[Commerce Bancorp logo]
Dividend Reinvestment and Stock Purchase Plan
5,000,000 shares of Common Stock
This prospectus describes the Commerce Bancorp, Inc. Dividend Reinvestment
and Stock Purchase Plan, referred to as the Plan. Commerce Bancorp wanted to
amend its currently existing Dividend Reinvestment and Stock Purchase Plan to
modernize it and provide new enhanced features. The Plan offers holders of
Commerce Bancorp equity securities the following:
o a simple and convenient method of investing cash dividends in
additional shares of Commerce Bancorp common stock; and
o the opportunity to purchase additional shares of Commerce Bancorp
common stock by making voluntary cash payments of $100 to $6,000
per month, this $6,000 maximum monthly purchase amount is subject
to change, see page 3.
Some of the significant features of the Plan are as follows:
o participants do not have to pay trading fees or service charges on
purchases made through the Plan;
o participants purchase the Commerce Bancorp common stock at a 3%
discount, this 3% discount is subject to change, see page 4;
o holders of shares currently enrolled in Commerce Bancorp's
Dividend Reinvestment and Stock Purchase Plan will automatically
be enrolled in this amended Plan;
o participation in the Plan is entirely voluntary, and participants
may terminate their participation at any time; and
o participants can obtain information and perform certain
transactions on their account on-line via Investor
ServiceDirect(R). See page 5 for information on how to access
Investor ServiceDirect.
Commerce Bancorp cannot estimate the net proceeds it will receive from the
sale of its common stock in connection with the Plan. The amount of the net
proceeds which Commerce Bancorp will receive will depend upon the following:
o the market price of Commerce Bancorp common stock;
o the extent of shareholder participation in the Plan; and
o other factors.
Commerce Bancorp common stock trades on the New York Stock Exchange under
the symbol "CBH".
The securities offered hereby are not savings accounts, deposits or other
obligations of a bank or savings association and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or has passed upon
the accuracy or adequacy of this prospectus. Any representation to the contrary
is a criminal offense.
The date of this prospectus is June 5, 2003.
Table of Contents
Summary....................................................................1
The Plan...................................................................3
Use of Proceeds...........................................................19
Description of Commerce Bancorp's Capital Stock...........................19
Dividends.................................................................22
Legal Matters.............................................................23
Experts...................................................................23
Where You Can Find More Information.......................................24
You should rely only on the information incorporated by reference or
provided in this prospectus. Commerce Bancorp has not authorized anyone else to
provide you with different information. Commerce Bancorp will not make an offer
of these shares in any state where the offer is not permitted. You should not
assume that the information in this prospectus is accurate as of any date other
than the date on the front page of this prospectus.
Summary
This summary highlights selected information from this prospectus and may
not contain all of the information that is important to you. To understand the
Plan fully, you should read this entire prospectus carefully before you decide
to participate in the Plan.
The Company
Background
Commerce Bancorp is a multi-bank holding company headquartered in Cherry
Hill, New Jersey which operates:
o four nationally chartered bank subsidiaries:
o Commerce Bank, N.A., Cherry Hill, New Jersey
o Commerce Bank/Pennsylvania, N.A., Devon, Pennsylvania,
o Commerce Bank/Shore, N.A., Toms River, New Jersey,
o Commerce Bank/Delaware, N.A., Wilmington Delaware, and
o one state chartered bank subsidiary:
o Commerce Bank/North, Ramsey, New Jersey.
These five bank subsidiaries have in excess of 225 retail branch offices
located in the States of New Jersey, Pennsylvania, Delaware and New York.
Commerce Bancorp, through its five bank subsidiaries, provides a full range of
retail and commercial banking services for consumers and small and mid-sized
companies. Lending services are focused on commercial real estate and commercial
and consumer loans to local borrowers. Commerce Bancorp's lending and investment
activities are funded principally by retail deposits gathered through its retail
branch office network.
Commerce Bank, N.A. operates a nonbank subsidiary, Commerce Capital
Markets, Inc., Philadelphia, Pennsylvania which engages in various securities,
investment banking and brokerage activities. In addition, Commerce Bancorp,
through Commerce Insurance Services, Inc., a nonbank subsidiary of Commerce
Bank/North, operates an insurance brokerage firm concentrating on commercial
property, casualty and surety as well as personal lines of insurance for clients
in multiple states, primarily New York, New Jersey, Pennsylvania and Delaware.
Address and telephone number
Commerce Bancorp's principal executive offices are located at Commerce
Atrium, 1701 Route 70 East, Cherry Hill, New Jersey 08034-5400, its telephone
number is (856) 751-9000 and its internet address is commerceonline.com.
Enrollment
If you are already a participant in the Plan, you need not do anything
further; your participation will continue until terminated.
Holders of Commerce Bancorp's equity securities can participate in the Plan
by completing and submitting the authorization card, which is enclosed with this
prospectus, to the Plan Administrator, Mellon Bank, N.A., c/o Mellon Investor
Services, at P. O. Box 3339, South Hackensack, NJ 07606-1939. See page 5.
Alternatively holders may enroll on-line through Investor ServiceDirect. See
page 5 for information on how to access Investor ServiceDirect.
If your shares of Commerce Bancorp stock are held in a brokerage account,
you may either arrange for your broker to be a participant in the Plan or you
may participate directly by transferring registration of some or all of your
shares into your name so that you can become a shareholder of record. See page
6.
Reinvestment of Dividends
You can reinvest your cash dividends on all or a portion of your shares of
Commerce Bancorp stock toward the purchase of additional shares of Commerce
Bancorp common stock. See page 6.
Fractional Shares
Commerce Bancorp pays dividends on both whole shares and fractional shares
in the Plan and will credit your plan account with dividends on both your whole
and fractional shares. See pages 4 and 11.
1
Optional Cash Investments
After you are enrolled in the Plan, you may buy additional shares of
Commerce Bancorp common stock under the Plan. You can invest a minimum of $100
and a maximum of $6,000 per calendar month. This $6,000 maximum monthly payment
amount is subject to change, see page 3. You can make an investment by check or
money order made payable to "Mellon Bank, N.A." or by authorizing an individual
automatic deduction from your bank account through Investor ServiceDirect. If
you choose to submit a check, please make sure to use the contribution form from
your plan statement and mail it to the address specified. Alternatively, if you
wish to make regular monthly purchases, you may authorize automatic monthly
deductions from your bank account. This feature enables you to make ongoing
investments in an amount that is comfortable for you, without having to write a
check. See page 9.
Fees and Purchase Price
You will not have to pay any trading fees or service charges for any shares
of Commerce Bancorp common stock purchased under the Plan. In addition, you will
be able to purchase Commerce Bancorp common stock at a 3% discount from the
market price of Commerce Bancorp common stock. This 3% discount is subject to
change, see page 4.
Safekeeping of Certificates
You can deposit your Commerce Bancorp common stock certificates with the
Plan Administrator for safekeeping at no cost to you. This feature of the Plan
applies whether or not you are having the dividends on deposited shares
reinvested under the Plan. A certificate for your shares will be sent to you,
free of charge, upon request. However, fractional shares will not be issued. See
pages 4 and 12.
Gifts and Transfers of Shares
You can give or transfer your shares of Commerce Bancorp common stock to
others.
Sell Shares Conveniently
If you choose to have the Plan Administrator sell your Commerce Bancorp
common stock held in your plan account, you will incur:
o a nominal fee to be deducted from the proceeds of the sale; o any
applicable trading fees; and o any applicable stock transfer taxes. See
page 10.
Tracking Your Investment
The Plan Administrator will send a transaction notice confirming the
details of each transaction you make. When you participate in the dividend
reinvestment feature, you will receive a quarterly statement of your account. If
you do not reinvest dividends and have no additional purchase or sale
transactions, you will receive an annual statement detailing the status of your
holdings of Commerce Bancorp common stock in your Plan account. Statements
provide the details of such transactions and show the share balance in your plan
account. See pages 4 and 10.
2
The Plan
The original Dividend Reinvestment and Stock Purchase Plan was adopted by
the board of directors of Commerce Bancorp in April 1992 and became effective in
November 1992. The Plan was amended by the board of directors of Commerce
Bancorp in January 1999. Shareholders who do not participate in the Plan will
receive cash dividends, as declared, and paid in the usual matter. The Plan,
which is comprised of a series of questions and answers, is set forth below.
Purpose
1. What are the purposes of the Plan?
The primary purposes of the Plan are to provide holders of record of shares
of Commerce Bancorp common stock and other classes of equity securities of
Commerce Bancorp outstanding from time to time, or both, collectively referred
to as the "Company Stock", with the opportunity to have cash dividends on all or
any part of their shares of Company Stock automatically reinvested in additional
shares of common stock and with a convenient and simple method of investing
voluntary cash payments in additional shares of common stock, in each case
without payment of any service charges or trading fees and at a discount from
the Market Price (as defined in Question 11). These additional shares of common
stock may be newly issued or treasury shares purchased directly from Commerce
Bancorp or may be shares purchased in the open market.
When newly issued or treasury shares are purchased from Commerce Bancorp,
Commerce Bancorp will receive new equity capital funds available for general
corporate purposes.
The Plan is intended for the benefit of long-term investors, and not for
the benefit of individuals or institutions who engage in short-term trading
activities that could cause aberrations in the composite trading volume of
Commerce Bancorp's common stock. From time to time, financial intermediaries may
engage in positioning transactions in order to benefit from the discount from
the Market Price of the shares of common stock acquired through the reinvestment
of dividends and voluntary cash payments under the Plan. Such transactions may
cause fluctuations in the trading volume of the common stock. Commerce Bancorp
reserves the right to modify, suspend or terminate participation in the Plan by
otherwise eligible holders of common stock in order to eliminate practices which
are not consistent with the purposes of the Plan.
Options Available to Participants
2. What options are available to enrolled participants?
Dividend Reinvestment Program. Holders of the Company Stock who wish to
participate in the Plan, whether record owners or beneficial owners, each a
"Participant" (see also Question 5 regarding the definition of a "Participant"),
may elect to have all or a portion of their cash dividends paid on their shares
of the Company's Stock automatically reinvested in additional shares of common
stock through the dividend reinvestment program. Cash dividends are paid on the
Company Stock when and as declared by Commerce Bancorp's board of directors,
generally on a quarterly basis. Subject to the availability of shares of common
stock registered for issuance under the Plan, there is no limitation on the
amount of dividends a Participant may reinvest under the dividend reinvestment
program of the Plan.
Stock Purchase Program. Each month, Participants may also elect to invest
optional cash payments in shares of common stock, subject to a minimum monthly
purchase limit of $100 and a maximum monthly purchase limit of $6,000. This
$6,000 maximum monthly purchase is subject to upward or downward adjustment.
Participants may make optional cash payments each month even if no dividend has
been declared. Participants are not required to enroll any shares of common
stock purchased through the stock purchase program into the dividend
reinvestment program but may designate all or a portion of such shares for such
participation on the enclosed authorization card or on-line through Investor
ServiceDirect, if desired.
3
Advantages and Disadvantages
3. What are the advantages and disadvantages of the Plan?
Advantages
(a) The Plan provides Participants with the opportunity to reinvest cash
dividends paid on all or a portion of their shares of Company Stock in
additional shares of common stock without payment of any trading fee or service
charge and at a 3% discount from the Market Price (as defined in Question 11 and
subject to change).
(b) The Plan provides Participants with the opportunity to make monthly
investments of optional cash payments, subject to a minimum and maximum amount,
for the purchase of shares of common stock at a 3% discount from the Market
Price (subject to change) and without payment of any trading fee or service
charge. The Participant may designate all, a portion or none of such Plan shares
to be enrolled in the dividend reinvestment program.
(c) All cash dividends paid on Participants' Plan shares enrolled in the
dividend reinvestment program can be fully invested in additional shares of
common stock because the Plan permits fractional shares to be credited to plan
accounts. Dividends on such fractional shares, as well as on whole shares, will
also be reinvested in additional shares which will be credited to plan accounts.
(d) The Plan Administrator provides for the safekeeping of stock
certificates for shares credited to each plan account. For your convenience,
shares purchased under the Plan will be maintained at no charge by the Plan
Administrator in your name in non-certificated form. You may, however, request a
stock certificate from the Plan Administrator at any time free of charge.
(e) A Participant may also elect to deposit with the Plan Administrator
certificates for the stockholder's other shares of Company Stock registered in
his or her name for safekeeping without charge. If you wish to use this Service,
you should complete the appropriate section on the enclosed Authorization Card
and return it to the Plan Administrator together with the certificate(s).
Because the Participant bears the risk of loss in sending certificates to the
Plan Administrator, certificates should be sent by registered mail, return
receipt requested, and properly insured to the address specified below:
Mellon Bank, N.A.
c/o Mellon Investor Services
85 Challenger Road
Ridgefield Park, NJ 07660
If certificates are later issued either upon request of the Participant or upon
termination of participation in the Plan, new, differently numbered certificates
will be issued.
(f) Periodic statements reflecting all current activity, including Plan
share purchases and the most recent plan account balance, simplify Participants'
record keeping. See Question 22 for information concerning reports to
Participants.
Disadvantages
(a) No interest will be paid by Commerce Bancorp or the Plan Administrator
on cash dividends or voluntary cash payments held pending reinvestment or
investment. See Question 17. In addition, optional cash payments of less than
$100 and that portion of any optional cash payments which exceed the maximum
monthly purchase limit of $6,000, are subject to return to the Participant
without interest. This $6,000 maximum monthly payment amount is subject to
change, see Question 2.
4
(b) With respect to shares acquired from Commerce Bancorp, the actual
number of shares to be issued to the Participant or the Participant's plan
account will not be determined until after the end of the relevant Pricing
Period (as defined in Question 11). Therefore, during the Pricing Period,
Participants will not know the actual price per share or the number of shares
they have purchased.
(c) With respect to shares acquired from Commerce Bancorp, while the Plan
currently provides for a 3% discount from the Market Price (subject to change)
during the Pricing Period, the Market Price, as so discounted, may exceed the
price at which shares of the common stock are trading on the Investment Date (as
defined in Question 13) when the shares are issued or thereafter. The trading
price on the Investment Date generally governs the amount of taxable income to
shareholders. See Question 34.
(d) Because optional cash payments must be received by the Plan
Administrator by the Optional Cash Payment Due Date (as defined in Question 13),
such payments may be exposed to changes in market conditions for a longer period
of time than in the case of typical secondary market transactions. See Questions
13 and 14 through 18.
(e) Sales of shares of common stock credited to a Participant's plan
account will involve a nominal fee per transaction to be deducted from the
proceeds of the sale by the Plan Administrator (if such resale is made by the
Plan Administrator at the request of a Participant), plus any trading fee and
any applicable stock transfer taxes on the sales. See Questions 19 and 20.
Administration
4. Who administers the Plan?
Mellon Bank, N.A. (the "Plan Administrator") administers the Plan. Certain
administrative support will be provided to the Plan Administrator by Mellon
Investor Services, a registered transfer agent, and FutureShare Financial, a
registered broker/dealer.
You can enroll in the Plan, obtain information, and perform certain
transactions on your Plan account on-line via Investor ServiceDirect(R). To
access Investor ServiceDirect please visit the Mellon Investor Services website
at:
www.melloninvestor.com
To gain access, you will need a password which you may establish when
you visit the website. If you have forgotten your password, call 1-877-978-7778
to have it reset.
You can contact shareholder customer service toll-free within the
United States and Canada at:
1-888-470-5884
If you are calling from outside the United States or Canada, please
contact shareholder customer service at:
1-201-329-8660
An automated voice response system is available 24 hours a day, 7 days
a week. Customer service representatives are available from 9:00 a.m. to 7:00
p.m., Eastern Standard Time, Monday through Friday (except holidays).
You may write to the Plan Administrator at the following address:
Mellon Bank, N.A.
c/o Mellon Investor Services
P.O. Box 3338
South Hackensack, NJ 07606-1938
Please include a reference to Commerce Bancorp, Inc. in all
correspondence.
5
Participation
5. Who is eligible to participate?
All registered shareholders are eligible for participation in the Plan.
If your shares of Company Stock are registered in a name other than your
own (e.g., in the name of a broker, bank or nominee) and you want to
participate, you must either make appropriate arrangements for your broker, bank
or nominee to become a Participant or you must become a shareholder of record by
having a part or all of your shares transferred to your own name. To have shares
of which you are the beneficial owner re-registered in your name, you must
request your broker, bank or nominee to send you a certificate representing such
shares.
If you are already a Participant in the Plan, you need not do anything
further; your participation will continue until terminated. (See Question 28).
6. How does an eligible shareholder participate?
An eligible holder of shares of Company Stock may enroll in the Plan by
signing an authorization card and returning it to the Plan Administrator:
Mellon Bank, N.A.
c/o Mellon Investor Services
P. O. Box 3339 South Hackensack, NJ
07606-1939
An authorization card and a return envelope are enclosed. Additional
authorization cards may be obtained at any time by contacting the Plan
Administrator at the above address or by telephoning the Plan Administrator at
(888) 470-5884. Alternatively, an eligible shareholder may enroll on-line
through Investor ServiceDirect. See question 5 for information on how to access
Investor ServiceDirect.
7. When may a shareholder join the Plan?
An eligible shareholder may join the Plan at any time.
If an authorization card specifying reinvestment of dividends is received
by the Plan Administrator prior to the record date established for a particular
cash dividend, reinvestment will commence with that cash dividend. With respect
to its common stock, Commerce Bancorp expects that dividend record dates will
normally fall on or about the latter part of December, March, June and
September, and that dividend payment dates will normally fall on or about 21
days after the record dates.
If the authorization card is received after the record date established for
a particular cash dividend, then the reinvestment of dividends will not begin
until the cash dividend payment date following the next record date. (See
Questions 14 -18 for information concerning the investment of voluntary cash
payments). Additionally, for Participants wishing to make optional cash payments
to purchase shares under the stock purchase program, full payment must be
received by the Plan Administrator by the Optional Cash Due Date. (See Questions
13 and 14).
8. What does the authorization card provide?
The authorization cards provide for the purchase of additional shares of
common stock through the following investment options:
(a) Full Dividend Reinvestment directs the investment in accordance
with the Plan of all of your cash dividends on all of the shares of Company
Stock then or subsequently registered in your name and also permits you to make
voluntary cash payments for the purchase of additional shares in accordance with
the Plan.
(b) Partial Dividend Reinvestment directs the investment in accordance
with the Plan of the cash dividends on that number of shares of Company Stock
registered in your name which are designated in the appropriate space
6
on the Authorization Card and reinvest cash dividends on all other shares of
Company Stock now or hereafter held for you by the Plan Administrator, and also
permits you to make voluntary cash payments for the purchase of additional
shares in accordance with the Plan.
You may, of course, choose not to reinvest any of your dividends, in which
case the Administrator will remit any dividends to you by check or automatic
deposit to a bank account that you designate.
You may select either of the above investment options for your Company
Stock. An eligible shareholder may not elect to make only voluntary cash
payments under the Plan. Participation in the Plan is limited to shareholders
who direct the Plan Administrator to reinvest dividends on shares of Company
Stock held of record by them to the purchase of additional shares of common
stock. Once so enrolled, a shareholder may elect to make voluntary cash
payments.
Any Participant who returns a properly executed authorization card to the
Plan Administrator without electing a dividend reinvestment option will be
enrolled as having selected the Full Dividend Reinvestment Option.
Common stock purchased with reinvested dividends or voluntary cash payments
(and shares of Company Stock deposited with the Plan Administrator) will be held
by the Plan Administrator in your name for your account. The cash dividends on
all of the shares of common stock credited to plan accounts (whether the related
share certificates are held by the Plan Administrator or by the Participant)
will be reinvested in accordance with the Plan. You may elect to receive cash
dividends on shares of common stock credited to your plan account only by (i)
requesting that the shares you want to receive cash dividends on are withdrawn
from your plan account and sent to you in certificated form and (ii) submitting
to the Plan Administrator an authorization card which either elects the Partial
Dividend Reinvestment option or modifies your then current Partial Dividend
Reinvestment Option with respect to Company Stock.
9. How may a Participant change options under the Plan?
As a Participant, you may change investment options or modify the number of
shares of Company Stock designated under the Partial Dividend Reinvestment
option at any time on-line through Investor ServiceDirect(R) or by notifying the
Plan Administrator in writing. Any such change will become effective as of the
cash dividend record date following the date the authorization card is received
by the Plan Administrator.
Purchases Under the Plan
10. How are shares acquired under the Plan?
A total of 5,000,000 shares of common stock are being offered under the
Plan. The Plan Administrator uses cash dividends and voluntary cash payments to
acquire shares of common stock directly from Commerce Bancorp for the account of
Participants. If Commerce Bancorp deems it advisable for shares to be acquired
in the open market (rather than directly from Commerce Bancorp) or if newly
issued or treasury shares are not available, the Plan Administrator, as agent
for the Participants, will arrange for the purchase of shares in the open market
with cash dividends and voluntary cash payments. Purchases of shares in the open
market will be effected through brokerage transactions and may be made in the
over-the-counter market or in negotiated transactions, which transactions may
include situations in which the broker is selling as a principal or an agent. To
the extent the Plan makes purchases from brokerage firms as principals, the
purchase price of shares may include a retail mark-up. If the shares are traded
on a securities exchange, they may be purchased on such exchange. Commerce
Bancorp's common stock currently is traded on the NYSE. Shares will be acquired
in the open market with cash dividends and voluntary cash payments at such times
as are described in Question 13.
Neither Commerce Bancorp nor any Participant shall have any authorization
or power to direct the time or price at which shares will be purchased or the
selection of the broker or dealer through or from whom purchases are to be made
by the Plan Administrator. However, when open market purchases are made by the
Plan Administrator, the Plan Administrator shall use its best efforts to
purchase the shares at the lowest possible price.
7
In the event that the number of shares purchased for the account of any
Participant in the Plan is not a whole number of shares, the Participant's plan
account will be credited with the full number of shares and/or fractional shares
computed to four decimal places.
11. At what price will shares be purchased under the Plan with reinvested
dividends?
Shares of common stock purchased through the Plan directly from Commerce
Bancorp, whether issued by Commerce Bancorp out of legally authorized but
unissued shares of common stock or out of treasury shares, will be purchased at
a discount of 3% from the average of the high and low sale prices of the common
stock as reported on the NYSE on the trading day immediately preceding the
particular Investment Date (as defined in Question 13) or the closest preceding
date if there are no high and low sale prices available on that date, referred
to as the Pricing Period. If there are no high and low sale prices available for
the common stock for the ten trading days preceding the applicable Investment
Date, then Commerce Bancorp's board of directors shall make the determination of
the purchase price on the basis of such information as it considers best
reflects current market value.
The purchase price for shares of common stock purchased through the Plan in
the open market shall be at a discount of 3% from the weighted average purchase
price of all shares purchased for the Plan in the open market on the relevant
Investment Date. In making purchases for the Participant's account in the open
market, the Plan Administrator may commingle the Participant's funds with those
of other shareholders of Commerce Bancorp participating in the Plan.
The average price described above is referred to herein as "Market Price"
and the purchase price, as discounted from the Market Price, is referred to
herein as the "Discounted Purchase Price." The discount is subject to change
from time to time (but will not vary from the range of 0% to 3%) and is also
subject to discontinuance at Commerce Bancorp's discretion after a review of
current market conditions, the level of participation in the Plan and Commerce
Bancorp's current and projected capital needs. Commerce Bancorp will provide
Participants with written notice of a change in the applicable discount at least
30 days prior to the relevant record date or via an appropriate press release
for the relevant Optional Cash Payment Due Date.
12. At what price will shares be purchased under the Plan with voluntary cash
payments?
Shares purchased under the Plan with voluntary cash payments will be
acquired by Participants at a price determined as described in Question 11.
13. When will the Plan purchase shares of common stock?
Except as otherwise provided in this Plan, dates on which shares are
purchased with reinvested dividends or with voluntary cash payments are referred
to in this Plan as "Investment Dates."
The Investment Date with respect to the common stock acquired pursuant to
dividend reinvestments will be (i) if acquired directly from Commerce Bancorp,
the quarterly dividend payment date declared by the board of directors or (ii)
in the case of open market purchases, the date or dates of actual investment,
but no later than 10 business days following the dividend payment date.
Purchases of common stock directly from Commerce Bancorp with voluntary
cash payments will occur every month on the related Investment Date. The
Optional Cash Payment Due Date is at least one business day prior to the
commencement of the related Investment Date and the Investment Date is on or
about the 20th day of each month. Checks or other drafts must clear prior to the
Investment Date on which the investment is to be made. Please allow sufficient
time for your check to clear.
Purchases of common stock in the open market may occur over one or more
trading days and will commence on the same days as specified above for purchases
made directly from Commerce Bancorp. For a number of reasons including
observance of the Rules and Regulations of the SEC requiring temporary
curtailment or suspension of purchases, it is possible that the whole amount of
funds available in a Participant's account for the purchase of shares of
Commerce Bancorp might not be applied to the purchase of such shares on or
before the next ensuing Investment Date. Neither Commerce Bancorp nor the Plan
Administrator shall be liable to any shareholder when such conditions prevent
the purchase of shares or interfere with the timing of such purchases.
8
Voluntary Cash Payments
14. How does a Participant make voluntary cash payments?
Eligible shareholders enrolling in the Plan may make voluntary cash
payments by authorizing an individual automatic deduction from your bank account
through Investor ServiceDirect(R) or by mailing a check or money order with an
executed authorization card to the Plan Administrator at the address set forth
in Question 6. If you choose to submit a check or money order, please make sure
to include the contribution form from your Plan statement and mail it to the
address specified on the Plan statement. All checks and money orders must be
payable to "Mellon Bank, N.A." Do not send cash. Voluntary cash payments must be
received before the particular Investment Date, and checks or other drafts must
clear prior to such Investment Date, for a voluntary cash payment to be invested
on such Investment Date. If you wish to make regular monthly optional cash
payments, you may authorize automatic monthly deductions from your bank account
by completing the Automatic Monthly Contribution section on the enclosed
authorization card and returning it to the Plan Administrator.
Shares purchased with voluntary cash payments will be held by the Plan
Administrator and credited to a Participant's plan account. Thereafter,
dividends on such shares automatically will be fully reinvested in additional
shares unless such shares are withdrawn from the Plan (see Question 28).
15. What are the limitations on the amount of voluntary cash payments?
Voluntary cash payments may not be less than $100 per payment nor may they total
more than $6,000 per monthly investment period. This $6,000 maximum monthly
purchase amount is subject to change, see Question 2. Purchases will be made on
or about the 20th day of each month.
The same amount of money need not be sent each time and there is no obligation
to make a voluntary cash payment.
16. May a participant elect to make only voluntary cash payments under the Plan?
No. Participants who do not otherwise elect to apply all or a portion of
dividends on Company Stock held of record by them to the purchase of additional
shares of common stock under the Plan may not elect to participate in the Plan
by making only voluntary cash payments under the Plan.
17. When are voluntary cash payments invested?
Voluntary cash payments will be invested at the times described in Question
13. No interest will be paid by Commerce Bancorp or the Plan Administrator on
cash dividends or voluntary cash payments held by the Plan Administrator prior
to the date of investment. For that reason, Commerce Bancorp recommends that
shareholders mail their voluntary cash payments so that they are received by the
Plan Administrator prior to, but as close as possible to, three business days
prior to an Investment Date.
18. Under what circumstances will voluntary cash payments be returned?
Participants may obtain refunds of voluntary cash payments provided that a
written request for refund is received by the Plan Administrator on or before
not less than two business days prior to the Investment Date for such voluntary
cash payment. Once the check in payment of the voluntary cash payment has
cleared, the Plan Administrator will promptly honor any timely request for a
refund.
In the unlikely event that, due to unusual market conditions, the Plan
Administrator is unable to invest the funds within 35 days, the Plan
Administrator will return the funds to you by check. No interest will be paid on
funds held by the Plan Administrator pending investment.
9
Costs
19. Are there any expenses to Participants in connection with the Plan?
Participants incur no service charges or trading fees for purchases made
under the Plan. All costs of administration of the Plan are paid by Commerce
Bancorp. Participants may elect to send the certificates for their other shares
of Company Stock to the Plan Administrator for safekeeping, and there is no fee
for this service. However, Participants who request that the Plan Administrator
sell all or any portion of their shares must pay a nominal fee per transaction
to the Plan Administrator, any related trading fees and applicable stock
transfer taxes.
20. What fees will a Plan Participant be responsible for?
Dividend Reinvestment No Charge
Optional Purchases No Charge
Sales Fee* $15.00
Fee for Returned Checks $50.00
Duplicate Statements
Current Year No Charge
Prior Years $20.00
* Plus a $. 12 per share trading fee.
The Plan Administrator will deduct the applicable fees from proceeds due
from a sale.
Administration
21. What are the functions of the Plan Administrator?
Mellon Bank, N.A. administers the Plan by automatically reinvesting
dividends and investing voluntary cash payments of Participants in additional
shares of common stock in accordance with the investment option selected by
Participants. Additionally, the Plan Administrator keeps records, sends
statements of account to Participants and performs other administrative duties
relating to the Plan.
Certain administrative support services will be provided by Mellon Investor
Services, Commerce Bancorp's registered transfer agent.
Participants' Accounts and Reports
22. What kind of accounts are maintained for Participants and what reports on
those accounts do they receive?
The Plan Administrator maintains a separate account for each Participant.
All shares purchased for a Participant under the Plan will be credited to the
Participant's account. The Plan Administrator will mail to each Participant a
statement of account confirming purchases of shares as soon as practicable after
purchases are made for a Participant's plan account. Statements of account
should be retained for income tax purposes.
In addition, each Participant will receive copies of Commerce Bancorp's
annual and quarterly reports to shareholders, proxy statements and dividend
income information for tax purposes.
10
Dividends
23. Will Participants be credited with dividends on shares credited to their
accounts under the Plan?
Yes. The Plan Administrator, as agent, will receive dividends for all
shares of Company Stock credited to each Participant's plan account on the cash
dividend record date, will credit these cash dividends to each Participant's
account on the basis of full and fractional shares held in each account (each
Participant's cash dividend will equal the number of whole and fractional shares
in his or her account times the cash dividend rate paid), and will automatically
reinvest these cash dividends in additional shares of common stock, computed to
four decimal places, in accordance with the option selected by the Participant.
In the unlikely event that, due to unusual market conditions, the
Administrator is unable to invest the funds within 30 days, the Administrator
will remit the funds to you by check. No interest will be paid on funds held by
the Administrator pending investment.
Certificates for Shares
24. Will certificates be issued for shares purchased under the Plan?
No. Shares purchased under the Plan will be maintained by the Plan
Administrator in your name in non-certificated form. This service protects
against loss, theft or destruction of the share certificates representing Plan
shares. Certificates for shares purchased under the Plan will not be issued to a
Participant unless a Participant requests certificates for a specified number of
whole shares credited to a Participant's plan account. No certificate for a
fractional share will be issued.
A Participant's request to the Plan Administrator for share certificates to
be issued in the Participant's name will not be treated as a withdrawal of such
shares from the Participant's account unless the request is made in conjunction
with a Participant's termination of participation in the Plan and/or change in
the number of shares to be reinvested (see Question 28). In the absence of an
accompanying authorization card changing the number of shares to be reinvested
or a Participant's termination of participation in the Plan, the dividends on
such shares will continue to be paid to and reinvested by the Plan Administrator
(See Questions 8, 25 and 28).
25. In whose name will certificates be registered when issued?
Accounts under the Plan are maintained in the names in which share
certificates of the Participants are registered at the time the Participants
enroll in the Plan. Certificates for whole shares, when issued at the request of
Participants, will be registered in the same names. However, even after the Plan
Administrator has issued certificates to a Participant for some or all of the
whole shares held in his or her plan account, cash dividends on all shares
credited to a Participant's plan account will continue to be reinvested in
additional common stock pursuant to the Plan. (See Questions 8, 23 and 24).
If a Participant has some or all of his or her shares held re-registered in
another name (because of a sale or gift of these shares, for example), dividends
on the re-registered shares will not continue to be reinvested in additional
common stock under the Plan. Dividends on the re-registered shares will be
reinvested in additional common stock under the Plan only if the new record
owner elects to become a Participant.
See Question 30 for information concerning the effect on a Participant's
plan account if the Participant sells or transfers common stock certificates
registered in his or her name.
Shares credited to the account of a Participant may not be pledged or
assigned and any such purported pledge or assignment is void. A Participant who
wishes to pledge or assign such shares must first request that the Plan
Administrator issue certificates for such shares.
11
26. May a Participant deposit Company shares in his or her account?
You may deposit certificates representing your shares of Company Stock with
the Plan Administrator for safekeeping at no charge. Shareholders are encouraged
but not required to deposit their Company Stock share certificates with the Plan
Administrator upon their election to participate in the Plan. Such certificates
must be accompanied by a written request that the shares be added to your plan
account. All shares of Company Stock held in your plan account will have the
cash dividends received thereon reinvested in additional shares of common stock
as provided in the Plan. (See Questions 8 and 23).
27. How may share certificates or other documents be sent to the Plan
Administrator?
The method of delivery of share certificates and other documents is at the
election and risk of the Participant. If such delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended.
Certificates should be mailed to:
Mellon Bank N.A.
c/o Mellon Investor Services
85 Challenger Road
Ridgefield Park, NJ 07660
Termination of Participation in the Plan or Withdrawal of Shares
28. How does a Participant terminate participation in the Plan or withdraw
shares from the Plan?
You may terminate your participation in the Plan at any time by notifying
the Plan Administrator at least one business day before the next dividend record
date. In the event notice of termination is not received by the Plan
Administrator by such time, shares will be purchased for the Participant with
the related cash dividend and participation in the Plan will not terminate until
after such dividend has been reinvested. You can notify the Plan Administrator
in writing, by calling 1-888-470-5884, or by changing your dividend election
on-line under the account management service at www.melloninvestor.com.
Because the legal requirements for proper notice of the death of the holder
of a plan account which is registered solely to that holder vary greatly,
depending on the state of residence of the Participant and form of registration
of the Participant's plan account, the Plan Administrator should be contacted at
the address or phone number set forth in the response to Question 6 in the event
of such death.
Upon termination by reason of notice of a Participant's death or
adjudicated incompetency, the Participant's shares held by the Plan
Administrator and any cash dividends thereafter received by the Plan
Administrator will be retained by the Plan Administrator until such time as such
Participant's legal representative has been appointed and has furnished proof
satisfactory to the Plan Administrator of the legal representative's right to
receive the share certificate and/or payment. No interest will be paid by either
Commerce Bancorp or the Plan Administrator on any dividends retained by the Plan
Administrator during any such period of time.
A Participant may withdraw a portion of the shares of Company Stock
credited to his or her account from participation in the Plan by giving notice
to that effect to the Plan Administrator and specifying in the notice the number
of whole shares to be withdrawn. This notice should be accompanied by a new
authorization card designating the Partial Dividend Reinvestment option and
showing the number of shares registered in your name with respect to which you
desire to have cash dividends reinvested in accordance with the Plan.
Alternatively, you may do this on-line under the account management service
through Investor ServiceDirect. No fractional shares may be withdrawn except
upon termination of participation in the Plan. The Plan Administrator will send
to the Participant a statement of account and a certificate representing the
withdrawn shares.
12
29. What will Participants receive when they terminate participation in the
Plan?
Upon electing to terminate participation in the Plan, the Plan
Administrator will send to the Participant a certificate representing the whole
shares of common stock held by the Plan Administrator in the Participant's plan
account and a check for the cash equivalent of any fractional share of common
stock less applicable sales fees.
The cash to be paid in lieu of a fractional share will be based on the
current market price of the common stock on the Investment Date, which for
purposes of this sentence is the day that the account is terminated by the Plan
Administrator.
Whenever a Participant does not own at least one share directly, the Plan
Administrator may, if instructed by Commerce Bancorp, terminate the Plan
Account, sell the fractional share and send the Participant the sale proceeds,
less related sales fees, if any.
Other Information
30. What happens when a Participant sells or transfers some (but not all) of the
shares registered in his or her name?
(a) Full Dividend Reinvestment.
If you are reinvesting the cash dividends on all of the shares registered
in your name, and you dispose of a portion of these shares, the Plan
Administrator will continue to reinvest the dividends on the remainder of the
shares registered in your name.
(b) Partial Dividend Reinvestment.
If you have directed the Plan Administrator to pay cash dividends to you on
some of your shares and to reinvest dividends on the remainder of your shares,
and you dispose of a portion of your shares, you should provide new written
instructions to the Plan Administrator on how to handle your account. If the
Plan Administrator does not receive new instructions, it may, in its discretion,
either (i) pay cash dividends on all of your shares or (ii) continue to reinvest
dividends on the number of shares, if any, you own in which you have requested
to have the dividends reinvested.
31. What happens if Commerce Bancorp pays a dividend in stock or splits its
shares?
Any shares of Commerce Bancorp's common stock issued in connection with a
stock split or dividend distributed by Commerce Bancorp with respect to shares
credited to your plan account will be added to your account.
As soon as practicable after the payment of a stock dividend or stock
split, a statement will be sent to each Participant which will indicate the
number of shares of common stock credited to each Participant's plan account as
a result of the stock dividend or stock split. A Participant may receive a
certificate for such shares (other than fractional shares) at any time by going
on-line under the account management service through Investor ServiceDirect, by
calling 1-888-470-5884 or by sending a written request to:
Mellon Bank, N.A.
c/o Mellon Investor Services
P. O. Box 3338 South Hackensack, NJ
07606-1938
13
32. If Commerce Bancorp has a common stock rights offering or otherwise makes
securities available to its shareholders, how will the rights offering with
respect to shares held in plan accounts be handled?
Warrants or other written instruments representing the rights offered with
respect to the whole shares of common stock credited to the plan account of a
Participant will be mailed directly to the Participant in the same manner as the
warrants or other written instruments are mailed to shareholders of record who
do not participate in the Plan.
33. How will a Participant's shares be voted at meetings of holders of shares?
Each Participant will receive a single proxy card covering the total number
of shares held by the Participant in certificate form plus the total number of
full shares credited to the Participant's plan account. If a properly signed
proxy card is returned to the Company and not revoked prior to the time of
voting, the Participant's shares will be voted as directed on the proxy card. If
a proxy card is returned properly signed, but without indicating instructions as
to the manner shares are to be voted with respect to any item thereon, the
shares covered will be voted in accordance with the recommendations of Commerce
Bancorp's management. If the proxy card is not returned, or if it is returned
unexecuted or improperly executed, the shares covered will not be voted unless
the Participant or the Participant's duly appointed representative votes in
person at the meeting.
Federal Income Tax Consequences
34. What are the federal income tax consequences of participation in the Plan?
The following summary is based upon the federal income tax laws as of June
1, 2003. It is important for each Participant to consult their own tax adviser
to determine their particular tax consequences, including state income tax (and
other taxes, such as stock transfer tax) consequences, which vary from state to
state and which may result from participation in the Plan and subsequent
disposition of shares acquired pursuant to the Plan. The following discussion is
not exhaustive of all possible tax considerations and is not tax advice. The
discussion does not deal with particular types of Participants that are subject
to special tax treatment under the Internal Revenue Code, such as insurance
companies, financial institutions and broker dealers; nor does it deal with
Participants who are not United States persons. The discussion assumes that all
distributions under the Plan will be from Commerce Bancorp's earnings and
profits.
A Participant in the Plan will generally be treated for federal income tax
purposes as having received, on each dividend payment date, a dividend in an
amount equal to the fair market value on such dividend payment date of the
shares acquired with reinvested dividends. For federal income tax purposes, the
fair market value of shares acquired with reinvested dividends under the Plan
will be equal to the mean of the highest and lowest quoted selling price, or if
such information is not available, the mean of the bid and the asked price, for
shares on the dividend payment date; the Discounted Purchase Price is not taken
into account in determining this fair market value. A corporate shareholder
participating in the Plan may be entitled to deduct a portion of that amount
deemed received as a dividend.
The tax basis of shares acquired with reinvested dividends will equal the
fair market value on the dividend payment date of such shares. A Participant's
holding period for shares (including fractional shares) acquired under the
dividend reinvestment feature of the Plan will begin on the day after the shares
are acquired. Consequently, shares of Commerce Bancorp stock acquired in
different quarters will have different holding periods.
A Participant will not be treated as having received a dividend upon the
purchase of shares at the Discounted Purchase Price with a voluntary cash
payment unless the Discounted Purchase Price of the shares is less than the fair
market value of the shares on the date on which shares are acquired for the
Participant's account. If the Discounted Purchase Price is less than the fair
market value of such shares, a Participant will be treated as having received a
dividend equal to the excess of the fair market value of the shares being
purchased over their Discounted Purchase Price.
The tax basis of shares purchased with a voluntary cash payment will equal
the Participant's voluntary cash payment plus the excess, if any, of the fair
market value of the shares being purchased over their current Discounted
Purchase Price. A Participant's holding period for shares (including fractional
shares) acquired under the stock
14
purchase feature of the Plan will begin on the day after the shares are
acquired. Consequently, shares of Commerce Bancorp stock acquired in different
months will have different holding periods.
The IRS may take the position that any service fee paid by Commerce Bancorp
to the Plan Administrator on behalf of Plan Participants is an additional
distribution, taxable as dividend income, to such Participants. In the event the
IRS asserts this position, those Participants who itemize deductions on their
federal income tax returns may be entitled to deduct the amount of the service
fee attributable to their account as a miscellaneous itemized deduction, subject
to applicable limitations.
A Participant will not realize any taxable income upon receipt of
certificates for whole shares credited to the Participant's account, either upon
the Participant's request for certain of those shares or upon withdrawal from or
termination of the Plan. A Participant will recognize gain or loss upon the sale
or exchange of shares acquired under the Plan. A Participant will also recognize
gain or loss upon receipt, following termination of participation in the Plan,
of a cash payment for any fractional share equivalents credited to the
Participant's account. The amount of any such gain or loss will equal the
difference between the amount that the Participant received for the shares or
fractional share equivalents and the Participant's tax basis in such shares.
In the case of both foreign shareholders who elect to have their dividends
reinvested and whose dividends are subject to United States income tax
withholding, and other shareholders who elect to have their dividends reinvested
and who are subject to back-up withholding under Section 3406(a)(l) of the
Internal Revenue Code of 1986, as amended (the "Code"), the Plan Administrator
will invest in shares of common stock in an amount equal to the dividends of
such Participants less the amount of tax required to be withheld. The full
amount of the dividends will be recognized as taxable income, without reduction
for the amount of tax required to be withheld. The quarterly statements
confirming purchases made for such Participants will indicate the net payment
reinvested.
Under Section 3406(a)(l) of the Code, Commerce Bancorp is required to
withhold for United States income tax purposes 28% of all dividend payments to a
shareholder of Commerce Bancorp if (i) the shareholder has failed to furnish to
Commerce Bancorp his/her taxpayer identification number ("TIN"), which for an
individual is his/her social security number, (ii) the IRS has notified Commerce
Bancorp that the TIN furnished by the shareholder is incorrect, (iii) the IRS
notifies Commerce Bancorp that back-up withholding should be commenced because
the shareholder has failed to report interest or dividends properly, or (iv) the
shareholder has failed to certify, under penalties of perjury, that he/she is
not subject to back-up withholding. Shareholders have previously been requested
by Commerce Bancorp or their broker to submit all information and certifications
required in order to exempt them from back-up withholding if such exemption is
available to them.
A Participant who is a foreign shareholder will be subject to federal
income tax withholding at 30%, or a lower treaty rate, of all dividend payments.
The foregoing discussion is based on the assumption that shares are
purchased directly from Commerce Bancorp. If the shares are purchased in the
open market, the federal tax consequences would generally be the same. However,
the payment of brokerage commissions by Commerce Bancorp in connection with the
purchase or sale of shares in the open market may be treated as additional
dividend income to Participants, in which case the amount of such commissions
would not be deductible, but would increase the basis of the applicable shares.
Each Participant should consult his or her own tax advisor to determine
the particular tax consequences, including state tax consequences (which will
vary from state to state), that may result from participation in the Plan and a
subsequent disposal of shares acquired pursuant to the Plan.
15
General
35. What are the liabilities of the Plan Administrator and Commerce Bancorp
under the Plan?
The Plan Administrator (or its nominees) and Commerce Bancorp shall not be
liable under the Plan for any act done in good faith, or for any good faith
omission to act, including, without limitation, any claim of liability (a)
arising out of any such act or omission to act which occurs prior to the
termination of participation and (b) with respect to the prices at which shares
are purchased or sold for the Participant's account and the times such purchases
or sales are made.
Participants should recognize that neither Commerce Bancorp nor the Plan
Administrator can assure Participants of profits, or protect participants
against losses, on shares purchased and/or held under the Plan. The Plan
Administrator (or its nominees) and Commerce Bancorp shall have no duties,
responsibilities or liabilities except as are expressly set forth in the Plan.
Shareholders are cautioned that this Plan does not represent a change in
Commerce Bancorp's dividend policy or a guarantee of future dividends, which
will continue to depend upon Commerce Bancorp's earnings, financial
requirements, governmental regulations and other factors. The Plan Administrator
has no responsibility with respect to the preparation and contents of the Plan.
36. Can Commerce Bancorp terminate the Plan or a Participant's interest in the
Plan?
Commerce Bancorp may terminate the Plan or a Participant's interest therein
upon not less than ten calendar days prior notice in writing mailed to the
Participant. In such event the Plan Administrator will follow the procedures for
termination set forth in Question 28.
37. What happens if the Plan cannot acquire shares?
If Commerce Bancorp determines not to make newly issued or treasury shares
available for purchase pursuant to the Plan and in the event that applicable law
or the closing of securities markets requires the temporary curtailment or
suspension of open market purchases of shares under the Plan, the Plan
Administrator is not accountable for the inability of the Plan to acquire shares
at such times. If shares are not available for a period longer than thirty
calendar days, the Plan Administrator will promptly mail to the participant a
check (without any interest earned thereon) payable to the participant's order
in the amount of funds submitted for investment.
38. When does a Participant obtain rights in shares acquired under the Plan?
A Participant will not acquire rights to dividends or other benefits of
stock ownership with respect to shares acquired under the Plan until the date
shares are actually purchased for his or her account.
39. Where should correspondence regarding the Plan be sent?
Any notice, instruction, request or election which by any provision of the
Plan is required or permitted to be given or made by the Participant to the Plan
Administrator shall be in writing, signed by the Participant and addressed to:
Mellon Bank, N.A.
c/o Mellon Investor Services
P. O. Box 3338 South Hackensack, NJ
07606-1938
or such address as the Plan Administrator shall furnish to the Participant, and
such notice, instruction, request or election shall be deemed to have been
sufficiently given or made when received by the Plan Administrator.
16
40. What is sufficient notice to a Participant?
Any notice or certificate which by any provision of the Plan is required to
be given by the Plan Administrator to the Participant shall be in writing and
shall be deemed to have been sufficiently given for all purposes by being
deposited by first class mail, postage prepaid, in a post office letter box,
addressed to the Participant at the Participant's address as it shall last
appear on the Plan Administrator's records.
41. Can a successor Plan Administrator be named?
Upon not less than thirty calendar days prior written notice to
Participants, Commerce Bancorp may terminate the Plan Administrator at any time
and may designate a bank or trust company as successor Plan Administrator for
all or a part of the Plan Administrator's functions under the Plan. If Commerce
Bancorp does so, references in this Plan to Mellon Bank, N.A. shall be deemed to
be references to the successor Plan Administrator, unless the context requires
otherwise.
Mellon Bank, N.A. may resign as Plan Administrator at any time upon not
less than thirty calendar days prior written notice to Commerce Bancorp, such
resignation to become effective as soon as a successor Plan Administrator is
named. Commerce Bancorp will endeavor to name a successor Plan Administrator as
soon as practicable.
42. What law governs the Plan?
The terms and conditions of the Plan and its operation are governed by the
substantive laws of the State of New Jersey.
43. Who bears the risk of fluctuations in the market price of common stock?
A Participant's investment in common stock held in a Plan Account is no
different with regard to market risk than an investment in common stock held in
certificate form. A Participant bears the risk of loss (and receives any benefit
of gain) occurring by reason of fluctuations in the market price of common stock
held in a plan account.
44. May the Plan be changed or discontinued?
While Commerce Bancorp hopes to continue the Plan indefinitely, Commerce
Bancorp reserves the right upon not less than ten calendar days prior written
notice to Participants to suspend or terminate the Plan or any Participant's
plan account (see Question 36) at any time. Commerce Bancorp also reserves the
right to interpret and make modifications in the Plan and any such determination
will be final. Commerce Bancorp may adopt rules and regulations to facilitate
the administration of the Plan. The terms and conditions of any such suspension,
termination or modification will be promptly announced to affected Participants.
45. Are there any restrictions on the resale of shares acquired under the Plan?
Persons who are not "affiliates" of Commerce Bancorp are free to sell
common stock acquired under the Plan at any time.
However, persons who are "affiliates" of Commerce Bancorp, as that term is
defined in Rule 405 promulgated by the SEC under the Securities Act may not
publicly reoffer shares acquired under the Plan except pursuant to Rule 144 of
the Securities Act or pursuant to an effective registration statement. Rule 405
defines an "affiliate" as a person who directly, or indirectly through one or
more intermediaries, controls, is controlled by or is under common control with
Commerce Bancorp. Directors and executive officers of Commerce Bancorp are
generally deemed to be "affiliates" of Commerce Bancorp under this definition.
Commerce Bancorp has no present intention of filing a registration statement
which would permit "affiliates" to reoffer common stock acquired under the Plan.
17
Officers and directors participating in the Plan are subject to the
reporting obligations of Section 16(a) and the short-swing profit recovery
provisions of Section 16(b) of the Exchange Act, with respect to purchases of
common stock made under the Plan with voluntary cash payments. While executive
officers and directors are not subject to the short-swing profit recovery
provisions of Section 16(b) of the Exchange Act with respect to purchases of
common stock made under the Plan with reinvested dividends, ownership and
disposition of common stock so acquired must be disclosed on reports filed
pursuant to Section 16(a) of the Exchange Act.
18
Use of Proceeds
The number of shares of Commerce Bancorp common stock that will be
purchased under the Plan and the prices at which the shares will be sold cannot
be determined at this time. The net proceeds from the sale of any shares by
Commerce Bancorp, after deducting expenses in connection with the Plan of
approximately $46,000, will be added to Commerce Bancorp's working capital.
These proceeds will be used for general corporate purposes, including, without
limitation, contributing all or a significant portion of the proceeds to one or
more of Commerce Bancorp's five banking subsidiaries. Commerce Bancorp cannot
estimate the amount of proceeds which will be devoted to any specific purpose.
Pending investment or application of the net proceeds, Commerce Bancorp will
invest the net proceeds primarily in short-term liquid investments. Commerce
Bancorp will not receive any proceeds from open market purchases of shares by
the Plan.
Description of Commerce Bancorp's Capital Stock
The following description is a summary of certain provisions of Commerce
Bancorp's charter and is qualified in its entirety by reference to the complete
text of Commerce Bancorp's charter which is incorporated by reference as an
exhibit to the registration statement on Form S-3 of which this prospectus is a
part.
Authorized Capital
The authorized capital stock of Commerce Bancorp consists of 150,000,000
shares of common stock, par value $1.00 per share, and 10,000,000 shares of
preferred stock, without par value.
Common Stock
The number of shares of Commerce Bancorp common stock outstanding as of the
date of this prospectus is approximately 69 million shares. The number of
shareholders of record of Commerce Bancorp is approximately 52,000 holders.
The rights, preferences and privileges of holders of Commerce Bancorp
common stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock which Commerce Bancorp may
designate and issue in the future.
Voting Rights. Holders of Commerce Bancorp common stock are entitled to one
vote for each share held on all matters submitted to a vote of shareholders.
Commerce Bancorp common shareholders do not have cumulative voting rights.
Holders of a majority of the shares of Commerce Bancorp common stock entitled to
vote in any election of directors may elect all of the directors standing for
election.
Dividends. Holders of Commerce Bancorp common stock are entitled to receive
ratably dividends, if any, as may be declared by Commerce Bancorp's board of
directors out of legally available funds, subject to any preferential dividend
rights of outstanding preferred stock. See "Dividends."
Liquidation. Upon the liquidation, dissolution or winding up of Commerce
Bancorp, the holders of Commerce Bancorp common stock are entitled to receive
ratably the net assets of Commerce Bancorp available after the payment of all
debts and other liabilities and subject to the prior rights of any outstanding
Commerce Bancorp preferred stock.
Preemptive Rights. Holders of Commerce Bancorp common stock have no
preemptive, subscription, redemption or conversion rights.
Transfer Agent and Registrar. The transfer agent and registrar for Commerce
Bancorp common stock is Mellon Investor Services.
19
Preferred Stock
The Commerce Bancorp preferred stock may be issued with such preferences,
voting rights and conversion rights as Commerce Bancorp's board of directors,
without further approval by the shareholders, may determine by duly adopted
resolution. The issuance of Commerce Bancorp preferred stock may have the effect
of delaying, deferring or preventing a change in control of Commerce Bancorp. As
of the date of this prospectus, there were no shares of Commerce Bancorp
preferred stock issued and outstanding. Commerce Bancorp has no present plans to
issue any shares of Commerce Bancorp preferred stock.
"Anti-Takeover" Provisions and Management Implications
Commerce Bancorp's Charter
Commerce Bancorp's charter requires the affirmative vote of the holders of
at least 80% of the outstanding capital stock of Commerce Bancorp entitled to
vote on the following transactions in order to permit the consummation of any of
the following transactions:
o any merger or consolidation of Commerce Bancorp with or into any
other corporation; or
o any sale, lease, exchange or other disposition of all of the assets
of Commerce Bancorp to or with any other corporation, person or
other entity. The 80% voting requirement would not, however, apply
to any transaction approved by Commerce Bancorp's board of directors
prior to the consummation of the transaction.
Commerce Bancorp's charter also provides for the issuance of up to
10,000,000 shares of Commerce Bancorp preferred stock, the rights, preferences
and limitations of which may be determined by the Commerce Bancorp board of
directors issuance of Commerce Bancorp preferred stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could make it more difficult for a third party to secure a majority of
Commerce Bancorp's outstanding voting stock. The authority of Commerce Bancorp's
board of directors to issue Commerce Bancorp preferred stock with rights and
privileges, including voting rights, as it may deem appropriate, may enable
Commerce Bancorp's board of directors to prevent a change of control despite a
shift in ownership of Commerce Bancorp common stock. In addition, Commerce
Bancorp's board of directors' authority to issue additional shares of Commerce
Bancorp common stock may help deter or delay a change of control by increasing
the number of shares needed to gain control.
The provisions in Commerce Bancorp's charter relating to the 80% voting
requirements and the issuance of Commerce Bancorp preferred stock may have the
effect not only of discouraging tender offers or other stock acquisitions but
also of deterring existing shareholders from making management changes. These
provisions may enhance the possibility that a potential bidder for control of
Commerce Bancorp will be required to act through arms-length negotiation with
respect to major transactions, such as a merger, consolidation or purchase of
substantially all of the assets of Commerce Bancorp. These provisions may also
have the effect of discouraging tender offers or other stock acquisitions,
giving management of Commerce Bancorp the power to reject certain transactions
which might be desired by the owners of a majority of Commerce Bancorp's voting
securities. These provisions could also be deemed to benefit incumbent
management to the extent they deter offers by persons who would wish to make
changes in management or exercise control over management. Commerce Bancorp's
board of directors does not presently know of a third party that plans to make
an offer to acquire Commerce Bancorp through a tender offer, merger or purchase
of substantially all the assets of Commerce Bancorp.
Banking Regulations.
The Change in Bank Control Act prohibits a person or group of persons from
acquiring "control" of a bank holding company unless the Federal Reserve Board
has been given 60 days prior written notice of the proposed acquisition and
within that time period the Federal Reserve Board has not issued a notice:
o disapproving the proposed acquisition, or
o extending for up to another 30 days the period during which such a
disapproval may be issued
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or unless the acquisition is subject to Federal Reserve Board
approval under the Bank Holding Company Act of 1956, referred to as
the BHCA. An acquisition may be made prior to the expiration of the
disapproval period if the Federal Reserve Board issues written
notice of its intent not to disapprove the action. Under a
rebuttable presumption established by the Federal Reserve Board,
the acquisition of more than ten percent of a class of voting stock
of a bank holding company with a class of securities registered
under Section 12 of the Exchange Act, such as Commerce Bancorp,
would, under the circumstances set forth in the presumption,
constitute the acquisition of control.
In addition, any "company" would be required to obtain the approval of the
Federal Reserve Board under the BHCA before acquiring 25 percent, five percent
in the case of an acquirer that is a bank holding company, or more of the
outstanding shares of Commerce Bancorp common stock, or otherwise obtaining
"control" over Commerce Bancorp. Under the BHCA, "control" generally means
o the ownership, control or power to vote 25 percent or more of any
class of voting securities of the banking holding company;
o the ability to elect a majority of the bank holding company's
directors; or
o the ability otherwise to exercise a controlling influence over the
management and policies of the bank holding company.
New Jersey Corporate Law.
The New Jersey Business Corporation Act, referred to as the NJBCA,
restricts the transactions that a publicly held corporation organized under the
laws of New Jersey with its principal executive offices or significant
operations located in New Jersey, referred to as a resident domestic
corporation, can engage. For example, the NJBCA provides that no resident
domestic corporation may engage in a "business combination," as defined in the
NJBCA, with an "interested shareholder" of the corporation for a period of five
years following the interested shareholder's stock acquisition, unless the
business combination is approved by the board of directors of the corporation
prior to the interested shareholder's stock acquisition. An interested
shareholder is a beneficial owner of ten percent or more of the voting power of
a corporation.
In addition, the NJBCA provides that no resident domestic corporation may
engage, at any time, in any business combination, with any interested
shareholders of the corporation other than:
o a business combination approved by the board of directors of such
corporation prior to the interested shareholder's stock
acquisition;
o a business combination approved by the affirmative vote of the
holders of two-thirds of the voting stock not beneficially owned
by that interested shareholder at a meeting called for such
purpose; or
o a business combination in which the interested shareholder pays a
formula price designed to ensure that all other shareholders
receive at least the highest price per share paid by that
interested shareholder.
Commerce Bancorp cannot opt-out of the foregoing provisions of the NJBCA.
The NJBCA allows the directors of a New Jersey corporation to look at
various factors in considering a proposal or offer to acquire the corporation.
Specifically, the NJBCA provides that a director of a New Jersey corporation in
evaluating a proposal or offer to acquire the corporation may consider, any of
the following:
o the effects of any action on the corporation's shareholders;
o the effects of the action on the corporation's employees, suppliers,
creditors and customers;
o the effects of the action on the community in which the corporation
operates; and
o the long-term as well as the short-term interests of the corporation
and its shareholders, including the possibility that these interests
may best be served by the continued independence of the corporation.
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If, on the basis of the foregoing factors, the board of directors determines
that any proposal or offer to acquire the corporation is not in the best
interest of the corporation, it may reject such proposal or offer, in which
event the board of directors will have no duty to facilitate, remove any
obstacles to, or refrain from impeding, such proposal or offer.
The existence of the foregoing provisions could
o result in Commerce Bancorp being less attractive to a potential
acquirer; and
o result in Commerce Bancorp's shareholders receiving less for their
shares of common stock than otherwise might be available in the
event of a takeover attempt.
Dividends
It is the present intention of Commerce Bancorp's board of directors to pay
quarterly cash dividends on Commerce Bancorp's common stock. However, the
declaration and payment of future dividends will be subject to determination and
declaration by the board of directors, which will consider the following:
o the earnings;
o the financial condition;
o the regulatory requirements; and
o the capital needs
of Commerce Bancorp, Commerce Bank, N.A., Commerce Bank/Delaware, N.A., Commerce
Bank/Pennsylvania, N.A., Commerce Bank/North and Commerce Bank/Shore, N.A.
Subject to the preferences, limitations and relative rights as may be fixed
for any series of Commerce Bancorp preferred stock that may be issued, holders
of Commerce Bancorp common stock are entitled to receive dividends, when, as and
if declared by the board of directors out of legally available funds.
Commerce Bancorp is a legal entity separate and distinct from its banking
and other subsidiaries. Under the NJBCA, a corporation may pay dividends or
purchase, redeem or otherwise acquire its own shares unless, after paying
dividends or acquiring its own stock:
o the corporation would be unable to pay its debts as they
become due in the usual course of its business; or
o its assets would be less than the sum of its liabilities plus
the amount that would be needed to satisfy the preferential
dissolution rights of shareholders whose preferential rights
are superior to those receiving the distribution.
Cash available for dividend distribution to the holders of Commerce
Bancorp's common stock and preferred stock must initially come primarily from
dividends paid to Commerce Bancorp by Commerce Bank, N.A., Commerce
Bank/Delaware, N.A., Commerce Bank/Pennsylvania, N.A., Commerce Bank/North and
Commerce Bank/Shore, N.A. Accordingly, restrictions on Commerce Bank, N.A.'s,
Commerce Bank/Delaware, N.A.'s, Commerce Bank/Pennsylvania, N.A.'s, Commerce
Bank/North's and Commerce Bank/Shore, N.A.'s cash dividend payments directly
affect the payment of cash dividends by Commerce Bancorp.
Commerce Bank, N.A., Commerce Bank/Delaware, N.A., Commerce
Bank/Pennsylvania, N.A. and Commerce Bank/Shore, N.A., as national banks, are
subject to certain limitations on the amount of cash dividends that they can
pay, without the prior approval of the Office of the Comptroller of the
Currency, referred to as the OCC. The prior approval of the OCC is required if
the total of all cash dividends declared by a national bank in any calendar year
will exceed the sum of the bank's net profits, as defined by statute, for that
year combined with the retained net profits for the preceding two calendar
years, less any required transfers to surplus.
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Commerce Bank/North, as a New Jersey State Bank, is also subject to certain
limitations on the amount of cash dividends that it can pay. No dividends may be
paid by Commerce Bank/North unless, following the payment of the dividend, the
capital stock of Commerce Bank/North is unimpaired and either:
o Commerce Bank/North will have a surplus of not less than 50% of its
capital stock; or
o the payment of the dividend will not reduce the surplus of Commerce
Bank/North.
In addition, the OCC and the Federal Deposit Insurance Corporation have
authority to prohibit banks from engaging in what in their opinion constitutes
an unsafe or unsound practice in conducting their businesses. The payment of
cash dividends could, depending upon the financial condition of the bank
involved, be considered an unsafe or unsound practice.
Legal Matters
An opinion has been delivered by Blank Rome LLP, Philadelphia, Pennsylvania
and Cherry Hill, New Jersey, to the effect that the shares of common stock
offered by Commerce Bancorp, when issued as contemplated in this prospectus,
will be legally issued, fully paid and non-assessable. Jack R Bershad, a former
partner in Blank Rome LLP, is a director of Commerce Bancorp and Commerce Bank,
N.A. Mr. Bershad and other partners of Blank Rome LLP are shareholders of
Commerce Bancorp.
Experts
The consolidated financial statements of Commerce Bancorp as of December
31, 2002 and 2001, and for each of the three years in the period ended December
31, 2002, appearing in Commerce Bancorp's Annual Report on Form 10-K for the
year ended December 31, 2002 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report which accompanied the financial
statements and is incorporated by reference in this prospectus. These financial
statements are incorporated by reference in this prospectus in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.
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Where You Can Find More Information
Commerce Bancorp files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, proxy statements and other information Commerce Bancorp files with the
SEC at the SEC's public reference facilities at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information on the operation of the
public reference facilities by calling the SEC at 1-800-SEC-0330. Commerce
Bancorp's SEC filings are also available on the SEC's world wide web site on the
Internet at http://www.sec.gov.
Commerce Bancorp has filed a registration statement on Form S-3 to register
the shares of Commerce Bancorp common stock offered under this prospectus. This
prospectus is a part of the registration statement on Form S-3 and constitutes a
prospectus of Commerce Bancorp. As allowed by SEC rules, this prospectus does
not contain all the information you can find in the registration statement on
Form S-3 or the exhibits to the registration statement on Form S-3.
The SEC also allows Commerce Bancorp to "incorporate by reference" the
information it files with the SEC, which means Commerce Bancorp can disclose
information to you by referring you to another document filed separately with
the SEC. Information incorporated by reference is deemed to be part of this
prospectus. Later information filed by Commerce Bancorp with the SEC updates and
supersedes this prospectus.
This prospectus incorporates important business and financial information
about Commerce Bancorp that is not included in or delivered with this
prospectus. Copies of any of that information are available without charge to
any person to whom this prospectus is delivered, upon written or oral request.
Written requests for those documents should be directed to Commerce Bancorp
Inc., 1701 Route 70 East, Cherry Hill, New Jersey 08034-5400, Attention: C.
Edward Jordan, Jr. and telephone requests may be directed to the C. Edward
Jordan, Jr. at (856) 751-9000.
The following documents previously filed by Commerce Bancorp with the SEC
pursuant to the Exchange Act are incorporated herein by this reference:
SEC Filings Period
----------- ------
Annual Report on Form 10-K Year ended December 31, 2002
Quarterly Report on Form 10-Q Quarter ended March 31, 2003
Current Report on Form 8-K Dated April 29, 2003
Current Report on Form 8-K Dated April 11, 2003
All documents filed by Commerce Bancorp pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this prospectus and
prior to the termination of the offering will be deemed to be incorporated by
reference.
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