Exhibit 10.39

 
AMENDED
AND
RESTATED
EMPLOYMENT AGREEMENT

COMMERCE BANCORP, INC.
 
AND
 
VERNON W. HILL, II
 

EFFECTIVE DATE JANUARY 1, 2006

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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
TABLE OF CONTENTS

BACKGROUND
 
1
     
1.
Employment and Term of Employment.
2
1.1
Five-Year Term
2
1.2
Conditions to Term.
2
(a)
Automatic Renewal and Extension.
2
(b)
Termination at Anniversary.
2
(c)
Termination for Other Reasons.
2
1.3
“Term“ Definition.
2
1.4
“Anniversary Date“ Definition
2
     
2.
Services and Duties.
3
2.1
Offices
3
2.2
Duties
3
(a)
Full Time and Best Efforts.
3
(b)
Outside Activities
3
     
3.
Compensation.
3
3.1
Compensation Definition
3
3.2
Base Salary
3
(a)
Payment.
3
(b)
Adjustment
4
3.3
Plans and Programs
4
(a)
Pro-Ration
4
3.4
Year
4
3.5
Compensation Pro-Ration
4
     
4.
Fringe and Other Benefits
4
4.1
Generally Available Benefits
4
4.2
Other Benefits
4
4.3
Expenses
4
4.4
Indemnity
4

 
 
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5.
Disability and Death Compensation.
5
5.1
Permanent Disability
5
5.2
Disability Compensation
5
(a)
Monthly Disability Payments
5
(b)
Disability Benefits
5
(c)
Partial Disability Compensation.
5
5.3
Death Compensation
6
(a)
Termination of Employment and Regular Compensation.
6
(b)
Death Benefit.
6
(c)
Life Insurance.
6
     
6.
Termination “For Cause” by Commerce.
6
6.1
“For Cause” Termination
6
(a)
Prior Written Notice
6
(b)
Failure to Cure
6
6.2
“For Cause” Definition
6
(a)
Conviction or Plea
6
(b)
Willful Violation
6
6.3
Compensation on Termination “For Cause”
7
     
7.
Termination “Without Cause” by Commerce.
7
7.1
“Without Cause” Termination
7
7.2
“Without Cause” Definition
7
7.3
Compensation for Termination “Without Cause”
7
(a)
Compensation through Termination Date
7
(b)
“Without Cause Severance Payment”
7
     
8.
Termination “For Good Reason” by Hill.
8
8.1
“Good Reason” Termination
8
(a)
Prior Written Notice
8
(b)
Failure to Cure
8
8.2
Compensation for “Good Reason” Termination
8
(a)
Compensation through Termination Date
8
(b)
“Good Reason Severance Payment”
8

 
 
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9.
“Change in Control” and “Good Reason”
8
9.1
Change in Control Definition
8
(a)
Board Change
8
(b)
Beneficial Ownership Change.
9
9.2
Good Reason Definition
9
(a)
Both a Change in Control and Other Reductions
9
(b)
Material Breaches
10
(c)
Non-Assumption
10
     
10.
Additional Payments/Excise Taxes.
10
10.1
Gross-Up Payment
10
(a)
Tax is Determined Due
10
(b)
Interest or Penalties are Incurred
10
10.2
Gross-Up Payment Determination
11
(a)
Cooperation
11
(b)
Calculations
11
(c)
Fees and Expenses.
11
(d)
Payment Timing
11
(e)
Binding Effect
11
(f)
Possible Underpayment
11
10.3
Notice of IRS Claim
12
(a)
Time and Content of Notice
12
(b)
Payment Timing
12
(c)
Contest Notice
12
(d)
Other Contest Terms
13
10.4
Refund
14
(a)
Denial of Refund
14
 
   
11.
Other Rights for Termination “Without Cause” or “For Good Reason”
14
11.1
Other Benefits
14
(a)
Insurance
14
11.2
Plans and Program Rights
14
11.3
No Mitigation by Hill
14
     
12.
Source of Payment and Timing.
15
12.1
Source
15
12.2
Time
15

 
 
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13.
Interest
15
     
14.
Reimbursement of Enforcement Expenses
15
14.1
Failure to Pay
15
14.2
Failure to Provide
15
14.3
Further Conditions for Reimbursement
15
     
15.
Confidential Information and Non-Competition.
16
15.1
Confidentiality
16
(a)
Company Information Definition
16
(b)
Non-Disclosure and Non-Use
16
15.2
Commerce’s Interests
16
15.3
Non-Competition and Time of Restrictions.
16
(a)
Non-Competition
16
(b)
Time of Restrictions
17
15.4
Remedies
17
(a)
No Defense or Bar
17
(b)
Payments After Breach
18
15.5
Enforceability
18
15.6
Commerce Definition
18
     
16.
Successions.
18
16.1
Successors/Assigns/Heirs
18
16.2
Death
19
16.3
Combinations
19
     
17.
Notices.
19
17.1
Form of Notice
19
17.2
Place of Notice
19
     
18.
General Provisions.
20
18.1
Entire Agreement
20
18.2
Amendments, Waivers and Termination
20
18.3
Alternate Payments
20
18.4
Benefits and Insurance
20
18.5
“Person” Definition.
20
18.6
Counterparts
20
18.7
No Waiver
21
18.8
Assignment
21
18.9
New Jersey Jurisdiction
21
(a)
Courts in Camden, NJ
21
(b)
Service of Process
21

 
 
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18.10
Headings.
21
18.11
Notice of Dispute and Cure
21
18.12
New Jersey Law
22
     
SIGNATURES
 
22

 

 

 

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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
 
This Amended and Restated Employment Agreement (“Agreement”) is dated effective
as of January 1, 2006, by and between:

Ø  
COMMERCE BANCORP, INC. (“Commerce”),

 
a New Jersey business corporation,
 
and
 

Ø  
VERNON W. HILL, II (“Hill”).

 

BACKGROUND

A.  Hill is the Chairman, President and Chief Executive Officer (“CEO”) of
Commerce and of Commerce Bank, N.A. (“CB”), a national banking association and a
wholly-owned subsidiary of Commerce.
 
B.  Hill and Commerce are parties to an Employment Agreement dated January 1,
1992 (“Prior Agreement”) and wish to amend and restate it to reflect current
circumstances, including reduction in Hill’s base salary and to make his total
compensation more incentive-based.
 
C.  The Board of Directors of Commerce (the “Board”) has determined that the
continued and future services of Hill will be of value to Commerce, CB and
Commerce’s other present and future subsidiaries, and has authorized this
Agreement.
 
D.  Accordingly, the Board wishes to have Hill’s services available to Commerce
for at least five (5) years and to provide supplemental benefits to Hill should
his employment with Commerce terminate under certain circumstances or should he
die or become disabled before the termination of this Agreement.
 

 

 

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NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained here, and intending to be legally bound, Commerce and Hill agree as
follows:

1. Employment and Term of Employment.
 
1.1 Five-Year Term. Commerce offers, and Hill accepts employment on all the
terms and conditions of this Agreement, for a term of five (5) years beginning
on the date stated above.  
 
1.2 Conditions to Term. This five-year term is subject to: 
 
(a) Automatic Renewal and Extension. On each Anniversary Date, this Agreement
and Hill’s employment shall automatically be renewed and extended (on the same
terms and conditions) for a new five-year term unless written notice of
Termination at Anniversary is given pursuant to Section 1.2(b) below. 
 
(b) Termination at Anniversary. Either Commerce or Hill may terminate this
Agreement on any Anniversary Date by giving to the other party written notice of
termination no later than November 1 before any such Anniversary Date. If such
prior notice is given to either party, then the Term will have four (4) years
remaining after the applicable Anniversary Date, subject to the terms and
conditions of this Agreement.
 
(c) Termination for Other Reasons. This Agreement may be terminated on Death,
“For Cause”, “Without Cause”, or for “Good Reason” as described in Sections 5-8
below. 

1.3 "Term" Definition. “Term” means the original five-year employment period, as
well as any renewed or extended periods as provided for in this Agreement. 
 
1.4  “Anniversary Date" Definition. “Anniversary Date” means January 1, 2007, as
well as each annual January 1 thereafter if this Agreement is automatically
renewed or extended. 
 

 
 

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2. Services and Duties.
 
2.1 Offices. During the Term, Hill shall be employed as Chairman, President and
CEO of Commerce. Subject to the approval of the CB Board of Directors, during
the Term, Hill shall also serve as the Chairman of the Board, President and CEO
of CB. Subject to the approval of the respective Boards of Directors, during the
Term, Hill shall also serve as an officer and/or director of such other
subsidiaries of Commerce as such Board of Directors, with the consent of Hill,
shall designate. 
 
2.2 Duties. As the Chairman of the Board, President and CEO of Commerce, Hill
shall have primary responsibility for all operations of Commerce and its
subsidiaries subject to the oversight of the respective Boards of Directors,
provided that such duties are consistent with his present duties. 
 
(a) Full Time and Best Efforts. Hill accepts such duties, will devote his full
time and best efforts to the business and affairs of Commerce and its
subsidiaries, and will use his best efforts to promote the interests of Commerce
and its subsidiaries.
 
(b) Outside Activities. Hill also has participated in and shall have discretion
to participate in other outside activities. Such outside activities are
expressly permitted, and shall be in addition to and notwithstanding Hill’s
obligation of full time and best efforts as described in Section 2.2(a).
 

3. Compensation.
 
3.1 Compensation Definition. “Compensation” means the sum of the highest annual
rate of base salary (described in Section 3.2) and highest cash bonus (described
in Section 3.3) paid to Hill during the most recent twenty-four (24) months of
the Term.
 
3.2 Base Salary. Commerce shall pay Hill “base salary” at the rate of not less
than $1,000,000 per year for all services to be rendered by him under this
Agreement and for all positions held by him during the Term. 
 
(a) Payment. Base salary is payable at regular intervals in accord with
Commerce’s normal payroll practices now or later in effect. 
 
 
 

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(b) Adjustment. Base salary is subject to an annual review and such upward
adjustments as may be deemed appropriate by the Board or a Board-designated
Committee. The Board or such Committee may recommend an increase in base salary
for Hill, but shall have no obligation to do so. Base salary may not be
decreased without Hill’s written consent.
 
3.3 Plans and Programs. During the Term, Hill shall be entitled to participate
in any cash or other bonus programs, incentive compensation plans, stock option
plans or similar benefit or compensation programs now or later in effect that
are generally made available to executive officers of Commerce. 
 
(a) Pro-Ration. For any period less than a full year during the Term, Hill shall
receive an amount equal to the prorated portion of any payment pursuant to such
plan or program.
 
3.4 Year. A “year” commences on January 1, 2006, and on January 1 of each
subsequent calendar year. 
 
3.5 Compensation Pro-Ration. Compensation for a portion of a year shall be
pro-rated. 

4. Fringe and Other Benefits. During the Term, Hill shall also be entitled to.
 
4.1 Generally Available Benefits. Participate in all fringe benefits as then in
effect that are generally available to Commerce’s executive officers including,
without limitation, medical and hospitalization coverage, life insurance
coverage and disability coverage, and Supplemental Executive Retirement Plan
(“SERP”) coverage;
 
4.2 Other Benefits. Such other fringe benefits as the Board, or a
Board-designated Committee, shall deem appropriate; provided that such benefits
are consistent with those that he currently enjoys including, without
limitation, use of an automobile, paid holidays and vacations, and club
memberships;
 
4.3 Expenses. Reimbursement by Commerce for all expenses incurred by Hill which
Commerce determines to be reasonable and necessary (in accord with its normal
reimbursement practices now or later in effect) for Hill to carry out his duties
under this Agreement; and
 
4.4 Indemnity. Indemnification by Commerce to the fullest extent permitted by
governing law and in accord with Commerce’s bylaws and policies, against all
claims concerning Hill’s status as an officer, director, employee, or agent of
Commerce. 
 

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5. Disability and Death Compensation.
 
5.1 Permanent Disability. Hill shall be deemed to have become “permanently
disabled” upon his failure to render services of the character contemplated by
this Agreement, because of his physical or mental illness or other incapacity
beyond his control, other than his death, for a continuous period of 6 months,
or for shorter periods aggregating more than 9 months in any 18 consecutive
months.
 
5.2 Disability Compensation. Commerce shall compensate Hill for the balance of
the Term at a rate equal to 70% of his Compensation at the time Hill becomes
permanently disabled while employed during the Term.
 
(a) Monthly Disability Payments. Commerce shall make the payments due under this
Section 5.2 on the first day of each month, starting with the first day of the
month following the month in which Hill is deemed to be permanently disabled, in
an amount equal to 1/12 of 70% of Hill’s Compensation at the time he is deemed
to be permanently disabled. 
 
(i) Insurance Reductions. Monthly Disability Payments shall be reduced each
month, however, by the amount of any disability payments made to Hill under any
Commerce-sponsored disability insurance plan. The amount of the reduction under
the preceding sentence shall be computed as if Hill had elected to receive
monthly payments of disability benefits (regardless of the actual payment
frequency).
 
(b) Disability Benefits. After becoming permanently disabled as provided in this
Section 5, Hill shall nonetheless continue until the end of the Term to be
entitled to receive at Commerce’s expense such group hospitalization coverage,
life insurance coverage and disability coverage as is generally made available
from time to time to executive officers of Commerce, if and to the extent
permitted by the respective insurers of such coverage. 
 
(c) Partial Disability Compensation. Hill shall continue to receive his full
Compensation if he is partially disabled and until such time as Hill is deemed
to be permanently disabled.
 
 
 

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5.3 Death Compensation. If Hill dies during the Term, then: 
 
(a) Termination of Employment and Regular Compensation. Hill’s employment and
rights to Compensation described above shall automatically terminate at the
close of the calendar week in which death occurs; and
 
(b) Death Benefit. Commerce shall pay to such person as Hill shall designate in
a notice filed with Commerce or, if no such person shall be designated, to his
estate, in addition to his full Compensation due under Section 5.3(a), a lump
sum “Death Benefit” in an amount equal to the product of three (3) times Hill’s
Compensation at the time of his death.
 
(c) Life Insurance. The foregoing “Death Benefit” shall be in addition to any
amount payable under any group life insurance program maintained by Commerce or
CB.

6. Termination “For Cause” by Commerce.
 
6.1  “For Cause” Termination. Commerce shall have the right at any time to
terminate Hill’s employment “For Cause” only if:
 
(a) Prior Written Notice. Commerce shall give Hill not less than thirty (30)
days prior written notice of its intention to terminate his employment
specifying in detail the reason(s) for such termination and the date of
termination; and 
 
(b) Failure to Cure. After receipt of such notice, Hill fails to cure, cease or
remedy the reason(s) for such termination before the date of termination stated
in such notice. 
 
6.2 “For Cause” Definition. “For Cause” means only the following at any time
during the Term:
 
(a) Conviction or Plea. If Hill is convicted of or enters a plea of guilty or
nolo contendre to, a felony, a crime of falsehood or a crime involving fraud,
moral turpitude or dishonesty; or
 
(b) Willful Violation. If Hill willfully violates any of the terms or provisions
of this Agreement, including, without limitation: 
 
 
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(i) Hill’s willful failure to perform his duties in Section 2.2 above and this
Agreement or the Board’s instructions after written notice of such instructions
(other than any such failure resulting from Hill’s incapacity due to illness or
disability); or
 
(ii) Hill engages in any conduct materially harmful to Commerce’s business.
 
6.3 Compensation on Termination “For Cause”. Commerce shall pay Hill any
prorated portion of his full Compensation that is then owed through the date of
termination if Hill’s employment shall terminate “For Cause” and Commerce shall
have no further obligations to Hill under this Agreement other than to pay Hill
such other plan, program, or other benefits as may be due Hill pursuant to
Sections 3.3 and 4 above.

7. Termination “Without Cause” by Commerce. 
 
7.1 “Without Cause” Termination. Commerce shall have the right to terminate
Hill’s employment “Without Cause” by giving not less than thirty (30) days prior
written notice of its intention to terminate his employment “Without Cause”
pursuant to this Section 7. 
 
7.2 “Without Cause” Definition. Termination “Without Cause” means any reason
other than by either Termination “For Cause” (Section 6 above), or Termination
at Anniversary (Section 1.2(b) above). 
 
7.3 Compensation for Termination “Without Cause”. Commerce shall pay Hill the
following if Commerce terminates Hill’s employment “Without Cause”:
 
(a) Compensation through Termination Date. Any pro-rated portion of his full
Compensation through the date of termination; and
 
(b) “Without Cause Severance Payment”. A lump sum severance payment (the
“Without Cause Severance Payment”) in lieu of any further Compensation payments
to Hill after the date of termination. 
 
(i) “Without Cause Severance Payment” means the sum of Hill’s full Compensation
that would still be remaining until the end of the then Term had Hill continued
to be employed by Commerce to the end of the then Term.
 
 
 
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8. Termination “For Good Reason” by Hill.
 
8.1 “Good Reason” Termination. Hill shall have the right to terminate his
employment “For Good Reason” (as defined in Section 9.2 below) if: 
 
(a) Prior Written Notice. Hill shall first give Commerce not less than thirty
(30) days prior written notice of his intention to terminate his employment
specifying the reason(s) for such termination and the date of termination; and 
 
(b) Failure to Cure. After receipt of such notice, if Commerce fails to cure,
cease or remedy the reason(s) for such termination before the date of
termination stated in such notice.
 
8.2 Compensation for “Good Reason” Termination. Commerce shall pay to Hill the
following if Hill terminates his employment “For Good Reason” (defined in
Section 9.2):
 
(a) Compensation through Termination Date. Hill’s full Compensation through the
termination date; and
 
(b) “Good Reason Severance Payment”. A lump sum “Good Reason Severance Payment”
in lieu of any further Compensation payments to Hill after the date of
termination. 
 
(i) “Good Reason Severance Payment” means a lump sum equal to four (4) times
Hill’s Compensation immediately preceding such termination.
 

9. “Change in Control” and “Good Reason”.
 
9.1 Change in Control Definition. “Change in Control” or “Change of Control”
means a change in control of Commerce or CB of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), or any successor provisions under the Exchange Act, whether or not
Commerce or CB is subject to such reporting requirement; provided that, without
limitation, such a change in control shall have been deemed to occur
conclusively when any of the following events shall have occurred without Hill’s
prior written consent:
 
(a) Board Change. Within any period of two (2) consecutive years during the
Term, there is a change in at least a majority of the members of the Board or
the addition of five or more new members to the Board, unless such change or
addition occurs with the affirmative vote in writing of Hill in his capacity as
a director or a shareholder; or
 
 
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(b) Beneficial Ownership Change. A Person or group acting in concert as
described in Section 13(d)(2) of the Exchange Act holds or acquires beneficial
ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act of
a number of common shares of Commerce which constitutes either: 
 
(i) more than fifty (50%) percent of the shares which voted in the election of
directors of Commerce at the shareholders’ meeting immediately preceding such
determination; or
 
(ii) more than thirty (30%) percent of Commerce’s outstanding common shares. For
this Section 9.1(b)(ii), unexercised warrants or options or unconverted
nonvoting securities shall count as constituting beneficial ownership of
Commerce’s common shares into which the warrants or options are exercisable or
the nonvoting convertible securities are convertible, notwithstanding anything
to the contrary contained in Rule 13d-3 of the Exchange Act.
 
9.2 Good Reason Definition. “Good Reason” means: 
 
(a) Both a Change in Control and Other Reductions. Both a “change in control” of
Commerce (as defined in Section 9.1 above); and if any of the following “Other
Reductions” occur within three (3) years after such change in control without
Hill’s prior written consent: 
 
(i) Reduction of Authority. The nature and scope of Hill’s authority with
Commerce or a surviving or acquiring Person are materially reduced to a level
below that which he enjoys when the change in control occurs;
 
(ii) Materially Inconsistent Duties. The duties and responsibilities assigned to
Hill are materially inconsistent with that which he enjoys when the change in
control occurs;
 
(iii) Materially Reduced Benefits. The fringe benefits which Commerce provides
Hill are materially reduced to a level below that which he enjoys when the
change in control occurs;
 
(iv) Reduction of Position or Title. Hill’s position or title with Commerce or
the surviving or acquiring Person is reduced from his current position or title
with Commerce when the change in control occurs; or
 
 
 

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 (v) Transfer or Offices and Relocation. Any relocation or transfer of
Commerce’s principal executive offices to a location more than fifty (50) miles
from Hill’s principal residence on the date when the change in control occurs;
or, if Hill is required, without his prior written consent, to relocate more
than fifty (50) miles from his principal residence when the change in control
occurs.
 
(b) Material Breaches. Commerce materially breaches this Agreement; or
 
(c) Non-Assumption. There is a failure or refusal of any successor to Commerce
to assume all duties and obligations of Commerce under this Agreement.

10. Additional Payments/Excise Taxes.
 
10.1 Gross-Up Payment. Notwithstanding anything in this Agreement to the
contrary or any termination of this Agreement, Hill shall be entitled to receive
an additional payment (a “Gross-Up Payment”) if: 
 
(a) Tax is Determined Due. It shall be determined that any payment or
distribution or benefit made or provided by Commerce or its affiliates to or for
the benefit of Hill, whether pursuant to this Agreement or some other plan or
otherwise, including income recognized by the exercise of options to buy
Commerce stock, and determined without regard to any additional payments
required under this Section 10 (a “Payment”), would be an excess Parachute
Payment that is not deductible by Commerce for federal income tax purposes and
subject to an excise tax; or 
 
(b) Interest or Penalties are Incurred. Any interest or penalties are incurred
by Hill concerning such excise tax. 
 
(i) Excise Tax Definition.  “Excise Tax” means both: any excise tax imposed on
any Compensation payments due to Hill - including Death Benefit, Compensation
for Termination “Without Cause” or “For Good Reason” under Sections 5.3(b), 7.3
or 8.2 above - because of Section 280G and Section 4999 of the Internal Revenue
Code of 1986 as amended (the “Code”) or any successor Code provision, or any
state or local law; and interest or penalties incurred concerning such excise
tax.
 
 
 

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 (ii) Gross-Up Payment Definition. “Gross-Up Payment” means any amount of
additional payments to Hill that are needed so that Hill incurs no out-of-pocket
expense for Excise Taxes, and to place Hill in the same position after all
federal and state taxes - including all income tax, Excise Tax, employment or
other tax or any penalties and interest - that Hill would have been in if: (a)
Hill did not have to pay the Excise Tax; (b) the Excise Tax did not apply for
reasons other than Sections 280G and 4999 of the Code; and (c) Hill did not have
to pay any interest or penalty charge for the imposition of any portion of the
Excise Tax.
 
10.2 Gross-Up Payment Determination. All determinations required to be made
under this Section 10, including whether and when a Gross-Up Payment is
required, the amount of such Gross-Up Payment, the calculations under Section
280G and 4999 of the Code, and the assumptions to be used in arriving at such
determination, shall be made by Commerce’s independent auditor or another
nationally recognized accounting firm chosen by the auditor with the consent of
Commerce and Hill (the “Accounting Firm”). 
 
(a) Cooperation. Commerce and Hill shall cooperate with Accounting Firm and
provide information needed for the determination. 
 
(b) Calculations. Accounting Firm shall provide detailed supporting calculations
both to Commerce and Hill within fifteen (15) business days of the receipt of
notice from Hill that there has been a Payment or receipt of Notice of IRS claim
under Section 10.3, or such earlier time as is requested by Commerce. 
 
(c) Fees and Expenses. Commerce shall pay all fees and expenses of the
Accounting Firm for services for this determination. 
 
(d) Payment Timing. Commerce shall pay any Gross-Up Payment, as determined
pursuant to this Section 10, to Hill within five (5) days of the receipt of the
Accounting Firm’s determination. 
 
(e) Binding Effect. Any determination by the Accounting Firm shall be binding
upon Commerce and Hill. 
 
(f) Possible Underpayment. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm, it is possible that Commerce may not make Gross-Up Payments
that should be made (“Underpayment”). 
 
 
 

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 (i) Determination. If Commerce exhausts its remedies pursuant to Section 10.3
and Hill is later required, directly or indirectly, to make a payment of any
Excise Tax, then the Accounting Firm shall determine the amount of the
Underpayment that has occurred. Such amount shall be sufficient to put Hill in
the same position after all federal and state taxes - including all income tax,
Excise Taxes, employment, or other taxes, and all penalties and interest on such
taxes - as Hill would have been in if there had been no Underpayment and
Commerce had made appropriate Gross-Up Payment in the first instance.
 
(ii) Payment. Commerce shall promptly pay to Hill or for the benefit of Hill any
amounts determined by Accounting Firm to be needed to satisfy any Underpayment.
 
10.3 Notice of IRS Claim. Hill shall notify Commerce in writing of any claim by
the Internal Revenue Service (“IRS”) that, if successful, would require the
payment by Commerce of the Gross-Up Payment. 
 
(a) Time and Content of Notice. Such notification shall be given as soon as
practicable but not later than ten (10) business days after Hill is informed in
writing of such claim and shall apprise Commerce of the nature of such claim and
the date on which such claim is requested to be paid. 
 
(b) Payment Timing. Hill shall not pay such IRS claim until thirty (30) days
after the date on which he gives such notice to Commerce (or such shorter period
ending on the date that any payment of taxes on such claim is due). 
 
(c) Contest Notice. If Commerce notifies Hill in writing before the expiration
of such thirty (30) day period that it desires to contest such IRS claim, then
Hill shall: 
 
(i) Give Commerce any information reasonably requested by Commerce relating to
such IRS claim;
 
(ii) Take such action in connection with contesting such IRS claim as Commerce
shall reasonably request in writing, including, without limitation, accepting
legal representation for such IRS claim by an attorney reasonably selected by
Commerce;
 
(iii) Cooperate with Commerce in good faith in order to effectively contest such
IRS claim; and
 
(iv) Permit Commerce to participate in any proceedings on such IRS claim.
 
 
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(d) Other Contest Terms. Without limitation on the foregoing provisions of this
Section 10.3: 
 
(i) Commerce shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold Hill harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and expenses.
 
(ii) Commerce shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearing and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct Hill to pay the
tax claimed and sue for a refund or contest the IRS claim in any permissible
manner;
 
(iii) Hill agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as Commerce shall determine;
 
(iv) If Commerce directs Hill to pay such IRS claim and sue for a refund, then
Commerce shall advance the amount of such payment to Hill on an interest-free
basis and shall indemnify and hold Hill harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest penalties) imposed regarding
such advance or regarding any imputed income with respect to such advance;
 
(v) Any extension of the statute of limitations relating to payment of taxes for
the taxable year of Hill with respect to which such contested amount is claimed
to be due is limited solely to such contested amount.
 
(vi) Commerce’s control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable under this Section 10 and Hill
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
 
 
 

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10.4  Refund. Hill shall [subject to Commerce’s complying with the requirements
of Section 10.3] promptly pay to Commerce the amount of any refund actually
received, including any interest paid or credited after applicable taxes if,
after the receipt by Hill of an amount advanced by Commerce pursuant to Section
10.3, Hill becomes entitled to receive any refund for such IRS claim. 
 
(a)  Denial of Refund. If, after the receipt by Hill of an amount advanced by
Commerce pursuant to Section 10.3, a determination is made that Hill shall not
be entitled to any refund for such IRS claim and Commerce does not notify Hill
in writing of its intent to contest such denial of refund before the expiration
of thirty (30) days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset the amount of Gross-Up Payment required to be paid. 

11. Other Rights for Termination “Without Cause” or “For Good Reason”.
 
11.1 Other Benefits. Hill shall be entitled to the following from Commerce, in
addition to the other Compensation stated in either Section 7.3 or 8.2 above, if
Hill’s employment is terminated either “Without Cause” or “For Good Reason” as
set forth in either Section 7.1 or 8.1 above:
 
(a) Insurance. Following the date of termination, Hill shall be entitled to
participate in all Commerce medical, disability, hospitalization and life
insurance benefits for a period of three (3) years: 
 
(i) Exception. If Hill accepts subsequent employment during the three-year
period following the date of termination, then continuation of any medical,
disability, hospitalization and life insurance benefits will be offset by
coverages provided through Hill’s subsequent employer.
 
(b) Options Vest. Any outstanding options held by Hill to purchase Commerce
stock shall vest as of the date of termination of Hill’s employment.
 
11.2 Plans and Program Rights. Nothing in this Agreement shall affect or have
any bearing on Hill’s entitlement to other benefits under any plan or program
providing benefits by reason of termination of employment.
 
11.3 No Mitigation by Hill. Hill shall not be required, under any circumstance
including provision in this Agreement, to mitigate the amount of any
Compensation or payment provided for in this Agreement by seeking other
employment.
 

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12. Source of Payment and Timing.
 
12.1 Source. All payments under this Agreement shall be paid in cash from the
general funds of Commerce. 
 
(a) No special or separate fund shall be required to be established and Hill
shall have no right, title or interest whatsoever in or to any investment which
Commerce may make to aid Commerce in meeting its obligations here, except to the
extent that Commerce shall, in its sole and absolute discretion, choose to
designate any of its rights it may have under one or more life insurance
policies it may obtain to cover any of its obligations under this Agreement. 
 
(b) Nothing in this Agreement, and no action taken pursuant to it, shall create
or be construed to create a trust of any kind or fiduciary relationship between
Commerce and Hill or any other Person.
 
12.2 Time. All payments due Hill under Sections 5.2, 6.3, 7.3 or 8.2 above shall
be made not later than the thirtieth (30th) day following the date of
termination of employment.

13. Interest. Hill shall be entitled (in addition to his other rights and
remedies) to interest on past due amounts at a rate equal to two percentage
points (2%) above the prime rate charged from time to time by CB if any benefits
due to Hill are not paid when due with such interest to commence on the date a
benefit was due.

14. Reimbursement of Enforcement Expenses. Hill shall be entitled to full
reimbursement from Commerce for all costs and expenses (including reasonable
attorneys’ fees, costs, and interest as stated in Section 13) incurred by Hill
in enforcing his rights under this Agreement if the following exist: 
 
14.1 Failure to Pay. Commerce fails to pay or provide Hill any of the amounts
due him under this Agreement; or 
 
14.2 Failure to Provide. Commerce fails to provide Hill with any of the other
benefits due him under this Agreement; and 
 
14.3 Further Conditions for Reimbursement. Provided that:
 
(a)  Commerce does not cure any such failure within thirty (30) days after
having received written notice from Hill of such failure; and 
 
 
 

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(b) there is an adjudication that Hill’s action in enforcing his rights are not
frivolous.

15. Confidential Information and Non-Competition.
 
15.1 Confidentiality. 
 
(a) Company Information Definition. “Company Information” means all data
relating to Commerce’s business that is not generally published or available to
the public, including writings, equipment, processes, drawings, strategic plans,
reports, manuals, inventions, records, financial information, business plans,
customer lists, the identity of and other facts concerning prospective
customers, inventory lists, arrangements with suppliers and customers, computer
programs, or other materials embodying trade secrets, customer product
information, or technical or business information of Commerce.
 
(b) Non-Disclosure and Non-Use. During the Term or any later time, except with
the prior written consent of Commerce’s Board, Hill shall not, directly or
indirectly:
 
(i) Non-Disclosure. Disclose, communicate or divulge Company Information to any
Person other than authorized Commerce personnel;
 
(ii) Non-Use. Use Company Information for the benefit of himself or any other
Person, other than authorized Commerce personnel.
 
15.2 Commerce’s Interests. Hill will not, during the Term, except with the
express prior written consent of Commerce’s Board, directly or indirectly, in
any capacity (including but not limited to employee, owner, partner, consultant,
agent, director, officer, shareholder or in any other capacity) engage in or
assist any Person to engage in any act or action which he, acting reasonably,
believes or should believe would be harmful or inimical to the interests of
Commerce.
 
15.3 Non-Competition and Time of Restrictions.
 
(a) Non-Competition. Hill will not, except with the express prior written
consent of Commerce’s Board, in any capacity (including, but not limited to,
owner, partner, shareholder, consultant, agent, employee, officer, director or
otherwise), directly or indirectly, for his own account or for the benefit of
any Person: 
 
 
 

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 (i) Business and Geographic Restriction. Establish, engage or participate in or
otherwise be connected with any commercial banking business which conducts
business in any geographic area in which Commerce and its subsidiaries is then
conducting such business.
 
(ii) Exception. The foregoing shall not prohibit Hill from owning as a
shareholder less than 5% of the outstanding voting stock of an issuer engaged in
the commercial banking business.
 
(b) Time of Restrictions. The non-competition restrictions in Section 15.3 shall
start on the effective date of this Agreement and end as stated below for the
appropriate circumstance.  
 
(i) Hill’s Termination at Anniversary or Voluntary. If this Agreement is
terminated by Hill in accord with the Termination at Anniversary in Section
1.2(b) of this Agreement or if Hill voluntarily terminates his employment,
then the non-competition restriction ends one year following the effective date
of termination of Hill’s employment under this Agreement;

(ii)  Commerce’s Termination at Anniversary. If this Agreement is terminated by
Commerce in accord with the provisions of Section 1.2(b) of this Agreement,
then the non-competition restriction ends on the effective date of termination
of Hill’s employment under this Agreement;

(iii) Termination “For Cause”. If Commerce terminates this Agreement “For Cause”
in accord with Section 6 of this Agreement, then the non-competition restriction
ends on the effective date of termination of Hill’s employment under this
Agreement; or
 
(iv) Termination “Without Cause” and “For Good Reason”. If this Agreement is
terminated “Without Cause” or “For Good Reason” in accord with either Section
7.1 or 8.1 above, then the non-competition restriction ends on the effective
date of termination of Hill’s employment under this Agreement.

15.4 Remedies. Any breach by Hill of any of the terms in this Section 15 will
result in irreparable injury to Commerce for which money damages could not
adequately compensate Commerce; and, thus, in the event of any such breach,
Commerce shall be entitled (in addition to any other rights and remedies which
it may have at law or in equity) to have an injunction issued by any competent
court enjoining and restraining Hill and/or any other Person involved from
continuing such breach. 
 
(a) No Defense or Bar. The existence of any claim or cause of action which Hill
may have against Commerce or any other Person (other than a claim for Commerce’s
breach of this Agreement for failure to make payments) shall not constitute a
defense or bar to the enforcement of the terms in this Section 15. 
 
 
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(b) Payments After Breach. In the event of any alleged breach by Hill of any of
the terms in this Section 15, Commerce shall continue any and all of the
payments due Hill under this Agreement until such time as a Court shall enter a
final and unappealable order finding such a breach. 
 
(i) Exception. The foregoing shall not preclude a Court from ordering Hill to
repay such payments made to him for the period after the breach is determined to
have occurred or from ordering that payments under this Agreement be permanently
terminated in the event of a material and willful breach.
 
15.5 Enforceability. If any portion of the terms in this Section 15, or their
application, is construed to be invalid or unenforceable, then the other
portions of such terms or their application shall not be affected and shall be
given full force and effect without regard to the invalid or unenforceable
portions to the fullest extent possible. 
 
(a) If any term in this Section 15 is held to be unenforceable because of the
area covered, duration, or scope, then Hill and Commerce expressly and
intentionally authorize the court making such determination to reduce the area
and/or duration and/or limit the scope to an enforceable term, so that the term
shall then be enforceable in its reduced form.
 
15.6 Commerce Definition. For this Section 15, the term “Commerce” means
Commerce, any successor of Commerce under Section 16 below, and all present and
future direct and indirect subsidiaries and affiliates of Commerce including,
but not limited to, CB.
 

16. Successions.
 
16.1 Successors/Assigns/Heirs. This Agreement shall inure to the benefit of and
be binding on:
 
(a) Commerce and Hill and their respective heirs, executors, administrators,
successors and assigns; and
 
(b) Any corporate or other successor of Commerce that acquires, directly or
indirectly, by combination, merger, consolidation, purchase, or otherwise, all
or substantially all of the assets of Commerce. 
 
 
 

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16.2 Death. On Hill’s death, except for the ”Death Benefit” governed by payment
described in Section 5.3 above, any payments or benefits otherwise due Hill
shall be paid to or be for the benefit of Hill’s legal representatives for his
estate. 
 
16.3 Combinations. Nothing in the Agreement shall preclude Commerce from
combining, consolidating or merging into or with or transferring all or
substantially all of its assets to another Person (“Combination”).
 
(a) In the event of a Combination, such other Person shall be deemed to assume
this Agreement and all obligations of Commerce in this Agreement.
 
(b) Upon such a Combination, the term “Commerce” shall mean such other Person
and this Agreement shall continue in full force and effect.

17. Notices.
 
17.1 Form of Notice. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given if delivered by: hand with delivery receipt; or certified or registered
mail, return receipt requested, with postage prepaid; or overnight or express
courier with a receipt-for-delivery tracking system. 
 
17.2 Place of Notice. All notices are to be delivered to the following addresses
or to such other address as either party may designate in writing by like
notice:
 

 
A.
If to Hill, to the address on file with the Company.

 

 
B.
If to Commerce, to:

Commerce Bancorp, Inc.
Commerce Atrium
1701 Route 70 East
Cherry Hill, New Jersey 08034-5400

 
Attn:
Chairman, Compensation Committee

Board of Directors

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18. General Provisions.
 
18.1 Entire Agreement. This Agreement constitutes the entire agreement between
Commerce and Hill concerning its subject matter. It supersedes and replaces all
prior discussions, representations, promises or agreements, whether written or
oral, express or implied, between Hill and Commerce or their representatives,
including the Prior Agreement. 
 
18.2 Amendments, Waivers and Termination. No amendment, waiver or termination of
any of the provisions of this Agreement shall be effective unless in writing and
signed by the party against whom it is sought to be enforced. Any written
amendment, waiver or termination of this Agreement executed by Commerce and Hill
(or his legal representatives) shall be binding upon them and upon all other
Persons, without the necessity of securing the consent of any other Person
including, but not limited to, Hill’s wife, and no Person shall be deemed to be
a third party beneficiary under this Agreement except as provided under Section
16 above.
 
18.3 Alternate Payments. Instead of Commerce, either CB or any other subsidiary
of Commerce may make payments to Hill and, to the extent such payments are so
made, Commerce shall be released of its obligations to make such payments.
 
18.4 Benefits and Insurance. The benefits provided under this Agreement shall be
in addition to and shall not affect the proceeds payable to Hill’s beneficiaries
under group life insurance policies which Commerce may be carrying on Hill’s
life.
 
18.5  “Person” Definition. “Person” means a natural person, joint venture,
corporation, sole proprietorship, trust, estate, partnership, cooperative,
association, non-profit organization or any other legal entity.
 
18.6 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same Agreement.
 
 
 

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18.7 No Waiver. Except as otherwise expressly stated in this Agreement, no
failure on the part of any party to this Agreement to exercise and no delay in
exercising any right, power or remedy under this Agreement shall operate as a
waiver; nor shall any single or partial exercise of any right, power or remedy
under this Agreement preclude any other or further exercise of any of or the
exercise of any other right, power or remedy.
 
18.8 Assignment. Without Commerce’s prior written consent and approval, neither
this Agreement nor any of its rights to receive payments shall be voluntarily or
involuntarily:
 
(a) Assigned, transferred, alienated, encumbered or disposed of, in whole or in
part; or
 
(b) Subject to anticipation, levy, execution, garnishment, attachment by, or
interference or control of, any creditor.
 
18.9 New Jersey Jurisdiction. Commerce and Hill irrevocably, voluntarily,
knowingly and expressly consent to: 
 
(a) Courts in Camden, NJ. The exclusive jurisdiction of the Superior Court, Law
Division, Camden County, New Jersey or the United States District Court for the
District of New Jersey, Camden Vicinage, to enforce this Agreement, or to
resolve any claim, controversy or dispute involving it; and 
 
(b) Service of Process. Service of process as set forth in the Notice stated in
Section 17 above. 
 
18.10 Headings. The headings of the sections of this Agreement have been
inserted for convenience and clarity. They do not restrict or modify any of the
terms or provisions of this Agreement.
 
18.11 Notice of Dispute and Cure. If Commerce or Hill has a dispute or claim
under this Agreement, then that dispute or claim shall be described with
specificity in writing; and, the party receiving such written notice shall have
thirty (30) business days to cure the dispute or claim. 
 
 
 

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18.12 New Jersey Law. This Agreement shall be governed and construed, and the
legal relationships of the parties determined, in accordance with the laws of
the State of New Jersey applicable to contracts executed and to be performed
solely in the State of New Jersey.
 

COMMERCE BANCORP, INC.

By:  /s/ Douglas J. Pauls
                        Title: Senior Vice-President and Chief Financial Officer

                 
 
Attest:  /s/ Alexander D. Bono
Title: Senior Vice-President and General Counsel

/s/ Vernon W. Hill, II    
Vernon W. Hill, II 
 
March 14, 2006
Date
 
 
 
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