PROSPECTUS
----------
$500,000,000
COMMERCE BANCORP, INC.
[LOGO OMITTED]
Debt Securities, Common Stock, Preferred Stock and Warrants
We may offer and sell from time to time, in one or more series, our
debt securities, which may consist of notes, debentures, or other evidences of
indebtedness, shares of our common stock, shares of our preferred stock and
warrants to purchase other securities. The debt securities and preferred stock
may be convertible into or exchangeable for other securities of ours. This
prospectus provides you with a general description of these securities. Each
time we offer any securities pursuant to this prospectus, we will provide you
with a prospectus supplement, and, if necessary, a pricing supplement, that will
describe the specific amounts, prices and terms of the securities being offered.
These supplements may also add, update or change information contained in this
prospectus. To understand the terms of the securities offered, you should
carefully read this prospectus together with the applicable supplements to
determine the specific terms of the securities we are offering.
___________________
These securities are not deposits or obligations of a bank or savings
association and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency.
For a discussion of the material risks that you should consider, see
"Risk Factors" beginning on page 3.
This prospectus may be used to offer and sell securities only if
accompanied by the prospectus supplement for those securities.
___________________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus or the accompanying prospectus supplement is accurate or
complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is August 21, 2003.
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We may provide information to you about the securities we are offering
in up to three separate documents that progressively provide more detail:
o this prospectus, which provides general information, some of which
may not apply to your securities;
o the accompanying prospectus supplement, which describes the specific
terms of your securities; and
o if necessary, a pricing supplement, which describes the specific
terms of your securities.
If terms vary among the pricing supplement, the prospectus supplement
and the accompanying prospectus, you should rely on the information as
controlling in the following order of priority:
o the pricing supplement, if any;
o the prospectus supplement; and
o the prospectus.
We include cross-references in this prospectus and the accompanying
prospectus supplement to captions in these materials where you can find further
related discussions. The following Table of Contents and the Table of Contents
included in the accompanying prospectus supplement provide the pages on which
these captions are located.
____________
Unless indicated in the applicable prospectus supplement, we have not
taken any action that would permit us to publicly sell these securities in any
jurisdiction outside the United States. If you are an investor outside the
United States, you should inform yourself about and comply with any restrictions
as to the offering of the securities and the distribution of this prospectus.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS......................................................1
WHERE YOU CAN FIND MORE INFORMATION........................................1
RISK FACTORS...............................................................3
FORWARD-LOOKING STATEMENTS.................................................6
COMMERCE BANCORP, INC......................................................7
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES...........................9
USE OF PROCEEDS............................................................9
SUPERVISION AND REGULATION.................................................9
DESCRIPTION OF DEBT SECURITIES............................................11
SENIOR DEBT SECURITIES....................................................20
SUBORDINATED DEBT SECURITIES..............................................21
DESCRIPTION OF CAPITAL STOCK..............................................23
DESCRIPTION OF WARRANTS...................................................27
ERISA CONSIDERATIONS......................................................29
PLAN OF DISTRIBUTION......................................................32
LEGAL MATTERS.............................................................34
INDEPENDENT AUDITORS......................................................34
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission, also referred to as the "SEC," utilizing a
"shelf" registration process. Under this shelf registration process, we may from
time to time sell the securities described in this prospectus in one or more
offerings up to a total dollar amount of $500,000,000. We may also sell other
securities under the registration statement that will reduce the total dollar
amount of securities that we may sell under this prospectus. This prospectus
provides you with a general description of the securities we may offer. Each
time we offer securities, we will provide a prospectus supplement that will
contain specific information about the terms of that offer. The prospectus
supplement may also add, update or change information contained in this
prospectus. You should read both this prospectus and any prospectus supplement
together with the additional information described under the heading "Where You
Can Find More Information."
Unless otherwise indicated or unless the context requires otherwise, all
references in this prospectus to "CBH," "we," "us," "our" or similar references
mean Commerce Bancorp, Inc. and references to the "banks" means our
subsidiaries: Commerce Bank, N.A., Commerce Bank/Pennsylvania, N.A., Commerce
Bank/Shore, N.A, Commerce Bank/Delaware, N.A., and Commerce Bank/North.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement under the Securities
Act of 1933, referred to as the "Securities Act," that registers, among other
securities, the offer and sale of the securities that we may offer under this
prospectus. The registration statement, including the attached exhibits and
schedules included or incorporated by reference in the registration statement,
contains additional relevant information about us. The rules and regulations of
the SEC allow us to omit certain information included in the registration
statement from this prospectus. In addition, we file reports, proxy statements
and other information with the SEC under the Securities Exchange Act of 1934,
referred to as the "Exchange Act."
You may read and copy this information at the following locations of
the SEC:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
Northeast Regional Office
The Woolworth Building
233 Broadway
New York, New York 10279
Midwest Regional Office
500 West Madison Street
Suite 1400
Chicago, Illinois 60661-2511
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates.
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The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers like us who file
electronically with the SEC. The address of that site is:
http://www.sec.gov
The SEC allows us to "incorporate by reference" information into this
prospectus. This means that we can disclose important information to you by
referring you to another document that we file or have filed separately with the
SEC.
The information incorporated by reference is considered to be a part of
this prospectus, except for any information that is superseded by information
that is included directly in this document or in a more recent incorporated
document.
This prospectus incorporates by reference the documents listed below that
we have previously filed with the SEC.
SEC Filings Period or Date (as applicable)
----------- ------------------------------
Annual Report on Form 10-K Year ended December 31, 2002, as filed on
March 31, 2003
Quarterly Reports on Form 10-Q Quarters
ended March 31,
2003, as filed
on May 15, 2003
and June 30,
2003 as filed
on August 8,
2003
Proxy Statement for the Annual Meeting of Shareholders Filed on April 21, 2003
In addition, we also incorporate by reference all future filings we
make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of our initial registration statement relating to the securities
until the completion of the distribution of the securities covered by this
prospectus. These documents include periodic reports, such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (other
than Current Reports furnished under Item 9 or 12 of Form 8-K), as well as proxy
statements.
The information incorporated by reference contains information about us
and our financial condition and is an important part of this prospectus.
You can obtain any of the documents incorporated by reference in this
document through us, or from the SEC through the SEC's Internet world wide web
site at www.sec.gov. Documents incorporated by reference are available from us
without charge, excluding any exhibits to those documents, unless the exhibit is
specifically incorporated by reference as an exhibit in this prospectus. You can
obtain documents incorporated by reference in this prospectus by requesting them
in writing or by telephone from us at the following address:
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Commerce Bancorp, Inc.
Shareholder Relations
1701 Route 70 East
Cherry Hill, NJ 08034-5400
(856) 751-9000
In addition, we maintain a corporate website, www.commerceonline.com.
We make available, on our website (through a link to the SEC's website referred
to above), our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K, and any amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the Securities and Exchange Commission. This
reference to our website is for the convenience of shareholders as required by
the Securities and Exchange Commission and shall not be deemed to incorporate
any information on the website into this Registration Statement.
We have not authorized anyone to give any information or make any
representation about us that is different from, or in addition to, those
contained in this prospectus or in any of the materials that we have
incorporated into this prospectus. If anyone does give you information of this
sort, you should not rely on it. If you are in a jurisdiction where offers to
sell, or solicitations of offers to purchase, the securities offered by this
prospectus are unlawful, or if you are a person to whom it is unlawful to direct
these types of activities, then the offer presented in this prospectus does not
extend to you. The information contained in this prospectus speaks only as of
the date of this prospectus unless the information specifically indicates that
another date applies.
RISK FACTORS
Before purchasing any securities, you should read carefully this
prospectus, any prospectus supplement and any documents incorporated by
reference and pay special attention to the following risk factors in addition to
any risk factors highlighted in the prospectus supplement. These are not the
only risks and uncertainties we face. Additional risks and uncertainties which
we currently consider immaterial or which are not yet known to us could also
adversely affect us.
We plan to continue to grow rapidly and there are risks associated with rapid
growth.
We intend to continue to rapidly expand our business and operations. In
particular, we intend to use proceeds of the securities covered by this
prospectus to support continued branch office expansion and anticipated
increases in our deposits and loans. Our ability to manage growth successfully
will depend on our ability to attract qualified personnel and maintain cost
controls and asset quality while attracting additional loans and deposits on
favorable terms, as well as on factors beyond our control, such as economic
conditions and interest rate trends. If we grow too quickly and are not able to
attract qualified personnel, control costs and maintain asset quality, this
continued rapid growth could materially adversely affect our financial
performance.
If we do not adjust to rapid changes in the financial services industry, our
financial performance may suffer.
Our ability to maintain our history of strong financial performance and
return on investment to shareholders may depend in part on our ability to expand
our scope of available financial services as needed to meet the needs and
demands of our customers. Our business model focuses on using superior customer
service to provide traditional banking services to a growing customer base.
However, we operate in an increasingly competitive environment in which our
competitors now include securities
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dealers, brokers, mortgage bankers, investment advisors and finance and
insurance companies who seek to offer one-stop financial services to their
customers that may include services that we have not been able or allowed to
offer to our customers in the past. This increasingly competitive environment is
a result primarily of changes in regulation, changes in technology and product
delivery systems and the accelerating pace of consolidation among financial
services providers. We cannot assure you that we will be able to continue to
compete successfully in this environment without expanding the scope of
financial services we provide, or that if we need to expand the scope of
services that we provide, that we will be able to do so successfully.
Our future success will depend on our ability to compete effectively in a highly
competitive market and geographic area.
We face substantial competition in all phases of our operations from a
variety of different competitors. We encounter competition from commercial
banks, savings and loan associations, mutual savings banks and other financial
institutions. Our competitors, including credit unions, consumer finance
companies, factors, insurance companies and money market mutual funds, compete
with lending and deposit-gathering services offered by us. There is very strong
competition for financial services in the Philadelphia, New Jersey, Delaware and
New York areas in which we conduct our businesses. This geographic area includes
offices of many of the largest financial institutions in the world. Many of
those competing institutions have much greater financial and marketing resources
than we have. Due to their size, many competitors can achieve larger economies
of scale and as a result may offer a broader range of products and services than
us. If we are unable to offer competitive products and services, our earnings
may be negatively affected.
Some of the financial services organizations with which we compete are
not subject to the same degree of regulation as is imposed on bank holding
companies and federally insured financial institutions. As a result, these
nonbank competitors have certain advantages over us in accessing funding and in
providing various services. The banking business in our primary market area is
very competitive, and the level of competition facing us may increase further,
which may limit our asset growth and profitability.
Our operations are concentrated in the New Jersey, Southeastern Pennsylvania,
Metropolitan New York and Delaware market areas.
Economic conditions either nationally or locally in areas in which our
operations are concentrated may be less favorable than expected. Deterioration
in local, regional, national or global economic conditions could result in,
among other things, an increase in loan delinquencies, a decrease in property
values, a change in housing turnover rate or a reduction in the level of bank
deposits. Particularly, a weakening of the real estate or employment market in
our primary market areas could result in an increase in the number of borrowers
who default on their loans and a reduction in the value of the collateral
securing their loans, which in turn could have an adverse effect on our
profitability. Substantially all of our real estate loans are collateralized by
properties located in these market areas, and substantially all of our loans are
made to borrowers who live in and conduct business in these market areas. Any
material economic deterioration in these market areas could have an adverse
impact on our profitability.
Changes in interest rates could reduce our income and cash flows.
Our income and cash flows and the value of our assets and liabilities
depend to a great extent on the difference between the interest rates earned on
interest-earning assets such as loans and investment securities, and the
interest rates paid on interest-bearing liabilities such as deposits and
borrowings. These rates are highly sensitive to many factors which are beyond
our control, including general
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economic conditions and policies of various governmental and regulatory
agencies, in particular, the Board of Governors of the Federal Reserve System
("FRB"). Changes in monetary policy, including changes in interest rates, will
influence the origination of loans and investment securities and the amounts
paid on deposits. If the rate of interest we pay on our deposits and other
borrowings increases more than the rate of interest we earn on our loans and
other investments, our net interest income, and therefore our earnings, could be
adversely affected. Our earnings could also be adversely affected if the rates
on our loans and other investments fall more quickly than those on our deposits
and other borrowings.
Future governmental regulation and legislation could limit our future growth.
We are subject to extensive state and federal regulation, supervision,
and legislation which govern almost all aspects of our operations. See
"Supervision and Regulation" below. These laws may change from time to time and
are primarily intended for the protection of customers, depositors, and the
deposit insurance funds. The impact of any changes to these laws may negatively
impact our ability to expand our services and to increase the value of our
business. While we cannot predict what effect any presently contemplated or
future changes in the laws or regulations or their interpretations would have on
us, these changes could be materially adverse to our investors and shareholders.
We are required to maintain an allowance for loan losses. These reserves are
based on management's judgment and may have to be adjusted in the future. Any
adjustment to the allowance for loan losses, whether due to regulatory changes,
economic conditions or other factors, may affect our financial condition and
earnings.
We maintain an allowance for loan losses. The allowance for loan losses
is maintained at a level believed adequate by management to absorb losses
inherent in the loan portfolio. In conjunction with an internal loan review
function that operates independently of the lending function, management
monitors the loan portfolio to identify risks on a timely basis so that an
appropriate allowance can be maintained. Based on an evaluation of the loan
portfolio, management presents a quarterly review of the loan loss reserve to
the Board of Directors, indicating any changes in the reserve since the last
review and any recommendations as to adjustments in the reserve. In making its
evaluation, in addition to the factors discussed below, management considers the
results of recent regulatory examinations, which typically include a review of
the allowance for loan losses as an integral part of the examination process.
In establishing the allowance, management evaluates individual large
classified loans and nonaccrual loans, and determines an aggregate reserve for
those loans based on that review. An allowance for the remainder of the loan
portfolio is also determined based on historical loss experience within the
components of the portfolio. These allocations may be modified if current
conditions indicate that loan losses may differ from historical experience,
based on economic factors and changes in portfolio mix and volume.
In addition, a portion of the allowance is established for losses
inherent in the loan portfolio which have not been identified by the more
quantitative processes described above. This determination inherently involves a
higher degree of subjectivity, and considers risk factors that may not have yet
manifested themselves in CBH's historical loss experience. Those factors include
changes in levels and trends of charge-offs, delinquencies, and nonaccrual
loans, trends in volume and terms of loans, changes in underwriting standards
and practices, portfolio mix, tenure of loan officers and management, entrance
into new geographic markets, changes in credit concentrations, and national and
local economic trends and conditions. While the allowance for loan losses is
maintained at a level believed to be adequate by management for estimated losses
in the loan portfolio, determination of the allowance is inherently subjective,
as it requires estimates, all of which may be susceptible to significant change.
Changes in these estimates may impact the provisions charged to expense in
future periods.
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It may be difficult for a third party to acquire CBH and this could depress
CBH's stock price.
Under CBH's certificate of incorporation, CBH has authorized 10,000,000
shares of preferred stock, which the board of directors may issue with terms,
rights, preferences and designations as the board of directors may determine and
without any vote of the shareholders, unless otherwise required by law. Issuing
the preferred stock, depending upon the rights, preferences and designations set
by the board of directors, may delay, deter, or prevent a change in control of
CBH. In addition, "anti-takeover" provisions of CBH's certificate of
incorporation, federal and state banking laws, and New Jersey law may restrict
the ability of the shareholders to approve a merger or business combination or
obtain control of CBH. This may tend to make it more difficult for shareholders
to replace existing management or may prevent shareholders from receiving a
premium for their shares of CBH common stock.
The securities of CBH are not insured by any governmental agency and, therefore,
investment in them involves risk.
The securities of CBH are not deposit accounts or other obligation of
any bank, and are not insured by the FDIC, or any other governmental agency, and
are subject to investment risk, including the possible loss of principal.
FORWARD-LOOKING STATEMENTS
We have included or may include statements in this prospectus, a
prospectus supplement or a pricing supplement (including documents incorporated
by reference described under the heading "Where You Can Find More Information")
that constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
include statements with respect to our beliefs, plans, objectives, goals,
expectations, anticipations, estimates and intentions, that are subject to
significant risks and uncertainties and are subject to change based on various
factors that are sometimes beyond our control. You will be able to recognize a
forward-looking statement because it contains the words "anticipate," "believe,"
"estimate," "expect," "project," "objective," "may," "could," "should," "would,"
"intend," "plan" or similar expressions to identify it as a forward-looking
statement.
The following factors, among others, could cause our financial
performance to differ materially from that expressed in such forward-looking
statements: the strength of the United States economy in general and the
strength of the local economies in which we conduct our operations; the effects
of, and changes in, trade, monetary and fiscal policies, including interest rate
policies of the FRB; inflation; interest rates, market and monetary
fluctuations; our timely development of competitive new products and services
and the acceptance of such products and services by customers; the willingness
of customers to substitute competitors' products and services for our products
and services and vice versa; the impact of changes in financial services laws
and regulations, including laws concerning taxes, banking, securities and
insurance; technological changes; future acquisitions; the expense savings and
revenue enhancements from acquisitions being less than expected; the growth and
profitability of our noninterest or fee income being less than expected; the
ability to maintain the growth and further development of our community-based
retail branching network; unanticipated regulatory or judicial proceedings;
changes in consumer spending and saving habits; and our success at managing the
risks involved in the foregoing. We caution that the foregoing list of important
factors is not exclusive.
We caution you that any such forward-looking statements are not
guarantees of future performance and involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to differ materially from the future results, performance or
achievements we have anticipated in such forward-looking statements. You should
note that many
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factors, some of which are discussed in "Risk Factors" and elsewhere in this
prospectus could affect our future financial results and could cause those
results to differ materially from those expressed or implied in our
forward-looking statements contained or incorporated by reference in this
document. We do not undertake to update any forward-looking statement, whether
written or oral, that may be made from time to time by or on behalf of us.
COMMERCE BANCORP, INC.
Overview
CBH is a New Jersey business corporation registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended the "Holding
Company Act". CBH was incorporated on December 9, 1982 and became an active bank
holding company on June 30, 1983 through the acquisition of Commerce Bank, N.A.,
referred to as Commerce NJ.
As of June 30, 2003, CBH had total assets of $19.8 billion, total loans
of $6.4 billion, and total deposits of $17.8 billion. The address of CBH's
principal executive office is Commerce Atrium, 1701 Route 70 East, Cherry Hill,
New Jersey, 08034-5400 and the telephone number is (856) 751-9000. CBH operates:
o four nationally chartered bank subsidiaries:
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
o one New Jersey state chartered bank subsidiary:
Commerce Bank/North, Ramsey, New Jersey ("Commerce North").
These five bank subsidiaries as of June 30, 2003 had 243 full service
retail branch offices located in the states of New Jersey, Pennsylvania,
Delaware and New York. These banks provide 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. The banks' lending and investment activities are funded
principally by retail deposits gathered through each bank's retail branch office
network.
CBH's primary growth strategy is the opening of new full service branch
offices, of which 19 have opened in 2003 through June 30; 40 opened in 2002; and
34 opened in 2001. CBH expects to open an additional 26 full service branch
offices in 2003.
Commerce NJ operates a non-bank subsidiary, Commerce Capital Markets,
Inc., Philadelphia, Pennsylvania, referred to as Commerce Capital Markets, which
engages in various securities, investment banking and brokerage activities. In
addition, CBH, through Commerce Insurance Services, Inc. (formerly Commerce
National Insurance Services, Inc.), a non-bank subsidiary of Commerce North,
referred to as Commerce Insurance, operates one of the nation's largest regional
insurance brokerage agency concentrating on commercial property, casualty and
surety as well as personal lines of insurance and employee benefits for clients
in multiple states, primarily Delaware, New Jersey, New York and Pennsylvania.
Since 1996, Commerce Insurance has completed several strategic acquisitions of
insurance brokerage agencies the most recent of which include the following:
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o in 2001, Fitzsimmons Insurance and Financial Services, Inc.,
Business Training Systems, Inc. and Brettler Financial Group, Inc.
were acquired;
o in 2002, Sanford and Purvis, Inc., Upper Montclair, NJ, was
acquired; and
o in 2003, The Porch Agency, Bridgeton, NJ, was acquired.
As a legal entity separate and distinct from its bank and non-bank
subsidiaries, CBH's principal sources of revenues are dividends and fees from
its bank and non-bank subsidiaries. The subsidiaries that operate in the
banking, insurance and securities business can pay dividends only if they are in
compliance with the applicable regulatory requirements imposed on them by
federal and state regulatory authorities.
The Banks
As of June 30, 2003, Commerce NJ had total assets of $13.3 billion,
total deposits of $9.5 billion, and total shareholders' equity of $691.5
million; Commerce PA had total assets of $4.1 billion, total deposits of $3.8
billion and total shareholders' equity of $231.6 million; Commerce Shore had
total assets of $2.4 billion, total deposits of $2.3 billion and total
shareholders' equity of $126.8 million; Commerce North had total assets of $2.1
billion, total deposits of $2.0 billion, and total shareholders' equity of
$129.1 million; and Commerce Delaware had total assets of $272.4 million, total
deposits of $255.4 million, and total shareholders' equity of $14.9 million.
Commerce NJ provides retail and commercial banking services through 125
retail branch offices in Central and Southern New Jersey, and Metropolitan New
York; Commerce PA provides retail and commercial banking services through 57
retail branch offices in Philadelphia, Bucks, Chester, Delaware and Montgomery
Counties in Southeastern Pennsylvania; Commerce Shore provides retail and
commercial banking services through 29 retail branch offices in Ocean and
Monmouth Counties, New Jersey; Commerce North provides retail and commercial
banking services through 26 retail branch offices in Bergen and Passaic
Counties, New Jersey; and Commerce Delaware provides retail and commercial
banking services through 6 retail branch offices in New Castle County, Delaware.
Retail Banking Services and Products
Each bank provides a broad range of retail banking services and
products, including free checking accounts, subject to minimum balances, savings
programs, money market accounts, negotiable orders of withdrawal accounts,
certificates of deposit, safe deposit facilities, consumer loan programs,
including installment loans for home improvement and the purchase of consumer
goods and automobiles, home equity and Visa Gold card revolving lines of credit,
overdraft checking and automated teller facilities. Each bank also offers
construction loans and permanent mortgages for houses. Additional information
pertaining to CBH's segments is set forth in "Note 19 - Segment Reporting" of
CBH's Notes to Consolidated Financial Statements which appear in CBH's Annual
Report on Form 10-K for the year ended December 31, 2002.
Additional information about us and our subsidiaries is included in
documents incorporated by reference in this prospectus. See "Where You Can Find
More Information" on page 1 of this prospectus.
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CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
Our consolidated ratios of earnings to fixed charges were as follows
for the periods presented:
Six Months Year Ended December 31,
Ended June 30,
2003 ---------------------------------------
-------------- 2002 2001 2000 1999 1998
Ratio of Earnings to Fixed Charges (1): ------ ----- ---- ---- ----
Excluding Interest on Deposits.................. 14.13 12.03 14.70 5.64 6.25 6.50
Including Interest on Deposits.................. 2.62 2.17 1.74 1.56 1.68 1.52
____________________________
(1) The ratio of earnings to fixed charges for CBH has been computed by
dividing earnings by fixed charges. "Earnings" include pretax income from
continuing operations plus fixed charges. "Fixed charges" include the
total of interest expense, capitalized interest, expensed or capitalized
amortization of debt expense and any related discount or premium, and
such portion of rental expense that is representative of the interest
factor of each such rental.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the securities for
general corporate purposes unless otherwise indicated in the prospectus
supplement relating to a specific issue of securities. Our general corporate
purposes may include repurchasing our outstanding common stock, financing
possible acquisitions of branches or other financial institutions or financial
service companies, extending credit to, or funding investments in, our
subsidiaries and repaying, reducing or refinancing indebtedness.
The precise amounts and the timing of our use of the net proceeds will
depend upon market conditions, our subsidiaries' funding requirements, the
availability of other funds and other factors. Until we use the net proceeds
from the sale of any of our securities for general corporate purposes, we will
use the net proceeds to reduce our indebtedness or for temporary investments. We
expect that we will, on a recurrent basis, engage in additional financings as
the need arises to finance our corporate strategies, to fund our subsidiaries,
to finance acquisitions or otherwise.
SUPERVISION AND REGULATION
The following discussion sets forth certain of the material elements of
the regulatory framework applicable to bank holding companies and their
subsidiaries and provides certain specific information relevant to CBH and its
subsidiaries. The regulatory framework is intended primarily for the protection
of depositors, other customers and the federal deposit insurance funds and not
for the protection of security holders. To the extent that the following
information describes statutory and regulatory provisions, it is qualified in
its entirety by reference to the particular statutory and regulatory provisions.
A change in applicable statutes, regulations or regulatory policy may have a
material effect on the business of CBH.
Supervision of CBH as a Holding Company
CBH is registered as a bank holding company under the Holding Company
Act, and is therefore subject to supervision and regulation by the FRB.
Under the Holding Company Act, CBH is required to secure the prior
approval of the FRB before it can merge or consolidate with any other bank
holding company or acquire all or substantially all of the
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assets of any bank or acquire direct or indirect ownership or control of any
voting shares of any bank that is not already majority owned by it, if after
such acquisition it would directly or indirectly own or control more than 5% of
the voting shares of such bank.
CBH is generally prohibited under the Holding Company Act from engaging
in, or acquiring direct or indirect ownership or control or more than 5% of the
voting shares of any company engaged in nonbanking activities unless the FRB, by
order or regulation, has found such activities to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto. In
making such a determination, the FRB considers whether the performance of these
activities by a bank holding company can reasonably be expected to produce
benefits to the public which outweigh the possible adverse effects.
Satisfactory financial condition, particularly with regard to capital
adequacy, and satisfactory Community Reinvestment Act (as amended, "CRA")
ratings are generally prerequisites to obtaining federal regulatory approval to
make acquisitions. All of CBH's subsidiary banks are currently rated at least
"satisfactory" under CRA; Commerce North is rated "outstanding."
In addition, under the Holding Company Act, CBH is required to file
periodic reports of its operations with, and is subject to examination by, the
FRB.
CBH is under the jurisdiction of the SEC and various state securities
commissions for matters relating to the offering and sale of its securities and
is subject to the SEC's rules and regulations relating to periodic reporting,
reporting to shareholders, proxy solicitation and insider trading.
A discussion of capital guidelines and capital is included in the
section entitled "Stockholders' Equity and Dividends" contained within
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in CBH's Annual Report on Form 10-K for the year ended
December 31, 2002.
Commerce NJ, Commerce PA, Commerce Shore, Commerce North, and Commerce Delaware
Commerce NJ, Commerce PA, Commerce Shore, and Commerce Delaware, as
national banks, are subject to the National Bank Act. Each is also subject to
the supervision of, and is regularly examined by, the Office of the Comptroller
of the Currency ("OCC") and is required to furnish quarterly reports to the OCC.
The approval of the OCC is required for the establishment of additional branch
offices by any national bank, subject to applicable state law restrictions.
Commerce North, as a New Jersey state-chartered bank, is subject to the
New Jersey Banking Act. Commerce North is also subject to the supervision of,
and is regularly examined by, the Department and the FDIC, and is required to
furnish quarterly reports to each agency. The approval of the Department and the
FDIC is necessary for the establishment of any additional branch offices by any
New Jersey state-chartered bank, subject to applicable state law restrictions.
Commerce NJ, Commerce PA, Commerce Shore, Commerce North and Commerce
Delaware are also members of the FDIC and, except for Commerce North, members of
the FRB and, therefore, are subject to additional regulation by these agencies.
Some of the aspects of the lending and deposit business of such banks which are
regulated by these agencies include personal lending, mortgage lending and
reserve requirements. The operation of such banks is also subject to numerous
federal, state and local laws and regulations which set forth specific
restrictions and procedural requirements with respect to interest rates on
loans, the extension of credit, credit practices, the disclosure of credit terms
and discrimination in credit transactions.
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Commerce NJ, Commerce PA, Commerce Shore, Commerce North and Commerce
Delaware are subject to certain limitations on the amount of cash dividends that
they can pay. See Note 18 of CBH's Notes to Consolidated Financial Statements
which appears in CBH's Annual Report on Form 10-K for the year ended December
31, 2002 and "Description of Capital Stock--Payment of Dividends" beginning on
page 26 of this prospectus.
The OCC has authority under the Financial Institutions Supervisory Act
to prohibit national banks from engaging in any activity which, in the OCC's
opinion, constitutes an unsafe or unsound practice in conducting their
businesses. The FRB has similar authority with respect to CBH and CBH's non-bank
subsidiaries. The FDIC has similar authority with respect to Commerce North.
All of the deposits of the banking subsidiaries are insured up to
applicable limits by the FDIC and are subject to deposit insurance assessments.
The insurance assessments are based upon a matrix that takes into account a
bank's capital level and supervisory rating. Effective January 1, 1996, the FDIC
reduced the insurance premiums it charged on bank deposits to the statutory
minimum of $2,000 annually for "well capitalized" banks.
Commerce Insurance/Commerce Capital Markets
Commerce Insurance, a non-bank subsidiary of Commerce North, is
currently subject to supervision, regulation and examination by the New Jersey
Department of Insurance, as well as other state insurance departments where it
operates. Commerce Capital Markets, a non-bank subsidiary of Commerce NJ,
engages in certain permitted securities activities and is regulated by the SEC.
Commerce Capital Markets is also subject to rules and regulations promulgated by
the National Association of Securities Dealers, Inc., the Securities Investors
Protection Corporation and various state securities commissions and with respect
to public finance activities the Municipal Securities Rulemaking Board.
Both Commerce Insurance and Commerce Capital Markets are also subject
to various state laws and regulations in which they do business. These laws and
regulations are primarily intended to benefit clients and generally grant
supervisory agencies broad administrative powers, including the power to limit
or restrict the carrying on of business for failure to comply with such laws and
regulations. In such event, the possible sanctions which may be imposed include
the suspension of individual employees, limitations on engaging in business for
specific periods, censures and fines.
THE RULES GOVERNING THE REGULATION OF FINANCIAL SERVICES INSTITUTIONS
AND THEIR HOLDING COMPANIES ARE VERY DETAILED AND TECHNICAL. ACCORDINGLY, THE
ABOVE DISCUSSION IS GENERAL IN NATURE AND DOES NOT PURPORT TO BE COMPLETE OR TO
DESCRIBE ALL OF THE LAWS AND REGULATIONS THAT APPLY TO CBH AND ITS SUBSIDIARIES.
DESCRIPTION OF DEBT SECURITIES
We may issue senior debt securities or subordinated debt securities.
Senior debt securities will be issued under an indenture, the "senior
indenture," between us and The Bank of New York, as senior indenture trustee.
Subordinated debt securities will be issued under a separate indenture, the
"subordinated indenture," between us and The Bank of New York, as subordinated
indenture trustee. A copy of the form of each of these indentures are exhibits
to the registration statement of which this prospectus is a part.
The senior debt securities may or may not be unsecured and may or may
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not rank equally with all of our other future senior unsecured indebtedness, if
any. The subordinated debt securities may or may not be unsecured and may or may
not be subordinated to all of our existing and future senior indebtedness, if
any, and other financial obligations, as described under "Subordinated Debt
Securities--Subordination" beginning on page 21 of this prospectus.
The following describes the general terms and provisions of the debt
securities to be offered by any prospectus supplement. The particular terms of
the debt securities offered by a prospectus supplement and the extent, if any,
to which these general provisions may apply to the debt securities so offered,
will be described in the prospectus supplement relating to those securities. The
following descriptions of the indentures are not complete and are subject to,
and are qualified in their entirety by reference to, all the provisions of the
respective indentures.
General
The indentures permit us to issue the debt securities from time to
time, without limitation as to aggregate principal amount, and in one or more
series. The indentures also do not limit or otherwise restrict the amount of
other indebtedness which we may incur or other securities which our subsidiaries
or we may issue, including indebtedness which may rank senior to the debt
securities. In this regard, nothing in the subordinated indenture prohibits the
issuance of securities representing subordinated indebtedness that is senior or
junior to the subordinated debt securities.
We may issue debt securities if the conditions contained in the
indentures are satisfied. These conditions include the adoption of resolutions
by our board of directors and a certificate of an authorized officer that
establishes the terms of the debt securities being issued. Any resolution or
officer's certificate approving the issuance of any issue of debt securities
will include the terms of that issue of debt securities, including, if
applicable:
o the title, CUSIP Number, and series designation;
o the aggregate principal amount and the limit, if any, on the
aggregate principal amount or initial issue price of the debt
securities which may be issued under the applicable indenture;
o the principal amount payable, whether at maturity or upon earlier
acceleration;
o whether the principal maturity consideration or interest amounts
payable will be determined with reference to an index, formula or
other method which may be calculated, by using, among other
measurements, the value of currencies, securities or baskets of
securities, commodities, or indices to which any such amount payable
is linked and the methods by which such amounts are determined;
o whether the debt securities will be issued as original issue
discount securities (as defined below);
o the date or dates on which the principal of the debt securities is
payable;
o any fixed or variable interest rate or rates per annum or the method
or formula for determining an interest rate;
o the date from which any interest will accrue;
o any interest payment dates;
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o whether the debt securities are senior or subordinated, and if
subordinated, the terms of the subordination if different from that
summarized in this prospectus;
o the stated maturity date;
o whether the debt securities are to be issued in global form, the
identify of the depository and the manner in which interest will be
paid;
o any sinking fund requirements;
o the price or prices at which the debt securities will be issued,
which may be expressed as a percentage of the aggregate principal
amount of those debt securities;
o any provisions for redemption, the redemption price and any
remarketing arrangements;
o the minimum denominations;
o whether the debt securities are denominated or payable in United
States dollars or a foreign currency or units of two or more foreign
currencies;
o the identity of the exchange agent, if any;
o any restrictions on the offer, sale and delivery of the debt
securities;
o information with respect to book-entry procedures;
o the place or places where payments on the debt securities will be
made and may be presented for registration of transfer or exchange;
o whether any of the debt securities will be subject to defeasance in
advance of the date for redemption or the stated maturity date;
o whether and how we may satisfy our obligations with regard to
payment upon maturity, any redemption, required repurchase, any
exchange provisions or interest payment through the delivery to
holders of other securities, which may or may not be issued by us,
or a combination of cash, securities and/or property, referred to as
"maturity consideration";
o the terms, if any, upon which the debt securities are convertible
into other securities of ours or another issuer and the terms and
conditions upon which any conversion will be effected, including the
initial conversion price or rate, the conversion period and any
other provisions in addition to or instead of those described in
this prospectus; and
o any other terms of the debt securities which are not inconsistent
with the provisions of the applicable indenture.
The debt securities may be issued as "original issue discount
securities" which bear no interest or interest at a rate which at the time of
issuance is below market rates and which will be sold at a substantial discount
below their principal amount. If the maturity of any original issue discount
security is accelerated, the amount payable to the holder of the security will
be determined by the applicable prospectus supplement, the terms of the security
and the relevant indenture, but may be an amount less
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than the amount payable at the maturity of the principal of that original issue
discount security. Special federal income tax and other considerations relating
to original issue discount securities will be described in the applicable
prospectus supplement.
Please see the accompanying prospectus supplement or pricing supplement
you have received or will receive for the terms of the specific debt securities
we are offering.
You should be aware that special U.S. Federal income tax, accounting
and other considerations may apply to the debt securities. The prospectus
supplement relating to an issue of debt securities will describe these
considerations.
Registration and Transfer
Holders may present debt securities in registered form for transfer or
exchange for other debt securities of the same series at the offices of the
applicable indenture trustee according to the terms of the applicable indenture
and the debt securities.
Unless otherwise indicated in the applicable prospectus supplement, the
debt securities will be issued in fully registered form, without coupons, and in
denominations of (1) $1,000 or integral multiples of $1,000 for any senior debt
security and (2) $100,000 or any integral multiple of $1,000 in excess of
$100,000 for any subordinated debt security.
No service charge will be required for any transfer or exchange of the
debt securities but we may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection with any transfer or
exchange.
Payment and Place of Payment
We will pay or deliver principal, maturity consideration and any
premium and interest in the manner, at the places and subject to the
restrictions set forth in the applicable indenture, the debt securities and the
applicable prospectus supplement. However, at our option, we may pay any
interest by check mailed to the holders of registered debt securities at their
registered addresses.
Global Securities
Each indenture provides that we may issue debt securities in global
form. If any series of debt securities is issued in global form, the prospectus
supplement will describe any circumstances under which beneficial owners of
interests in any of those global debt securities may exchange their interests
for debt securities of that series and of like tenor and principal amount in any
authorized form and denomination.
Events of Default
Unless otherwise indicated in the applicable prospectus supplement, the
following are events of default under the senior indenture with respect to the
senior debt securities:
o default in the payment of any principal or premium on senior debt
securities when due;
o default in the payment of any interest on senior debt securities
when due, which continues for 30 days;
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o default in the delivery or payment of the maturity consideration on
senior debt securities when due;
o default in the deposit of any sinking fund payment on senior debt
securities when due;
o default in the performance of any other obligation contained in the
applicable indenture for the benefit of that series or in the senior
debt securities of that series, which continues for 60 days after
written notice;
o default in the payment of any of our other indebtedness or the
indebtedness of any principal constituent bank (i.e. a bank
subsidiary that has total assets equal to 50% or more of our
assets), whether currently existing or created in the future, as a
result of which indebtedness of CBH or such principal constituent
bank in excess of $5,000,000 aggregate principal amount shall be or
become due and payable prior to the date it would have otherwise
become due and such acceleration has not been rescinded or annulled
within 30 days of the related declaration;
o specified events in bankruptcy, insolvency or reorganization of us
or any principal constituent bank; and
o any other event of default provided with respect to senior debt
securities of any series.
If an event of default (other than an event of default arising from
specified events in bankruptcy of us or any principal constituent bank) occurs
and is continuing for any series of senior debt securities, the senior indenture
trustee or the holders of not less than 25% in aggregate principal amount or,
under certain circumstances, issue price of the outstanding debt securities of
that series may declare all amounts, or any lesser amount provided for in the
senior debt securities of that series, to be due and payable or deliverable
immediately.
Unless otherwise indicated in the applicable prospectus supplement, the
following are the events of default under the subordinated indenture with
respect to the subordinated debt securities:
o specified events in bankruptcy, insolvency or reorganization; and
o with respect to a particular series of subordinated debt securities
any other event of default provided with respect to that series.
If an event of default occurs and is continuing for any series of
subordinated debt securities, the subordinated indenture trustee or the holders
of not less than 25% in aggregate principal amount or, under certain
circumstances, issue price of the outstanding securities of that series may
declare all amounts, or any lesser amount provided for in the subordinated debt
securities of that series, to be due and payable or deliverable immediately. The
subordinated indenture trustee and the holders of subordinated debt securities
will not be entitled to accelerate the maturity of the subordinated debt
securities in the case of a default in the performance of any covenant with
respect to the subordinated debt securities, including the payment of interest
and principal or the delivery of the maturity consideration, unless such default
is an event of default with respect to the subordinated debt securities of the
applicable series.
If a default occurs and is continuing under the subordinated indenture,
the subordinated indenture trustee may, in its discretion and subject to certain
conditions, seek to enforce its rights and the rights of the holders of the
subordinated debt securities by appropriate judicial proceedings. The following
are defaults under the subordinated indenture with respect to subordinated debt
securities of any series:
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o any event of default with respect to subordinated debt securities of
that series;
o default in the payment of any principal or premium on subordinated
debt securities of that series when due;
o default in the payment of any interest on subordinated debt
securities of that series when due, which continues for 30 days;
o default in the delivery or payment of the maturity consideration on
subordinated debt securities of that series when due;
o default in the performance of any other obligation contained in the
subordinated indenture for the benefit of that series or in the
subordinated debt securities of that series, which continues for 60
days after written notice; and
o any other default provided with respect to subordinated debt
securities of that series.
At any time after the applicable indenture trustee or the holders have
accelerated a series of debt securities, but before the applicable indenture
trustee has obtained a judgment or decree for payment of money due or delivery
of the maturity consideration, the holders of a majority in aggregate principal
amount or, under certain circumstances, issue price of outstanding debt
securities of that series may rescind and annul that acceleration and its
consequences, provided that all payments and/or deliveries due, other than those
due as a result of acceleration, have been made and all events of default have
been remedied or waived.
The holders of a majority in principal amount or aggregate issue price,
as applicable, of the outstanding debt securities of any series may waive any
default with respect to that series that has not been cured and, except a
default:
o in the payment of any amounts due and payable or deliverable under
the debt securities of that series; or
o in an obligation contained in, or a provision of, an indenture which
cannot be modified under the terms of that indenture without the
consent of each holder of each series of debt securities affected.
The holders of a majority in principal amount or, under certain
circumstances, issue price of the outstanding debt securities of a series may
direct the time, method and place of conducting any proceeding for any remedy
available to the applicable indenture trustee or exercising any trust or power
conferred on the indenture trustee with respect to debt securities of that
series, provided that such direction:
o is not in conflict with any rule of law or the applicable indenture;
o may not be unjustly prejudicial to the right of the holders of a
series not taking part in such direction; and
o will not expose the trustee to personal liability.
Subject to the provisions of the applicable indenture relating to the
duties of the indenture trustee, before proceeding to exercise any right or
power under the indenture at the direction of the holders, the
16
indenture trustee is entitled to receive from those holders reasonable security
or indemnity against the costs, expenses and liabilities which it might incur in
complying with any direction. Additionally, the indenture trustee has the right
to decline to follow any direction if the indenture trustee determines, in good
faith, that proceeding in accordance with the direction would involve the
indenture trustee in personal liability.
A holder of any debt security of any series will have the right to
institute a proceeding with respect to the applicable indenture or for any
remedy under the indenture, if:
o that holder previously gives to the indenture trustee written notice
of a continuing event of default with respect to debt securities of
that series;
o the holders of not less than 25% for any senior debt security, or a
majority for any subordinated debt security, in aggregate principal
amount or, under certain circumstances, issue price of the
outstanding debt securities of that series also have made written
request and offered the indenture trustee indemnity satisfactory to
the indenture trustee to institute that proceeding as indenture
trustee;
o during the 60 day period beginning on the date the trustee receives
notice, the indenture trustee has not received from the holders of a
majority in principal amount or, under certain circumstances, issue
price of the outstanding debt securities of that series a direction
inconsistent with the request; and
o the indenture trustee fails to institute the proceeding within 60
days.
However, any holder of a debt security has the absolute right to institute suit
for any defaulted payment after the due dates for payment of principal and
interest under that debt security.
We are required to furnish to the indenture trustees annually a
statement as to the performance of our obligations under the indentures and as
to any default in that performance.
Modification and Waiver
Unless otherwise indicated in the applicable indenture supplement, CBH
and the applicable indenture trustee may amend and modify each indenture with
the consent of holders of at least a majority in principal amount or, under
certain circumstances, issue price of each series of debt securities issued
under that indenture affected. However, without the consent of each holder of
any debt security issued under the applicable indenture, we may not amend or
modify that indenture to:
o change the stated maturity date of the principal or maturity
consideration of, or any installment of principal or interest on,
any debt security issued under that indenture;
o reduce the principal amount or maturity consideration of, the rate
of interest on, or any premium payable upon the redemption of any
debt security issued under that indenture;
o reduce the amount of principal or maturity consideration of an
original issue discount security issued under that indenture payable
upon acceleration of its maturity;
o change the place or currency of payment of principal or maturity
consideration of, or any premium or interest on, any debt security
issued under that indenture;
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o impair the right to institute suit for the enforcement of any
payment or delivery on or with respect to any debt security issued
under that indenture;
o reduce the percentage in principal amount or, under certain
circumstances, issue price of debt securities of any series issued
under that indenture, the consent of whose holders is required to
modify or amend the indenture or to waive compliance with certain
provisions of the indenture;
o make any change relating to the subordination of the debt securities
in a manner adverse to the holders of those debt securities or, in
the case of subordinated debt securities, in a manner adverse to
holders of senior indebtedness, unless the holders of senior
indebtedness consent to that change under the terms of that senior
indebtedness; or
o reduce the percentage in principal amount or, under certain
circumstances, issue price of debt securities of any series issued
under that indenture, the consent of whose holders is required to
waive any past default.
The holders of at least a majority in principal amount or, under
certain circumstances, issue price of the outstanding debt securities of any
series issued under that indenture may, with respect to that series, waive past
defaults under the indenture, except with respect to:
o the payment or delivery of the principal (or premium, if any),
maturity consideration or interest on any security of such series;
or
o any covenant or provision of the applicable indenture that cannot be
modified or amended without the consent of the holder of each
outstanding security of that series.
Unless otherwise indicated in the applicable prospectus supplement, we
and the applicable indenture trustee may also amend and modify each indenture
without the consent of any holder for any of the following purposes:
o to evidence the succession of another person to CBH;
o to add to our covenants for the benefit of the holders of all or any
series of securities;
o to add events of default;
o to add or change any provisions of the indentures to facilitate the
issuance of bearer securities;
indenture, so long as any such change or elimination will become
effective only when there is no outstanding security of any series
which is entitled to the benefit of that provision;
o to establish the form or terms of debt securities of any series;
o to evidence and provide for the acceptance of appointment by a
successor indenture trustee;
o to cure any ambiguity, to correct or supplement any provision in the
applicable indenture, or to make any other provisions with respect
to matters or questions arising under that
18
indenture so long as the interests of holders of debt securities
of any series are not adversely affected in any material respect
under that indenture;
o to convey, transfer, assign, mortgage or pledge any property to or
with the indenture trustee securing the debt securities; or
o to provide for conversion rights of the holders of the debt
securities of any series to enable those holders to convert those
securities into other securities.
Consolidation, Merger and Sale of Assets
Unless otherwise indicated in the applicable prospectus supplement, we
may consolidate or merge with or into any other corporation, and we may sell,
lease or convey all or substantially all of our assets to any corporation,
provided that:
o the resulting corporation, if other than us, is a corporation
organized and existing under the laws of the United States of
America or any U.S. state and assumes all of our obligations to:
(1) pay or deliver the principal or maturity
consideration of, and any premium or interest on, the
debt securities; and
(2) perform and observe all of our other obligations
under the indentures.
o we are not, or any successor corporation, as the case may be, is
not, immediately after any consolidation or merger, in default under
the indentures; and
o we deliver an officer's certificate and an opinion of counsel to the
trustee which state that we have complied with all necessary
conditions.
Neither of the indentures provides for any right of acceleration in the
event of a consolidation, merger, sale of all or substantially all of the
assets, recapitalization or change in our stock ownership. In addition, the
indentures do not contain any provision which would protect the holders of debt
securities against a sudden and dramatic decline in credit quality resulting
from takeovers, recapitalizations or similar restructurings.
Governing Law
Unless otherwise provided in the prospectus supplement, the indentures
will be governed by, and construed in accordance with, the laws of the State of
New York.
Regarding the Indenture Trustee
The indenture trustee provides trust services to us and our affiliates
in connection with certain trust preferred securities that we currently have
outstanding.
The occurrence of any default under either the senior indenture, the
subordinated indenture or the indenture between us and the indenture trustee
relating to our junior subordinated debentures, which may also be issued under
this registration statement, could create a conflicting interest for the
indenture trustee under the Trust Indenture Act. If that default has not been
cured or waived within 90 days after the indenture trustee has or acquired a
conflicting interest, the indenture trustee would generally be required
19
by the Trust Indenture Act to eliminate that conflicting interest or resign as
indenture trustee with respect to the debt securities issued under the senior
indenture or the subordinated indenture, or with respect to the junior
subordinated debentures issued to certain Delaware statutory trusts of ours
under a separate indenture. If the indenture trustee resigns, we are required to
promptly appoint a successor trustee with respect to the affected securities.
The Trust Indenture Act also imposes certain limitations on the right
of the indenture trustee, as a creditor of ours, to obtain payment of claims in
certain cases, or to realize on certain property received in respect to any cash
claim or otherwise. The indenture trustee will be permitted to engage in other
transactions with us, provided that, if it acquires a conflicting interest
within the meaning of Section 310 of the Trust Indenture Act, it must generally
either eliminate that conflict or resign.
International Offering
If specified in the applicable prospectus supplement, we may issue debt
securities outside the United States. Those debt securities will be described in
the applicable prospectus supplement. In connection with any offering outside
the United States, we will designate paying agents, registrars or other agents
with respect to the debt securities, as specified in the applicable prospectus
supplement.
We will describe in the applicable prospectus supplement whether our
debt securities issued outside the United States: (1) may be subject to certain
selling restrictions; (2) may be listed on one or more foreign stock exchanges;
and (3) may have special United States tax and other considerations applicable
to an offering outside the United States.
SENIOR DEBT SECURITIES
The senior debt securities will be our direct, unsecured obligations
and will rank equally with all of our other outstanding senior indebtedness.
Restrictive Covenants
The senior indenture does not contain any significant restrictive
covenants. The prospectus supplement relating to a series of senior debt
securities may describe certain restrictive covenants, if any, to which we may
be bound under the senior indenture.
Defeasance
We may terminate or "defease" our obligations under the senior
indenture with respect to the senior debt securities of any series by taking the
following steps:
(1) depositing irrevocably with the senior indenture trustee an amount,
which through the payment of interest, principal or premium, if any, will
provide an amount sufficient to pay the entire amount of the senior debt
securities:
- in the case of senior debt securities denominated in U.S. dollars,
U.S. dollars or U.S. government obligations;
- in the case of senior debt securities denominated in a foreign
currency, of money in that foreign currency or foreign government
obligations of the foreign government or governments issuing that
foreign currency; or
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- a combination of money and U.S. government obligations or foreign
government obligations, as applicable;
(2) delivering:
- an opinion of independent counsel that the holders of the senior
debt securities of that series will have no federal income tax
consequences solely as a result of that deposit and termination;
- if the senior debt securities of that series are then listed on a
national or regional securities exchange in the United States, an
opinion of counsel that those senior debt securities will not be
delisted as a result of the exercise of this defeasance option;
- an opinion of counsel as to certain other matters;
- officers' certificates certifying as to compliance with the senior
indenture and other matters; and
(3) paying all amounts due under the senior indenture.
Further, the defeasance cannot cause an event of default under the
senior indenture or any other agreement or instrument and no default under the
senior indenture or any such other agreement or instrument can exist at the time
the defeasance occurs.
SUBORDINATED DEBT SECURITIES
The subordinated debt securities will be our direct, unsecured
obligations. Unless otherwise specified in the applicable prospectus supplement,
the subordinated debt securities will rank equally with all of our outstanding
subordinated indebtedness that is not specifically stated to be junior to the
subordinated debt securities.
Subordination
The subordinated debt securities will be subordinated in right of
payment to all "senior indebtedness," as defined in the subordinated indenture.
In certain circumstances relating to our liquidation, dissolution, winding up,
reorganization, insolvency or similar proceedings, the holders of all senior
indebtedness will first be entitled to receive payment in full before the
holders of the subordinated debt securities will be entitled to receive any
payment on the subordinated debt securities.
If the maturity of any debt securities is accelerated, we will have to
repay all senior indebtedness before we can make any payment on the subordinated
debt securities.
In addition, we may make no payment on the subordinated debt securities
in the event:
o there is a default in any payment or delivery with respect to any
senior indebtedness; or
o there is an event of default with respect to any senior indebtedness
which permits the holders of that senior indebtedness to accelerate
the maturity of the senior indebtedness.
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By reason of this subordination in favor of the holders of senior
indebtedness, in the event of an insolvency, our creditors who are not holders
of senior indebtedness or the subordinated debt securities may recover less,
proportionately, than holders of senior indebtedness and may recover more,
proportionately, than holders of the subordinated debt securities. Unless
otherwise specified in the prospectus supplement relating to the particular
series of subordinated debt securities, "senior indebtedness" is defined in the
subordinated indenture as the principal of, premium, if any, and interest
(including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) on:
(1) all indebtedness, obligations and other liabilities (contingent or
otherwise) of CBH for borrowed money (including obligations of CBH in respect of
overdrafts, foreign exchange contracts, currency exchange agreements, interest
rate protection agreements, and any loans or advances from banks, whether or not
evidenced by notes or similar instruments) or evidenced by bonds, debentures,
notes or other instruments for the payment of money, or indebtedness incurred in
connection with the acquisition of any properties or assets (whether or not the
recourse of the lender is to the whole of the assets of CBH or to only a portion
thereof), other than any account payable or other accrued current liability or
obligation to trade creditors incurred in the ordinary course of business;
(2) all obligations and liabilities (contingent or otherwise) in
respect of leases of CBH required or permitted, in conformity with accounting
principles generally accepted in the United States of America, to be accounted
for as capitalized lease obligations on the balance sheet of CBH;
(3) all direct or indirect guaranties or similar agreements by CBH in
respect of, and obligations or liabilities (contingent or otherwise) of CBH to
purchase or otherwise acquire or otherwise assure a creditor against loss in
respect of, indebtedness, obligations or liabilities of another Person of the
kind described in clauses (1) and (2); and
(4) any and all amendments, renewals, extensions and refundings of any
indebtedness, obligation or liability of the kind described in clauses (1)
through (3).
"Senior Indebtedness" does not include:
o any indebtedness in which the instrument or instruments evidencing
or securing the same or pursuant to which the same is outstanding,
or in any amendment, renewal, extension or refunding of such
instrument or instruments, it is expressly provided that such
indebtedness shall not be senior in right of payment to the
securities or expressly provides that such Indebtedness is pari
passu or junior to the securities; or
o trade accounts payable in the ordinary course of business.
The subordinated indenture does not limit or prohibit the incurrence of
additional senior indebtedness, which may include indebtedness that is senior to
the subordinated debt securities, but subordinate to our other obligations. Any
prospectus supplement relating to a particular series of subordinated debt
securities will set forth the aggregate amount of our indebtedness senior to the
subordinated debt securities as of a recent practicable date.
The subordinated debt securities will rank equally in right of payment
with each other.
The prospectus supplement may further describe the provisions, if any,
which may apply to the subordination of the subordinated debt securities of a
particular series.
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Restrictive Covenants
The subordinated indenture does not contain any significant restrictive
covenants. The prospectus supplement relating to a series of subordinated debt
securities may describe certain restrictive covenants, if any, to which we may
be bound under the subordinated indenture.
DESCRIPTION OF CAPITAL STOCK
The following statements are summaries of certain provisions of CBH's
restated certificate of incorporation and are qualified in their entirety by
reference to the complete text of CBH's restated certificate of incorporation.
Authorized Capital
The authorized capital stock of CBH consists of 150,000,000 shares of
common stock, par value $1.00 per share, and 10,000,000 shares of preferred
stock, no par value.
Under CBH's certificate of incorporation, the CBH board of directors is
authorized, without further shareholder action, to provide for the issuance of
the preferred stock in one or more series, with such designations, number of
shares, relative rights, preferences and limitations as shall be set forth in
resolutions providing for the issuance thereof adopted by the CBH board of
directors.
Description of Common Stock
As of June 30, 2003, there were 69,634,321 shares of CBH common stock
outstanding held by approximately 52,000 shareholders of record.
The rights, preferences and privileges of holders of CBH 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 CBH may designate and issue in the
future.
Voting Rights. Holders of CBH common stock are entitled to one vote for
each share held on all matters submitted to a vote of shareholders and do not
have cumulative voting rights. Holders of a majority of the shares of common
stock entitled to vote in any election of directors may elect all of the
directors standing for election.
Dividends. Holders of CBH common stock are entitled to receive ratably
dividends, if any, as may be declared by the CBH board of directors out of
legally available funds, subject to any preferential dividend rights of
outstanding preferred stock.
Liquidation. Upon the liquidation, dissolution or winding up of CBH,
the holders of CBH common stock are entitled to receive ratably the net assets
of CBH available after the payment of all debts and other liabilities and
subject to the prior rights of any outstanding preferred stock.
Preemptive Rights. Holders of CBH common stock have no preemptive,
subscription, redemption or conversion rights.
Transfer Agent and Registrar. The transfer agent and registrar for the
CBH's common stock is Mellon Investor Services.
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Description of Preferred Stock
CBH may issue preferred stock, from time to time, with such
preferences, voting rights and conversion rights as CBH's board of directors,
without further approval by the shareholders, may determine by duly adopted
resolution.
The issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of CBH. As of June 30, 2003 there
were no shares of CBH preferred stock issued and outstanding.
"Anti-Takeover" Provisions and Management Implications
CBH's Certificate of Incorporation
CBH's restated certificate of incorporation requires the affirmative
vote of the holders of at least 80% of the outstanding capital stock of CBH
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 CBH with or into any other
corporation; or
o any sale, lease, exchange or other disposition of all of the assets
of CBH to or with any other corporation, person or other entity.
The 80% voting requirement would not, however, apply to any transaction
approved by CBH's board of directors prior to the consummation of the
transaction.
CBH's restated certificate of incorporation also provides for the
issuance of up to 10,000,000 shares of preferred stock; the rights, preferences
and limitations of which may be determined by the board of directors of CBH.
Issuance of CBH 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 CBH's outstanding voting stock. The
authority of CBH's board of directors to issue CBH preferred stock with rights
and privileges, including voting rights, as it may deem appropriate, may enable
CBH's board of directors to prevent a change of control despite a shift in
ownership of CBH common stock. In addition, CBH's board of directors' authority
to issue additional shares of CBH common stock may help deter or delay a change
of control by increasing the number of shares needed to gain control.
The provisions in CBH's restated certificate of incorporation relating
to the 80% voting requirements and issuance of CBH 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 CBH will be required to act through arms-length negotiation with
respect to such major transactions, such as a merger, consolidation or purchase
of substantially all of the assets of CBH. These provisions may also have the
effect of discouraging tender offers or other stock acquisitions, giving
management of CBH the power to reject certain transactions which might be
desired by the owners of a majority of CBH's voting securities. These provisions
could also be deemed to benefit incumbent management to the extent they deter
such offers by persons who would wish to make changes in management or exercise
control over management. CBH's board of directors does not presently know of a
third party that plans to make an offer to acquire CBH through a tender proposal
offer, merger or purchase of substantially all the assets of CBH.
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Banking Regulations
The Change in Bank Control Act prohibits a person or group of persons
from acquiring "control" of a bank holding company unless that FRB has been
given 60 days prior written notice of the proposed acquisition and within that
time period the FRB has not issued a notice:
o disapproving the proposed acquisition, or
o extending for up to another 30 days the period during which a
disapproval may be issued; or
o unless the acquisition is subject to FRB 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 FRB issues written notice of its intent not to disapprove the action. Under
a rebuttal presumption established by the FRB, 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 CBH, 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 FRB under the BHCA before acquiring 25 percent, five percent in the case of
an acquiror that is a bank holding company, or more of the outstanding shares of
CBH common stock, or otherwise obtaining "control" over CBH. 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 in which 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 the
corporation prior to the interested shareholder's stock acquisition;
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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
CBH 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 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.
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 impending, such proposal or offer.
The existence of the foregoing provisions could:
o result in CBH being less attractive to a potential acquiror; and
o result in CBH's shareholders receiving less for their shares of CBH
common stock than otherwise might be available in the event of a
takeover attempt.
Payment of Dividends
It is the present intention of CBH's board of directors to pay
quarterly cash dividends on CBH'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 CBH.
26
Subject to the preferences, limitations and relative rights as may be
fixed for any series of CBH preferred stock that may be issued, holders of CBH
common stock are entitled to receive dividends, when, as and if declared by the
board of directors out of legally available funds.
CBH 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 distributions to the holders of CBH's
common stock and preferred stock must initially come primarily from dividends
paid to CBH by Commerce NJ, Commerce Delaware, Commerce PA, Commerce North and
Commerce Shore. Accordingly, restrictions on Commerce NJ's, Commerce Delaware's,
Commerce PA's, Commerce North's and Commerce Shore's cash dividend payments
directly affect the payment of cash dividends by CBH.
Commerce NJ, Commerce Delaware, Commerce PA and Commerce Shore, 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.
Commerce 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 North unless, following the payment of the dividend, the
capital stock of Commerce North is unimpaired and either:
o Commerce 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
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.
DESCRIPTION OF WARRANTS
We may issue warrants to purchase debt securities, preferred stock or
common stock. We may offer warrants separately or together with one or more
additional warrants, debt securities, preferred stock or common stock, or any
combination of those securities in the form of units, as described in the
appropriate prospectus supplement. If we issue warrants as part of a unit, the
accompanying prospectus supplement will specify whether those warrants may be
separated from the other securities in the unit prior to the warrants'
expiration date. Below is a description of certain general terms and provisions
of the warrants that we may offer. Further terms of the warrants will be
described in the prospectus supplement.
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The applicable prospectus supplement will contain, where applicable,
the following terms of and other information relating to the warrants:
o the specific designation and aggregate number of, and the price at
which we will issue, the warrants;
o the currency or currency units in which the offering price, if any,
and the exercise price are payable;
o the date on which the right to exercise the warrants will begin and
the date on which that right will expire or, if you may not
continuously exercise the warrants throughout that period, the
specific date or dates on which you may exercise the warrants;
o any applicable anti-dilution provisions;
o any applicable redemption or call provisions;
o the circumstances under which the warrant exercise price may be
adjusted;
o whether the warrants will be issued in fully registered form or
bearer form, in definitive or global form or in any combination of
these forms, although, in any case, the form of a warrant included
in a unit will correspond to the form of the unit and of any
security included in that unit;
o any applicable material United States federal income tax
consequences;
o the identity of the warrant agent for the warrants and of any other
depositaries, execution or paying agents, transfer agents,
registrars or other agents;
o the proposed listing, if any, of the warrants or any securities
purchasable upon exercise of the warrants on any securities
exchange;
o the designation and terms of the preferred stock or common stock
purchasable upon exercise of the warrants;
o the designation, aggregate principal amount, currency and terms of
the debt securities that may be purchased upon exercise of the
warrants;
o if applicable, the designation and terms of the debt securities,
preferred stock, depositary shares or common stock with which the
warrants are issued and the number of warrants issued with each
security;
o if applicable, the date from and after which the warrants and the
related debt securities, preferred stock, depositary shares or
common stock will be separately transferable;
o the number of shares of preferred stock, the number of depositary
shares or the number of shares of common stock purchasable upon
exercise of a warrant and the price at which those shares may be
purchased;
o if applicable, the minimum or maximum amount of the warrants that
may be exercised at any one time;
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o information with respect to book-entry procedures, if any;
o the antidilution provisions of the warrants, if any;
o any redemption or call provisions;
o whether the warrants are to be sold separately or with other
securities as parts of units; and
o any additional terms of the warrants, including terms, procedures
and limitations relating to the exchange and exercise of the
warrants.
ERISA CONSIDERATIONS
General
The following is a summary of certain considerations associated with
the purchase of securities by employee benefit plans that are subject to Title I
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), a
plan described in Section 4975 of the Code, including an individual retirement
arrangement under Section 408 of the Code and a "Keogh" plan, a plan (such as a
governmental, church or non-U.S. plan) subject to provisions under applicable
federal, state, local, non-U.S. or other laws or regulations that are similar to
the provisions of Title I of ERISA or Section 4975 of the Code ("Similar Laws"),
and any entity of which the underlying assets are considered to include "plan
assets" of such plans, accounts and arrangements (each, a "Plan").
ERISA and the Code impose certain duties on persons who are fiduciaries
of a Plan subject to Title I of ERISA or Section 4975 of the Code (an "ERISA
Plan") and prohibit certain transactions involving the assets of an ERISA Plan
and its fiduciaries or other interested parties or disqualified persons.
Generally, a person who exercises discretionary authority or control with
respect to the assets of an ERISA Plan will be considered a fiduciary of the
ERISA Plan.
In evaluating the purchase of securities with assets of a Plan, a
fiduciary should consider, among other matters:
o whether the acquisition and holding of securities is in accordance
with the documents and
instruments governing such Plan;
o whether the acquisition and holding of securities is solely in the
interest of Plan participants and beneficiaries and otherwise
consistent with the fiduciary's responsibilities and in compliance
with the applicable requirements of ERISA, the Code or any Similar
Laws including, in particular, any diversification, prudence and
liquidity requirements;
o whether the assets of the trust are treated as assets of the Plan;
and
o the need to value the assets of the Plan annually.
Any insurance company proposing to invest assets of its general account
in securities should consider the extent that such investment would be subject
to the requirements of ERISA in light of the
29
U.S. Supreme Court's decision in John Hancock Mutual Life Insurance Co. v.
Harris Trust and Savings Bank and under any subsequent legislation or other
guidance that has or may become available relating to that decision, including
the enactment of Section 401(c) of ERISA by the Small Business Job Protection
Act of 1996 and the regulations promulgated thereunder.
Plan Assets Regulation
Under a Department of Labor regulation (29 C.F.R. Sec. 2510.3-101, the
"Plan Assets Regulation") governing what constitutes the assets of a Plan for
purposes of ERISA and the related prohibited transaction provisions of the Code,
when an ERISA Plan acquires an equity interest in an entity that is neither a
"publicly-offered security" nor a security issued by an investment company
registered under the Investment Company Act of 1940, the ERISA Plan's assets
include both the equity interest and an undivided interest in each of the
underlying assets of the entity unless it is established either that equity
participation in the entity by "benefit plan investors" is not significant or
that the entity is an "operating company," in each case as defined in the Plan
Assets Regulation. For purposes of the Plan Assets Regulation, equity
participation in an entity by benefit plan investors will not be significant if
they hold, in the aggregate, less than 25% of the value of each class of such
entity's equity, excluding equity interests held by persons (other than benefit
plan investors) with discretionary authority or control over the assets of the
entity or who provide investment advice for a fee (direct or indirect) with
respect to such assets, and any affiliates thereof. For purposes of this 25%
test, "benefit plan investors" include all employee benefit plans, whether or
not subject to ERISA or the Code, including Keogh plans, individual retirement
accounts and pension plans maintained by foreign corporations, as well as any
entity whose underlying assets are deemed to include "plan assets" under the
Plan Assets Regulation (e.g., an entity of which 25% or more of the value of any
class of equity interests is held by benefit plan investors and which does not
satisfy another exception under the Plan Assets Regulation). The DOL has stated
that, in its view, for purposes of determining whether equity participation in
an entity by benefit plan investors is "significant" within the meaning of the
significant participation test contained within the Plan Assets Regulation, only
the proportion of an insurance company general account's equity investment in
the entity that represents plan assets should be taken into account and,
therefore, the proportion of that investment that represents plan assets would
equal the proportion of the insurance company general account as a whole that
constitutes plan assets (59 FR 43134, 43136).
For purposes of the Plan Assets Regulation, a "publicly offered
security" is a security that is (a) "freely transferable", (b) part of a class
of securities that is "widely held," and (c) (i) sold to the Plan as part of an
offering of securities to the public pursuant to an effective registration
statement under the Securities Act of 1933 and the class of securities to which
such security is a part is registered under the Securities Exchange Act of 1934
within 120 days after the end of the fiscal year of the issuer during which the
offering of such securities to the public has occurred, or (ii) is part of a
class of securities that is registered under Section 12 of the Securities
Exchange Act of 1934. A class of securities is "widely held" if, as a class of
securities, it is owned by 100 or more investors which are independent of the
issuer and of one another. A class of securities will not fail to be widely held
solely because, subsequent to the initial offering, the number of independent
investors falls below 100 as a result of events beyond the control of the
issuer.
If the assets of the trust were deemed to be plan assets under ERISA,
this could result, among other things, in:
o the application of the prudence and other fiduciary responsibility
standards of ERISA to investments made by the trust;
30
o the possibility that certain transactions in which the trust might
seek to engage could result in a non-exempt " prohibited
transaction" under ERISA and/or the Code; and
o the possibility that an investment by an ERISA Plan in the
securities would, in effect, be considered for purposes of the
fiduciary responsibility provisions of ERISA and the prohibited
transaction provisions of ERISA and the Code, to be an investment in
the corresponding junior subordinated convertible debentures and an
ongoing loan to CBH.
It is anticipated that the securities will satisfy the definition of
"publicly offered security". In such case, the underlying assets of the trust
shall not be deemed plan assets for purposes of Plan Assets Regulations. The
above notwithstanding, no representation is made by the CBH or any other person
associated with the sale of securities with regard to whether the underlying
assets are "plan assets" as defined in the Plan Asset Regulations.
Prohibited Transactions
Section 406 of ERISA and Section 4975 of the Code prohibit ERISA Plans
from engaging in specified transactions involving plan assets with persons or
entities who are "parties in interest," within the meaning of ERISA, or
disqualified persons" within the meaning of Section 4975 of the Code, unless an
exemption is available. A party in interest or disqualified person who engages
in a non-exempt prohibited transaction may be subject to excise taxes and other
penalties and liabilities under ERISA and the Code. In addition, the fiduciary
of the ERISA Plan that engages in such non-exempt prohibited transaction may be
subject to penalties and liabilities under ERISA and the Code.
Whether or not the trust's underlying assets were deemed to include
plan assets as described above, the acquisition and/or holding of the securities
by an ERISA Plan with respect to which CBH, the initial purchasers of the
securities or their affiliates may be a party in interest or a disqualified
person, may give rise to a prohibited transaction. Consequently, before
investing in securities, any person who is acquiring such securities for, or on
behalf of, an ERISA Plan should determine that either a statutory or an
administrative exemption from the prohibited transaction rules is applicable to
such investment in the securities, or that such acquisition and holding of such
securities will not result in a non-exempt prohibited transaction.
The statutory or administrative exemptions from the prohibited
transaction rules under ERISA and the Code which may be available to an ERISA
Plan investing in securities include the following:
o Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding
investments by insurance company pooled separate accounts;
o PTCE 91-38, regarding investments by bank collective investment
funds;
o PTCE 84-14, regarding transactions effected by qualified
professional asset managers;
o PTCE 96-23, regarding transactions effected by in-house asset
managers; and
o PTCE 95-60, regarding investments by insurance company general
accounts.
Governmental plans, non-U.S. plans and certain church plans while not
subject to the prohibited transaction provisions of ERISA and Section 4975 of
the Code may nevertheless be subject to Similar
31
Laws which may affect their investment in securities. Any fiduciary of such a
governmental, non-U.S. or church plan considering an investment in the
securities should consult with its counsel before purchasing securities to
consider the applicable fiduciary standards and to determine the need for, and
the availability, if necessary, of any exemptive relief under such Similar Laws.
Because of the foregoing, the securities should not be purchased or
held by any person investing Plan Assets of any Plan unless such purchase and
holding will not constitute a non-exempt prohibited transaction under ERISA and
the Code or a violation under any applicable Similar Laws.
Accordingly, by its acquisition of securities, each purchaser and
subsequent transferee of the securities shall be deemed to be making a
representation to the trust and CBH either that: (i) it is not a Plan and no
part of the assets to be used by it to acquire and/or hold such securities or
any interest therein directly or indirectly constitutes plan assets of any Plan
or (ii) such acquisition and holding will not result in a prohibited transaction
under Title I of ERISA or Section 4975 of the Code (or a violation under Similar
Laws) for which there is no applicable statutory or administrative exemption.
In the case of securities delivered in certificated form, the purchaser
and subsequent transferees will be required to make such representation, in
writing, to among others, CBH.
The discussion of ERISA and the Code in this prospectus is general in
nature and is not intended to be all inclusive. Any person considering an
investment in securities on behalf of a Plan should consult with its legal
advisors regarding the consequences of such investment and consider whether the
Plan can make the representations noted above.
Further, the sale of investments to Plans is in no respect a
representation by CBH or any other person associated with the sale of the
securities that such securities meet all relevant legal requirements with
respect to investments by Plans generally or by any particular Plan, or that
such securities are otherwise appropriate for Plans generally or any particular
Plan.
PLAN OF DISTRIBUTION
We may sell securities:
o to the public through an underwriter, or a group of underwriters
managed or co-managed by one or more underwriters or through
dealers, on either a firm-commitment or best efforts basis;
o through one or more agents; or
o directly to purchasers.
The distribution of the securities may be effected from time to time in
one or more transactions:
o at a fixed price, or prices which may be changed from time to time;
o at market prices prevailing at the time of sale;
o at prices related to those prevailing market prices; or
o at negotiated prices.
32
A prospectus supplement will describe the method of distribution of the
securities and any applicable restrictions. Offers or sales of our securities
may include secondary market transactions by affiliates of CBH.
The prospectus supplement with respect to the securities of a
particular series will describe the terms of the offering of the securities,
including the following:
o the name or names of any agents, dealers or underwriters;
o the public offering or purchase price;
o the terms of any underwriting, sale or similar agreement entered in
connection with the distribution;
o any discounts and commissions to be allowed or paid to the agents or
underwriters;
o all other items constituting underwriting compensation;
o any discounts, concessions and/or commissions to be allowed or paid
to dealers; and
o any exchanges on which the securities will be listed.
We may agree to enter into an agreement to indemnify the agents,
dealers and/or the underwriters, as the case may be, against certain civil
liabilities, including liabilities under the Securities Act or to contribute to
payments such persons may be required to make.
If so indicated in the applicable prospectus supplement, we will
authorize underwriters or other persons acting as our agents to solicit offers
by certain institutions to purchase debt securities from us pursuant to delayed
delivery contracts providing for payment and delivery on the date stated in the
prospectus supplement. Each contract will be for an amount not less than, and
the aggregate amount of securities sold pursuant to those contracts will be
equal to, the respective amounts stated in the prospectus supplement.
Institutions with whom the contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and other institutions, but
will in all cases be subject to our approval. Delayed delivery contracts will
not be subject to any conditions except that:
o the purchase by an institution of the debt securities covered under
that contract will not at the time of delivery be prohibited under
the laws of the jurisdiction to which that institution is subject;
and
o if the debt securities are also being sold to underwriters acting as
principals for their own account, the underwriters will have
purchased those debt securities not sold for delayed delivery. The
underwriters and other persons acting as our agents will not have
any responsibility in respect of the validity or performance of
delayed delivery contracts.
To facilitate offering the securities in an underwritten transaction
and in accordance with industry practice, the underwriters may engage in
transactions that stabilize, maintain, or otherwise affect the market price of
the offered securities or any other securities. Those transactions may include
overallotment, stabilizing bids, effecting syndicated covering transactions and
reclaiming selling concessions allowed to an underwriter or a dealer. The
underwriters would not be required to conduct any of these activities and could
discontinue them at any time. Certain of the underwriters may use this
33
prospectus and the accompanying prospectus supplement for offers and sales
related to market-making transactions in the securities. Any such underwriter
will be under no obligation to continue any such transactions, which could
discontinue at any time. These underwriters may act as principal or agent in
these transactions, and the sales will be made at prices related to prevailing
market prices at the time of sale.
Certain of the underwriters, dealers or agents, and their respective
associates and affiliates, may be customers of, have borrowing relationships
with, engage in other transactions with, and/or perform services, including
investment banking services, for, us or one or more of our affiliates in the
ordinary course of business.
LEGAL MATTERS
Matters relating to the validity of our unsecured debt securities,
shares of our common stock, shares of our preferred stock and warrants to
purchase other securities will be passed upon on behalf of CBH by Blank Rome
LLP, Philadelphia, Pennsylvania, Cherry Hill, New Jersey, Wilmington, Delaware
and New York, New York. Jack R Bershad, a retired partner in Blank Rome LLP is a
director of CBH, Commerce NJ, and Commerce PA. Mr. Bershad and other partners of
Blank Rome LLP are shareholders of CBH.
INDEPENDENT AUDITORS
The consolidated financial statements of CBH as of December 31, 2002
and December 31, 2001, and for each of the three years in the period ended
December 31, 2002, incorporated by reference in this prospectus and registration
statement and audited by Ernst & Young LLP, independent auditors, have been
included in reliance on their report given on their authority as experts in
accounting and auditing.
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