-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TyJuOJg7ac+HMC9ehXcmOFhdGp4WmJUay1ahlWhvLQFcKOcw+FIPvsJlUAr0q2Ke Jt68rsFMg0PsnCPBHIRBRw== 0000950159-03-000422.txt : 20030515 0000950159-03-000422.hdr.sgml : 20030515 20030515102022 ACCESSION NUMBER: 0000950159-03-000422 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMERCE BANCORP INC /NJ/ CENTRAL INDEX KEY: 0000715096 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 222433468 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12069 FILM NUMBER: 03701531 BUSINESS ADDRESS: STREET 1: COMMERCE ATRIUM STREET 2: 1701 RTE 70 E CITY: CHERRY HILL STATE: NJ ZIP: 08034-5400 BUSINESS PHONE: 8567519000 MAIL ADDRESS: STREET 1: 1701 ROUTE 70 EAST CITY: CHERRY HILL STATE: NJ ZIP: 08034-5400 10-Q 1 commercenj10q.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 2003 -------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File #0-12874 -------- [LOGO OMITTED] (Exact name of registrant as specified in its charter) New Jersey 22-2433468 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer Identification incorporation or organization) Number) Commerce Atrium, 1701 Route 70 East, Cherry Hill, New Jersey 08034-5400 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (856) 751-9000 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ --- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes X No __ -- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practical date. Common Stock 69,110,715 - -------------------------------------------------------------------------------- (Title of Class) (No. of Shares Outstanding as of 5/8/03)
COMMERCE BANCORP, INC. AND SUBSIDIARIES INDEX Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets (unaudited) March 31, 2003 and December 31, 2002.......................................................1 Consolidated Statements of Income (unaudited) Three months ended March 31, 2003 and March 31, 2002.............................................................................2 Consolidated Statements of Cash Flows (unaudited) Three months ended March 31, 2003 and March 31, 2002.............................................................................3 Consolidated Statement of Changes in Stockholders' Equity (unaudited) Three months ended March 31, 2003..........................................................4 Notes to Consolidated Financial Statements (unaudited).....................................5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation.........................................................9 Item 3. Quantitative and Qualitative Disclosures About Market Risk................................17 Item 4. Control and Procedures....................................................................17 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K...............................................................19
COMMERCE BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) ------------------------------------------------------------------------------------------------ March 31, December 31, --------------------------------- (dollars in thousands) 2003 2002 ------------------------------------------------------------------------------------------------ Assets Cash and due from banks $ 832,821 $ 811,434 Federal funds sold 61,000 0 ------------- --------------- Cash and cash equivalents 893,821 811,434 Loans held for sale 55,230 96,920 Trading securities 205,631 326,479 Securities available for sale 8,852,908 7,806,779 Securities held to maturity 927,562 763,026 (market value 03/03-$957,414; 12/02-$791,889) Loans 5,993,427 5,822,589 Less allowance for loan losses 94,731 90,733 ------------- --------------- 5,898,696 5,731,856 Bank premises and equipment, net 556,945 499,189 Other assets 407,330 368,298 ------------- --------------- $17,798,123 $ 16,403,981 ------------- --------------- Liabilities Deposits: Demand: Interest-bearing $ 6,097,976 $ 5,635,351 Noninterest-bearing 3,626,661 3,243,091 Savings 3,331,131 2,861,677 Time 3,176,133 2,808,722 ------------- --------------- Total deposits 16,231,901 14,548,841 Other borrowed money 109,622 391,641 Other liabilities 303,039 345,489 Convertible Trust Capital Securities - Commerce Capital Trust II 200,000 200,000 ============= =============== 16,844,562 15,485,971 Stockholders' Common stock, 69,071,627 shares Equity issued (68,043,171 shares in 2002) 69,072 68,043 Capital in excess of par or stated value 565,246 538,795 Retained earnings 231,280 199,604 Accumulated other comprehensive income 93,208 113,614 ------------- --------------- 958,806 920,056 Less treasury stock, at cost, 286,358 shares issued (209,794 shares in 2002) 5,245 2,046 ------------- --------------- Total stockholders' equity 953,561 918,010 ------------- --------------- $17,798,123 $ 16,403,981 ============= =============== See accompanying notes.
1
COMMERCE BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) ----------------------------------------------------------------------------------------------- Three Months Ended March 31, ------------------------------- (dollars in thousands, except per share amounts) 2003 2002 ----------------------------------------------------------------------------------------------- Interest Interest and fees on loans $ 93,121 $81,823 income Interest on investments 113,661 86,217 Other interest 79 164 -------------- -------------- Total interest income 206,861 168,204 -------------- -------------- Interest Interest on deposits: expense Demand 12,397 12,908 Savings 6,355 7,078 Time 16,846 21,281 -------------- -------------- Total interest on deposits 35,598 41,267 Interest on other borrowed money 914 426 Interest on long-term debt 3,020 2,432 -------------- -------------- Total interest expense 39,532 44,125 -------------- -------------- Net interest income 167,329 124,079 Provision for loan losses 6,900 6,900 -------------- -------------- Net interest income after provision for loan losses 160,429 117,179 Noninterest Deposit charges and service fees 34,842 28,963 income Other operating income 41,360 26,927 Net investment securities losses (136) -------------- -------------- Total noninterest income 76,066 55,890 -------------- -------------- Noninterest Salaries and benefits 82,082 60,145 expense Occupancy 20,488 12,098 Furniture and equipment 21,226 15,105 Office 9,186 6,916 Marketing 5,276 4,861 Other 33,863 26,796 -------------- -------------- Total noninterest expenses 172,121 125,921 -------------- -------------- Income before income taxes 64,374 47,148 Provision for federal and state income taxes 21,484 15,398 -------------- -------------- Net income $ 42,890 $ 31,750 ============= ============== Net income per common and common equivalent share: Basic $ 0.63 $ 0.48 Diluted $ 0.60 $ 0.45 Average common and common equivalent shares outstanding: Basic 68,318 65,995 Diluted 71,785 70,033 Cash dividends, common stock $ 0.17 $ 0.15 See accompanying notes.
2
COMMERCE BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) ---------------------------------------------------------------------------------------------------- Three Months Ended March 31, ------------------------------- (dollars in thousands) 2003 2002 ---------------------------------------------------------------------------------------------------- Operating Net income $ 42,890 $ 31,750 activities Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 6,900 6,900 Provision for depreciation, amortization and accretion 27,459 13,531 Losses on sales of securities available for sale (136) Proceeds from sales of loans held for sale 421,783 290,945 Originations of loans held for sale (380,093) (257,300) Net decrease in trading securities 120,848 39,625 (Increase) decrease in other assets (31,746) 19,189 Decrease in other liabilities (42,450) (45,032) ---------------------------------------------------------------------------------------------------- Net cash provided by operating activities 165,455 97,980 Investing Proceeds from the sales of securities available for sale 752,512 275,325 activities Proceeds from the maturity of securities available for sale 1,087,641 396,716 Proceeds from the maturity of securities held to maturity 135,436 135,619 Purchase of securities available for sale (2,929,021) (1,752,379) Purchase of securities held to maturity (299,839) (17,823) Net increase in loans (222,739) (327,303) Proceeds from sales of loans 48,999 6,677 Capital expenditures (70,165) (38,045) ---------------------------------------------------------------------------------------------------- Net cash used by investing activities (1,497,176) (1,319,585) Financing Net increase in demand and savings deposits 1,315,649 682,787 activities Net increase in time deposits 367,411 452,482 Net decrease in other borrowed money (282,019) (182,987) Proceeds from Trust Capital Securities 200,000 Dividends paid (11,213) (9,846) Proceeds from issuance of common stock under dividend reinvestment and other stock plans 25,588 16,950 Other (1,308) ---------------------------------------------------------------------------------------------------- Net cash provided by financing activities 1,414,108 1,159,386 Increase (decrease) in cash and cash equivalents 82,387 (62,219) Cash and cash equivalents at beginning of year 811,434 557,738 ---------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 893,821 $ 495,519 ==================================================================================================== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 39,586 $ 43,053 ---------------------------------------------------------------------------------------------------- See accompanying notes.
3
COMMERCE BANCORP, INC. AND SUBSIDIARIES Consolidated Statement of Changes in Stockholders' Equity Three months ended March 31, 2003 (in thousands) - ------------------------------------------------------------------------------------------------------------------------------------ Capital in Accumulated Excess of Other Common Par or Retained Treasury Comprehensive Stock Stated Value Earnings Stock Income Total - ------------------------------------------------------------------------------------------------------------------------------------ Balances at December 31, 2002 $68,043 $538,795 $199,604 $(2,046) $ 113,614 $918,010 Net income 42,890 42,890 Other comprehensive income, net of tax Unrealized loss on securities (pre-tax $20,722) (13,983) (13,983) Reclassification adjustment (pre-tax $9,881) (6,423) (6,423) ------------- Other comprehensive income (20,406) Total comprehensive income 22,484 Cash dividends paid (11,213) (11,213) Shares issued under dividend reinvestment and compensation and benefit plans (985 shares) 985 24,603 25,588 Acquisition of insurance brokerage agency (44 shares) 44 1,848 1,892 Other (1) (3,199) (3,200) - ------------------------------------------------------------------------------------------------------------------------------------ Balances at March 31, 2003 $69,072 $565,246 $231,280 $(5,245) $ 93,208 $953,561 - ------------------------------------------------------------------------------------------------------------------------------------ See accompanying notes.
4 COMMERCE BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) A. Consolidated Financial Statements The consolidated financial statements included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. The accompanying condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented. Such adjustments are of a normal recurring nature. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the registrant's Annual Report on Form 10-K for the year ended December 31, 2002. The results for the three months ended March 31, 2003 are not necessarily indicative of the results that may be expected for the year ended December 31, 2003. The consolidated financial statements include the accounts of Commerce Bancorp, Inc. and all of its subsidiaries, including Commerce Bank, N.A. (Commerce NJ), Commerce Bank/Pennsylvania, N.A., Commerce Bank/Shore, N.A., Commerce Bank/North, Commerce Bank/Delaware, N.A., Commerce Insurance Services, Inc. (CIS), Commerce Capital Trust II, and Commerce Capital Markets, Inc. (CCMI). All material intercompany transactions have been eliminated. Certain amounts from prior years have been reclassified to conform with 2003 presentation. B. Commitments In the normal course of business, there are various outstanding commitments to extend credit, such as letters of credit and unadvanced loan commitments, which are not reflected in the accompanying consolidated financial statements. Management does not anticipate any material losses as a result of these transactions. C. Comprehensive Income Total comprehensive income, which for the Company included net income and changes in unrealized gains and losses on the Company's available for sale securities, amounted to $22.5 million and $6.6 million, respectively, for the three months ended March 31, 2003 and 2002. D. Other In accordance with accounting principles generally accepted in the United States, when capitalizing costs for branch construction, the Company includes the costs of purchasing the land, developing the site, constructing the building (or leasehold improvements if the property is leased), and furniture, fixtures and equipment necessary to equip the branch. Capital expenditures for branches that have not yet opened are included in Other assets. All other pre-opening and post-opening costs related to branches are expensed as incurred. 5
E. Segment Information Selected segment information is as follows: - ------------------------------------------------------------------------------------------------------------------------- Three Months Ended Three Months Ended March 31, 2003 March 31, 2002 Community Parent/ Community Parent/ Banks Other Total Banks Other Total - ------------------------------------------------------------------------------------------------------------------------- Net interest income $ 168,229 $ (900)$ 167,329 $ 125,470 $ (1,391) $ 124,079 Provision for loan losses 6,900 - 6,900 6,900 - 6,900 ----------------------------------------------------------------------------------- Net interest income after provision 161,329 (900) 160,429 118,570 (1,391) 117,179 Noninterest income 49,995 26,071 76,066 36,048 19,842 55,890 Noninterest expense 149,450 22,671 172,121 107,852 18,069 125,921 ----------------------------------------------------------------------------------- Income before income taxes 61,874 2,500 64,374 46,766 382 47,148 Income tax expense 20,975 509 21,484 15,256 142 15,398 ----------------------------------------------------------------------------------- Net income $ 40,899 $ 1,991 $ 42,890 $ 31,510 $ 240 $ 31,750 =================================================================================== Average assets (in billions) $ 14,993 $ 1,839 $ 16,832 $ 10,495 $ 1,196 $ 11,691 ===================================================================================
F. Recent Accounting Statement In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities." This interpretation provides guidance on how to identify a variable interest entity ("VIE") and determine when the assets, liabilities, noncontrolling interests, and results of operations of a VIE need to be included in a company's consolidated financial statements. The new accounting provisions of this interpretation became effective upon issuance for all new variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies to the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. While the impact is currently being assessed, management does not expect the adoption of FIN 46 to have a material impact on the Company's results of operations and financial position. In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure" (FAS 148). This statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirements of FAS No. 123, "Accounting for Stock-Based Compensation." This statement is effective for fiscal years ending after December 15, 2002 and did not have an impact on the financial condition or operating results of the Company. The Company will continue to follow APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related Interpretations to account for its stock-based compensation plans. If the Company had accounted for stock options under the fair value provisions of FAS 123, net income and net income per share would have been as follows (in thousands, except per share amounts): ------------------------------------------------------------------------ 2003 2002 ------------------------------------------------------------------------ Pro forma net income $ 40,510 $ 29,643 Pro forma net income per share: Basic $ 0.59 $ 0.45 Diluted 0.57 0.43 ------------------------------------------------------------------------ 6 The fair value of options granted in 2003 and 2002 was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rates of 3.00% to 4.41%, dividend yields of 1.50% to 2.50%, volatility factors of the expected market price of the Company's common stock of .304 and weighted average expected lives of the options of 5.22 and 4.75 years. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options. G. Trust Capital Securities On March 11, 2002 the Company issued $200.0 million of 5.95% Convertible Trust Capital Securities through Commerce Capital Trust II, a newly formed Delaware business trust subsidiary of the Company. The Convertible Trust Capital Securities mature in 2032. Holders of the Convertible Trust Capital Securities may convert each security into 0.9478 shares of Company common stock, subject to adjustment, if (1) the closing sale price of Company common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of any calendar quarter beginning with the quarter ending June 30, 2002 is more than 110% of the Convertible Trust Capital Securities conversion price ($52.75 at March 31, 2003) then in effect on the last day of such calendar quarter, (2) the assigned credit rating by Moody's of the Convertible Trust Capital Securities is at or below Bal, (3) the Convertible Trust Capital Securities are called for redemption, or (4) specified corporate transactions have occurred. All $200.0 million of the Convertible Trust Capital Securities qualify as Tier 1 capital for regulatory capital purposes. As of March 31, 2003, the Convertible Trust Capital Securities were not convertible. The net proceeds of this offering were used for general corporate purposes, including the redemption of the Company's $57.5 million of 8.75% Trust Capital Securities on July 1, 2002 and the repayment of the Company's $23.0 million of 8 3/8% subordinated notes on May 20, 2002. H. Earnings Per Share The calculation of earnings per share follows (in thousands, except for per share amounts):
Three Months Ended March 31, ----------------------------------------- 2003 2002 ------------------ ------------------- Basic: Net income $42,890 $31,750 ================== =================== Average common shares outstanding 68,318 65,995 ================== =================== Net income per share of common share $ 0.63 $ 0.48 ================== =================== Diluted: Net income $42,890 $31,750 ================== =================== Average common shares outstanding 68,318 65,995 Additional shares considered in diluted computation assuming: Exercise of stock options 3,467 4,038 ------------------ ------------------- Average number of shares outstanding on a diluted basis 71,785 70,033 ================== =================== Net income per common share - diluted $ 0.60 $ 0.45 ================== ===================
7 Item 2. Management's Discussion and Analysis of Financial Condition and Results ------------------------------------------------------------------------ of Operation - ------------ Capital Resources At March 31, 2003, stockholders' equity totaled $953.6 million or 5.36% of total assets, compared to $918.0 million or 5.60% of total assets at December 31, 2002. The table below presents the Company's and Commerce NJ's risk-based and leverage ratios at March 31, 2003 and 2002:
Per Regulatory Guidelines --------------------------------------------------- Actual Minimum "Well Capitalized" Amount Ratio Amount Ratio Amount Ratio - -------------------------------------------------------------------------------------------------------------------- March 31, 2003 Company Risk based capital ratios: Tier 1 $1,050,051 11.25% $373,411 4.00% $560,117 6.00% Total capital 1,144,782 12.26 746,823 8.00 933,529 10.00 Leverage ratio 1,050,051 6.28 668,655 4.00 835,819 5.00 Commerce NJ Risk based capital ratios: Tier 1 $567,037 9.83% $230,644 4.00% $345,966 6.00% Total capital 630,037 10.93 461,288 8.00 576,610 10.00 Leverage ratio 567,037 5.53 410,116 4.00 512,645 5.00 March 31, 2002 Company Risk based capital ratios: Tier 1 $876,379 12.84% $273,067 4.00% $409,601 6.00% Total capital 990,846 14.51 546,135 8.00 682,668 10.00 Leverage ratio 876,379 7.51 466,568 4.00 583,210 5.00 Commerce NJ Risk based capital ratios: Tier 1 $406,225 9.70% $167,498 4.00% $251,247 6.00% Total capital 452,595 10.81 334,996 8.00 418,744 10.00 Leverage ratio 406,225 6.00 270,739 4.00 338,424 5.00
At March 31, 2003, the Company's consolidated capital levels and each of the Company's bank subsidiaries met the regulatory definition of a "well capitalized" financial institution, i.e., a leverage capital ratio exceeding 5%, a Tier 1 risk-based capital ratio exceeding 6%, and a total risk-based capital ratio exceeding 10%. Management believes that as of March 31, 2003, the Company and its subsidiaries meet all capital adequacy requirements to which they are subject. Deposits - -------- Total deposits at March 31, 2003 were $16.2 billion, up $4.9 billion, or 43% over total deposits of $11.3 billion at March 31, 2002, and up by $1.7 billion, or 12% from year-end 2002. Deposit growth during the first three months of 2003 included core deposit growth in all categories as well as growth from the public sector. The Company experienced "same-store core deposit growth" of 29% at March 31, 2003 as compared to deposits a year ago for those branches open for more than two years. Interest Rate Sensitivity and Liquidity - --------------------------------------- The Company's risk of loss arising from adverse changes in the fair market value of financial instruments, or market risk, is composed primarily of interest rate risk. The primary objective of the Company's asset/liability management activities is to maximize net interest income, while maintaining acceptable levels of interest rate risk. The Company's 8 Asset/Liability Committee (ALCO) is responsible for establishing policies to limit exposure to interest rate risk, and to ensure procedures are established to monitor compliance with these policies. The guidelines established by ALCO are reviewed by the Company's Board of Directors. Management believes the simulation of net interest income in different interest rate environments to be the best indicator of the Company's interest rate risk. Income simulation analysis captures not only the potential of all assets and liabilities to mature or reprice, but also the probability that they will do so. Income simulation also attends to the relative interest rate sensitivities of these items, and projects their behavior over an extended period of time. Finally, income simulation permits management to assess the probable effects on the balance sheet not only of changes in interest rates, but also of proposed strategies for responding to them. The Company's income simulation model analyzes interest rate sensitivity by projecting net income over the next 24 months in a flat rate scenario versus net income in alternative interest rate scenarios. Management continually reviews and refines its interest rate risk management process in response to the changing economic climate. Currently, the Company's model projects a proportionate plus 200 and minus 100 basis point change during the next year, with rates remaining constant in the second year. The Company's ALCO policy has established that interest income sensitivity will be considered acceptable if net income in the above interest rate scenario is within 15% of net income in the flat rate scenario in the first year and within 30% over the two year time frame. At March 31, 2003, the Company's income simulation model net income would decrease by 2.35% and 4.65% in the first year and over a two year time frame, respectively, if rates decreased as described above. At March 31 2002, the Company's income simulation model was run assuming a 200 basis point decrease and indicated net income would decrease by 2.64% and by 10.97% in the first year and over a two year time frame, respectively. At March 31, 2003, the model projects that net income would increase by 7.78% and increase 13.83% in the first year and over a two year time frame, respectively, if rates increased as described above as compared to a decrease by 0.88% and increase 4.88%, respectively, at March 31, 2002. All of these net income projections are within an acceptable level of interest rate risk pursuant to the policy established by ALCO. In the event the Company's interest rate risk models indicate an unacceptable level of risk, the Company could undertake a number of actions that would reduce this risk, including the sale of a portion of its available for sale portfolio, the use of risk management strategies such as interest rate swaps and caps, or the extension of the maturities of its short-term borrowings. Management also monitors interest rate risk by utilizing a market value of equity model. The model assesses the impact of a change in interest rates on the market value of all the Company's assets and liabilities, as well as any off balance sheet items. The model calculates the market value of the Company's assets and liabilities in excess of book value in the current rate scenario, and then compares the excess of market value over book value given an immediate plus 200 and minus 100 basis point change in rates. The Company's ALCO policy indicates that the level of interest rate risk is unacceptable if the immediate plus 200 and minus 100 basis point change would result in the loss of 50% or more of the excess of market value over book value in the current rate scenario. At March 31, 2003, the market value of equity model indicates an acceptable level of interest rate risk. Liquidity involves the Company's ability to raise funds to support asset growth or decrease assets to meet deposit withdrawals and other borrowing needs, to maintain reserve requirements and to otherwise operate the Company on an ongoing basis. The Company's liquidity needs are primarily met by growth in core deposits, its cash and federal funds sold position, cash flow from its amortizing investment and loan portfolios, as well as the use of short-term borrowings, as required. If necessary, the Company has the ability to raise liquidity through collateralized borrowings, FHLB advances, or the sale of its available for sale investment portfolio. As of March 31, 2003 the Company had in excess of $8.5 billion in immediately available liquidity which includes securities that could be sold or used for collateralized borrowings, cash on hand, and borrowing capacities under existing lines of credit. During the first three months of 2003, deposit growth was used to fund growth in the loan portfolio and purchase additional investment securities. 9 Short-Term Borrowings - --------------------- Short-term borrowings, or other borrowed money, consist primarily of securities sold under agreements to repurchase and overnight lines of credit, and are used to meet short term funding needs. During the first three months of 2003, the Company reduced its short-term borrowings, primarily through increased deposits. At March 31, 2003, short-term borrowings aggregated $109.6 million and had an average rate of 1.14%, as compared to $391.6 million at an average rate of 1.55% at December 31, 2002. Interest Earning Assets - ----------------------- For the three month period ended March 31, 2003, interest earning assets increased $1.3 billion from $14.8 billion to $16.1 billion. This increase was primarily in investment securities and the loan portfolio as described below. Loans - ----- During the first three months of 2003, loans increased $170.8 million from $5.8 billion to $6.0 billion. At March 31, 2003, loans represented 37% of total deposits and 34% of total assets. All segments of the loan portfolio experienced growth in the first three months of 2003, including loans secured by commercial real estate properties, commercial loans, and consumer loans. The following table summarizes the loan portfolio of the Company by type of loan as of the dates shown.
March 31, December 31, ----------------------------------------- 2003 2002 ----------------------------------------- (dollars in thousands) Commercial real estate: Owner-occupied $ 1,333,390 $ 1,345,306 Investor developer 930,791 885,276 Construction 91,378 102,080 ----------------------------------------- 2,355,559 2,332,662 Commercial: Term 872,787 842,869 Line of credit 732,693 683,640 Demand 15,795 317 ----------------------------------------- 1,621,275 1,526,826 Consumer: Mortgages (1-4 family residential) 647,955 626,652 Installment 134,116 140,493 Home equity 1,183,594 1,139,589 Credit lines 50,928 56,367 ----------------------------------------- 2,016,593 1,963,101 ----------------------------------------- Total loans $ 5,993,427 $ 5,822,589 =========================================
10 Investments - ----------- In total, for the first three months of 2003, securities increased $1.09 billion from $8.9 billion to $10.0 billion. The available for sale portfolio increased $1.05 billion to $8.9 billion at March 31, 2003 from $7.8 billion at December 31, 2002, and the securities held to maturity portfolio increased $164.5 million to $927.6 million at March 31, 2003 from $763.0 million at year-end 2002. The portfolio of trading securities decreased $120.8 million from year-end 2002 to $205.6 million at March 31, 2003. At March 31, 2003, the average life of the investment portfolio was approximately 3.3 years, and the duration was approximately 2.7 years. At March 31, 2003, total securities represented 56% of total assets. The following table summarizes the book value of securities available for sale and securities held to maturity by the Company as of the dates shown.
March 31, December 31, --------------------------------- 2003 2002 --------------------------------- (dollars in thousands) U.S. Government agency and mortgage backed obligations $8,721,995 $7,659,737 Obligations of state and political subdivisions 32,325 23,185 Equity securities 14,592 24,054 Other 83,996 99,803 --------------------------------- Securities available for sale $8,852,908 $7,806,779 ================================= U.S. Government agency and mortgage backed obligations $711,122 $624,688 Obligations of state and political subdivisions 165,639 91,204 Other 50,801 47,134 --------------------------------- Securities held to maturity $927,562 $763,026 =================================
Net Income - ---------- Net income for the first quarter of 2003 was $42.9 million, an increase of $11.1 million or 35% over the $31.8 million recorded for the first quarter of 2002. On a per share basis, diluted net income for the first quarter of 2003 was $0.60 per common share compared to $0.45 per common share for the first quarter of 2002. Return on average assets (ROA) and return on average equity (ROE) for the first quarter of 2003 were 1.02% and 17.94%, respectively, compared to 1.09% and 19.00%, respectively, for the same 2002 period. Net Interest Income - ------------------- Net interest income totaled $167.3 million for the first quarter of 2003, an increase of $43.3 million or 35% from $124.1 million in the first quarter of 2002. The improvement in net interest income was due primarily to volume increases in the loan and investment portfolios. The following table sets forth balance sheet items on a daily average basis for the three months ended March 31, 2003, December 31, 2002 and March 31, 2002 and presents the daily average interest earned on assets and paid on liabilities for such periods. 11
Average Balances and Net Interest Income ----------------------------------------------------------------------------------------------------- March 2003 December 2002 March 2002 ---------------------------------- ------------------------------- --------------------------------- Average Average Average Average Average Average (dollars in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate ---------------------------------- ------------------------------- --------------------------------- Earning Assets - -------------------------------- Investment securities Taxable $ 8,681,675 109,916 5.13% $ 8,033,417 $104,326 5.15% $ 5,511,447 $ 83,211 6.12% Tax-exempt 140,307 2,545 7.36 113,895 1,820 6.34 110,293 1,665 6.12 Trading 270,299 3,215 4.82 272,107 4,068 5.93 189,651 2,960 6.33 ------------- ------------ ------- ------------ --------- -------- --------------- -------- -------- Total investment securities 9,092,281 115,676 5.16 8,419,419 110,214 5.19 5,811,391 87,836 6.13 Federal funds sold 27,154 80 1.19 51,988 181 1.38 40,672 164 1.64 Loans Commercial mortgages 2,177,008 35,125 6.54 2,241,044 37,009 6.55 1,828,586 31,304 6.94 Commercial 1,496,039 20,943 5.68 1,338,892 19,816 5.87 1,087,048 16,338 6.10 Consumer 2,075,256 33,719 6.59 1,963,307 33,928 6.86 1,656,000 30,936 7.58 Tax-exempt 258,614 5,129 8.04 195,972 4,517 9.14 233,669 4,992 8.66 ------------- ------------ ------- ------------ --------- -------- --------------- -------- -------- Total loans 6,006,917 94,916 6.41 5,739,215 95,270 6.59 4,805,303 83,570 7.05 ------------- ------------ ------- ------------ --------- -------- --------------- -------- -------- Total earning assets $15,126,352 $ 210,672 5.65% $ 14,210,622 $205,665 5.74% $10,657,366 $171,570 6.53% ============= ============= =============== Sources of Funds - -------------------------------- Interest-bearing liabilities Regular savings $ 3,021,219 $ 6,355 0.85% $2,809,817 $ 7,110 1.00% $2,044,873 $ 7,078 1.40% N.O.W. accounts 403,415 813 0.82 393,844 919 0.93 300,742 1,053 1.42 Money market plus 5,472,788 11,584 0.86 5,048,365 12,375 0.97 3,459,619 11,855 1.39 Time deposits 2,148,534 13,731 2.59 2,054,038 14,376 2.78 1,673,580 16,004 3.88 Public funds 793,437 3,115 1.59 842,374 3,998 1.88 874,379 5,277 2.45 ------------- ------------ ------- ------------ --------- -------- --------------- -------- -------- Total deposits 11,839,393 35,598 1.22 11,148,438 38,778 1.38 8,353,193 41,267 2.00 Other borrowed money 272,304 914 1.36 201,547 729 1.44 102,611 426 1.68 Long-term debt 200,000 3,020 6.12 200,000 3,022 5.99 127,167 2,432 7.76 ------------- ------------ ------- ------------ --------- -------- --------------- -------- -------- Total deposits and interest-bearing liabilities 12,311,697 39,532 1.30 11,549,985 42,529 1.46 8,582,971 44,125 2.08 Noninterest-bearing funds (net) 2,814,655 2,660,637 2,074,395 ------------- ------------ ------- ------------ --------- -------- --------------- -------- -------- Total sources to fund earning $ 15,126,352 39,532 1.06 $ 14,210,622 42,529 1.19 $ 10,657,366 44,125 1.68 assets ------------- ------------ ------- ------------ --------- -------- --------------- -------- -------- Net interest income and margin tax-equivalent basis $ 171,140 4.59% $163,136 4.55% $127,445 4.85% ============ ======= ========= ======== ========= ======== Other Balances - -------------------------------- Cash and due from banks $ 865,209 $ 788,271 $ 510,269 Other assets 933,321 831,250 592,129 Total assets 16,831,542 15,741,365 11,690,615 Total deposits 15,033,367 14,170,281 10,684,272 Demand deposits (noninterest- bearing) 3,193,974 3,021,843 2,331,079 Other liabilities 369,691 283,708 108,125 Stockholders' equity 956,180 885,829 668,440 Notes- Weighted average yields on tax-exempt obligations have been computed on a tax-equivalent basis assuming a federal tax rate of 35%. - Non-accrual loans have been included in the average loan balance - Investment securities includes investments available for sale. - Consumer loans include mortgage loans held for sale.
12 Noninterest Income - ------------------ Noninterest income totaled $76.1 million for the first quarter of 2003, an increase of $20.2 million or 36% from $55.9 million in the first quarter of 2002. The increase was due to increased deposit charges and service fees, which rose $5.9 million over the first quarter of 2002 primarily due to higher transaction volumes. In addition, other operating income increased $14.4 million over the prior year, including increased revenues of $3.6 million from CCMI, the Company's municipal public finance subsidiary and increased revenues of $2.7 million from CIS, the Company's insurance brokerage subsidiary.
Three Months Ended ------------------ 3/31/03 3/31/02 % Increase ------- ------- ---------- (Dollars in thousands) ---------------------------------------------------------- Deposit charges & service fees $34,842 $28,963 20% Other operating income: Insurance 16,055 13,388 20 Capital markets 10,003 6,446 55 Loan brokerage fees 7,923 4,025 97 Other 7,379 3,068 141 ---------------------------------------------------------- Total other 41,360 26,927 54% Net investment securities losses (136) ---------------------------------------------------------- Total non-interest income $76,066 $55,890 36% ==========================================================
Noninterest Expense - ------------------- For the first quarter of 2003, noninterest expense totaled $172.1 million, an increase of $46.2 million or 37% over the same period in 2002. Contributing to this increase was new branch activity over the past twelve months, with the number of branches increasing from 187 at March 31, 2002 to 226 at March 31, 2003. With the addition of these new offices, staff, facilities, and related expenses rose accordingly. Other noninterest expenses rose $7.1 million over the first quarter of 2002. This increase resulted primarily from higher bank card-related service charges, increased business development expenses, and increased provisions for non-credit-related losses. The Company's operating efficiency ratio (noninterest expenses, less other real estate expense, divided by net interest income plus noninterest income excluding non-recurring gains) was 70.58% for the first three months of 2003 as compared to 69.80% for the same 2002 period. The Company's efficiency ratio remains above its peer group primarily due to its aggressive growth expansion activities. Loan and Asset Quality - ---------------------- Total non-performing assets (non-performing loans and other real estate, excluding loans past due 90 days or more and still accruing interest) at March 31, 2003 were $22.5 million, or 0.13% of total assets compared to $17.8 million or 0.11% of total assets at December 31, 2002 and $19.5 million or 0.16% of total assets at March 31, 2002. Total non-performing loans (non-accrual loans and restructured loans, excluding loans past due 90 days or more and still accruing interest) at March 31, 2003 were $19.0 million or 0.32% of total loans compared to $14.2 million or 0.24% of total loans at December 31, 2002 and $16.9 million or 0.34% of total loans at March 31, 2002. At March 31, 2003, loans past due 90 days or more and still accruing interest amounted to $376 thousand compared to $620 thousand at December 31, 2002 and $484 thousand at March 31, 2002. Additional loans considered as potential problem loans by the Company's internal loan review department ($31.7 million at March 31, 2003) have been evaluated as to risk exposure in determining the adequacy of the allowance for loan losses. Other real estate (ORE) at March 31, 2003 totaled $3.6 million compared to $3.6 million at December 31, 2002 and $2.6 million at March 31, 2002. These properties have been written down to the lower of cost or fair value less disposition costs. 13
The following summary presents information regarding non-performing loans and assets as of March 31, 2003 and the preceding four quarters (dollar amounts in thousands). March 31, December 31, September 30, June 30, March 31, 2003 2002 2002 2002 2002 --------------------------------------------------------------------------- Non-accrual loans: Commercial $ 4,874 $ 5,412 $ 7,213 $7,581 $9,473 Consumer 6,388 2,734 2,147 1,557 1,537 Real estate: Construction 131 131 181 181 Mortgage 7,721 5,891 5,754 5,778 5,695 --------------------------------------------------------------------------- Total non-accrual loans 18,983 14,168 15,245 15,097 16,886 --------------------------------------------------------------------------- Restructured loans: Commercial 4 5 6 6 7 Consumer Real estate: Construction Mortgage --------------------------------------------------------------------------- Total restructured loans 4 5 6 6 7 --------------------------------------------------------------------------- Total non-performing loans 18,987 14,173 15,251 15,103 16,893 --------------------------------------------------------------------------- Other real estate 3,553 3,589 2,367 2,471 2,602 --------------------------------------------------------------------------- Total non-performing assets 22,540 17,762 17,618 17,574 19,495 --------------------------------------------------------------------------- Loans past due 90 days or more and still accruing 376 620 900 834 484 --------------------------------------------------------------------------- Total non-performing assets and loans past due 90 days or more $22,916 $18,382 $18,518 $18,408 $19,979 =========================================================================== Total non-performing loans as a percentage of total period-end loans 0.32% 0.24% 0.28% 0.29% 0.34% Total non-performing assets as a percentage of total period-end assets 0.13% 0.11% 0.11% 0.13% 0.16% Total non-performing assets and loans past due 90 days or more as a percentage of total period-end assets 0.13% 0.11% 0.12% 0.13% 0.16% Allowance for loan losses as a percentage of total non-performing loans 499% 640% 560% 530% 428% Allowance for loan losses as a percentage of total period-end loans 1.58% 1.56% 1.54% 1.52% 1.47% Total non-performing assets and loans past due 90 days or more as a percentage of stockholders' equity and allowance for loan losses 2% 2% 2% 2% 3%
14
The following table presents, for the periods indicated, an analysis of the allowance for loan losses and other related data: (dollar amounts in thousands) Year Three Months Ended Ended ------------------------------ 03/31/03 03/31/02 12/31/02 ----------- ----------- ---------- Balance at beginning of period $90,733 $66,981 $66,981 Provisions charged to operating expenses 6,900 6,900 33,150 ----------- ----------- ---------- 97,633 73,881 100,131 Recoveries on loans charged-off: Commercial 204 190 815 Consumer 131 115 339 Commercial real estate 1 176 ----------- ----------- ---------- Total recoveries 335 306 1,330 Loans charged-off: Commercial (1,868) (1,187) (7,181) Consumer (1,365) (724) (3,514) Commercial real estate (4) (23) (33) ----------- ----------- ---------- Total charge-offs (3,237) (1,934) (10,728) ----------- ----------- ---------- Net charge-offs (2,902) (1,628) (9,398) ----------- ----------- ---------- Balance at end of period $94,731 $72,253 $90,733 =========== =========== =========== Net charge-offs as a percentage of Average loans outstanding 0.19% 0.14% 0.18% Net Reserve Additions $ 3,998 $ 5,272 $23,752
Forward-Looking Statements - -------------------------- The Company may from time to time make written or oral "forward-looking statements", including statements contained in the Company's filings with the Securities and Exchange Commission (including this Form 10-Q), in its reports to stockholders and in other communications by the Company, which are made in good faith by the Company pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to the Company's 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 (some of which are beyond the Company's control). The words "may", "could", "should", "would", believe", "anticipate", "estimate", "expect", "intend", "plan" and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause the Company's 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 the Company conducts operations; the effects of, and changes in, trade, monetary and fiscal policies, including interest rate policies of the Board of Governors of the Federal Reserve System (the "FRB"); inflation; interest rates, market and monetary fluctuations; the timely development of competitive new products and services by the Company and the acceptance of such products and services by customers; the willingness of customers to substitute competitors' products and services for the Company's 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 the Company's noninterest or fee income being less than expected; unanticipated regulatory or judicial proceedings; changes in consumer spending and saving habits; and the success of the Company at managing the risks involved in the foregoing. 15 The Company cautions that the foregoing list of important factors is not exclusive. The Company does 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 the Company. Item 3: Quantitative and Qualitative Disclosures About Market Risk ----------------------------------------------------------- See Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operation, Interest Rate Sensitivity and Liquidity. Item 4. Controls and Procedures ------------------------- Quarterly evaluation of the Company's Disclosure Controls and Internal Controls. Within the 90 days prior to the date of this Quarterly Report on Form 10-Q, the Company evaluated the effectiveness of the design and operation of its "disclosure controls and procedures" ("Disclosure Controls"). This evaluation ("Controls Evaluation") was done under the supervision and with the participation of management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"). Limitations on the Effectiveness of Controls. The Company's management, including the CEO and CFO, does not expect that its Disclosure Controls or its "internal controls and procedures for financial reporting" ("Internal Controls" ) will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Conclusions. Based upon the Controls Evaluation, the CEO and CFO have concluded that, subject to the limitations noted above, the Disclosure Controls are effective to timely alert management to material information relating to the Company during the period when its periodic reports are being prepared. In accordance with SEC requirements, the CEO and CFO note that, since the date of the Controls Evaluation to the date of this Quarterly Report, there have been no significant changes in Internal Controls or in other factors that could significantly affect Internal Controls, including any corrective actions with regard to significant deficiencies and material weaknesses. 16 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K --------------------------------- Exhibits - -------- Exhibit 10.34 Ground lease dated January 1, 2001, between Commerce NJ and Willingboro Equities, L.L.C., relating to Commerce NJ's branch office in Willingboro, New Jersey. Exhibit 10.35 Ground lease dated November 27, 2001, between Commerce PA and Warrington Equities, L.L.C., relating to Commerce PA's branch office in Warrington, Pennsylvania. Exhibit 99.1 906 Certification Reports on Form 8-K - ------------------- No reports on Form 8-K were filed by the Company during the quarter ended March 31, 2003. 17 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COMMERCE BANCORP, INC. ---------------------------------------------- (Registrant) May 14, 2003 /s/ DOUGLAS J. PAULS - ------------------------------ ---------------------------------------------- (Date) DOUGLAS J. PAULS SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) 18 CERTIFICATION I, Vernon W. Hill, II, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Commerce Bancorp, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 14, 2003 /s/ Vernon W. Hill, II ----------------------- Vernon W. Hill, II Chairman, President and Chief Executive Officer (principal executive officer) 19 CERTIFICATION I, Douglas J. Pauls, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Commerce Bancorp, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 14, 2003 /s/ Douglas J. Pauls ------------------------- Douglas J. Pauls Senior Vice President and Chief Financial Officer (principal financial officer) 20 EX-10 3 cbwilling.txt EXHIBIT 10.34 (cbwilling) LEASE from WILLINGBORO EQUITIES, L.L.C. to COMMERCE BANK Article 1 Reference Date and Exhibits --------------------------- 1.1 Data ---- DATE January 1, 2001 LOCATION OF PREMISES Route 130 & Levitt Parkway Willingboro, NJ LANDLORD Willingboro Equities, L.L.C. ORIGINAL ADDRESS OF LANDLORD 17000 Horizon Way Suite 100 Mount Laurel, NJ 08054 TENANT Commerce Bank ORIGINAL ADDRESS OF TENANT c/o Commerce Bancorp, Inc. 1701 Route 70 East Cherry Hill, NJ 08034 LEASE TERM Twenty Years ANNUAL FIXED RENT RATE Year 1-5 $110,000.00 6-10 $121,000.00 11-15 $133,100.00 16-20 $146,410.00 1 1.2 Table of Contents ----------------- ARTICLE I - Reference Data and Exhibits Page - --------- ---- 1.1 Data 1 1.2 Table of Contents 2 ARTICLE II - Premises and Term - ---------- 2.1 Premises 4 2.2 Term 4 2.3 Option to Extend 4 ARTICLE III - Improvements - ----------- 3.1 Construction of lmprovements 4 3.2 Contractor 5 3.3 Signs 5 ARTICLE IV - Rent - ---------- 4.1 The Rent, Minimum Fixed and Percentage 5 ARTICLE V - Real Estate Taxes - --------- 5.1 Real Estate Taxes 5 5.2 Taxes 6 5.3 Method of Payment 6 ARTICLE VI - Utilities and Services - ---------- 6.1 Utilities and Charges Therefore 6 ARTICLE VII - TENANT'S Additional Covenants - ----------- 7.1 Affirmative Covenants 7 7.1.1 Use 7 7.1.2 Compliance with Law 7 7.1.3 Payment of TENANT'S Work 7 7.1.4 Indemnity and Liability Insurance 8 7.1.5 LANDLORD'S Right to Enter 8 7.1.6 Personal Property at TENANT'S Risk 8 7.1.7 Payment of LANDLORD'S Cost of Enforcement 8 7.1.8 Yield Up 8 7.1.9 Maintenance 9 7.1.10 Insurance 9 7.2 Negative Comments 9 7.2.1 Overloading, Nuisance, etc. 9 7.2.2 Installation, Alteration or Additions 10 ARTICLE VIII -LANDLORD'S Additional Covenants - ------------ 8.1 Warranty on Use 10 8.2 Competing Use 10 ARTICLE IX - Casualty or Taking - ---------- 9.1 TENANT to Repair or Rebuild in the Event of Casualty 10 9.2 Right to Terminate in Event of Casualty 10 9.3 Eminent Domain 11 2 ARTICLE X - Defaults Page - --------- ---- 10.1 Events of Default 11 10.2 Remedies 12 10.3 Remedies Cumulative 12 10.4 LANDLORD'S and TENANT'S Right to Cure Defaults 12 10.5 Effect of Waivers of Default 12 ARTICLE Xl - Miscellaneous Provisions - --------- 11.1 Assignment, Subletting, etc. 13 11.2 Notice from One Party to Other 13 11.3 Quiet Enjoyment 13 11.4 Recording 13 11.5 Acts of God 13 11.6 Waiver of Subrogation 14 11.7 Rights of Mortgagee and Subordination 14 11.7.1 14 11.7.2 No Accord and Satisfaction 15 11.8 Applicable Law and Construction 15 ARTICLE XII - Permits and Approvals - ----------- 12.1 Tenant Obligations 15 12.2 Approvals 15 12.3 Easements 15 ARTICLE XIII - Net, Net, Net Lease - ------------ 13.1 Net, Net, Net Lease 15 ARTICLE XIV - Right of First Refusal - ----------- 14.1 Right of First Refusal to Lease 16 14.2 Right of First Refusal to Purchase 16 ARTICLE XV - Holdover - ---------- 15.1 Holdover 16 ARTICLE XVI - Common Area - ----------- 16.1 Common Area 17 16.2 Common Area Charges 17 16.3 Determination and Payment of Common Area Charges 17 16.4 Construction Cost 17 ARTICLE XVII - Environmental - ------------ 17.1 Environmental Matters 17 ARTICLE XVIII - - ------------- 18.1 Title 18 18.2 Ownership 18 3 ARTICLE II Premises and Term ----------------- 2.1 Premises - LANDLORD hereby leases to TENANT and TENANT hereby leases from LANDLORD, subject to and with the benefit of the terms, covenants, conditions and provisions of this Lease, the premises shown on Exhibit "A" and described in Exhibit "B", both annexed hereto and made a part hereof, together with any and all improvements, appurtenances, rights, privileges and easements befitting, belonging or pertaining thereto and a building no greater than 4,000 square feet, so long as such building is within the perimeter of the leased premises as shown on Exhibit "A". 2.2 Term - TO HAVE AND TO HOLD for a term beginning Ninety (90) days (inclusive of the time for objectors to appeal for any approval) after TENANT has obtained approval for the construction of the branch bank as set forth in Article 12 (notwithstanding TENANT may not have commenced construction) and continuing for the Lease term of twenty (20) years unless sooner terminated as hereinafter provided. When dates of the beginning and end of the Lease term have been determined, such dates shall be evidenced by a document in form for recording, executed by LANDLORD and TENANT and delivered each to the other. 2.3 Option to Extend - So long as TENANT is not in default hereunder, TENANT shall have the right to extend this Lease for four (4) periods of five (5) years under the same terms, conditions and provisions as in the original term, at the following rentals: Option Years 1-5 $161,051.00 6-10 $177,156.00 11-15 $194,872.00 16-20 $214,359.00 TENANT shall give written notice of its intention to exercise each extension option not less than Ninety (90) days prior to the expiration of the then current term. Lack of written notice by TENANT of its intention to exercise any option prior to ninety (90) days before the expiration of the then current term shall be deemed to constitute exercise of that option by the TENANT. TENANT shall be responsible for any transfer tax associated with this lease. ARTICLE III Improvements ------------ 3.1 Construction of Improvements - TENANT agrees to construct, at its sole cost, a branch banking facility, pursuant to the attached Site Plan, subject to reasonable approval by the LANDLORD of the building plans and specifications, including all necessary site work and public improvements. TENANT shall be responsible for securing all approvals and permits for its use. If such approvals cannot be secured, then TENANT may terminate the lease by giving LANDLORD written notice and thirty (30) days to cure. 4 3.2 Contractor - TENANT shall have the right to select and approve the contractor to complete the construction, which shall be subject to the approval of the LANDLORD. Approval by LANDLORD shall not be unreasonably withheld. 3.3 Signs -- TENANT shall have the right to erect such signs as permitted by applicable zoning ordinances within the leased area, provided it does not preclude LANDLORD from erecting signs for tenants for the balance of the shopping center. Tenant agrees that it shall share equally a monument sign with KinderCare and all related costs. In the event Tenant is unable to obtain all required approvals for signs sufficient to properly identify its business, including a monument or pylon type sign, and a building mounted "C" logo sign, it may elect to terminate the lease with no further obligation to the Landlord. ARTICLE IV Rent ---- 4.1 The Rent, Minimum Fixed - TENANT covenants and agrees to pay rent to LANDLORD at the original address of LANDLORD or such other place as LANDLORD may by notice in writing to TENANT from time to time direct, at the following rates and times. (a) TENANT agrees to pay to LANDLORD base annual fixed rent for the Premises in accordance with and in the amount set forth in Paragraph 1.1 "Data". The base annual fixed rent shall be paid in equal monthly installments in advance on the first (1st) day of each month beginning on the Commencement Date. In addition to the base annual fixed rent, TENANT shall pay as and when the same become due and owing as additional rents, all other monies provided for in the Lease. It is the parties intention that all charges and assessments charged to or assessed against the Premises shall be the responsibility of the TENANT, such that the Lease shall be "net, net, net" to the LANDLORD, excepting only interest and principal on any mortgage made by the LANDLORD and affecting the Premises. (b) For purposes of this Lease, the scheduled increases in the base annual fixed rate shall occur on the first day of the sixth (6th), eleventh (11th) and sixteenth (16th) years of the Initial Term as same is determined pursuant to Paragraph 2.2 and on the first day of the first (1~), the sixth (6th), eleventh (11th) and sixteenth (16th), years of the Option Terms. (c) If any installment under this Lease is not paid within fifteen (15) days of the time and at the place and in the manner specified, then LANDLORD may, at its option, declare TENANT in default. 5 ARTICLE V Real Estate Taxes ----------------- 5.1 Real Estate Taxes - As additional rent, TENANT agrees to pay all real estate taxes levied upon the Premises, improvements located on the Premises, the leasehold estate, or any subleasehold estate of any nature including special assessments. The obligation for payment by TENANT of all real estate taxes shall commence simultaneously with the payment of rent hereunder. 5.2 Taxes - TENANT agrees to pay all taxes levied upon rents and personal property, including trade fixtures and inventory, kept on the demised Premises, covered by Section 5.1 after presentation to TENANT by LANDLORD of statements from the taxing jurisdiction in which said property is located. TENANT, however, will pay only the lowest discounted amount and will not be required to pay any penalty, interest or cost occurring by reason of LANDLORD'S failure to secure said tax statements in a timely fashion from the taxing authorities for any tax required to be paid by TENANT. LANDLORD may, however, direct the taxing authorities to send the statements directly to TENANT. In the event LANDLORD directs the taxing authorities to send a statement directly to TENANT, TENANT shall make all such payments directly to the taxing authority at least ten (10) days before any delinquency and before any fine, interest or penalty shall become due or imposed by operation of law for their non-payment. Further, TENANT shall furnish to LANDLORD within ten (10) days of the date when any tax, assessment or charge would become delinquent, receipts or other satisfactory evidence establishing the timely payment of said taxes or charges. LANDLORD further agrees that TENANT, in the name of LANDLORD, but at TENANT'S sole expense, may protest any assessment before any taxing authority or board or maintain any necessary legal action in reference to said assessment or for the recovery of any taxes paid thereon. Nothing herein contained shall require TENANT to pay any income or excess profits, taxes assessed against LANDLORD or any corporation, capital stock, or franchise tax imposed upon LANDLORD. 5.3 Method of Payment - LANDLORD shall give written notice advising TENANT of the amount of real estate taxes, together with a copy of the tax bill, and TENANT shall pay such amount to LANDLORD within thirty (30) days after receipt of such notice. If this Lease shall terminate during a tax year, TENANT shall pay to LANDLORD, a prorated portion of the amount that would have been due for the full tax year based on the number of days of said tax year expired on the date of termination. 6 ARTICLE VI Utilities and Services ---------------------- 6.1 Utilities and Charges Therefore - TENANT agrees to pay directly to the authority charged with the collection thereof, all charges for water, gas, electricity, sanitary sewer and sprinkler changes, telephone connection and standby fees and other utilities used or consumed in the Premises and shall make its own arrangements for such utilities. In the event any such services cannot be reasonably procured from any public agency, and LANDLORD provides any such services, TENANT shall reimburse LANDLORD for its proportionate share of any such services used or consumed in the demised premises as additional rental. ARTICLE VII TENANT'S Additional Covenants ----------------------------- 7.1 Affirmative Covenants - TENANT covenants at its expense at all times during the Lease term and such further time as TENANT occupies the Premises or any part thereof. 7.1.1 Use - TENANT shall use and permit the use of the Premises and the improvements to be constructed thereon primarily for the operation of a branch bank, provided that (subject to the other terms and conditions of this Lease), TENANT may at any time use the Premises and the building and other improvements to be constructed thereon, for any other lawful commercial purposes which do not conflict with existing primary uses in the shopping center which forms part of the common area, with such uses to be approved by the LANDLORD, which approval shall not be unreasonably withheld. Neither TENANT nor its subtenants, if any, shall commit any nuisance, nor permit the emission of any objectionable noise or odor, nor bring on, deposit or allow to be brought on or deposited on the Premises any asbestos materials or any other Hazardous Substance or materials as the same may be defined by Federal, State or local laws, rules, statutes or regulations or in the Environmental Rider annexed hereto, nor use the property in such a manner which negatively effects the reversion. 7.1.2 Compliance with Law - To make all repairs, alterations, additions or replacements to the Premises required by any law or ordinance or any order or regulation of any public authority because of TENANT'S use of the Premises, to keep the Premises equipped with all safety appliances so required because of such use; to pay all municipal, county or state taxes assessed against the personal property of any kind owned by or placed in, upon or about the premises by TENANT; and to comply with the orders and regulations of all governmental authorities, as well as all Insurance Carriers and Underwriters. 7.1.2 (A) TENANT has the right to contest by appropriate judicial or administrative proceeding, without cost or expense to the LANDLORD, the validity or application of any law, ordinance, order, rule, regulation or requirement ("law") which the TENANT legitimately deems unduly burdensome 7 or inappropriate and TENANT shall not be in default for failure to comply with such law until the legally permitted time following final determination of TENANT'S contest expires; provided, however, if LANDLORD gives notice of request, TENANT shall first furnish LANDLORD with a bond, satisfactory to LANDLORD in form and insurer, guaranteeing compliance by TENANT with the contested law and indemnifying LANDLORD against all liability that LANDLORD may sustain by reason of TENANT'S failure or delay in complying with the law. LANDLORD may, but is not required to, contest any such law independent of TENANT. On TENANT'S notice of request, LANDLORD may join in TENANT'S contest. 7.1.3 Payment for TENANT'S Work - To pay promptly when due the entire cost of any work to the Premises undertaken by TENANT and to bond against or discharge any liens for labor or materials within ten (10) days after written request by LANDLORD; to procure all necessary permits before undertaking such work; and to do all of such work in a good and workmanlike manner, employing new materials of good quality and complying with all governmental requirements. 7.1.4 Indemnity and Liability Insurance - To defend with counsel, save harmless and indemnify LANDLORD from all claims or damage to or of any person or property while on the premises unless arising from any omission, fault, negligence or other misconduct of LANDLORD, and from all : claims or damage to or of any person or property occasioned by any omission, fault, neglect or other misconduct of TENANT; to maintain in responsible companies qualified to do business in the state in which the premises is located and in good standing therein, public liability insurance covering the premises insuring LANDLORD, as well as TENANT, with limits at least equal to those stated in Section 1.1, workmen's compensation insurance with statutory limits, covering all of TENANT'S employees working in the premises, and to deposit promptly with LANDLORD certificates for such insurance and all renewals thereof, bearing the endorsement that the policies will not be canceled until after ten (10) days written notice to LANDLORD. TENANT'S obligations hereunder may be satisfied through a blanket insurance policy covering other interests of the TENANT. 7.1.5 LANDLORD'S Right to Enter - To permit LANDLORD and its agents to examine the premises at reasonable times and to show the premises to prospective purchasers and lenders, provided such entry shall not unreasonably interfere with TENANT'S operation and conduct of its business in the demised premises or compromise security. 7.1.6 Personal Property at TENANT'S Risk - That all of the furnishings, fixtures, equipment, effects and property of every kind, nature and description of TENANT and of all persons claiming under TENANT, that may be on the premises, shall be at the sole risk and hazard of TENANT, and if the whole or any part thereof shall be destroyed or damaged by fire, water, or otherwise, or by the leakage or bursting of water pipes, steam pipes or other pipes, by theft or from any other cause, no part of said loss or damage is to charged to or be borne by LANDLORD, except that LANDLORD shall in no event be indemnified or held harmless or exonerated from any liability resulting from its sole negligence, failure to perform any of its obligations under this Lease or to any extent prohibited by law. 8 7.1.7 Payment of LANDLORD'S Cost of Enforcement - To pay on demand LANDLORD'S expenses, including reasonable attorney's fees, incurred in enforcing any obligation of TENANT under this Lease or in curing any default by TENANT under this Lease as provided in Section 10.4, provided LANDLORD shall prevail in any judicial proceedings in respect to such enforcement. 7.1.8 Yield Up - At the expiration of the Lease term or earlier termination o this Lease, TENANT shall remove all trade fixtures and personal property, to repair any damage caused by such removal, to remove all TENANT'S signs wherever located and to surrender all keys to the premises and yield up the premises, broom clean and in the same good order and repair in which TENANT is obligated to keep and maintain the premises by the provisions of this Lease, reasonable wear and tear and insured damage by fire, casualty or taking excepted. Any property not so removed shall be deemed abandoned and may be removed and disposed of by LANDLORD in such manner as LANDLORD shall determine, without any obligation on the part of LANDLORD to account to TENANT for any proceeds there from, all of which shall become the property of LANDLORD. Any holdover by TENANT will not be deemed an extension of this Lease, and TENANT shall indemnify LANDLORD against all losses and damages from a failure to surrender. 7.1.9 Maintenance - Throughout the term, TENANT shall, at TENANT'S sole cost and expense maintain the premises and all improvements thereon in good condition and repair, ordinary wear and tear excepted, and in accordance with all applicable laws, rules, ordinances, orders and regulations of (1) federal, state, county, municipal and other governmental agencies and bodies having or claiming jurisdiction and all of their respective departments, bureaus and officials; (2) the insurance underwriting board or insurance inspection bureau having or claiming jurisdiction; and (3) all insurance companies insuring all or any part of the premises of the improvements located thereon, or both except as provided below and subject only to the provisions of Paragraph 9.2, TENANT shall promptly and diligently repair, restore and replace as required to maintain the premises and the improvements in the condition set forth above, or to remedy all damage to or destruction of all or any part of the improvements. (A) The completed work of maintenance, compliance, repair, restoration or replacement shall be equal in value, quality and use to the condition of the improvements before the event giving rise to the work, unless otherwise provided for in this Lease. LANDLORD shall not be required to furnish any services or facilities or to make any repairs or alterations of any kind in or upon or on the premises, LANDLORD'S election to perform any obligations of the TENANT under this provision on TENANT'S failure or refusal to do so shall not constitute a waiver of any right or remedy for TENANT'S default and TENANT shall promptly reimburse, defend and indemnify LANDLORD against all liability, loss, cost and expense arising from it. 7.1.10 Insurance - TENANT shall maintain in full force and effect, at its own cost, full replacement cost coverage insurance covering the demised premises (and all improvements for the full insurable value) against loss or damage by fire or casualty, with the usual extended coverage 9 endorsements, together will endorsements protecting against loss or damage resulting from malicious mischief, sprinkler leakage and vandalism all in amounts not less than replacement parts value above foundation walls. All insurance policies shall name the LANDLORD as its interest may appear. 7.2 Negative Covenants - TENANT covenants at all times during the Lease term and such further times as TENANT occupies the premises or any part thereof: 7.2.1 Overloading Nuisance, etc. - Not to injure, overload, deface or otherwise harm the premises; nor commit any nuisance; nor make any use of the premises which is improper, offensive or contrary to any law or ordinance. 7.2.2 Installation, Alteration or Additions - Not to make any installations, alterations or additions (except only the installation of fixtures necessary for the conduct of its business), without on each occasion obtaining prior written consent of LANDLORD, LANDLORD'S consent not be unreasonable withheld. No consent shall be required for nonstructural alterations not exceeding $100,000 in cost. No addition will be allowed which increases the building size to more than 4,000 square feet, or which violates the terms of Paragraph 2.1 of this Lease. ARTICLE VIII LANDLORD'S Additional Covenants ------------------------------- 8.1 Warranty on Use - LANDLORD warrants and represents that at the commencement of construction it will be the Owner in Fee of the Land shown on Exhibit "A" and described in Exhibit "B". LANDLORD has no knowledge of zoning regulations, restrictive agreements, leases or other instruments which prevent the use of the premises for the purpose intended herein, nor otherwise conflict with any of the provisions of this Lease. TENANT'S sole and conclusive remedy for a breach of this warranty shall be its right, at its election, to terminate the Lease prior to commencement of construction. TENANT shall be responsible for securing the zoning and all approvals. 8.2 Competing Use - During the term of this Lease, provided TENANT is not in default, LANDLORD agrees not to lease or sell any portion of the project, of which the leased premises is a part, to a commercial bank, savings bank, savings and loan or credit union. ARTICLE IX Casualty or Taking ------------------ 9.1 TENANT to Repair or Rebuild in the Event of Casualty - In case the Premises or any part thereof shall be damaged or destroyed by fire other casualty, taken (which term or reference to eminent domain action generally, for the purposes of this Article shall include a sale in lieu of the exercise of the right of eminent domain) or ordered to be demolished by the action of any public authority in consequence 10 of a fire or other casualty, this Lease shall, unless it is terminated as provided below in Section 9.2 or 9.3, remain in full force and effect and TENANT shall, at its expense, proceed with all reasonable dispatch, to repair or rebuild the premises and the improvements, or what may remain thereof, so as to restore them as nearly as practicable to the condition they were in immediately prior to such damage or destruction. 9.2 Right to Terminate in Event of Casualty - In case of any damage or destruction occurring in the last five years of the original term of this Lease or during any extension of the term, to the extent of 50% or more of the insurable value of the building, TENANT may at its option, to be evidenced by notice in writing given to the LANDLORD within seven (7) days after the occurrence of such damage or destruction, in lieu of repairing or replacing the building, elect to terminate this Lease as of the date of said damage or destruction. In the event the TENANT shall so terminate the lease all insurance proceeds shall become the property of the LANDLORD. 9.3 Eminent Domain - If the whole, or any part of the demised premises shall be taken or condemned by any competent authority for any public use or purpose during the term of this Lease, TENANT reserves unto itself the right to prosecute its claim for an award based upon its leasehold interest for such taking, without impairing any rights of LANDLORD for the taking of or injury to the reversion. In the event that a part of the demised premises shall be taken or condemned that (a) the part so taken includes the building on the demised premises or any part thereof or (b) the part so taken shall remove from the premises 20% or more of the front depth of the parking areas thereof, or (c) the part so taken shall consist of 25% or more of the total parking area, or (d) such partial taking shall result in cutting off direct access from the demised premises to any adjacent public street or highway, then and in any such event, the TENANT may at any time either prior to or within a period of sixty (60) days after the date when possession of the premises shall be required by the condemning authority elect to terminate this Lease, or if any option to purchase the premises is conferred upon the TENANT by any other provision of this Lease, may as an alternative to such termination of this Lease elect to purchase the demised premises in accordance with such purpose option. In the event that TENANT shall fail to exercise any such option to terminate this Lease or to purchase the premises or in the event that a part of the demised premises shall be taken or condemned under circumstances under which the TENANT will have no such option, then and in either such event the LANDLORD shall, with reasonable promptness, make necessary repairs to and alterations of the improvements on the demised premises for the purpose of restoring the same to an economic architectural unit, susceptible to the same use as that which was in effect immediately prior to such taking, to the extent that may have been necessary by such condemnation, subject to a pro-rata reduction in rental. Any dispute resulting from Section 9.3 of this Lease shall be submitted to the American Arbitration Society, whose decision shall be binding on the parties hereto. ARTICLE X Defaults -------- 11 10.1 Events of Default - If (a) Tenant shall default in the performance of any of its obligations to pay rent or additional rent hereunder and if such default shall continue for ten (10) days after written notice from LANDLORD designating such default or if within thirty (30) days after written notice from LANDLORD to TENANT specifying any other non-monetary default or defaults, TENANT has not commenced diligently to correct the default or defaults so specified or has not thereafter diligently pursued such corrective action to completion, or (b) any assignment shall be made by TENANT for the benefit of creditors, or (c) if TENANT'S leasehold interest shall be taken on execution, attached, levied upon or (d) if a petition is filed by TENANT for adjudication as a bankrupt, or for reorganization or an arrangement under any provision of the Bankruptcy Act as then in force and effect, or (e) if an involuntary petition under any of the provisions of said Bankruptcy Act is filed against TENANT and such involuntary petition is not dismissed within sixty (60) days thereafter, then, and in any of such cases, LANDLORD lawfully may exercise all defaults rights available to it under law, including repossession of the leased property, termination of the lease, acceleration of all future rental payments, and such other rights as may be lawfully permitted. 10.2 Remedies - In the event that this Lease is terminated under any of the provisions contained in Section 10.1 or shall be otherwise terminated for breach of any obligation of TENANT, TENANT covenants to pay punctually to LANDLORD all the sums and perform all the obligations which TENANT covenants in this Lease to pay and to perform in the same manner and to the same extent at the same time as if this Lease had not been terminated so long as such obligations shall have not been rendered unnecessary or impossible of performance by the subsequent re-letting or other occupancy permitted by LANDLORD. In calculating the amounts to be paid by TENANT under the foregoing covenant, TENANT shall be credited with the net proceeds of any rent or the value of other considerations obtained by LANDLORD by re-letting the premises, after deducting all LANDLORD'S expenses in connection with such re-letting, including, without limitation, all repossession costs, brokerage commissions, reasonable fees for legal services and expenses of preparing the premises for re-letting, it being agreed by TENANT that LANDLORD may (i) re-let the premises or any part or parts thereof, for a term or terms which may at LANDLORD'S option be equal to or less than or exceed the period which would otherwise have constituted the balance of the Lease term, and (ii) make such alterations, repairs and decorations in the premises as LANDLORD in its sole judgment considers advisable or necessary to re-let the same. Nothing contained in this Lease shall, however, limit or prejudice the right of LANDLORD to prove for and obtain in proceedings for bankruptcy or insolvency by reason of the termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount be greater, equal to, or less than the amounts of the loss or damages referred to above. 10.3 Remedies Cumulative - Any and all rights and remedies which LANDLORD may have under this Lease, and at law and equity, shall be cumulative and shall not be deemed inconsistent with 12 each other, and any two or more of all such rights and remedies may be exercised at the same time insofar as permitted by law. 10.4 LANDLORD'S and TENANT'S Right to Cure Defaults - LANDLORD may, but shall not be obligated to, cure at any time, following ten (10) days prior written notice to TENANT, except in cases of emergency when no notice shall be required, any default by TENANT under this Lease; and whenever LANDLORD so elects, all costs and expenses incurred by LANDLORD, including reasonable attorney's fees, in curing a default shall be paid by TENANT to LANDLORD as additional rent on demand. TENANT shall have a like right to cure any default of LANDLORD, and TENANT may reimburse itself for the cost thereof out of succeeding rental payments. 10.5 Effect of Waivers on Default - No consent or waiver, expressed or implied, by either party to or of any breach of any covenants, conditions or duty of the other shall be construed as a consent or waiver to or of any other breach of the same of any other covenant, condition or duty. ARTICLE Xl Miscellaneous Provisions ------------------------ 11.1 Assignment, Subletting, etc. - LANDLORD'S written consent shall be required for any assignment, transfer or subletting except to another financial institution which consent shall not be unreasonably withheld. 11.2 Notice from One Party to the Other - Any notice from LANDLORD to TENANT or from TENANT to LANDLORD shall be deemed duly served if mailed by registered or certified mail, return receipt requested, postage pre-paid, addressed, if to TENANT, at the original address of TENANT or such other addresses as TENANT shall have last designated by notice in writing to LANDLORD, and if to LANDLORD, at the original address of LANDLORD or such other address as LANDLORD shall have last designated by notice in writing to TENANT. 11.3 Quiet Enjoyment - LANDLORD agrees that upon TENANT'S paying the rent and performing and observing the agreements, conditions and other provisions on its part to be performed and observed, TENANT shall and may peaceably and quietly have, hold and enjoy the demised premises during the Lease term without any manner of hindrance, disturbance or molestation from LANDLORD or anyone claiming under LANDLORD, subject to the covenants and conditions of this Lease. 11.4 Recording - TENANT agrees not to record this Lease, but each party hereto agrees on request of the other, to execute a Notice or Short Form of this Lease in recordable form in compliance with applicable statutes, and reasonably satisfactory to LANDLORD'S and TENANT'S attorneys. In no event shall such document set forth the rental or other charges payable by TENANT under this Lease; and any such document shall expressly state that it is executed pursuant to the provisions contained in this Lease, and is not intended to vary the terms and conditions of this Lease. In the event LANDLORD and/or TENANT believe that the Lease has been lawfully terminated, abandoned or otherwise of no force and 13 effect and the other party will not voluntarily execute a Discharge of Memorandum of Lease, the party seeking the Discharge of Memorandum of Lease may move summarily before the Superior Court of New Jersey for a determination of whether or not the Memorandum of Lease should be discharged. The other party consents to the jurisdiction of the Superior Court of New Jersey and agrees to proceed in a summary manner. It is expressly understood and agreed that in addition to the relief provided herein, the parties will have such additional cumulative remedies as are available to it at law or in equity for damages suffered by reason of a wrongful refusal to execute and deliver a Discharge of Memorandum of Lease. 11.5 Acts of God - In any case where either party hereto is required to do any act, delays caused by or resulting from Acts of God, war, civil commotion, fire or other casualty, labor difficulties, shortages of labor, materials or equipment, government regulations, or other causes beyond such party's reasonable control shall not be counted in determining the time during which work shall be completed, whether or such time be designated by a fixed date, a fixed time or "a reasonable time". 11.6 Waiver of Subrogation - All insurance which is carried by either party with respect to the demised premises, whether or not required, shall include provisions which either designates the other party as one of the insured or deny to the insurer acquisition by subrogation of rights of recovery against the other party. Each party shall be entitled to have duplicates or certificates of any policies containing such provisions. Each party hereby waives all rights of recovery against the other for loss or injury against which the waiving party is protected by insurance containing such provisions. 11.7 Rights of Mortgagee and Subordination - 11.7.1 This Lease is subject and is hereby subordinated to all present and future mortgages, deeds of trust, and other encumbrances affecting the premises or the property of which said premises are a part; provided, however, that an agreement or instrument affecting such subordination shall be executed by the mortgagee or other Lender, be recorded with such mortgage or other security agreement, and a copy delivered to the TENANT and contain provisions, to the effect that (i) so long as TENANT observes the terms and provisions of this Lease and notwithstanding the Lease may be foreclosed, TENANT will not be effected or disturbed by the mortgagee in the exercise of any of its rights under the mortgage or other security agreement, or the bond, note or debt secured thereby; (ii) in the event the mortgagee comes into possession or ownership of the premises by foreclosing or otherwise, TENANT'S use, occupancy and quiet enjoyment of the premises shall not be disturbed by any such proceedings; (iii) in the event the premises are sold or otherwise disposed of pursuant to any right or power contained in the mortgage or other security agreement, or the bond or note secured thereby, or as a result of proceedings thereon, the purchaser shall take title subject to this Agreement of Non Disturbance, and all of the rights of the TENANT hereunder; (iv) in the event the buildings and improvements upon the premises are damaged by fire and other casualty, for which loss the proceeds payable under any insurance policy or policies are payable to the mortgagee, such insurance funds, when paid, shall be made available for the purpose of repair and restoration as provided in this Lease; and (v) 14 the agreement shall be binding upon the LANDLORD, mortgagee and their respective heirs, executors, administrators, successors and assigns. The TENANT agrees to execute, at no expense to the LANDLORD, any instrument which may be deemed necessary or desirable by the LANDLORD to further effect the subordination of this Lease to any such mortgage, deed of trust or encumbrance. 11.7.2 No Accord and Satisfaction - No acceptance by LANDLORD of lesser sum than the rent or any other charges then due shall be deemed to be other than on account of the earliest installment of such rent or charge due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent or other charge be deemed an accord and satisfaction, and LANDLORD may accept such check or payment without prejudice to LANDLORD'S right to recover and balance of such installments or pursue any other remedy in this Lease provided. 11.8 Applicable Law and Construction - This Lease shall be governed by and construed in accordance with the laws of the State of Pennsylvania, and if any provisions of this Lease shall to any extent be invalid, the remainder of this Lease shall not be affected thereby. There are no oral or written agreements between LANDLORD and TENANT affecting this Lease. This Lease may be amended only by instruments in writing executed by LANDLORD and TENANT. LANDLORD shall not be deemed in any way or for any purpose, to have become, by the execution of this Lease or any action taken thereunder, a partner of TENANT in its business or otherwise a joint venture or member of any enterprises of TENANT. The titles of the several Articles and Sections contained herein are for convenience only and shall not be considered in construing this Lease. Unless repugnant to the context, the words "LANDLORD and TENANT" appearing in this Lease shall be construed to mean those names above and their respective heirs, administrators, successors and assigns, and those claiming through or under them respectively. ARTICLE XII Permits and Approvals --------------------- 12.1 TENANT'S Obligations - The obligations of TENANT hereunder are contingent upon final approval by the bank's Board of Directors of this transaction and upon TENANT securing on or before April 15, 2001 the following unconditional and unappealable approvals: A. All state and federal regulatory approvals for the construction and operation of a branch bank on the leased premises. B. All municipal and governmental approvals required for the construction of TENANT'S proposed building including the issuance of a building permit ("Permit and Approvals"). 12.2 Approvals - TENANT shall be responsible for and shall diligently pursue all required approvals and permits and all related costs. 12.3 Easements - TENANT shall have absolutely no right to grant any easement with regard to the premises other than such easements to public entities or public service corporations for the purpose of serving only the premises, rights-of-way or easements on or over the premises for poles or conduits, or both, for telephone, electricity, water, sanitary or storm sewers or both and for other utilities and municipal 15 or special district services. LANDLORD shall cooperate with TENANT to permit the creation of all necessary easements. ARTICLE XIII Net, Net, Net Lease ------------------- 13.1 Net, Net, Net Lease - It is the intention of LANDLORD and TENANT that the rental herein specified shall be net to LANDLORD in each lease year, that all costs, expenses, and obligations of every kind relating to the TENANT'S use and occupancy of the premises which may arise during the term of this Lease shall be paid by TENANT, and that LANDLORD shall be indemnified by TENANT against any such costs, expenses and obligations. ARTICLE XIV Right of First Refusal ---------------------- 14.1 Right of First Refusal to Lease - If within one hundred eighty (180) days prior to the conclusion of this Lease and all options to extend the term thereof, LANDLORD shall desire to accept a bona fide offer received by it to lease any part of the Premises, LANDLORD shall notify TENANT of such a desire in the manner provided in this Lease for the giving of notice, and TENANT shall have the right of first refusal to lease said premises exercisable within ten (10) days of said written notice upon the terms contained in the notice. This provision shall only be effective after the termination, expiration or conclusion of the original lease term and all options to extend the Lease, and shall not affect the premises during the term of this Lease or any option to extend the term thereof. 14.2 Right of First Refusal to Purchase - TENANT shall have the right of first refusal to purchase the demised premises as hereinafter set forth. If at any time during the term as extended, LANDLORD shall receive a bona fide offer from a third person for the purchase of the demised premises, which offer LANDLORD shall desire to accept, LANDLORD shall promptly deliver to TENANT a copy of such offer, and TENANT may, within fifteen (15) days thereafter, elect to purchase the demised premises on the same terms as those set forth in such offer, excepting that TENANT shall be credited against the purchase price to be paid by TENANT, with a sum equal to the amount of any brokerage commissions, if any, which LANDLORD shall save by a sale to TENANT. If LANDLORD shall receive an offer for the purchase of the demised premises, which is not consummated by delivering a deed to the offerer, the TENANT'S right of first refusal to purchase shall remain applicable to subsequent offers. If LANDLORD shall sell the demised premises after a failure of TENANT to exercise its right of first refusal, such shall be subject to the Lease and shall continue to be applicable to subsequent sales of the demised premises. Notwithstanding the foregoing, TENANT'S right of first refusal shall not apply or extend to any sales or transfers between LANDLORD and any affiliates in which the principals of the LANDLORD are the 16 majority shareholders to any family trusts or to the heirs of the principals of LANDLORD. LANDLORD shall be entitled to net the same amount under any right of first refusal exercise. ARTICLE XV Holdover -------- 15.1 Holdover - In the event that TENANT continues in use and occupancy and holds over in possession of the premises after the expiration of the Initial Term or, properly exercised, the Option Term, in addition to all other damages to which LANDLORD may be entitled, the monthly rent during the period of holdover shall be in a sum equal to double the amount of the monthly installment of base annual fixed rent during the last month of the term which has just expired. Said holdover rent shall be in addition to all additional rents for which the TENANT shall be responsible during the holdover period. ARTICLE XVI Common Area ----------- 16.1 Common Area - LANDLORD hereby grants to TENANT, in common with LANDLORD and other tenants, with respective invitees and licensees, the right to use the parking and public areas in the project of which the Leased Premises is a part, subject to the conditions hereinafter provided. TENANT hereby agrees that: (a) LANDLORD may designate an area for TENANT'S employee parking (b) Said parking area will not be used for permanent garaging or overnight parking (c) TENANT will conform with the reasonable rules and regulations of the Shopping Center common area (d) LANDLORD agrees that it will permit construction of the parking area in substantial conformance with the attached plan. 16.2 Common Area Charges - As additional rental, TENANT agrees to pay its pro rata share of the common area maintenance costs which shall include maintenance, landscaping, illumination, cleaning, snow and ice removals, common sewerage disposal costs, common signs, and all other common area costs. If TENANT is the only occupant on the property then it shall be responsible for I 00% of common area charges. 16.3 Determination and Payment of Common Area Charges - All such common area charges shall be deemed additional rental and shall be paid in monthly installments equal to 1/12th of TENANT'S estimated common are contribution. TENANT'S common area pro rata shall be determined pursuant to the following formula:
Total Common Area Charges x Net Square Ft of Tenant's Leased Premises = TENANT Common Area ----------------------------------------- Charges Occupied Land Area of Project Charges
16.4 Construction Cost - TENANT shall construct its own building at its own costs and bear all construction within its demised premises, as identified in Exhibit A. 17 ARTICLE XVII Environmental ------------- 17.1 Environmental Matters - A. LANDLORD represents and warrants that any handling, transportation, storage, treatment or usage of hazardous or toxic substances (as defined by any applicant government authority and hereinafter being referred to as "Hazardous Materials") that has occurred or will occur on the Demised Premises shall be in compliance with all applicable federal, state and local laws, regulations and ordinances. TENANT represents and warrants that any handling, transportation, storage, treatment or usage of Hazardous Materials by TENANT at the Demised Premises shall be in compliance with applicable federal, state and local laws. LANDLORD further represents and warrants that no leak, spill, discharge, emission or disposal of Hazardous Materials has occurred or will occur on the Demised Premises and that the soil, groundwater, soil vapor on or under the Demised Premises is or will be free of Hazardous Materials as of the date hereof. LANDLORD agrees to indemnify, defend and hold TENANT and its officers, from any claims, judgments, damages, fines, penalties, costs, liabilities (including sums paid in settlement of claims) or loss including attorney's fees, consultants fees, and expert fees which arise during or after the Primary Term or any Renewal Term, or in connection with the presence of suspected presence of Hazardous Materials in the soil, groundwater, or soil vapor on or under the Demised Premises, unless such Hazardous Materials are present solely as the result of the acts of TENANT, its officers, employees or agents. Without limiting the generality of the foregoing, this indemnification shall survive the expiration of this Lease and does specifically cover costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision because of the presence or suspected presence of Hazardous Materials in the soil, groundwater or soil vapor odor under the Demised Premises, unless the hazardous Materials are present solely as the result of the acts of TENANT, its officers, agents or employees. Without limiting the generality of the foregoing, this indemnification shall also specifically cover costs in connection with: 1. Hazardous Materials present or suspected to be present in the soil, groundwater or soil vapor on or under the Demised Premises before the date hereof; or 2. Hazardous Materials that migrate, flow, percolate, diffuse or in any move onto or under the Demised Premises after the date hereof; or 3. Hazardous Materials present on or under the Demised Premises as a result of any discharge, dumping, spilling (accidental or otherwise) onto the Demised Premises during or after the Primary Term or any Renewal Term by any person or entity. B. TENANT agrees to indemnify LANDLORD and its officers, employees and agents harmless from any claims, judgments, damages, fines, penalties, costs, liabilities (including sums paid in 18 settlement of claims) or loss including attorney's fees, consultants fees and expert fees which arise during or after the Primary Term or any Renewal Term in connection with the presence of toxic or hazardous substances in the soil, groundwater, or soil vapor on or under the Demised Premises to the extent such presence is caused by the acts of Tenant, its officers, employees and agents. C. A condition precedent to this Lease shall be TENANT's satisfactory review of the report (the "Phase I Environmental Survey") on the environmental condition of the land on which the Demised Premises is located. LANDLORD agrees to provide TENANT with a Phase I Environmental Survey of the land on which the Demised Premises is located. In the event that TENANT shall discover i its review of the Phase I Environmental Survey that any Hazardous Materials may be present in the soil, ground water or soil vapor on or under the Demised Premises, TENANT may, upon written notice to LANDLORD within ten (10) days after the date TENANT receives the Phase I Environmental Survey, terminate this Lease. D. If during the term of this Lease any governmental authority requires the remediation of Hazardous Materials from the Demised Premises or the Shopping Center and such remediation materially affects TENANT's business operations or poses a safety threat to TENANT's employees or customers, then TENANT shall be entitled to an equitable abatement of rent from the date such interference or safety hazard occurs to the date such interference and safety hazard are no longer present. ARTICLE XVIII 18.1 Title - This lease shall be subject and subordinate to the lien of any bank or institution or other mortgage or mortgages now or hereafter in force against LANDLORD's property, and to all advances made upon the security thereof, provided the holder of any such mortgage shall execute and deliver to TENANT an agreement, in the form of Exhibit D attached hereto, or as otherwise agreed to by TENANT, LANDLORD and such holder, providing that such holder will recognize this lease and not disturb TENANT's possession of the premises in the event of foreclosure if TENANT is not then in default hereunder beyond any applicable cure period. TENANT agrees, upon receipt of such agreement, to execute such further instrument(s) as may be necessary to subordinate this lease to the lien of any such mortgage. The term "mortgage" shall include deeds of trust or any other similar hypothecations. 18.2 Ownership LANDLORD warrants that it will own in fee the subject premises at the commencement of the lease, subject only to the liens, mortgages and encumbrances listed on the attached schedule, evidenced by a title report provided by LANDLORD to TENANT within forty-five (45) days of the execution of this lease, which shall be subject to TENANT's reasonable approval. TENANT'S lease hereunder shall be subordinate only to such liens where the holder of such liens has executed and delivered to TENANT in the form attached hereto a Subordination and Non-Disturbance Agreement. 19 IN WITNESS WHEREOF, the parties have hereunto set their hands and seals this day and year first above written. TENANT: COMMERCE BANK /s/ Jacqueline Watson BY:/s/Thomas H. Arasz - --------------------------- --------------------------- Attest Thomas H. Arasz Senior Vice President/Real Estate Officer LANDLORD: WILLINGBORO EQUITIES, L.L.C BY: /s/ * - --------------------------- --------------------------- Attest EX-10 4 warrington.txt EXHIBIT 10.35 11/27/01 (cb-warrington) LEASE from to COMMERCE BANK, PA Article I Reference Date and Exhibits --------------------------- 1.1 Data
DATE : November 27, 2001 LOCATION OF PREMISES : Route 611 and Street Road Warrington, Pennsylvania LANDLORD : Warrington Equities, LLC ORIGINAL ADDRESS OF : 17000 Horizon Way Suite 100 Mt. Laurel, NJ 08054 TENANT : Commerce Bank/Pennsylvania, N.A. ORIGINAL ADDRESS OF : c/o Commerce Bancorp, Inc. 1701 Route 70 East Cherry Hill, NJ 08034 LEASE TERM : Twenty Years ANNUAL FIXED RENT RATE : Year 1-5 $135,000.00 6-10 $148,500.00 11-15 $163,350.00 16-20 $179,685.00 INSURANCE LIMITS : $2,000,000 Single Action $4,000,000 Aggregate
1 Standard sc 11/27/01
1.2 Table of Contents ----------------- ARTICLE I - Reference Data and Exhibits Page - --------- --------------------------- ---- 1.1 Data 1 1.2 Table of Contents 2 ARTICLE II - Premises and Term - ------------ ----------------- 2.1 Premises 4 2.2 Term 4 2.3 Option to Extend 4 ARTICLE Ill - Improvements - ------------- ------------ 3.1 Construction of Improvements 4 3.2 Contractor 4 3.3 Signs 5 ARTICLE IV - Rent - ---------- 4.1 The Rent, Minimum Fixed and Percentage 5 ARTICLE V - Real Estate Taxes - ----------- ----------------- 5.1 Real EstateTaxes 5 5.2 Taxes 5 5.3 Method of Payment 6 ARTICLE VI - Utilities and Services - ---------- ---------------------- 6.1 Utilities and Charges Therefore 6 ARTICLE VII - TENANT'S Additional Covenants - ----------- ----------------------------- 7.1 Affirmative Covenants 6 7.1.1 Use 6 7.1.2 Compliance with Law 7 7.1.3 Payment of TENANT'S Work 7 7.1.4 Indemnity and Liability Insurance 7 7.1.5 LANDLORD'S Right to Enter 8 7.1.6 Personal Property at TENANT'S Risk 8 7.1.7 Payment of LANDLORD'S Cost of Enforcement 8 7.1.8 Yield Up 8 7.1.9 Maintenance 9 7.1.10 Insurance 9 7.2 Negative Comments 9 7.2.1 Overloading, Nuisance, etc. 9 7.2.2 Installation, Alteration or Additions 9 ARTICLE VIII - LANDLORD'S Additional Covenants - ------------ ------------------------------- 8.1 Warranty on Use 10 8.2 Competing Use 10 ARTICLE IX - Casualty or Taking - ---------- ------------------ 9.1 TENANT to Repair or Rebuild in the Event of Casualty 10 9.2 Right to Terminate in Event of Casualty 10 9.3 Eminent Domain 10 Standard sc 2 11/27/01 Page ---- ARTICLE X - Defaults - --------- --------- 10.1 Events of Default . 11 10.2 Remedies 12 10.3 Remedies Cumulative 12 10.4 LANDLORD'S and TENANT'S Right to Cure Defaults 12 10.5 Effect of Waivers of Default 12 ARTICLE XI - Miscellaneous Provisions - ---------- ---------------------- 11.1 Assignment, Subletting, etc. 13 11.2 Notice from One Party to Other 13 11.3 Quiet Enjoyment 13 11.4 Recording 13 11.5 Acts of God 13 11.6 Waiver of Subrogation 14 11.7 Rights of Mortgagee and Subordination 14 11.7.1 14 11.7.2 No Accord and Satisfaction 14 11.8 Applicable Law and Construction 15 ARTICLE XII - Permits and Approvals - ----------- --------------------- 12.1 Tenant Obligations 15 12.2 Approvals 15 12.3 Easements 15 ARTICLE XIII- Net, Net Lease - ------------ -------------- 13.1 Net, Net, Net Lease 15 ARTICLE XIV - Right of First Refusal - ----------- ---------------------- 14.1 Right of First Refusal to Lease 16 14.2 Right of First Refusal to Purchase 16 ARTICLE XV - Holdover - ---------- -------- 15.1 Holdover 16 ARTICLE XVI - Common Area - ------------ ---------- 16.1 Common Area 17 16.2 Common Area Charges 17 16.3 Determination and Payment of Common Area Charges 17 16.4 Construction Cost 17 ARTICLE XVII - Environmental - ------------- ------------- 17.1 Environmental Matters 17 ARTICLE XVIII - ------------- 18.1 Title 18 18.2 Ownership 18 Standard sc 3
11/27/01 ARTICLE II Premises and Term ----------------- 2.1 Premises - LANDLORD hereby leases to TENANT and TENANT hereby leases from LANDLORD, subject to and with the benefit of the terms, covenants, conditions and provisions of this Lease, the premises shown on Exhibit "A" and described in Exhibit "B", both annexed hereto and made a part hereof, together with any and all improvements, appurtenances, rights, privileges and easements befitting, belonging or pertaining thereto and a building no greater than 4,000 square feet, so long as such building is within the perimeter of the leased premises as shown on Exhibit "A". 2.2 Term - TO HAVE AND TO HOLD for a term beginning Ninety (90) days (inclusive of the time for objectors to appeal for any approval) after LANDLORD has obtained approval for the construction of the branch bank as set forth in Article 12 (notwithstanding TENANT may not have commenced construction) and continuing for the Lease term of twenty (20) years unless sooner terminated as hereinafter provided. When dates of the beginning and end of the Lease term ~iave been determined, such dates shall be evidenced by a document in form for recording, executed by LANDLORD and TENANT and delivered each to the other. 2.3 Option to Extend - So long as TENANT is not in default hereunder, TENANT shall have the right to extend this Lease for three (3) five (5) year terms and one (I ) four (4) year eleven (1 1 ) month term under the same terms, conditions and provisions as in the original term, at the following rentals: Option Years 1-5 $197,653.00 6-10 $217,418.00 11-15 $239,160.00 16-20 $263,076.00 TENANT shall give written notice of its intention to exercise each extension option not less than Ninety (90) days prior to the expiration of the then current term. Lack of written notice by TENANT of its intention to exercise any option prior to ninety (90) days before the expiration of the then current term shall be deemed to constitute exercise of that option by the TENANT. ARTICLE III Improvements ------------ 3.1 Construction of Improvements - TENANT agrees to construct, at its sole cost, a branch banking facility, pursuant to the attached Site Plan, subject to reasonable approval by the LANDLORD of the building plans and specifications. 3.2 Contractor - TENANT shall have the right to select and approve the contractor to complete the construction, which shall be subject to the approval of the LANDLORD. Approval by LANDLORD shall not be unreasonably withheld. Standard sc 4 11/27/01 3.3 Signs - TENANT shall have the right to erect such signs as permitted by applicable zoning ordinances within the leased area, provided it does not preclude LANDLORD from erecting signs for tenants for the balance of the shopping center. ARTICLE IV Rent ---- 4.1 The Rent, Minimum Fixed - TENANT covenants and agrees to pay rent to LANDLORD at the original address of LANDLORD or such other place as LANDLORD may by notice in writing to TENANT from time to time direct, at the following rates and times. (a) TENANT agrees to pay to LANDLORD base annual fixed rent for the Premises in accordance with and in the amount set forth in Paragraph 1.1 "Data". The base annual fixed rent shall be paid in equal monthly installments in advance on the first (1st) day of each month beginning on the Commencement Date. In addition to the base annual fixed rent, TENANT sha9 pay as and when the same become due and owing as additional rents, all other monies provided for in the Lease. It is the parties intention that all charges and assessments charged to or assessed against the Premises shall be the responsibility of the TENANT, such that the Lease shall be "net, net, net" to the LANDLORD, excepting only interest and principal on any mortgage made by the LANDLORD and affecting the Premises. (b) For purposes of this Lease, the scheduled increases in the base annual fixed rate shall occur on the first day of the sixth (6th), eleventh (11th) and sixteenth (16th) years of the Initial Term as same is determined pursuant to Paragraph 2.2 and on the first day of the first (1st), sixth (6th), eleventh (11th) and sixteenth (16th), years of the Option Terms. (c) If any installment under this Lease is not paid within fifteen (15) days of the time and at the place and in the manner specified, then LANDLORD may, at its option, declare TENANT in default. ARTICLE V Real Estate Taxes ----------------- 5.1 Real Estate Taxes - As additional rent, TENANT agrees to pay all real estate taxes levied upon the Premises, improvements located on the Premises, the leasehold estate, or any subleasehold estate of any nature including special assessments. The obligation for payment by TENANT of all real estate taxes shall commence simultaneously with the payment of rent hereunder. 5.2 Taxes - TENANT agrees to pay all taxes levied upon rents ~and personal property, including trade fixtures and inventory, kept on the demised Premises, covered by Section 5.1 after presentation to TENANT by LANDLORD of statements from the taxing jurisdiction in which said property is located. TENANT, however, will pay only the lowest discounted amount and will not be required to pay Standard sc 5 11/27/01 any penalty, interest or cost occurring by reason of LANDLORD'S failure to secure said tax statements in a timely fashion from the taxing authorities for any tax required to be paid by TENANT. LANDLORD may, however, direct the taxing authorities to send the statements directly to TENANT. In the event LANDLORD directs the taxing authorities to send a statement directly to TENANT, TENANT shall make all such payments directly to the taxing authority at least ten (10) days before any delinquency and before any fine, interest or penalty shall become due or imposed by operation of law for their non-payment. Further, TENANT shall furnish to LANDLORD within ten (10) days of the date when any tax, assessment or charge would become delinquent, receipts or other satisfactory evidence establishing the timely payment of said taxes or charges. LANDLORD further agrees that TENANT, in the name of LANDLORD, but at TENANT'S sole expense, may protest any assessment before any taxing authority or board or maintain any necessary legal action in reference to said assessment or for the recovery of any taxes paid thereon. Nothing herein contained shall require TENANT to pay any income or excess profits, taxes assessed against LANDLORD or any corporation, capital stock, or franchise tax imposed upon LANDLORD. 5.3 Method of Payment - LANDLORD shall give written notice advising TENANT of the amount of real estate taxes, together with a copy of the tax bill, and TENANT shall pay such amount to LANDLORD within thirty (30) days after receipt of such notice. If this Lease shall terminate during a tax year, TENANT shall pay to LANDLORD; a prorated portion of the amount that would have been due for the full tax year based on the number of days of said tax year expired on the date of termination. ARTICLE VI Utilities and Services ---------------------- 6.1 Utilities and Charges Therefore - TENANT agrees to pay directly to the authority charged with the collection thereof, all charges for water, gas, electricity, sanitary sewer and sprinkler changes, telephone connection and standby fees and other utilities used or consumed in the Premises and shall make its own arrangements for such utilities. In the event any such services cannot be reasonably procured from any public agency, and LANDLORD provides any such services, TENANT shall reimburse LANDLORD for its proportionate share of any such services used or consumed in the demised premises as additional rental. ARTICLE VII TENANT'S Additional Covenants ----------------------------- 7.1 Affirmative Covenants - TENANT covenants at its expense at all times during the Lease term and such further time as TENANT occupies the Premises or any part thereof. 6 Standard sc 11/27/01 7.1.1 Use - TENANT shall use and permit the use of the Premises and the improvements to be constructed thereon primarily for the operation of a branch bank, provided that (subject to the other terms and conditions of this Lease), TENANT may at any time use the Premises and the building and other improvements to be constructed thereon, for any other lawful commercial purposes which do not conflict with existing primary uses in the Shopping Center which forms part of the common area, with such uses to be approved by the LANDLORD, which approval shall not be unreasonably withheld. Neither TENANT nor its subtenants, if any, shall commit any nuisance, nor permit the emission of any objectionable noise or odor, nor bring on, deposit or allow to be brought on or deposited on the Premises any asbestos materials or any other Hazardous Substance or materials as the same may be defined by Federal, State or local laws, rules, statutes or regulations or in the Environmental Rider annexed hereto, nor use the property in such a manner which negatively effects the reversion. 7.1.2 Compliance with Law - To make all repairs, alterations, additions or replacements to the Premises required by any law or ordinance or any order or regulation of any public authority because of TENANT'S use of the Premises, to keep the Premises equipped with all safety appliances so required because of such use; to pay all municipal, county or state taxes assessed against the personal property of any kind owned by or placed in, upon or about the premises by TENANT; and to comply with the orders and regulations of all governmental authorities, as well as all Insurance Carriers and Underwriters. 7.1.2 (A) TENANT has the right to contest by appropriate judicial or administrative proceeding, without cost or expense to the LANDLORD, the validity or application of any law, ordinance, order, rule, regulation or requirement ("law") which the TENANT legitimately deems unduly burdensome or inappropriate and TENANT shall not be in default for failure to comply with such law until the legally permitted time following final determination of TENANT'S contest expires; provided, however, if LANDLORD gives notice of request, TENANT shall first furnish LANDLORD with a bond, satisfactory to LANDLORD in form and insurer, guaranteeing compliance by TENANT with the contested law and indemnifying LANDLORD against all liability that LANDLORD may sustain by reason of TENANT'S failure or delay in complying with the law. LANDLORD may, but is not required to, contest any such law independent of TENANT. On TENANT'S notice of request, LANDLORD may join in TENANT'S contest. 7.1.3 Payment for TENANT'S Work - To pay promptly when due the entire cost of any work to the Premises undertaken by TENANT and to bond against or discharge any liens for labor or materials within ten (10) days after written request by LANDLORD; to procure all necessary permits before undertaking such work; and to do all of such work in a good and workmanlike manner, employing new materials of good quality and complying with all governmental requirements. 7.1.4 Indemnity and Liability Insurance - To defend with counsel, save harmless and indemnify LANDLORD from all claims or damage to or of any person or property while on the premises Standard sc 7 11/27/01 unless arising from any omission, fault, negligence or other misconduct of LANDLORD, and from all claims or damage to or of any person or property occasioned by any omission, fault, neglect or other misconduct of TENANT; to maintain in responsible companies qualified to do business in the state in which the premises is located and in good standing therein, public liability insurance covering the premises insuring LANDLORD, as well as TENANT, with limits at least equal to those stated in Section 1.1, workmen's compensation insurance with statutory limits, covering all of TENANT'S employees working in the premises, and to deposit promptly with LANDLORD certificates for such insurance and all renewals thereof, bearing the endorsement that the policies will not be canceled until after ten (10) days written notice to LANDLORD. TENANT'S obligations hereunder may be satisfied through a blanket insurance policy covering other interests of the TENANT. 7.1.5 LANDLORD'S Right to Enter - To permit LANDLORD and its agents to examine the premises at reasonable times and to show the premises to prospective purchasers and lenders, provided such entry shall not unreasonably interfere with TENANT'S operation and conduct of its business in the demised premises or compromise security. 7.1.6 Personal Property at TENANT'S Risk - That all of the furnishings, fixtures, equipment, effects and property of every kind, nature and description of TENANT and of all persons claiming under TENANT, that may be on the premises, shall be at the sole risk and hazard of TENANT, and if the whole or any part thereof shall be destroyed or damaged by fire, water, or otherwise, or by the leakage or bursting of water pipes, steam pipes or other pipes, by theft or from any other cause, no part of said loss or damage is to charged to or be borne by LANDLORD, except that LANDLORD shall in no event be indemnified or held harmless or exonerated from any liability resulting from its sole negligence, failure to perform any of its obligations under this Lease or to any extent prohibited by law. 7.1.7 Payment of LANDLORD'S Cost of Enforcement - To pay on demand LANDLORD'S expenses, including reasonable attorney's fees, incurred in enforcing any obligation of TENANT under this Lease or in curing any default by TENANT under this Lease as provided in Section 10.4, provided LANDLORD shall prevail in any judicial proceedings in respect to such enforcement. 7.1.8 Yield Up - At the expiration of the Lease term or earlier termination of this Lease, TENANT shall remove all trade fixtures and personal property, to repair any damage caused by such removal, to remove all TENANT'S signs wherever located and to surrender all keys to the premises and yield up the premises, broom clean and in the same good order and repair in which TENANT is obligated to keep and maintain the premises by the provisions of this Lease, reasonable wear and tear and insured damage by fire, casualty or taking excepted. Any property not so removed shall be deemed abandoned and may be removed and disposed of by LANDLORD in such manner as LANDLORD shall determine, without any obligation on the part of LANDLORD to account to TENANT for any proceeds therefrom, all of which shall become the property of LANDLORD. Any holdover by TENANT will not be deemed an Standard sc 8 11/27/01 extension of this Lease, and TENANT shall indemnify LANDLORD against all losses and damages from a failure to surrender. 7.1.9 Maintenance - Throughout the term, TENANT shall, at TENANT'S sole cost and expense maintain the premises and all improvements thereon in good condition and repair, ordinary wear and tear excepted, and in accordance with all applicable laws, rules, ordinances, orders and regulations of (1) federal, state, county, municipal and other governmental agencies and bodies having or claiming jurisdiction and all of their respective departments, bureaus and officials; (2) the insurance underwriting board or insurance inspection bureau having or claiming jurisdiction; and (3) all insurance companies insuring all or any part of the premises of the improvements located thereon, or both except as provided below and subject only to the provisions of Paragraph 9.2, TENANT shall promptly and diligently repair, restore and replace as required to maintain the premises and the improvements in the condition set forth above, or to remedy all damage to or destruction of all or any part of the improvements. (A) The completed work of maintenance, compliance, repair, restoration or replacement shall be equal in value, quality and use to the condition of the improvements before the event giving rise to the work, unless otherwise provided for in this Lease. LANDLORD shall not be required to furnish any services or facilities or to make any repairs or alterations of any kind in or upon or on the premises, LANDLORD'S election to perform any obligations of the TENANT under this provision on TENANT'S failure or refusal to do so shall not constitute a waiver of any right or remedy for TENANT'S default and TENANT shall promptly reimburse, defend and indemnify LANDLORD against all liability, loss, cost and expense arising from it. 7.1.10 Insurance - TENANT shall maintain in full force and effect, at its own cost, full replacement cost coverage insurance covering the demised premises (and all improvements for the full insurable value) against loss or damage by fire or casualty, with the usual extended coverage endorsements, together will endorsements protecting against loss or damage resulting from malicious mischief, sprinkler leakage and vandalism all in amounts not less than replacement parts value above foundation walls. All insurance policies shall name the LANDLORD as its interest may appear. 7.2 Negative Covenants - TENANT covenants at all times during the Lease term and such further times as TENANT occupies the premises or any part thereof: 7.2.1 Overloading Nuisance. etc. - Not to injure, overload, deface or otherwise harm the premises; nor commit any nuisance; nor make any use of the premises which is improper, offensive or contrary to any law or ordinance. 7.2.2 Installation, Alteration or Additions - Not to make any installations, alterations or additions (except only the installation of fixtures necessary for the conduct of its business), without on each occasion obtaining prior written consent of LANDLORD, LANDLORD'S consent not be unreasonable withheld. No consent shall be required for nonstructural alterations not exceeding $100,000 in cost. No Standard sc 9 11/27/01 addition will be allowed which increases the building size to more than 4,000 square feet, or which violates the terms of Paragraph 2.1 of this Lease. ARTICLE VIII LANDLORD'S Additional Covenants ------------------------------- 8.1 Warranty on Use - LANDLORD warrants and represents that at the commencement of construction it will be the Owner in Fee of the Land shown on Exhibit "A" and described in Exhibit "B". LANDLORD has no knowledge of and TENANT requires that there be no zoning regulations, restrictive agreements, leases or other instruments which prevent the use of the premises for the purpose intended herein, nor otherwise conflict with any of the provisions of this Lease. TENANT'S sole and conclusive remedy for a breach of this warranty shall be its right, at its election, to terminate the Lease prior to commencement of construction. 8.2 Competing Use - During the term of this Lease, provided TENANT is not in default, LANDLORD agrees not to lease or sell any portion of the project, of which the leased premises is a part, to a commercial bank, savings bank, savings and loan or credit union. ARTICLE IX Casualty or Taking ------------------ 9.1 TENANT to Repair or Rebuild in the Event of Casualty - In case the Premises or any part thereof shall be damaged or destroyed by fire other casualty, taken (which term or reference to eminent domain action generally, for the purposes of this Article shall include a sale in lieu of the exercise of the right of eminent domain) or ordered to be demolished by the action of any public authority in consequence of a fire or other casualty, this Lease shall, unless it is terminated as provided below in Section 9.2 or 9.3, remain in full force and effect and TENANT shall, at its expense, proceed with all reasonable dispatch, to repair or rebuild the premises and the improvements, or what may remain thereof, so as to restore them as nearly as practicable to the condition they were in immediately prior to such damage or destruction. 9.2 Right to Terminate in Event of Casualty - In case of any damage or destruction occurring in the last five years of the original term of this Lease or during any extension of the term, to the extent of 50% or more of the insurable value of the building, TENANT may at its option, to be evidenced by notice in writing given to the LANDLORD within seven (7) days after the occurrence of such damage or destruction, in lieu of repairing or replacing the building, elect to terminate this Lease as of the date of said damage or destruction. In the event the TENANT shall so terminate the lease all insurance proceeds shall become the property of the LANDLORD. 9.3 Eminent Domain - If the whole, or any part of the demised premises shall be taken or condemned by any competent authority for any public use or purpose during the term of this Lease, Standard sc 10 11/27/01 TENANT reserves unto itself the right to prosecute its claim for an award based upon its leasehold interest for such taking, without impairing any rights of LANDLORD for the taking of or injury to the reversion. In the event that a part of the demised premises shall be taken or condemned that (a) the part so taken includes the building on the demised premises or any part thereof or (b) the part so taken shall remove from the premises 20% or more of the front depth of the parking areas thereof, or (c) the part so taken shall consist of 25% or more of the total parking area, or (d) such partial taking shall result in cutting off direct access from the demised premises to any adjacent public street or highway, then and in any such event, the TENANT may at any time either prior to or within a period of sixty (60) days after the date when possession of the premises shall be required by the condemning authority elect to terminate this Lease, or if any option to purchase the premises is conferred upon the TENANT by any other provision of this Lease, may as an alternative to such termination of this Lease elect to purchase the demised premises in accordance with such purpose option. In the event that TENANT shall fail to exercise any such option to terminate this Lease or to purchase the premises or in the event that a part of the demised premises shall be taken or condemned under circumstances under which the TENANT will have no such option, then and in either such event the LANDLORD shall, with reasonable promptness, make necessary repairs to and alterations of the improvements on the demised premises for the purpose of restoring the same to an economic architectural unit, susceptible to the same use as that which was in effect immediately prior to such taking, to the extent that may have been necessary by such condemnation, subject to a pro-rata reduction in rental. Any dispute resulting from Section 9.3 of this Lease shall be submitted to the American Arbitration Society, whose decision shall be binding on the parties hereto. ARTICLE X Defaults -------- 10.1 Events of Default - If (a) Tenant shall default in the performance of any of its obligations to pay rent or additional rent hereunder and if such default shall continue for ten (10) days after written notice from LANDLORD designating such default or if within thirty (30) days after written notice from LANDLORD to TENANT specifying any other non-monetary default or defaults, TENANT has not commenced diligently to correct the default or defaults so specified or has not thereafter diligently pursued such corrective action to completion, or (b) any assignment shall be made by TENANT for the benefit of creditors, or (c) if TENANT'S leasehold interest shall be taken on execution, attached, levied upon or (d) if a petition is filed by TENANT for adjudication as a bankrupt, or for reorganization or an arrangement under any provision of the Bankruptcy Act as then in force and effect, or (e) if an involuntary petition under any of the provisions of said Bankruptcy Act is filed against TENANT and such involuntary petition is not dismissed within sixty (60) days thereafter, then, and in any of such cases, LANDLORD lawfully may exercise all defaults rights Standard sc 11 11/27/01 available to it under law, including repossession of the leased property, termination of the lease, and such other rights as may be lawfully permitted. 10.2 Remedies - In the event that this Lease is terminated under any of the provisions contained in Section 10.1 or shall be otherwise terminated for breach of any obligation of TENANT, TENANT covenants to pay punctually to LANDLORD all the sums and perform all the obligations which TENANT covenants in this Lease to pay and to perform in the same manner and to the same extent at the same time as if this Lease had not been terminated so long as such obligations shall have not been rendered unnecessary or impossible of performance by the subsequent re-letting or other occupancy permitted by LANDLORD. In calculating the amounts to be paid by TENANT under the foregoing covenant, TENANT shall be credited with the net proceeds of any rent or the value of other considerations obtained by LANDLORD by re-letting the premises, after deducting all LANDLORD'S expenses in connection with such re-letting, including, without limitation, all repossession costs, brokerage commissions, reasonable fees for legal services and expenses of preparing the premises for re-letting, it being agreed by TENANT that LANDLORD may (i) re-let the premises or any part or parts thereof, for a term or terms which may at LANDLORD'S option be equal to or less than or exceed the period which would otherwise have constituted the balance of the Lease term, and (ii) make such alterations, repairs and decorations in the premises as LANDLORD in its sole judgment considers advisable or necessary to re-let the same. Nothing contained in this Lease shall, however, limit or prejudice the right of LANDLORD to prove for and obtain in proceedings for bankruptcy or insolvency by reason of the termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount be greater, equal to, or less than the amounts of the loss or damages referred to above. 10.3 Remedies Cumulative - Any and all rights and remedies which LANDLORD may have under this Lease, and at law and equity, shall be cumulative and shall not be deemed inconsistent with each other, and any two or more of all such rights and remedies may be exercised at the same time insofar as permitted by law. 10.4 LANDLORD'S and TENANT'S Right to Cure Defaults - LANDLORD may, but shall not be obligated to, cure at any time, following ten (10) days prior written notice to TENANT, except in cases of emergency when no notice shall be required, any default by TENANT under this Lease; and whenever LANDLORD so elects, all costs and expenses incurred by LANDLORD, including reasonable attorney's fees, in curing a default shall be paid by TENANT to LANDLORD as additional rent on demand. TENANT shall have a like right to cure any default of LANDLORD, and TENANT may reimburse itself for the cost thereof out of succeeding rental payments. Standard sc 12 11/27/01 10.5 Effect of Waivers on Default - No consent or waiver, expressed or implied, by either party to or of any breach of any covenants, conditions or duty of the other shall be construed as a consent or waiver to or of any other breach of the same of any other covenant, condition or duty. ARTICLE Xl Miscellaneous Provisions ------------------------ 11.1 Assignment, Subletting, etc. - LANDLORD'S written consent shall be required for any assignment, transfer or subletting except to another financial institution which consent shall not be unreasonably withheld. 11.2 Notice from One Party to the Other - Any notice from LANDLORD to TENANT or from TENANT to LANDLORD shall be deemed duly served if mailed by registered or certified mail, return receipt requested, postage pre-paid, addressed, if to TENANT, at the original address of TENANT or such other addresses as TENANT shall have last designated by notice in writing to LANDLORD, and if to LANDLORD, at the original address of LANDLORD or such other address as LANDLORD shall have last designated by notice in writing to TENANT. 11.3 Quiet Enjoyment - LANDLORD agrees that upon TENANT'S paying the rent and performing and observing the agreements, conditions and other provisions on its part to be performed and observed, TENANT shall and may peaceably and quietly have, hold and enjoy the demised premises during the Lease term without any manner of hindrance, disturbance or molestation from LANDLORD or anyone claiming under LANDLORD, subject to the covenants and conditions of this Lease. 11.4 Recording - TENANT agrees not to record this Lease, but each party hereto agrees on request of the other, to execute a Notice or Short Form of this Lease in recordable form in compliance with applicable statutes, and reasonably satisfactory to LANDLORD'S and TENANT'S attorneys. In no event shall such document set forth the rental or other charges payable by TENANT under this Lease; and any such document shall expressly state that it is executed pursuant to the provisions contained in this Lease, and is not intended to vary the terms and conditions of this Lease. In the event LANDLORD and/or TENANT believe that the Lease has been lawfully terminated, abandoned or otherwise of no force and effect and the other party will not voluntarily execute a Discharge of Memorandum of Lease, the party seeking the Discharge of Memorandum of Lease may move summarily before the Pennsylvania Court of Common Pleas for a determination of whether or not the Memorandum of Lease should be discharged. The other party consents to the jurisdiction of the Pennsylvania Court of Common Pleas and agrees to proceed in a summary manner. It is expressly understood and agreed that in addition to the relief provided herein, the parties will have such additional cumulative remedies as are available to it at law or in equity for damages suffered by reason of a wrongful refusal to execute and deliver a Discharge of Memorandum of Lease. Standard sc 13 11/27/01 ARTICLE XV Holdover -------- 15.1 Holdover - In the event that TENANT continues in use and occupancy and holds over in possession of the premises after the expiration of the Initial Term or, properly exercised, the Option Term, in addition to all other damages to which LANDLORD may be entitled, the monthly rent during the period of holdover shall be in a sum equal to double the amount of the monthly installment of base annual fixed rent during the last month of the term which has just expired. Said holdover rent shall be in addition to all additional rents for which the TENANT shall be responsible during the holdover period. ARTICLE XVI Common Area ----------- 16.1 Common Area - LANDLORD hereby grants to TENANT, in common with LANDLORD and other tenants, with respective invitees and licensees, the right to use the parking and public areas in the project of which the Leased Premises is a part, subject to the conditions hereinafter provided. TENANT hereby agrees that: (a) LANDLORD may designate an area for TENANT'S employee parking (b) Said parking area will not be used for permanent garaging or overnight parking (c) TENANT will conform with the reasonable rules and regulations of the Shopping Center common area (d) LANDLORD agrees that it will permit construction of the parking area in substantial conformance with the attached plan. 16.2 Common Area Charges - As additional rental, TENANT agrees to pay its pro rata share of the common area maintenance costs which shall include maintenance, landscaping, illumination, cleaning, snow and ice removals, common sewerage disposal costs, common signs, and all other common area costs. 16.3 Determination and Payment of Common Area Charges - All such common area charges shall be deemed additional rental and shall be paid in monthly installments equal to 1/12th of TENANT'S estimated common are contribution. TENANT'S common area pro rata shall be determined pursuant to the following formula:
Total Common Area Charges x TENANT Net Square Ft = TENANT Common Area -------------------- Charges Total Shopping Center Square Ft
16.4 Construction Cost - TENANT shall construct its own building at its own costs and bear all construction within its demised premises, as identified in Exhibit A. Standard sc 14 11/27/01 ARTICLE XVII Environmental ------------- 17.1 Environmental Matters - --------------------- A. LANDLORD represents and warrants that any handling, transportation, storage, treatment or usage of hazardous or toxic substances (as defined by any applicant government authority and hereinafter being referred to as "Hazardous Materials") that has occurred or will occur on the Demised Premises shall be in compliance with all applicable federal, state and local laws, regulations and ordinances. TENANT represents and warrants that any handling, transportation, storage, treatment or usage of Hazardous Materials by TENANT at the Demised Premises shall be in compliance with applicable federal, state and local laws. LANDLORD further represents and warrants that no leak, spill, discharge, emission or disposal of Hazardous Materials has occurred or will occur on the Demised Premises and that the soil, groundwater, soil vapor on or under the Demised Premises is or will be free of Hazardous Materials as of the date hereof. LANDLORD agrees to indemnify, defend and hold TENANT and its officers, from any claims, judgments, damages, fines, penalties, costs, Iiabilities (including sums paid in settlement of claims) or loss including attorney's fees, consultants fees, and expert fees which arise during or after the Primary Term or any Renewal Term, or in connection with the presence of suspected presence of Hazardous Materials in the soil, groundwater, or soil vapor on or under the Demised Premises, unless such Hazardous Materials are present solely as the result of the acts of TENANT, its officers, employees or agents. Without limiting the generality of the foregoing, this indemnification shall survive the expiration of this Lease and does specifically cover costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision because of the presence or suspected presence of Hazardous Materials in the soil, groundwater or soil vapor odor under the Demised Premises, unless the hazardous Materials are present solely as the result of the acts of TENANT, its officers, agents or employees. Without limiting the generality of the foregoing, this indemnification shall also specifically cover costs in connection with: 1. Hazardous Materials present or suspected to be present in the soil, groundwater or soil vapor on or under the Demised Premises before the date hereof; or 2. Hazardous Materials that migrate, flow, percolate, diffuse or in any move onto or under the Demised Premises after the date hereof; or 3. Hazardous Materials present on or under the Demised Premises as a result of any discharge, dumping, spilling (accidental or otherwise) onto the Demised Premises during or after the Primary Term or any Renewal Term by any person or entity. Standard sc 15 11/27/01 such liens where the holder of such liens has executed and delivered to TENANT in the form attached hereto a Subordination and Non-Disturbance Agreement. IN WITNESS WHEREOF, the parties have hereunto set their hands and seals this day and year first above written. _______________________________ BY:_______________________________ Attest Thomas H. Arasz Senior Vice President/ Real Estate Officer WARRINGTON EQUITIES, LLC _______________________________ BY:_______________________________ Attest John P. Silvestri Managing Member Standard sc 16 EX-99.1 5 exhibit99-1.txt Exhibit 99.1 ------------ CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 This Certification is intended to accompany the Quarterly Report of Commerce Bancorp, Inc. (the "Company") on Form 10-Q for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), and is given solely for the purpose of satisfying the requirements of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. To the best of their knowledge, the undersigned, in their respective capacities as set forth below, hereby certify that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. /s/ Vernon W. Hill, II , Chief Executive Officer Date: May 14, 2003 --------------------------- /s/ Douglas J. Pauls, Chief Financial Officer Date: May 14, 2003 ------------------------- A signed original of this written statement required by Section 906 has been provided to Commerce Bancorp, Inc. and will be retained by Commerce Bancorp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. 21 -----END PRIVACY-ENHANCED MESSAGE-----