COMMERCE BANCSHARES,
INC.
EXECUTIVE INCENTIVE COMPENSATION
PLAN
AMENDMENT AND RESTATEMENT AS
OF JANUARY 1, 2009
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”).
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.
Notwithstanding
the foregoing, the Retirement Committee shall administer the
“Deferral Options” set forth in section 6 of this Plan
in accordance with the terms of such section. The co-chairpersons
of the “Retirement Committee” shall be the
Company’s Controller and Retirement Committee. The
co-chairpersons shall appoint and remove the other members of the
Retirement Committee. The Retirement Committee shall consist of a
minimum of three members. The Retirement Committee shall act by a
majority of its members at the time in office, but such action may
be taken by a vote at a meeting or in writing (including e-mail)
without a meeting. The members of the Retirement Committee shall
receive no compensation for their services as such. Notwithstanding
the foregoing, the Retirement Committee may choose to delegate its
administrative functions hereunder. Decisions of the Retirement
Committee may be reflected in the terms of administrative forms
provided to 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.
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4.
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DETERMINATION OF
AWARD
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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:
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a.
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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:
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(i)
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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 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.
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(ii)
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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.
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(iii)
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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.
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(iv)
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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.
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(v)
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Performance Goals shall be set by
the Committee before the end of the period that constitutes the
earlier of the first ninety (90) days
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of, or 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.
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(vi)
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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.
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(vii)
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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.
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b.
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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.
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5.
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PAYMENT OF INCENTIVE
AWARD
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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, except for
amounts deferred in accordance with Section 6, incentive
compensation awards will be paid no later than the date 2
1 / 2
months following the end of the
calendar year during which the performance period for the incentive
compensation award ends.
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.
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a.
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Eligible employees who are members
of a select group of management or highly compensated employees, as
selected by the Retirement Committee, in its discretion, may elect
to defer all or a portion of an incentive compensation award until
the earlier to occur of the eligible employee’s Disability or
Separation from Service. Anyone who has made a deferral shall be
referred to as a “participant” until such individual
has received payment of all of his or her accounts under this Plan.
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 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.
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b.
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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
Retirement Committee 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. Notwithstanding
the foregoing, in the case of any incentive compensation award that
qualifies as being “performance based” within the
meaning of 409A and that is attributable to a performance period
that is at least 12 months in duration and is based on
performance criteria established no later than the date
90 days after the commencement of the performance period (a
“Performance Award”), the Retirement Committee may
permit an election with regard to a Performance Award to be
received by the Committee no later than 6 months prior to the
expiration of such performance period (no later than June 30
th
for a performance period
ending December 31), provided that the employee was employed
by Commerce continuously from the date the performance criteria was
established through the date of the election and that the payment
of the Performance Award is not substantially certain or readily
ascertainable at the time the election is received by the
Retirement Committee. An election to defer any incentive
compensation awards (including any Performance Award) shall become
irrevocable as of the deadline for making such election.
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c.
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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
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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 Retirement
Committee in its 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, a participant 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 Retirement Committee, which rules, procedures, and
deadlines may be amended from time to time in such
committee’s discretion (the “Administrative
Rules”). Except as set forth in the following paragraph,
however, a participant 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 Retirement Committee by the date set by
the Commerce Retirement Committee and must be in a written form
satisfactory to such committee, 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 trading day determined in a
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