive officer) for 2002. 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 Compensation 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.
COMPENSATION COMMITTEE
Morton N. Kerr
Daniel J. Ragone
Jack R Bershad
Compensation Committee Interlocks and Insider Participation
The Compensation Committee members are Morton N. Kerr, Daniel J. Ragone
and Jack R Bershad. No person who served as a member of the Compensation
Committee during 2002 was a current or former officer or employee of Bancorp or,
except as disclosed below, engaged in certain transactions with Bancorp required
to be disclosed by regulations of the SEC. Additionally, there were no
compensation committee "interlocks" during 2002, which generally means that no
executive officer of Bancorp served as a director or member of the compensation
committee of another entity, one of whose executive officers served as a
director or member of the Compensation Committee of Bancorp.
Mr. Kerr was the Chairman of Markeim-Chalmers, Inc., Appraisal Firm
which in 2002 received approximately $289,000 in fees for real estate related
services, primarily real estate appraisals. In August 2002, Mr. Kerr severed his
relationship with this appraisal firm.
Mr. Bershad was 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
"EXECUTIVE COMPENSATION -- Certain Transactions."
21
FINANCIAL PERFORMANCE
The graph below shows a comparison of the cumulative return experienced
by Bancorp's shareholders over the years 1998 through 2002, the S&P Mid-Cap Bank
Index and the S&P 500 Index assuming an investment of $100 in each at December
31, 1997 and the reinvestment of dividends.
Comparison of Five Year Cumulative Total Return
Commerce Bancorp, S&P Mid-Cap Bank Index, S&P 500 Index
Year-end 1997 to Year-end 2002
The beginning and end data points used for the performance graph are
listed below.
[GRAPH OMITTED - DATA POINTS AS FOLLOWS]
S&P Mid-Cap
December 31, CBH Bank Index S&P 500
------------ -------- -------------- -----------
1997 100.0 100.0 100.0
1998 138.2 103.4 128.6
1999 114.0 86.4 155.6
2000 206.8 104.5 141.5
2001 241.7 112.6 124.7
2002 268.9 119.3 97.1
Previously, Bancorp used the S&P Small Regional Bank Index for
comparison purposes. However, the S&P Small Regional Bank Index is no longer
available. As a result, Bancorp replaced the S&P Small Regional Bank Index with
the S&P Mid-Cap Bank Index.
22
APPROVAL OF THE AMENDMENTS TO THE 1998
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
At the Annual Meeting you are being asked to approve amendments to the
1998 Plan that will (i) increase the number of shares issuable under the 1998
Plan by 500,000 shares to an aggregate of 1,602,500 shares (as adjusted for all
stock splits and stock dividends through April 1, 2003) and (ii) to extend the
time period for which options may be granted under this plan by five years. The
board of directors approved the amendments to the 1998 Plan on April 15, 2003
subject to shareholder approval at the Annual Meeting. The 1998 Plan is
discussed in "ELECTION OF DIRECTORS -- 1989 and 1998 Stock Option Plans for
Non-Employee Directors."
General
In 1998, Bancorp adopted, and the shareholders approved, the 1998 Plan.
Bancorp's board of directors believes that in order to enable Bancorp and its
subsidiary corporations to continue to attract, retain and motivate members of
their respective boards of directors who are not also employees and other
persons who are not their employees, it is in the best interest of Bancorp and
its shareholders to provide to members of the board of directors of Bancorp or
its subsidiary corporations who are not also employees and other persons who are
not employees of Bancorp or its subsidiary corporations, through the granting of
stock options, the opportunity to participate in the value and/or appreciation
in value of Bancorp's common stock. The board of directors has found that the
granting of options under the 1998 Plan has proven to be a valuable tool in
attracting, retaining, and compensating non-employee directors of the respective
boards of Bancorp and its subsidiary corporations and other persons who are not
employees of Bancorp or its subsidiary corporations.
Currently, 2,376 shares of Bancorp common stock (as adjusted for all
stock splits and stock dividends through April 1, 2003) are available for
issuance under the 1998 Plan. Options may be granted under the 1998 Plan though
June 29, 2003. Bancorp's board of directors approved the increase in the number
of shares issuable under the 1998 Plan to an aggregate of 1,602,500 shares of
Bancorp common stock (as adjusted for all stock splits and stock dividends
through April 1, 2003) and the extension of the time period for which options
may be granted under the 1998 Plan to June 29, 2008, to provide additional time
to make grants and sufficient shares to fund future awards.
In 2002, options to purchase 124,500 shares of Bancorp common stock (as
adjusted for all stock splits and stock dividends through April 1, 2003) were
granted under the 1998 Plan. For information concerning grants of options
pursuant to the 1998 Plan in 2002 to Bancorp's directors, see "ELECTION OF
DIRECTORS -- 1989 and 1998 Stock Option Plans for Non-Employee Directors." Of
the options granted in 2002, no options were granted pursuant to the amendments
to the 1998 Plan described above. No determination has been made with respect to
the grant of options in 2003 authorized by the amendments set forth herein.
A summary of certain federal income tax consequences associated with
the 1998 Plan is set forth in " -- Federal Income Tax Consequences of the 1998
Plan."
Bancorp is seeking shareholder approval of the amendments to the 1998
Plan set forth herein to satisfy a NYSE requirement that requires companies
whose shares are listed on the NYSE to obtain shareholder approval of amendments
to such stock plans.
Required Vote
The affirmative vote of the holders of a majority of the votes cast,
provided that the total vote cast on the amendments to the 1998 Plan represents
over 50% in interest of all securities entitled to vote on such amendments, is
necessary to approve the amendments to the 1998 Plan. For purposes of
determining the votes cast on the proposal to amend the 1998 Plan, under
applicable NYSE rules, votes "FOR," "AGAINST" and "ABSTENTIONS" are included.
Abstentions will have the legal effect of an "AGAINST" vote. Brokers non-votes
will not be treated as votes cast.
23
The board of directors recommends that you vote "FOR" approval of the
amendments to the 1998 Plan.
On April 1, 2003, the last sale price of Bancorp common stock was
$39.70 per share as reported on the NYSE.
Federal Income Tax Consequences of the 1998 Plan
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 or short-term capital gain or loss depending
upon their holding period for such stock. 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.
EQUITY COMPENSATION PLAN INFORMATION
The following table details information regarding Bancorp's existing
equity compensation plans as of December 31, 2002:
(a) (b) (c)
Number of securities remaining
Number of securities to Weighted-average exercise available for future issuance
be issued upon exercise price of outstanding under equity compensation plans
of outstanding options, options, warrants and (excluding securities reflected
warrants and rights rights in column (a)) (1)
-------------------------- --------------------------- -------------------------------
Equity compensation plans
approved by security holders 11,048,553 $23.71 5,389,520
-------------------------- --------------------------- --------------------------------
Total 11,048,553 $23.71 5,389,520
========================== =========================== ================================
-------------------------------------
(1) Does not include the effect of the proposed increase of 500,000 shares under
the 1998 Plan described herein.
24
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended
("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 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, 2002. 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. The Audit Committee has
selected Ernst & Young LLP to be Bancorp's independent auditors for 2003. The
selection of Bancorp's independent auditors is not being submitted to
shareholders because there is no legal requirement to do so. Representatives of
Ernst & Young LLP are expected to be present at the Annual Meeting and to have
the opportunity to make a statement, if they desire to do so, and to be
available to respond to appropriate questions.
Aggregate fees(1) for professional services rendered for Bancorp by Ernst &
Young LLP as of or for the years ended December 31, 2002 and 2001 were:
2002 2001
----------- -----------
Audit Fees.................................... $817,000 $615,000
Audit Related Fees............................ 17,500 120,000
Tax Fees...................................... 61,500 90,000
All Other Fees................................ 45,000 50,000
Total......................................... $941,000 $875,000
=========== ===========
The Audit fees for the years ended December 31, 2002 and 2001, respectively,
were for professional services rendered for the audits of the consolidated
financial statements of Bancorp, quarterly reviews, issuance of consents, and
review of registration statements filed with the SEC.
Audit Related fees for the years ended December 31, 2002 and 2001, were for
employee benefit plan audits, consultations concerning financial accounting and
reporting standards, and non-statutory compliance reports.
Tax fees for the years ended December 31, 2002 and 2001, were for services
performed in connection with corporate tax services other than those directly
related to the audit of the income tax accrual.
____________________________
(1) The aggregate fees included in Audit are fees billed for the fiscal years
for the audit of the registrant's annual financial statements and reviews
of financial statements and statutory and regulatory filings or
engagements. The aggregate fees included in each of the other categories
are fees billed in the fiscal years.
The Audit Committee has considered and determined that the services
provided by Ernst & Young LLP are compatible with maintaining Ernst & Young
LLP's independence.
SHAREHOLDER PROPOSALS
Pursuant to the proxy rules promulgated under the Exchange Act, Bancorp
shareholders are notified that the deadline for providing Bancorp timely notice
of any shareholder proposal to be submitted outside of the Rule 14a-8 process
for consideration at Bancorp's Annual Meeting to be held in 2004 (the "2004
Annual Meeting")
25
will be March 4, 2004. As to all such matters which Bancorp does not have notice
on or prior to March 4, 2004, discretionary authority shall be granted to the
persons designated in Bancorp's proxy related to the 2004 Annual Meeting to vote
on such proposal.
A shareholder proposal for the 2004 Annual Meeting must be submitted to
Bancorp at its headquarters located at the Commerce Atrium, 1701 Route 70 East,
Cherry Hill, NJ 08034, Attention: C. Edward Jordan, Jr., by December 20, 2003 to
receive consideration for inclusion in Bancorp's proxy materials relating to the
2004 Annual Meeting. Any such proposal must also comply with the proxy rules
under the Exchange Act, including Rule 14a-8.
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 ON FORM 10-K AS FILED WITH THE SEC
FOR THE YEAR ENDED DECEMBER 31, 2002 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
26
APPENDIX A
FORM OF PROXY
PROXY
COMMERCE BANCORP, INC.
This proxy is solicited on behalf of the Board of Directors of 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 May 20, 2003, or any postponement or adjournment
thereof. The undersigned hereby directs this proxy to be voted as indicated on
the reverse side.
DISCRETIONARY AUTHORITY IS CONFERRED BY THIS PROXY AS TO CERTAIN MATTERS
DESCRIBED IN THE COMPANY'S PROXY STATEMENT.
(Continued, and to be marked, dated and signed, on the other side)
Address Change/Comments (Mark the corresponding box on the reverse side)
-------------------------------------------------------------------------
FOLD AND DETACH HERE. Please Mark [ ]
Here for Address
Change or Comments
SEE REVERSE SIDE
UNLESS YOU SPECIFY OTHERWISE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE
NOMINEES AS DIRECTED AND "FOR" THE AMENDMENTS TO THE 1998 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS.
1. For the election of the following nominees to the Board of Directors for
the ensuing year:
01 Vernon W. Hill, II, 02 Robert C. Beck, 03 Jack R Bershad,
04 Joseph E. Buckelew, 05 Donald T. DiFrancesco, 06 Morton N. Kerr,
07 Steven M. Lewis, 08 George E. Norcross, III, 09 Daniel J. Ragone,
10 William A. Schwartz, Jr., 11 Joseph T. Tarquini, Jr.,
12 Frank C. Videon, Sr.
FOR all nominees listed [ ] WITHHOLD AUTHORITY [ ]
above (except as to vote for all nominees
marked to the contrary) listed above
To withhold authority to vote for any individual nominee, write the nominee's
name in the space provided below.
--------------------------------------------------------------------------------
2. For the approval of the amendments to the 1998 Stock Option Plan for
Non-Employee Directors, as more fully described in the accompanying proxy
statement.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion, upon other matters as may properly come before the
meeting or any adjournments thereof.
Each of such attorneys and proxies, or their substitutes at the
meeting, or any adjournment 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 a copy of the notice of such meeting and
proxy statement relating thereto and the 2002 Annual Report to Shareholders.
Shareholder(s) Shareholder(s) Printed Name of
Signature Signature Shareholder(s) Date
_____________________ _______________________ ___________________ ________
NOTE: Signature(s) should correspond with name appearing on stock
certificate(s). When signing in a fiduciary or representative capacity, sign
full title as such. When more than one owner, each should sign.
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
ANNUAL MEETING OF SHAREHOLDERS
OF
COMMERCE BANCORP, INC.
Tuesday, May 20, 2003
5:30 p.m.
COMMERCE UNIVERSITY BUILDING
17000 HORIZON WAY
MT. LAUREL, NEW JERSEY
(856) 751-9000
APPENDIX B
COMMERCE BANCORP, INC.
1998 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS, AS AMENDED
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
other persons who are not employees of the Companies and to provide additional
incentive to members of their respective Boards of Directors other persons who
are not their employees 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 shareholders.
2. Aggregate Number of Shares:
400,000* shares of the Company's common stock, par value $1.00 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.
* 1,602,500 shares (as adjusted for all stock splits and dividends through April
1, 2003) of the Company's Common Stock will be the aggregate number of shares
which may be issued under this Plan if the proposed amendments to this Plan are
adopted by the Company's shareholders at the 2003 Annual Meeting of
Shareholders.
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 (i) Directors
who at the time of such grant are not an employee of the Company or any Company
subsidiary corporation or (ii) other persons who are not employees of the
Company or any Company subsidiary. 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 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
shareholders 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 shareholder 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 shareholder approval.
**Ten years if the proposed amendments to this Plan are adopted by the Company's
shareholders at the 2003 Annual Meeting of Shareholders.
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 shareholder approval, provided such options shall not be exercisable
until shareholder approval is obtained.
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 shareholder(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.
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 $1.00 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 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 shareholder 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 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)