SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
Commerce Bancshares, Inc.
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(Name of Registrant as Specified in Its Charter)
Commerce Bancshares, Inc.
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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[COMMERCE BANCSHARES, INC. LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 17, 2002
The annual meeting of the shareholders of Commerce Bancshares, Inc., will
be held in the "Gallery I" room of the Sheraton Clayton Plaza Hotel at 7730
Bonhomme Avenue, Clayton, Missouri on April 17, 2002, at 9:30 a.m., for the
following purposes:
(1) To elect five directors to the 2005 Class for a term of three
years; and
(2) To approve an amendment to the Executive Incentive Compensation
Plan; and
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business February 22, 2002, are
entitled to notice of and to vote at the meeting.
To be sure that your shares are represented at the meeting, please either
complete and promptly mail the enclosed proxy card in the envelope provided for
this purpose or vote through the telephone or Internet voting procedures
described on the proxy card. If your shares are registered in the name of a bank
or brokerage firm, telephone or Internet voting will be available to you only if
offered by your bank or broker and such procedures are described on the voting
form sent to you.
Most shareholders can elect to view future proxy statements and annual
reports over the Internet instead of receiving paper copies in the mail. Please
refer to page 16 of the proxy statement and your proxy card for further
information.
By Order of the Board of Directors
J. DANIEL STINNETT, Secretary
March 12, 2002
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING. YOU ARE
URGED TO DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY OR REGISTER YOUR VOTE
BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE PROXY CARD.
PROXY STATEMENT
COMMERCE BANCSHARES, INC.
ANNUAL MEETING APRIL 17, 2002
SOLICITATION:
The Board of Directors of Commerce Bancshares, Inc. (the Company) P.O. Box
13686, Kansas City, Missouri 64199-3686 solicits your proxy, and asks that you
vote, sign, date and promptly mail the enclosed proxy card for use at the annual
meeting of shareholders to be held April 17, 2002. Most shareholders also have a
choice of voting by using a toll-free telephone number or by voting over the
Internet. Please refer to your proxy card or the information forwarded by your
bank, broker or other holder of record to see which options are available to
you.
The cost of solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, proxies may be solicited personally or by
telephone, telegram or via the Internet by regular employees of the Company.
Brokerage houses and other custodians, nominees and fiduciaries may be requested
to forward soliciting material to their principals and the Company will
reimburse them for the expense of doing so. This proxy statement and proxy will
be first sent to security holders on or about March 12, 2002.
If you wish, at any time before your proxy is voted, you may revoke it by
written notice to the Company, or by delivery of a later-dated proxy (including
a telephone or Internet vote), or by voting in person at the meeting
The shares represented by all properly executed proxies will be voted as
directed by you. In the absence of direction, properly executed proxies will be
voted in accordance with the recommendations of the Board as set forth below.
VOTING SECURITIES AND OWNERSHIP THEREOF BY CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT:
Only shares at the close of business on February 22, 2002, are entitled to
vote at the meeting, and at the close of business on said date there were
outstanding 65,471,611 shares of common stock of the Company. Each holder of
common stock is entitled to one vote for each share held. In the election of
directors, abstentions and broker nonvotes will be considered solely for quorum
purposes and are not counted for the election of directors. On all other matters
presented for shareholder vote, abstentions will be treated as votes against
such matters and broker nonvotes will have no effect on the outcome.
(a) Under applicable Securities and Exchange Commission Rules, beneficial
ownership of shares includes shares as to which a person has or shares voting
power and/or investment power.
As of December 31, 2001, the trust departments of the Company's subsidiary
banks beneficially owned 5,336,205 shares representing 8.1% of the Company's
outstanding common stock as of that date. Of those shares the subsidiary banks
had (i) sole voting power over 5,145,694 shares; (ii) shared voting power over
89,367 shares, (iii) sole investment power over 4,750,879 shares and (iv) shared
investment power over 190,511 shares. The Company has been advised by the
subsidiary banks that the shares held by them and as to which they have sole
voting power will be voted at the annual meeting for the election of directors
(Proposal One) and in favor of Proposal Two. Shares held in all other fiduciary
accounts will be voted as specifically directed by the co-trustees and
co-executors. Shares held in custodial accounts will be voted by the owners.
(b) The following information pertains to the common stock of the Company
beneficially owned, directly or indirectly, by all directors and nominees for
director, the executive officers named in the Summary Compensation Table, and by
all directors, nominees and executive officers of the Company as a group as of
December 31, 2001. Such persons have sole voting and sole investment power as to
such shares unless otherwise noted.
NUMBER OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS
------------------------------------ --------- --------
Giorgio Balzer.............................................. 8,094 *
Kansas City, Missouri
John Capps.................................................. 3,473 *
Creve Coeur, Missouri
W. Thomas Grant, II......................................... 1,209 *
Shawnee Mission, Kansas
James B. Hebenstreit........................................ 26,668 *
Kansas City, Missouri 43,262(7)
David W. Kemper............................................. 880,418
Clayton, Missouri 101,554(1)
215,061(2)
123,991(3)
702,495(4)
2,004,540(6) 6.2
Jonathan M. Kemper.......................................... 16,804
Kansas City, Missouri 462,396(1)
702,495(4)
261,708(2)
123,991(3)
1,002,270(6) 3.9
Seth M. Leadbeater.......................................... 19,649 *
Clayton, Missouri 126,015(2)
Robert C. Matthews, Jr. .................................... 21,918 *
Kansas City, Missouri 131,157(2)
Thomas A. McDonnell......................................... 5,592 *
Kansas City, Missouri
Terry O. Meek............................................... 14,308 *
Springfield, Missouri
Benjamin F. Rassieur, III................................... 4,249 *
St. Louis, Missouri
L. W. Stolzer............................................... 384,512 *
Manhattan, Kansas 965,636(5)
V. Raymond Stranghoener..................................... 2,032 *
St. Louis, Missouri 5,778(2)
William A. Sullins, Jr. .................................... 44,210 *
Clayton, Missouri 123,019(2)
Andrew C. Taylor............................................ 12,893 *
St. Louis, Missouri
Mary Ann Van Lokeren........................................ 6,573 *
St. Peters, Missouri
Robert H. West.............................................. 12,894 *
Kansas City, Missouri
All 25 directors, nominees and executive officers as a group
(including those listed above)............................ 6,932,735 10.6
2
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(1) Shared voting power and investment power.
(2) Shares which could be acquired within 60 days by exercise of options.
(3) Owned by corporation as to which Messrs. David W. Kemper and Jonathan M.
Kemper serve as directors. Messrs. David W. Kemper and Jonathan M. Kemper
disclaim beneficial ownership as to such shares.
(4) Mr. Jonathan M. Kemper has sole investment power, but shares voting power
with Mr. David W. Kemper.
(5) Represents shares owned by spouse or by trust for benefit of spouse. Mr.
Stolzer disclaims beneficial ownership as to such shares.
(6) Shared voting power.
(7) Owned by a corporation for which Mr. Hebenstreit serves as President. Mr.
Hebenstreit disclaims beneficial ownership in these shares.
* Less than 1%.
THE BOARD OF DIRECTORS
RECOMMEND A VOTE FOR ALL THE
NOMINEES OF THE
CLASS OF 2005
PROPOSAL ONE
ELECTION OF DIRECTORS
Under the Articles of Incorporation and the By-Laws of the Company, the
Board of Directors is divided into three classes, each as nearly equal as
possible, and the Board is authorized to determine the number of persons
constituting the board. The Board has fixed the number of directors at fifteen.
Therefore, it is proposed that five directors (constituting one-third of the
board of directors) be elected at the meeting to serve until the 2005 annual
meeting (the 2005 Class), and until their successors shall be elected and
qualified unless otherwise directed. The persons acting under the accompanying
proxy intend to vote for the election of the nominees hereinafter named. Should
any nominee become unable to accept nomination or election, it is intended,
unless otherwise directed, that the person acting under the proxy will vote for
the election of such other person as the Board of Directors of the Company may
recommend. The five nominees for election as directors who receive the greatest
number of votes cast for the election of directors at the meeting, a quorum
being present, shall become directors. Vacancies occurring in a class during a
term are filled by the Board pursuant to the Company's By-Laws. There are no
arrangements or understandings between any nominee and any other person pursuant
to which the nominee was selected.
3
The following information is provided with respect to each nominee:
NAME AND AGE PERIODS SERVED AS DIRECTOR AND BUSINESS EXPERIENCE DURING PAST 5 YEARS
------------ ----------------------------------------------------------------------
2005 CLASS:
John R. Capps, 51.................... Elected a director in January, 2000. Mr. Capps has served as the
President and Chief Executive Officer of Plaza Motor Company since
1981. Plaza Motor Company is a retail dealership for eight luxury
automobile franchises. Mr. Capps is a director of Whitfield School
(from 1995-present), St. Louis Priory School (from 1988-present), Muny
Opera (from 1999-present), Whitaker Foundation (from August
2001-present), and St. Louis Art Museum (from October 2001-present).
He is Chairman of the Regional Business Council. He also served as a
director of Commerce Bank, N.A., a subsidiary of the Company.
W. Thomas Grant, II, 51.............. Elected a director in June, 1983. Mr. Grant became the Chairman of the
Board of LabOne, Inc. in October, 1995. LabOne, Inc. is a national
laboratory services provider that performs insurance, clinical and
substance abuse testing. Mr. Grant also serves on the board of
directors for AMC Entertainment Inc., and Business Men's Assurance
Company of America.
James B. Hebenstreit, 56............. Elected a director in October, 1987. Mr. Hebenstreit has been
President of Bartlett and Company since January, 1992. Bartlett and
Company is engaged in grain merchandising and storage, flour and feed
milling and cattle feeding.
Robert C. Matthews, Jr., 54.......... Elected a director in February, 2001. Mr. Matthews has been an
Executive Vice President and Chief Credit Officer of Commerce
Bancshares, Inc. since 1989. He also serves as Executive Vice
President of Commerce Bank, N.A., a subsidiary of the Company. Mr.
Matthews has been an officer of Commerce Bank since 1971.
William A. Sullins, Jr., 63.......... Elected a director in February, 1999. Mr. Sullins is Vice Chairman of
the Company and is Vice Chairman of Commerce Bank, N.A., a subsidiary
of the Company
The following directors of the Company are not nominees for election, and their terms will continue after
the 2002 annual meeting.
2004 CLASS:
David W. Kemper, 51.................. Elected a director in February, 1982. Mr. Kemper is Chairman of the
Board (since November, 1991), President and Chief Executive Officer of
the Company and is Chairman of the Board, President, and Chief
Executive Officer of Commerce Bank, N.A., a subsidiary of the Company.
He is also a director of Ralcorp Holdings, Inc., and Tower Properties
Company. Mr. David Kemper is the brother of Jonathan M. Kemper.
Thomas A. McDonnell, 56.............. Elected a director in April, 2001. Mr. McDonnell is the President and
Chief Executive Officer of DST Systems, Inc. DST Systems is a provider
of computer software solutions to the financial services and other
industries. He has been employed by DST since 1969 and has served as
President since January 1973 (except for a 30 month period from
October 1984 to April 1987). He is a director of DST Systems, Inc.;
Computer Sciences Corporation; Janus Capital Corporation; BHA Group,
Inc.; Euronet Worldwide, Inc.; and Garmin, LTD.
4
NAME AND AGE PERIODS SERVED AS DIRECTOR AND BUSINESS EXPERIENCE DURING PAST 5 YEARS
------------ ----------------------------------------------------------------------
Benjamin F. Rassieur, III, 47........ Elected a director in August, 1997. Mr. Rassieur is President of Paulo
Products Co. The company is engaged in commercial heat treating,
electroplating, and furnace brazing services. Mr. Rassieur has served
as a director of Commerce Bank, N.A., a subsidiary of the Company.
Andrew C. Taylor, 54................. Elected a director in February, 1990. Mr. Taylor is Chairman and Chief
Executive Officer of Enterprise Rent-A-Car Company (formerly
Enterprise Leasing Co.) which is engaged in automobile leasing, rental
and related services. He is also a director of GenAmerica Life
Insurance Company and Anheuser-Busch Companies. Mr. Taylor has served
as a director of Commerce Bank, N.A., a subsidiary of the Company.
Robert H. West, 63................... Elected a director in October, 1985. Mr. West retired as Chairman of
the Board of Butler Manufacturing Company and from its board of
directors on July 1, 1999. He is a director of Kansas City Power &
Light Company, Burlington Northern Santa Fe Corporation and Astec
Industries, Inc. Mr. West has also served as a director of Commerce
Bank, N.A., a subsidiary of the Company.
2003 CLASS:
Giorgio Balzer, 62................... Elected a director in December, 1990. Mr. Balzer is, since August
1990, Chairman of the Board and Chief Executive Officer of Business
Men's Assurance Company of America. He is also U.S. Representative for
Assicurazioni-Generali, S.p.A., U.S. Branch, an Italian insurance
group, as well as Chairman of Worldwide Assistance Services, Inc.,
Washington, D.C. He is also a director of CNA Surety, Chicago,
Illinois; and Transocean Holding Corp., a Generali financial company
in the U.S.
Jonathan M. Kemper, 48............... Elected a director in January, 1997. Mr. Kemper is Vice Chairman of
the Company and Vice Chairman of Commerce Bank, N.A., a subsidiary of
the Company. He is a director of Tower Properties, and a trustee of
the National Trust for Historic Preservation Board of Trustees. Mr.
Jonathan Kemper is the brother of David W. Kemper.
Terry O. Meek, 58.................... Elected a director in April, 1989. Mr. Meek is President of Meek
Lumber Yard, Inc., which operates a chain of builders' materials
centers under the name Meeks Building Centers. He has served as a
director of Commerce Bank, N.A., a subsidiary of the Company.
L. W. Stolzer, 67.................... Elected a director in October, 1995. Mr. Stolzer is the Chairman and
Chief Executive Officer of Griffith Lumber, Inc. Griffith Lumber is a
retail lumber and building materials business located in Manhattan,
Kansas, marketing to commercial, industrial and construction accounts.
He has served as a director of Commerce Bank, N.A., a subsidiary of
the Company.
Mary Ann Van Lokeren, 54............. Elected a director in April, 1996. Ms. Van Lokeren is the Chief
Executive Officer of Krey Distributing Company. Krey Distributing
Company is the exclusive Anheuser Busch wholesaler for St. Charles and
Lincoln counties in Missouri. She is also a director of Laclede Gas
Company, and Masco Corporation. She has served as a director of
Commerce Bank, N.A., a subsidiary of the Company.
5
During 2001 Messrs. James B. Hebenstreit, Benjamin F. Rassieur, III, L. W.
Stolzer and Robert H. West served as members of the Audit Committee. The role of
the Audit Committee is to assist the Board of Directors in its oversight of the
Company's financial reporting process. The Audit Committee annually receives the
proposal of the independent public accountants for the performance of audit
services for the Company and its subsidiaries, reviews the scope of audits to be
performed by the independent public accountants and the internal auditing staff
of the Company, and reviews annually the program of the internal auditing staff
both with respect to audits performed in the prior year and scheduled audits for
the ensuing year. The Audit Committee also receives, reviews and takes action
which it deems appropriate with respect to reports submitted by the internal
auditing staff and the independent public accountants. The Audit Committee held
three meetings during 2001.
The Board of Directors has appointed a Compensation and Benefits Committee
to review and establish compensation to be paid to officers of the Company and
to grant options pursuant to the Company's stock option plans. Directors Giorgio
Balzer, Andrew C. Taylor and Mary Ann Van Lokeren presently comprise the
committee which held one meeting during 2001 for these purposes.
The Board of Directors has established a Committee on Directors for the
purpose of considering and recommending to the full Board the nominees for
election to the Board of Directors of the Company. W. Thomas Grant II, Terry O.
Meek and John R. Capps, were members of the committee which held one meeting in
January 2002. By February of each year, the committee makes its recommendations
to the Board of its proposed slate of directors for the class of directors to be
submitted to the shareholders of the Company at the annual meeting to be held
the following April.
The Board of Directors held four meetings during 2001. Each director,
except W. Thomas Grant, II, Andrew C. Taylor and Mary Ann Van Lokeren attended
75% or more of the total number of meetings of the Board and meetings held by
committees of the Board on which the respective director served.
Directors and officers of the Company and the nominees for directors and
their associates have deposit accounts with the subsidiary banks of the Company,
and some directors, nominees for directors and officers and their associates
also have other transactions with the subsidiary banks, including loans in the
ordinary course of business, all of which were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons, and did not involve more than
normal risk of collectibility or present other unfavorable features.
During 2001, subsidiaries of the Company paid Tower Properties Company
$1,502,329 in rentals, $5,477 in leasing fees, $36,394 for operation of parking
garages, $864,374 for building management fees, and $939,382 for other property
construction and repair costs. Messrs. David Kemper and Jonathan Kemper are
directors of Tower Properties Company and together with members of their
immediate families own beneficially approximately 48% of the outstanding stock
of Tower Properties Company.
DIRECTOR COMPENSATION:
An employee of the Company or a subsidiary of the Company receives no
additional compensation for serving as a director. Non-employee directors of the
Company are required to participate in the Stock Purchase Plan for Non-Employee
Directors. Under this Plan, all compensation payable to a non-employee director
is credited to an account in the name of such director as earned and the Company
contributes to the account of such director an amount equal to 25% of the
compensation credited to the director's account. As of the last business day of
each month, the cash balance is used to purchase from the Company whole shares
of common stock of the Company based on the last sale price of the Company's
common stock on such date. Each non-employee director of the Company contributes
(as adjusted for the 25% contribution by the Company) the annual retainer of
$9,000 (paid on a quarterly basis), fees of $2,500 for each meeting of the Board
of Directors attended, and fees of $500 for attendance at each meeting of a
committee of which the director was a member and attended.
6
PROPOSAL TWO
AMENDMENT TO THE EXECUTIVE INCENTIVE COMPENSATION PLAN
COMMERCE BANCSHARES, INC. EXECUTIVE INCENTIVE COMPENSATION PLAN
On February 1, 2002, the Board of Directors (the "Board") approved an
amendment (the "Amendment") to the Commerce Bancshares, Inc. Executive Incentive
Compensation Plan (the "Incentive Plan"). The Incentive Plan was adopted by the
Board on December 3, 1993 and approved by the Company's shareholders on April
20, 1994. The Incentive Plan was amended and restated as of July 31, 1998 and
was further amended as of December 31, 1999. The Amendment is intended to revise
the Incentive Plan to comply with Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code") so that awards made to the Company's Chief
Executive Officer and the other four most highly compensated executive officers
("Covered Employees") pursuant to the Incentive Plan will qualify as
performance-based compensation within the meaning of Code Section 162(m) and the
regulations thereunder ("Performance-Based Compensation"). Qualification for an
exemption under Section 162(m) will permit the Company to deduct certain amounts
related to awards under the Incentive Plan after the date of shareholder
approval without regard to the limits imposed by Section 162(m).
Code Section 162(m), which was enacted in 1993, generally disallows a tax
deduction to public companies for compensation over $1 million paid to Covered
Employees. Performance-Based Compensation is not subject to the deduction limit.
The Company intends for awards provided under the Incentive Plan to Covered
Employees to be Performance-Based Compensation. Proposal Two is being presented
to shareholders in order for the awards paid pursuant to the Incentive Plan to
be Performance-Based Compensation.
The policy of the Company is to compensate its officers based upon
performance. The purpose of the Incentive Plan is to provide incentive
compensation awards to those individuals whose management efforts reflect a
desire to meet commonly agreed upon objectives or to those who by their superior
performance directly contribute to the profitability of the Company and to
encourage the retention of outstanding contributors. The following discussion
summarizes the material features of the Amendment. The full text of the
Incentive Plan, as amended, appears as Exhibit A to this Proxy Statement and
qualifies this summary in its entirety.
The Incentive Plan is administered by the Compensation and Benefits
Committee (the "Committee") of the Board. The Committee shall consist solely of
two or more directors who are "non-employee directors" under Rule 16b-3(b)(3)
promulgated under the Securities Exchange Act of 1934, as amended, or any
successor provision thereto, and "outside directors" within the meaning of
Treasury Regulation Section 1.162-27(e)(3)(i).
Participants in the Incentive Plan are all chief executive officers,
Chairmen of the Board, Vice Chairmen of the Board, Presidents, and Vice
Presidents of the Company or any of its affiliated banks or subsidiary
companies, together with such other officers of the Company and its affiliated
banks and subsidiary companies as the Committee shall determine. Directors who
are not officers or employees of the Company, an affiliated bank, or a
subsidiary company, are not eligible to Participate in the Incentive Plan.
The Board approves the amount of aggregate incentive awards based upon the
Committee's recommendation. The Committee administers the Plan and approves
individual awards for participants, regardless of whether the participant is a
Covered Employee or not. Individual awards to Covered Employees are intended to
be Performance-Based Compensation. The Committee may set restrictions on such
awards based upon the achievement of objective performance goals. Such
performance goals may be set for the Company as a whole, for each division or
unit, or for individual performance criteria. The performance objectives may
vary from participant to participant, but with respect to Covered Employees, the
performance goals shall be based on one or more of the following criteria:
revenue, earnings, earnings per share, pre-tax earnings and net profits, stock
price, market share, costs, return on equity, efficiency ratio (non-interest
expense, divided by total revenue) asset management, asset quality, asset growth
and budget achievement.
7
The Committee will specifically define the performance goal in advance and
shall set the performance goal no later than the end of the period which
constitutes the first twenty-five percent (25%) of the period of service to
which the performance goal relates, provided that the outcome is substantially
uncertain at the time the goal is established. The performance goal will be
sufficiently objective such that a third party having knowledge of the relevant
facts could determine whether the performance goal has been met. No award to a
Covered Employee shall be paid before the Committee certifies that such Covered
Employee met the requirements of the applicable performance goal and satisfied
any other material terms applicable to the award. The maximum amount that may be
paid to any employee (whether or not a Covered Employee) pursuant to the
Incentive Plan for any calendar year shall not exceed $1,500,000.
Awards payable under the Incentive Plan are normally payable in cash. The
awards will be paid as soon as practicable after the awards are determined,
unless the recipient of the award elects to defer receipt of the award as
provided in the Incentive Plan.
A majority of the shares of Common Stock represented and entitled to vote
at the Annual Meeting must vote for the Amendment of the Incentive Plan in order
for awards to Covered Employees pursuant to the Incentive Plan to become
Performance-Based Compensation. In accordance with Missouri law, abstentions
will be treated as represented and entitled to vote. Unless marked to the
contrary, all proxies received will be voted for the amendment of the Incentive
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL TWO DESCRIBED ABOVE.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS:
The Company has a Severance Agreement with each of David W. Kemper,
Jonathan M. Kemper, William A. Sullins, Jr., Seth M. Leadbeater and V. Raymond
Stranghoener which provides among other things, that, if his employment is
terminated by the Corporation without "cause" or by him for "good reason" either
during the twelve months before or the three years after a "change in control,"
or if he voluntarily terminates for any reason during the 30 days following one
year after a "change of control," he shall receive three times (one and one half
times in the case of Mr. Stranghoener) the sum of his annualized base salary in
effect twelve months prior to the "change in control," and his average annual
bonus for the prior three years; the greater of his actual bonus for the
preceding first year or his target bonus for the current year (prorated for the
year in which the termination occurs); and continuation of health and welfare
benefits for him and his spouse for three years (one and one half years in the
case of Mr. Stranghoener) or until age 65 if sooner, at a cost equal to such
rates paid from time to time by similarly situated employees of the Corporation,
"grossed up" to cover any excise tax imposed by Section 4999 of the Internal
Revenue Code.
8
EXECUTIVE COMPENSATION:
The following information is given as to the Chief Executive Officer
("CEO") and as to each of the four most highly compensated executive officers of
the Company, other than the CEO, who received total cash compensation of more
than $100,000, during the fiscal year ended December 31, 2001.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
---------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ----------------------- -------
--------------------------------------- (g)
(e) (f) SECURITIES
OTHER RESTRICTED UNDERLYING (h) (i)
(a) (c) (d) ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL (b) SALARY BONUS COMPENSATION AWARDS SARs PAYOUTS COMPENSATION(1)
POSITION YEAR ($) ($) ($) ($) (#) ($) $
------------------ ---- ------- ------- ------------ ---------- ---------- ------- ---------------
David W. Kemper............ 2001 632,850 360,000 0 166,238 76,650 0 52,565
Chairman, President & CEO 2000 610,800 475,000 0 157,481 77,175 0 52,828
Commerce Bancshares, Inc. 1999 574,584 470,000 0 0 69,457 0 65,785
Jonathan M. Kemper......... 2001 331,750 126,000 0 59,494 33,600 0 49,336
Vice Chairman 2000 319,500 170,000 0 54,591 33,075 0 19,720
Commerce Bancshares, Inc. 1999 309,000 165,000 0 0 31,255 0 19,524
William A. Sullins, Jr. ... 2001 254,750 80,000 0 43,745 15,750 0 31,204
Vice Chairman 2000 252,500 125,000 0 43,390 17,640 0 28,803
Commerce Bancshares, Inc. 1999 246,500 125,000 0 0 17,363 0 29,229
Seth M. Leadbeater......... 2001 248,750 94,000 0 43,745 15,750 0 17,872
Executive Vice President 2000 237,100 125,000 0 38,482 17,640 0 15,108
Commerce Bancshares, Inc. 1999 209,917 125,000 0 0 17,363 0 12,546
V. Raymond Stranghoener.... 2001 217,938 84,000 0 32,667 13,650 0 7,468
Senior Vice President, 2000 211,311 93,400 0 0 1,708 0 1,481
Commerce Bancshares, Inc. 1999 46,932 100,000 0 0 1,445 0 80
---------------
(1) All Other Compensation (i) includes the total of the amounts contributed by
the Company to the CERP and 401(k) Plans for the benefit of these
individuals. For 2001, this is based on a maximum of 1.2% of salary in
column (c) for the 401(k) Plan plus the amount allocated to each individual
under the CERP Plan. For 2001, those amounts for the CERP and 401(k),
respectively, are as follows: David W. Kemper -- $46,223 and $5,100;
Jonathan M. Kemper -- $43,433 and $5,100; William A. Sullins, Jr. -- $23,471
and $5,100; Seth M. Leadbeater -- $11,878 and $5,100; and V. Raymond
Stranghoener -- $1,601 and $5,100. Other amounts are for the Group Term Life
Insurance plan of the Company.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(c) POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
-------------------------------------------------------------------------------------- VALUE AT
% OF ASSUMED ANNUAL
(b) TOTAL RATES OF STOCK
NUMBER OPTIONS/ PRICE
OF SARS APPRECIATION FOR
SECURITIES GRANTED (d) OPTION TERM
UNDERLYING TO EXERCISE ---------------------
OPTIONS/SARS EMPLOYEES OR BASE (e) (f) (g)
(a) GRANTED IN FISCAL PRICE EXPIRATION 5% 10%
NAME (#) YEAR ($/SH) DATE ($) ($)
---- ------------ ------------ ----------- ---------- --------- ---------
David W. Kemper............... 76,650 13.11% $37.68 3/6/2011 1,816,287 4,602,828
Jonathan M. Kemper............ 33,600 5.74% $37.68 3/6/2011 796,181 2,017,678
William A. Sullins, Jr. ...... 15,750 2.69% $37.68 3/6/2011 373,210 945,787
Seth M. Leadbeater............ 15,750 2.69% $37.68 3/6/2011 373,210 945,787
V. Raymond Stranghoener....... 13,650 2.33% $37.68 3/6/2011 323,448 819,682
Options granted (column b) include only Non-Qualified Stock Options (NQ).
All substantive terms are identical -- four (4) equal vesting periods with 25%
exercisable at date of grant and an additional 25% exercisable on each
anniversary date thereof. The exercise price is defined as the closing market
price on the date of grant, and the options are not exercisable following
voluntary termination. The options are not
9
assignable but may be exercised by the optionee's estate or beneficiary, subject
to certain limitations, in the case of the death of the optionee.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
(d)
NUMBER OF (e)
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
(b) UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED (c) FY-END FY-END
ON VALUE (#) ($)
(a) EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- ----------- --------- ------------------------- -------------------------
David W. Kemper............. 67,880 961,619 178,403 981,874
113,438 622,258
Jonathan M. Kemper.......... 0 0 245,626 4,231,246
49,550 269,625
William A. Sullins, Jr. .... 80,949 2,037,702 114,269 1,637,345
24,972 142,698
Seth M. Leadbeater.......... 5,825 153,767 117,265 1,851,916
24,972 142,698
V. Raymond Stranghoener..... 0 0 5,351 21,560
11,452 25,663
PERFORMANCE GRAPH:
[PERFORMANCE GRAPH]
FIVE YEAR CUMULATIVE TOTAL RETURN
----------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
----------------------------------------------------------------------------------------------------
Commerce CBSH 100.00 156.19 156.31 132.91 178.28 174.62
----------------------------------------------------------------------------------------------------
NASDAQ
Financial 100.00 167.54 162.77 161.68 174.63 192.10
----------------------------------------------------------------------------------------------------
S&P 500 100.00 133.36 171.48 208.56 188.66 166.24
----------------------------------------------------------------------------------------------------
Assumes $100 invested 12/31/96 with dividends reinvested on a Total Return
basis with Commerce (CBSH) compared to the above named indices.
10
RETIREMENT BENEFITS:
The Company maintains the Commerce Bancshares Restated Retirement Plan. All
employees are eligible to participate on the later of January 1st or July 1st
after completion of one year of service and the attainment of age 21. The Plan
provides benefits based upon earnings, age and years of participation.
The annual benefit is determined under a cash balance formula effective
January 1, 1995. Under the cash balance formula, a retirement account balance is
maintained for each participant. At the end of each Plan Year beginning after
December 31, 1994, the participant's account will be credited with a cash
balance credit equal to a percentage of total pay for the year plus the same
percentage of pay in excess of 50% of the Social Security taxable wage base for
the year. Pay for this purpose is limited by Section 401(a)(17) of the Internal
Revenue Code. The applicable percentage is determined by the sum of the
participant's age and years of participation at the beginning of the Plan Year,
and ranges from 1% for a sum of less than 30 to 4% for a sum of 75 or more.
Interest is credited to the participant's account at the end of each Plan Year
beginning after 1995 at a rate not less than 5% of the account balance at the
end of the prior Plan Year (for 2001, the rate of interest was 7%). At
retirement, the retirement account balance is converted to various annual
benefit options based on actuarial factors defined in the Plan.
In addition, the participant shall receive an annual benefit equal to his
annual benefit accrued through December 31, 1994 under the Plan's prior formula,
adjusted for increases in the cost of living (but not in excess of 4% per year)
for each year of participation after December 31, 1994. Certain executive
members of the plan will receive a special minimum benefit based on the final
five-year average pay and years of service. This provision is subject to IRS
approval, which has been requested.
This Plan is fully paid for by the Company and employees covered by the
Plan become fully vested after five years of service. The normal retirement age
under the Plan is 65. Reduced benefits are available as early as age 55. Messrs.
David Kemper, Jonathan Kemper, Sullins, Leadbeater, and Stranghoener have,
respectively, 22, 19, 26,11 and 1 year(s) of service as of December 31, 2001.
Compensation covered by the Plan for 2001 includes salary (as reported in
the Summary Compensation Schedule) and was limited by Section 401(a)(17) of the
Internal Revenue Code to $170,000. The compensation for 2001 covered by the Plan
was: Mr. David Kemper $170,000; Mr. Jonathan Kemper $170,000; Mr. Sullins
$170,000; Mr. Leadbeater $170,000; and Mr. Stranghoener $170,000.
The estimated annual benefits payable at normal retirement age for Messrs.
David Kemper, Jonathan Kemper, Sullins, Leadbeater and Stranghoener are
$131,802, $120,008, $63,303, $76,529, and $38,271, respectively. These benefits
assume the election of a retirement allowance payable as a straight life annuity
to the participant.
The Company also maintains the Commerce Executive Retirement Plan ("CERP"),
effective January 1, 1995, to provide nonqualified deferred compensation for a
select group of executives. The CERP is unfunded; benefits are payable from the
assets of the Company. The Board of Directors may designate the CEO as a
participant; other participants are selected by the CEO.
A participant's benefit under the CERP is the amount by which (1) exceeds
(2), where (1) is the benefit that would be payable under Commerce Bancshares
Retirement Plan if that benefit were calculated using the participant's total
pay including any bonus deferred under a nonqualified deferred compensation plan
maintained by the Company and without regard to the pay limit of Section
401(a)(17) of the Internal Revenue Code and (2) is the benefit actually payable
under the Commerce Bancshares Retirement Plan.
Compensation covered by the CERP for 2001 includes salary and bonuses as
reported in the Summary Compensation Schedule. The compensation for 2001 covered
by the CERP was: Mr. David Kemper $1,108,153; Mr. Jonathan Kemper $502,054; Mr.
Sullins $379,750; Mr. Leadbeater $373,750; and Mr. Stranghoener $311,338.
The estimated annual benefits payable under the CERP at normal retirement
age for Messrs. David Kemper, Jonathan Kemper, Sullins, Leadbeater and
Stranghoener are $229,110, $59,563, $3,784, $816 and
11
$0, respectively. These benefits assume the election of a retirement allowance
payable as a straight life annuity to the participant.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION:
The Company's executive compensation policy is intended to be competitive
with bank holding companies in geographic proximity, comparable asset size and
considered as direct competitors with the Company so that total compensation
received by the executive officers of the Company is believed to be comparable
on a long-term basis. The policy is also intended to offer an incentive for
performance for the Company's executive officers and managers, including the
chief executive officer and the four other most highly paid executive officers
(collectively with the chief executive officer, the "senior executives"). The
overall compensation program is designed to retain and reward on both a short
and long-term basis. In the case of the Chief Executive Officer, the Committee
pays particular attention to the total compensation paid to the chief executive
officers of the competing bank holding companies described above but taking into
consideration the relative size of the companies and their financial returns.
Statistical measurements including earnings per share, return on assets, return
on equity, net income, and asset quality are considered over a one to five year
time frame but not weighted in regard to base salary considerations.
The three members of the Compensation and Benefits Committee are all
non-employee directors. The principal elements of the Company's executive
compensation program for the fiscal year ended December 31, 2001, applicable to
the Company's executive officers, including the senior executives, were:
(1) Base salary levels are reviewed and determined annually.
Consideration is given to the scope of responsibilities and to the
similarity of positions with immediate competitors. In this regard,
comparison is made with the compensation paid to the top five officers of
comparable bank holding companies which, by virtue of their location, are
considered immediate competitors. Factors included in the comparison are
relative size of companies, the financial results obtained, both currently
and over a period of time, and the experience and responsibility of the
individuals. While the base salary compensation paid to the senior
executives is somewhat below the average of the immediate competitors, the
Committee believes such compensation is in line considering the relative
size of the companies and also considering the Company's strong emphasis on
long-term shareholder alignment through incentives such as stock options.
In addition, the Committee reviews individual performance ratings, being
the result of reviews conducted by an officer's superior. The Committee
also considers responsibility changes, taking into account outstanding or
improved performance. The Committee approves salary increases and salary
levels after consideration of both internal and external information as set
forth above. In establishing base salaries, the Committee does not assign
any weight to any particular factor. The Committee reviewed national survey
data and competitor data prior to recommending base salary increases during
2001.
(2) Cash Bonus awards are considered annually. In awarding bonus
payments, factors considered by the Compensation Committee include: (i) a
review of the Company's financial performance as determined by the level of
overall net income, as well as statistical measurements, return on assets,
return on equity, asset quality and asset growth, as compared to internal
trends and selected competitors; (ii) the value created for shareholders in
both the most recent year and five year trends as determined by market
price of the Company stock compared to the NASDAQ financial indices; and
(iii) the performance of individuals to the extent measurable in meeting
budget expectations. The Committee has established performance targets that
affect the granting of and size of a bonus for the top executives of the
Company. Performance of the Company in relation to competitors' performance
is considered but not weighted in the granting of a bonus. The Chief
Executive Officer is also subject to the previous measurements. Bonuses
earned as a percentage of base salary for senior executives for 2001
performance ranged from 56.3% in the case of the chief executive officer to
4.0%.
(3) Stock Options are also awarded annually. They are awarded to
provide individuals with long-term incentives for profitable growth and
closer align the Company's senior executives with the interest of the
Company's shareholders. Retention and long-term reward are both factors
considered in granting stock options. With respect to the amount of options
to be granted, consideration is given to the scope of
12
responsibility and the degree of its effect on the Company's performance as
well as the degree of importance in providing incentive to the individual
to stay with the Company over time. The Committee, in determining whether
to grant options or in the granting of options, does not take into
consideration the amounts of options previously granted or outstanding.
However, the Company has implemented targeted guidelines in determining
option awards to all participants in the option program including senior
executives. Targeted percents range from 25% to 500% of base pay depending
on the grade of the individual officer. Targeted percents may be exceeded
when individual participants' performance exceed expectations. A new long
term incentive component was added during 1999 based on a study reviewed by
the Compensation and Benefit Committee. This new component is restricted
stock awards based on the overall long-term performance of the Company.
The overall executive compensation policy described above also applies to
the compensation of the Chief Executive Officer. The Compensation and Benefits
Committee reviews Mr. David Kemper's performance each year and makes
recommendations to the board for any increases. Mr. Kemper completes a
self-appraisal which the Committee considers before making its final
recommendation. Several factors were considered in the review of Mr. Kemper's
performance in 2001 with an overall focus on the increase in the franchise value
of the company. Besides financial performance the Committee also considered
factors such as growth in the human capital of the organization, the continued
reinvestment and improvement of the company's product offerings and the overall
focus on risk management.
The Compensation and Benefits Committee also reviews annually the total
compensation of key executives to determine whether the Company's compensation
package is competitive when compared to national survey data as well as a peer
group of executives at bank holding companies in geographic proximity,
comparable asset size and considered to be direct competitors with the Company.
The Internal Revenue Code ("Code") contains a limitation on the
deductibility for tax purposes of certain executive compensation in excess of
$1,000,000. The limitations contained in Section 162(m) of the Code apply to the
compensation paid to the executive officers of the Company named in the Summary
Compensation Table. In 2001, no executive officer exceeded $1,000,000 in taxable
compensation as defined in Section 162(m).
Non-Qualified Stock Option Plan was amended in 1995 to provide for a
formula to determine the maximum number of options which may be granted in any
one year to any one person, which means any income recognized on the exercise of
a nonqualified stock option will qualify as "performance-based compensation" and
will not be included in determining the compensation which is limited to
$1,000,000.
Executives other than senior executives also participate in both the bonus
and stock option programs. Other elements of compensation offered to the senior
executives and to all other eligible employees include participation in a 401(k)
deferred contribution plan.
Submitted by the Compensation and Benefits Committee of the Company's Board
of Directors:
Andrew C. Taylor Giorgio Balzer Mary Ann Van Lokeren
13
AUDIT COMMITTEE REPORT:
JANUARY 22, 2002
The role of the Audit Committee is to assist the Board of Directors in its
oversight of the Company's financial reporting process. The Board of Directors,
in its business judgment, has determined that all members of the Audit Committee
are "independent" as required by applicable listing standards of the NASDAQ. The
Audit Committee operates pursuant to a Charter that was last amended and
restated by the Board on February 1, 2001. As set forth in the Charter,
management of the Company is responsible for the preparation, presentation and
integrity of the Company's financial statements, the Company's accounting and
financial reporting principles and internal controls and procedures designed to
assure compliance with accounting standards and applicable laws and regulations.
The independent auditors are responsible for auditing the Company's financial
statements and expressing an opinion as to their conformity with generally
accepted accounting principles.
In the performance of its oversight function, the Audit Committee has
considered and discussed the audited financial statements with management and
the independent auditors. The Audit Committee has also discussed with the
independent auditors the matters required to be discussed by Statement on
Auditing Standard No. 61, Communication with Audit Committees, as currently in
effect. Finally, the Audit Committee has received the written disclosures and
the letter from the independent auditors required by Independence Standards
Board No. 1, Independence Discussions with Audit Committees, as currently in
effect, and written confirmations from management with respect to internal audit
services provided by the auditors. The Audit Committee has considered whether
internal audit and other non-audit services provided by the independent auditors
to the Company is compatible with maintaining the auditor's independence and has
discussed with the auditors the auditors' independence.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not financial experts in the fields
of accounting or auditing, including in respect of auditor independence. Members
of the Audit Committee rely without independent verification on the information
provided to them and on the representations made by management and the
independent accountants. Accordingly, the Audit Committee's oversight does not
provide an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles or appropriate
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the Audit Committee
has relied upon the expertise and representations of others to determine that
the audit of the Company's financial statements have been carried out in
accordance with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted accounting
principles, and that the Company's auditors are in fact "independent".
Based on the reports and discussions described in this report, and subject
to the limitations on the role and responsibilities of the Audit Committee
referred to above and in the Charter, the Audit Committee recommended to the
Board that the audited financial statements be included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2001 to be filed with the
Securities and Exchange Commission.
SUBMITTED BY THE AUDIT COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS
Robert H. West James B. Hebenstreit L. W. Stolzer Benjamin F. Rassieur, III
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION:
The Compensation and Benefits Committee consists of three members of the
Board of Directors of the Company, none of whom are officers of the Company.
During 2001, the Committee consisted of Ms. Mary Van Lokeren and Messrs. Giorgio
Balzer and Andrew C. Taylor.
14
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE:
Pursuant to Section 16 of the Securities Exchange Act of 1934, the
Company's Directors and certain executive officers are required to report,
within specified monthly and annual due dates, their initial ownership of the
Company's common stocks and all subsequent acquisitions, dispositions or other
transfers of interest in such securities, if and to the extent reportable events
occur which require reporting by such due dates. The Company is required to
identify in its proxy statement whether it has knowledge that any person
required to file such a report may have failed to do so in a timely manner.
Based on that review, all of the Company's directors and all executive officers
subject to the reporting requirements satisfied such requirements in full,
except that due to a clerical error reporting on Form 5 of changes in 2000
holdings of non-employee directors in the Non-Employee Director Stock Purchase
Plan was filed one day late. In addition, A. Bayard Clark, an executive of the
Company, filed a correction to a monthly report on Form 4 relating to one
transaction after the due date; and W. Thomas Grant, II, a director of the
Company, filed a monthly report on Form 4 relating to one transaction after the
due date. The Company's review determined that the late filings were due to
inadvertent oversight and had been properly corrected.
RELATIONSHIP AND APPROVAL OF AUDITORS:
Since the Company began operations in 1967, the accounting firm of KPMG LLP
has examined and reported on the financial statements of the Company and has
rendered certain non-audit services. The Board of Directors, upon recommendation
of its Audit Committee, has determined to continue the services of this firm for
the current fiscal year, ending December 31, 2002. Such services will include
the examination of the financial statements of the Company for the fiscal year
ending on such date and other appropriate accounting services. A member of KPMG
LLP will attend the annual meeting and will have the opportunity to make a
statement if desired. Such member will also be available to respond to questions
of the shareholders.
AUDIT FEES
The aggregate fees billed by KPMG LLP for professional services rendered
for the audit of the Company's annual financial statements for the fiscal year
ended December 31, 2001 and for the reviews of the financial statements included
in the Company's Quarterly Reports on Form 10-Q for that fiscal year were
$311,000.
ALL OTHER FEES
The aggregate fees billed by KPMG LLP for services rendered to the Company,
other than the services described above under "Audit Fees" for the fiscal year
ended December 31, 2001 were $899,918. There were no professional services
rendered for information technology services relating to financial information
systems design and implementation during 2001.
SHAREHOLDER PROPOSALS AND NOMINATIONS:
Proposals of shareholders pursuant to Rule 14a-8 for inclusion in the proxy
statement for the annual meeting of shareholders to be held on April 16, 2003,
must be received by the Company at its principal offices not later than November
12, 2002. For proposals other than those submitted pursuant to Rule 14a-8, the
Company's By-laws provide that shareholders must give timely written notice to
the Secretary of the Company of a nomination for director or before bringing any
business before the annual meeting. Notice of nominations and shareholder
proposals for the annual meeting to be held on April 16, 2003 must be received
by the Secretary no later than February 16, 2003 nor before January 17, 2003. To
be considered, the notice must contain the name and record address of the
shareholder; the class or series and number of shares of capital stock of the
Company owned beneficially or of record by the shareholder; a description of all
arrangements or understandings between such shareholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) or shareholder proposal is made; and a representation
that such shareholder intends to appear in person or by proxy at the meeting to
nominate the person or bring the business proposal before the meeting. For
shareholder proposals, the notice must also set
15
forth a brief description of the business to be brought before the meeting and
the reasons for conducting such business at the meeting and any material
interest of such shareholder in such business. For nominations, the notice must
also set forth as to each person the shareholder proposes to nominate for
election as a director the name, age business and residence address of the
person; the principal occupation or employment of the person; the class or
series and number of shares of capital stock of the Company which are owned
beneficially or of record by the person and any other information relating to
the person nominated or the nominating shareholder that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities and Exchange Act of 1934. Such notice must also be
accompanied by a written consent of each proposed nominee to be named a nominee
and to serve as a director if elected.
OTHER MATTERS:
The management does not know of any matter or business to come before the
meeting other than that referred to in the notice of meeting but it is intended
that, as to any such other matter or business, the person named in the
accompanying proxy will vote said proxy in accordance with the judgment of the
person or persons voting the same.
ELECTRONIC ACCESS TO PROXY STATEMENT AND ANNUAL REPORT:
This proxy statement and the 2001 annual report are available on the
Company's Internet site at http://www.commercebank.com/ir. Most Shareholders can
elect to view future proxy statements and annual reports over the Internet
instead of receiving paper copies in the mail.
Shareholders of record can choose this option and save the Company the cost
of producing and mailing these documents by filling out the online consent form
by logging on to the sign-up website at http://www.econsent.com/cbsh.
Shareholders who choose to view future proxy statements and annual reports over
the Internet will receive an e-mail message next year with instructions
containing the Internet address of those materials. The election may be
withdrawn at anytime by accessing your account on the website and changing the
election. Shareholders do not have to elect Internet access each year.
Shareholders who hold their Company stock through a bank, broker or other
holder of record, should refer to the information provided by that entity for
instructions on how to elect to view future proxy statements and annual reports
over the Internet.
Some Shareholders who hold their Company stock through a bank, broker or
other holder of record and who elect electronic access will receive an e-mail
next year containing the Internet address to use to access the Company's proxy
statement and annual report.
By Order of the Board of Directors
J. DANIEL STINNETT
Secretary
March 12, 2002
16
EXHIBIT A
COMMERCE BANCSHARES, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
AMENDMENT AND RESTATEMENT OF JULY 31, 1998
1. PURPOSE
The policy of Commerce Bancshares, Inc. ("Commerce") is to compensate its
officers based on performance. The purpose of this Executive Incentive
Compensation Plan ("Plan") is to provide incentive compensation awards to those
individuals whose management efforts reflect a desire to meet commonly agreed
upon objectives or to those who by their superior performance directly
contribute to the profitability of Commerce and to encourage the retention of
outstanding contributors.
This Plan is intended to comply with Section 162(m) of the Internal Revenue
Code (the "Code") so that awards made under the Plan to individuals who are
covered employees within the meaning of Code Section 162(m)(3) ("Covered
Employees") will qualify as performance-based compensation within the meaning of
Code Section 162(m) and the regulations thereunder ("Performance-Based
Compensation").
2. ADMINISTRATION
The Plan shall be administered by the Compensation and Benefits Committee
("Committee") of the Board of Directors ("Board") of Commerce, which shall
consist solely of two or more directors who are "non-employee directors" under
Rule 16b-3(b)(3) promulgated under the Securities Exchange Act of 1934, as
amended, or any successor provision thereto, and "outside directors" within the
meaning of Treasury Regulation Section 1.162-27(e)(3)(i). The Committee shall
have authority in its sole discretion to interpret the Plan, establish rules and
procedures thereunder, and make all determinations, including the determination
of incentive compensation awards eligible to be deferred under the Plan. All
determinations made by the Committee shall be final and binding.
3. ELIGIBLE PARTICIPANTS
All chief executive officers, Chairman of the Board, Presidents, and Vice
Presidents of Commerce or any of its affiliated banks or subsidiary companies
shall be eligible to participate in the Plan, together with such other officers
of Commerce and its affiliated banks and subsidiary companies as the Committee
shall determine. Directors who are not officers or employees of Commerce, an
affiliated bank, or a subsidiary company, are not eligible to participate in the
Plan.
4. DETERMINATION OF AWARD
The Board of Commerce in its sole discretion shall approve the amount of
the aggregate incentive compensation awards to be granted based on the
recommendation of the Committee. Individual incentive compensation awards shall
be granted in the following manner:
a. With respect to Covered Employees, individual incentive
compensation awards shall qualify as Performance-Based Compensation. In so
qualifying awards, the Committee, in its sole discretion, may set
restrictions based upon the achievement of objective performance goals
within the meaning of Code Section 162(m) and the regulations thereunder
("Performance Goals"). Each award to a Covered Employee shall meet the
following requirements:
(i) Performance Goals for the award shall be established by the
Committee based on one or more of the following criteria: revenue,
earnings, earnings per share, pre-tax earnings and net profits, stock
price, market share, costs, return on equity, efficiency ratio
(non-interest expense, divided by total revenue) asset management, asset
quality, asset growth and budget achievement. Performance
17
Goals need not be the same with respect to all Covered Employees and may
be established separately for Commerce as a whole or for its various
groups, divisions, subsidiaries and affiliates.
(ii) Each Performance Goal shall be specifically defined in advance
by the Committee and may include or exclude specified items of an
unusual, non-recurring or extraordinary nature.
(iii) Each Performance Goal must be sufficiently objective that a
third party having knowledge of the relevant facts could determine
whether the Performance Goal has been met.
(iv) Different awards may be set by the Committee based on
achievement of certain Performance Goals or specified levels of
achieving the Performance Goals. However, no award shall be paid to any
Covered Employee if the applicable minimum Performance Goal(s) are not
achieved.
(v) Performance Goals shall be set by the Committee before the end
of the period that constitutes the first twenty-five percent (25%) of
the period of service to which the Performance Goal relates, provided
that the outcome is substantially uncertain at the time the Committee
actually establishes the Performance Goal.
(vi) The Committee shall have no discretion to increase the amount
of compensation that otherwise would be due upon attainment of a
Performance Goal, although the Committee may have discretion to deny an
award or to adjust downward the compensation payable pursuant to an
award, as, in the Committee's sole judgment, is prudent based upon the
Committee's assessment of the Covered Employee's performance and
Commerce's performance during the Fiscal Year.
(vii) In granting awards, the Committee shall follow any additional
procedures determined by it in its sole discretion from time to time to
be necessary, advisable or appropriate to ensure qualification of the
awards as Performance-Based Compensation.
b. With respect to individuals who are not Covered Employees,
individual incentive compensation awards shall be determined with reference
to performance during the preceding year. The incentive compensation awards
to be made to the Chairman of the Board or the President (if such persons
are not Covered Employees) shall be determined by the Committee. All other
awards to be made under this Plan may be determined by the Committee, or
should the Committee so direct, by a committee consisting of the Chief
Executive Officer, a Vice-Chairman designated by the Chief Executive
Officer, and the chief human resource officer.
5. PAYMENT OF INCENTIVE AWARD
Incentive compensation awards are generally determined and made on or
before the date of the annual meeting of the shareholders of Commerce. The
normal method of payment will be in the form of cash and awards will be paid as
soon as practicable after the awards are determined, provided, that the
recipient of an award shall not have elected to defer receipt of the incentive
compensation award as hereinafter provided.
Notwithstanding the foregoing, no incentive compensation award shall be
paid to a Covered Employee before the Committee certifies that such Covered
Employee met the requirements of the applicable Performance Goal and satisfied
any other material terms applicable to the incentive compensation award.
The maximum bonus that may be paid to any employee pursuant to the plan for
any calendar year shall not exceed $1,500,000.
6. DEFERRAL OPTIONS
a. Eligible employees who are members of a select group of management or
highly compensated employees, as selected by the Commerce Director of Human
Resources in his or her discretion, may elect to defer all or a portion of an
incentive compensation award until the earlier to occur of retirement, death, or
termination. A deferral must be expressed either as "all" or as a specified
dollar amount. Any incentive compensation award above the specified amount will
be paid in cash, and if the award is less than the amount deferred, the total
award will be deferred. The granting of an incentive compensation award is
discretionary
18
and neither delivery of deferral election materials nor an election to defer
shall affect entitlement to such an award. All deferral elections made under the
Plan are irrevocable. It is intended that this arrangement qualify as, and shall
be administered to qualify as being unfunded and being primarily for the purpose
of providing deferred compensation for a select group of management or highly
compensated employees.
b. In order to ensure that elections to defer incentive compensation awards
are effective under applicable tax laws, all persons eligible to participate in
this Plan will be given the opportunity to defer payment of all or a portion of
an incentive compensation award. An election to defer must be made in a written
form satisfactory to Commerce and must be received by the Commerce Director of
Human Resources on or before the last business day of the year preceding the
year for which performance is measured to determine the granting of an incentive
compensation award.
c. An eligible employee in electing a deferred payment shall also elect the
accounts, from among the accounts that Commerce makes available to the
participating employee, to which the relevant portion of the award deferral will
be credited. Credits to available accounts for deferral of an incentive
compensation award shall be determined from time to time based upon hypothetical
measuring investments (the "Measuring Investments") for each account; one of
which shall consist of a Company Stock Account and there shall be such other
accounts determined from time to time by the Director of Human Resources in his
or her discretion. Such accounts are bookkeeping accounts only and are
maintained for the sole purpose of determining the amount payable by Commerce to
the eligible employee based upon the hypothetical performance of the Measuring
Investments for each such account, determined as if the account had assets
invested in the Measuring Investments of such account. No assets shall be
segregated for the benefit of an eligible employee and the bookkeeping account
shall not represent assets set aside for the benefit of an eligible employee.
With the exception of the Commerce Stock Account, an eligible employee may
elect to transfer credits between accounts, and the amount credited to all such
accounts shall be determined from time to time, all pursuant to
non-discriminatory rules, procedures and deadlines set by the Commerce Director
of Human Resources, which rules, procedures, and deadlines may be amended from
time to time in such officer's discretion (the "Administrative Rules"). Except
as set forth in the following paragraph, however, an eligible employee may elect
to transfer credits into the Commerce Stock Account, but not out of the Commerce
Stock Account. Any election to transfer a credit to the Commerce Stock Account
or among the other accounts (a "Transfer Election") must be received by the
Commerce Director of Human Resources by the date set by the Commerce Director of
Human Resources and must be in a written form satisfactory to such officer, in
each case pursuant to the Administrative Rules. Any transfer to the Commerce
Stock Account shall be based upon the last sale price of Commerce Stock as
reported by the National Association of Security Dealers National Market System
on the last trading day determined in accordance with the Administrative Rules.
The credit transferred from any other account shall be based upon the amount
credited to such account as of the date determined in accordance with the
Administrative Rules.
Notwithstanding the above, an eligible employee may make a one-time
election to remove any or all amounts out of the Commerce Stock Account (a
"Diversification Election") as of February 17, 2000. Such Diversification
Election must be made at the time and in the manner determined pursuant to the
Administrative Rules. Any transfer from the Commerce Stock Account shall be
based upon the last sale price of Commerce Stock as reported by the National
Association of Security Dealers National Market System on the trading day
determined in accordance with the Administrative Rules. The amount transferred
from the Commerce Stock Account pursuant to the Diversification Election shall
be based upon the number of units credited to such account as of the date
determined in accordance with the Administrative Rules.
d. The accounts made available for the deferral of incentive compensation
awards are bookkeeping accounts. The amount credited to each account, including
any hypothetical earnings, gains or losses, will be determined in accordance
with the Administrative Rules, based on the investment performance of the
Measuring Investments for such Account. The timing and manner of making credits
or debits to each account shall be determined in accordance with the
Administrative Rules.
19
e. Commerce shall provide periodically to each participant (but not less
frequently than once per calendar year) a statement setting forth the balance to
the credit of such participant in each of the accounts.
f. Amounts deferred under the provisions of this Plan will be disbursed to
participants in accordance with the following:
(i) An amount equal to the amounts credited to accounts other than the
Commerce Stock Account will be paid by Commerce in a single distribution as
soon as reasonably practicable after retirement, disability, death or other
termination of employment, except that a participant may elect to instead
have payment made in up to ten annual equal installments or in such
installments after receiving a lump sum payment of a portion of the payment
due. Annual installments will be paid in an amount, less applicable
withholding taxes, determined by multiplying the balance in such other
accounts by a fraction, the numerator of which is one (1) and the
denominator of which is a number equal to remaining unpaid annual
installments.
(ii) If a participant dies after the commencement of payments from
such participant's accounts other than the Commerce Stock Account, the
designated beneficiary shall receive the remaining installments over the
elected installment period.
(iii) With respect to a participant's Commerce Stock Account, upon
such participant's disability, death, retirement, or other termination of
employment, Commerce shall transfer to such participant a number of shares
of Commerce stock, and cash for any fractional shares, equal to the units
credited to the participant's Commerce Stock Account. Alternatively, a
participant may elect to have payment with respect to his Commerce Stock
Account made in up to ten equal annual installments or in such installments
after receiving a lump sum payment of a portion of the payment due, in
which case Commerce shall transfer to such electing participant for each
installment the number of shares of Commerce stock, and cash for any
fractional shares, equal to the units credited to the portion of the
participant's Commerce Stock Account to be paid in such installment. No
payment, however, shall be made with respect to the Commerce Stock Account
until arrangements satisfactory to Commerce shall have been made to provide
for payment to Commerce of federal, state, local, and payroll withholding
taxes attributable to such payment.
(iv) Each participant shall have the right at any time to designate
any person or persons as beneficiary or beneficiaries (both principal as
well as contingent) to whom payment under this Plan shall be made in the
event of death prior to complete distribution to the participant of the
amounts due under this Plan. Any beneficiary designation may be changed by
a participant by the filing of such change in writing on a form prescribed
by Commerce. The filing of a new beneficiary designation form will cancel
all beneficiary designations previously filed and will apply to all
deferrals in the account. If a beneficiary has not been designated or if
all designated beneficiaries predecease the participant, then any amounts
payable to the beneficiary shall be paid to the participant's estate in one
lump sum.
(v) If there is any change in the number or class of shares of
Commerce stock through the declaration of stock dividend or other
extraordinary dividends or recapitalization resulting in stock splits or
combinations or exchanges of such shares or in the event of similar
corporate transactions, each participant's Commerce Stock Account shall be
equitably adjusted to reflect any such change in the number or class of
issued shares of common stock of Commerce or to reflect such similar
corporate transaction.
(vi) The Human Resources/Salary Committee of Commerce, upon 30 days
written notice, may approve a "hardship" request for distribution of a
deferred award. Unless the participant presents proof satisfactory to such
committee of financial need, requests for hardship distribution will be
denied. Each request will be evaluated on the basis of uniformly applied
criteria.
7. AMENDMENT AND TERMINATION OF PLAN
The Board of Directors may at its discretion and at any time amend the Plan
in whole or in part. The Committee may terminate the Plan in its entirety at any
time, and, upon such termination or such later date or
20
dates, each participant shall: receive, in a single distribution, the shares and
cash for the fractions thereof of Commerce Stock credited to the Commerce Stock
Account; and shall be paid, in a single distribution or over such period of time
as determined by the Committee, an amount equal to the then remaining amount
credited to such participant's accounts other than the Commerce Stock Account.
8. MISCELLANEOUS
a. A participant under this Plan is merely a general unsecured creditor and
nothing contained in this Plan shall create a trust of any kind or a fiduciary
relationship between Commerce and the participant or the participant's estate.
Nothing contained herein shall be construed as conferring upon the participant
the right to continued employment with Commerce or its subsidiaries or to an
incentive compensation award. Except as otherwise provided by applicable law,
benefits payable under this Plan may not be assigned or hypothecated, and no
such benefits shall be subject to legal process or attachment for the payment of
any claim of any person entitled to receive the same.
b. The amendment of the Plan to allow a Commerce Stock deferral option
shall become effective on the date the shareholders of Commerce approve the
same. Subject to such approval, an employee having a deferred option may elect
(but prior to June 30, 1994) to transfer his balance in the Treasury Bill
account and/or the Treasury Note Account as of April 1, 1994 to the Commerce
Stock Account with the number of units credited to his account determined as
provided in Section 6d hereof but based on the last sale price as of the last
day in March 1994 on which a trade of Commerce Stock is reported. An employee
who in 1993 deferred a potential incentive compensation award with respect to
performance in 1994 and elected either a Treasury Bill Account or a Treasury
Note Account may elect prior to June 30, 1994 to defer such award for 1994 to
the Common Stock Account.
c. Notwithstanding any other provision herein, Commerce may establish a
trust subject to the claims of the general creditors of Commerce (a "rabbi
trust") and deposit amounts into the rabbi trust. Although any payments from the
rabbi trust to a participant shall discharge Commerce's obligation to the extent
of payment made, this plan is unfunded and no participant shall have an interest
in any rabbi trust asset.
d. Notwithstanding any other provision of this Plan to the contrary,
incentive compensation awards shall not be paid to Covered Employees unless and
until the material terms under which the remuneration is to be paid, including
the Performance Goals, are (1) disclosed to shareholders and (2) subsequently
approved by a majority of the vote in a separate shareholder vote before the
payment of such remuneration.
21
COMMERCE BANCSHARES,INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P
The undersigned hereby appoints Jonathan M.Kemper and David W.Kemper, or
R either of them, as agents and proxies with full power of substitution in
each, to represent the undersigned at the annual meeting of shareholders to
O be held on April 17, 2002, or any adjournment thereof, on all matters
coming before the meeting.
X Change of address
Election of Director, Nominees:
Y ----------------------------
01 John R.Capps, 02 W.Thomas Grant, II, ----------------------------
03 James B.Hebenstreit, 04 Robert C. ----------------------------
Matthews, Jr.and 05 William A.Sullins, Jr. ----------------------------
(If you have written in the
above space, please mark the
corresponding box on the
reverse side of this card)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX,
SEE REVERSE SIDE.YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTOR'S RECOMMENDATIONS.YOUR SHARES CANNOT
BE VOTED UNLESS YOU SIGN AND RETURN THIS CARD OR YOU ELECT TO VOTE YOUR
SHARES ELECTRONICALLY BY TELEPHONE OR VIA THE INTERNET.
-----------
SEE REVERSE
SIDE
-----------
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-- DETACH AND RETURN PROXY CARD --
IMPORTANT:PLEASE VOTE BY SIGNING YOUR
PROXY AND RETURNING IT IN THE ENVELOPE PROVIDED OR TAKE
ADVANTAGE OF INTERNET OR TELEPHONE VOTING AS DESCRIBED ON THE
REVERSE SIDE
ANY SHAREHOLDER WHO IS RECEIVING MULTIPLE COPIES OF THE ANNUAL REPORT AND
ANY OTHER MAILINGS FROM COMMERCE BANCSHARES, INC. ARE ENCOURAGED TO CALL
EQUISERVE TRUST COMPANY NA, OUR TRANSFER AGENT, AT 1-800-317-4445 FOR
ASSISTANCE IN CONSOLIDATING COMMON OWNERSHIP POSITIONS. REDUCING MAILINGS
WILL IMPROVE THE COMPANY'S OPERATING EFFICIENCIES.
PLEASE MARK YOUR 1573
[X] VOTES AS IN THIS
EXAMPLE.
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DIRECTORS RECOMMEND AVOTE FOR ALL NOMINEES. DIRECTORS RECOMMEND A VOTE FOR ITEM 2.
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FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 2. Approval of amendment to the Executive
Directors: [ ] [ ] Incentive Compensation Plan [ ] [ ] [ ]
(see reverse)
For, except vote withheld from the
following nominee(s):
-----------------------------------------
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Change of
Address on [ ]
Reverse Side
Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title
as such.The signer hereby revokes all proxies heretofore
given by the signer to vote at said meeting or any
adjournments thereof.
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SIGNATURE (S) DATE
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-- FOLD AND DETACH HERE --
To our Shareholders:
Commerce Bancshares, Inc.encourages you to vote your shares electronically
this year either by telephone or via the Internet.This will eliminate the
need to return your proxy card.You will need your proxy card and Social
Security Number (where applicable) when voting your shares
electronically.The Voter Control Number that appears in the box above, just
below the perforation, must be used in order to vote by telephone or via
the Internet.
The EquiServe Vote by Telephone and Vote by Internet systems can be
accessed 24-hours a day, seven days a week until the day prior to the
meeting.
TO VOTE BY TELEPHONE:
Using a touch-tone phone call Toll-free 1-877-PRX-VOTE (1-877-779-8683)
From outside the United States, call direct 1-201-536-8073
TO VOTE BY INTERNET:
Log on to the Internet and go to the website:
HTTP://WWW.EPROXYVOTE.COM/CBSH
THANK YOU FOR VOTING YOUR SHARES
YOUR VOTE IS IMPORTANT!
DO NOT RETURN THIS PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR THE
INTERNET.