<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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 Under Rule 14a-12
Commercial Bancshares, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[ ] 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:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
COMMERCIAL BANCSHARES, INC.
118 SOUTH SANDUSKY AVENUE
UPPER SANDUSKY, OHIO 43351
PROXY STATEMENT
TIME, DATE, AND PLACE OF MEETING
The Board of Directors of Commercial Bancshares, Inc. (the "Company"),
an Ohio corporation, is furnishing you with these proxy materials in connection
with the solicitation of proxies to be voted at the Company's 2000 Annual
Meeting of Shareholders (the "Meeting").
You are invited to attend the Meeting which will be held at 4:30 p.m.
on Wednesday, April 12, 2000 at the main office of the Commercial Savings Bank
(the "Bank") located at 118 South Sandusky Avenue, Upper Sandusky, Ohio 43351.
This Proxy Statement and form of proxy are being mailed to Shareholders
on or about March 10, 2000.
SHAREHOLDERS ENTITLED TO VOTE
Shareholders of record at the close of business on February 18, 2000
are entitled to receive these proxy materials and to vote their shares at the
Meeting. As of that date, there were 1,049,999 common shares outstanding. Each
common share is entitled to one vote on each matter brought before the Meeting.
VOTING YOUR SHARES
Your vote is important. You may vote your shares by attending the
Meeting and voting your shares in person or by completing and returning your
form of proxy as follows:
>> Mark your voting preference,
>> Sign and date your proxy form, and
>> Return to the Bank prior to the Meeting. A postage paid envelope is
enclosed for your convenience.
If your shares are held in the name of a bank, broker, or other holder
of record, you must obtain a proxy from the holder of record to be able to vote
at the Meeting.
You may revoke your proxy at any time before it is exercised by:
>> Delivering a signed revocation to the Company,
>> Submitting a later dated proxy, or
>> Attending the Meeting and voting your shares in person.
1
<PAGE> 3
The Board of Directors of the Company is soliciting proxies. Proxies
may be solicited on behalf of the Company by its directors, officers, and
employees. Proxies may be solicited personally, by fax, by electronic mail
(e-mail) or by telephone, in addition to the use of the mails. The Company will
bear the costs of soliciting proxies.
MULTIPLE COPIES OF ANNUAL REPORT
The 1999 Annual Report of the Company to Shareholders has been mailed
to Shareholders. If more than one copy has been sent to you, we will discontinue
mailing of reports on the accounts you select if you mark the designated box on
the appropriate form of proxy.
You must continue to receive the Annual Report for at least one
account. Your receipt of the other materials in your proxy mailing, and other
mailings throughout the year will not be affected by your election to
discontinue future duplicate mailings of the Annual Report.
Shareholders present in person or by proxy will constitute a quorum for
the purpose of considering and acting upon matters to be brought before the
Meeting or any adjournment thereof.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following is a table reflecting all shareholders, to the best
knowledge of the Company's management, owning beneficially five percent (5%) or
more of the Company's Common Stock as of February 18, 2000.
<TABLE>
<CAPTION>
- ------------------------------------- --------------------- ---------------------------- ----------------------------
Name and Address Title of Class Beneficial Ownership Percent of Class
Of Beneficial Owner of Stock
- ------------------------------------- --------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Myers Properties Limited
Partnership
605 Los Corales Circle Common Stock
Green Valley, AZ 85614 without par value 61,716(1) 5.9%
- ------------------------------------- --------------------- ---------------------------- ----------------------------
</TABLE>
(1) The general partners of Myers Properties Limited Partnership are Barbara K.
Emerson, 30062 Morningside Drive, Perrysburg 43551, and Marsha S. McClain, 872
Arrowhead Drive, Bucyrus, Ohio 44820. Barbara K. Emerson is the spouse of Edwin
G. Emerson, a Class I Director of the Company.
BOARD AND COMMITTEE MEMBERSHIP
During 1999, the Board of Directors of the Company met fourteen times and had
several ongoing committees. These committees include an Executive Committee,
Executive Compensation Committee, and an Audit Committee. All of our Directors
attended at least eighty-seven percent of the meetings of the Board and Board
Committees on which they served in 1999.
2
<PAGE> 4
<TABLE>
- -------------------------------------------------------------------------------------------------------
<CAPTION>
Executive
Name Board Audit Compensation Executive
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mr. Berg X X X
Mr. Deer X
Mr. Loren Dillon X
Mr. Mark Dillon X
Mr. Emerson X X X
Ms. Franks X X*
Ms. Grafmiller X
Mr. Graves X X
Mr. Mastro X X
Mr. Ruse X
Mr. Sheaffer X* X X X*
Mr. Smith X X*
1998 Meetings 14 3 2 14
* denotes Chairperson of Committee
- -------------------------------------------------------------------------------------------------------
</TABLE>
THE AUDIT COMMITTEE
The Audit Committee generally meets quarterly. Its primary duties
include the following:
o Approve the selection or termination of the independent public
accounting firm to be our outside auditor.
o Participate in setting the Company and Bank's audit policy and monitor
the operations of the internal audit function.
o Provide active directorate guidance to the internal audit function.
o Correct deficiencies and implement audit recommendations.
o Review results of internal audits conducted and action taken by
management.
THE EXECUTIVE COMMITTEE
The Executive Committee performs such duties as are delegated to them
by the Board of Directors.
NOMINATING COMMITTEE
The Board of Directors does not have a standing nominating committee or
a committee performing a similar function.
COMPENSATION OF DIRECTORS
In 1999, non-officer directors of the Company received $10,000 for
service on the Board and Board Committees, with the exception of Directors
Grafmiller, M. Dillon, and L. Dillon, who received $13,500 due to their service
on the Bank's Loan Committee, which generally meets with the most regularity.
Also, Mr. Sheaffer, the Board's Chairman received $13,500 for service on the
Board and Board Committees. Directors who are also officers of the Company
received $5,600 for service on the Board and Board Committees.
3
<PAGE> 5
FAMILY RELATIONSHIPS
Directors Mark Dillon and Loren H. Dillon are second cousins. No other
relationships exist among the Company's directors and executive officers.
RELATED TRANSACTIONS
The Bank has had and expects to continue banking relationships in the
ordinary course of business with directors, officers, and principal Shareholders
of the Company and the Bank. These relationships are carried out on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with the Bank's other loan
customers and do not involve more than the normal risk of collectability or
present other unfavorable features.
From time to time in 1999, management of the Bank and Company consulted
with Shumaker, Loop & Kendrick, LLP, a law firm located in Toledo, Ohio, for
certain legal matters. Director Edwin G. Emerson is a partner with that law
firm. The Bank also engaged the services of Certified Appraisal Service, an
appraisal firm in which Director Deborah J. Grafmiller is a co-owner. The Bank
used this firm mainly for obtaining appraisals of real estate relating to
secured loans made to borrowers in the ordinary course of the Bank's business.
The amount of business for Certified Appraisal Service attributable to the Bank
in 1999 totaled $41,665.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes of four directors
each. The terms of each class expire at successive annual meetings. The term of
Class III Directors of the Company expire this year.
You may vote for up to four nominees to serve as Class III Directors
with terms expiring at the 2003 Annual Meeting of Shareholders. The Board
proposes the following nominees for election:
o James A. Deer
o Hazel D. Franks
o Raymond E. Graves
o Richard A. Sheaffer
If you return the enclosed proxy form properly executed without an
indication that your vote should be withheld for any or all of the nominees, the
persons named on the enclosed proxy form will vote your proxy for the election
of the above-mentioned nominees for Class III Directors.
We expect that each nominee for election as a Class III Director will
be able to serve if elected. However, if any nominee is unable to serve, proxies
will be voted for the remaining nominees and may be voted for substitute
nominees that the Board may recommend.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF
THESE NOMINEES AS CLASS III DIRECTORS OF THE COMPANY.
4
<PAGE> 6
INFORMATION RELATING TO NOMINEES AND OTHER DIRECTORS
The following tables set forth certain information relating to the
Nominees and other members of the Board of Directors whose terms of office
continue after the Meeting. This information includes the age, principal
occupation, and beneficial ownership of the Company's voting securities.
<TABLE>
CLASS III DIRECTORS
(NOMINEES FOR TERMS EXPIRING IN 2003)
- -------------------------- ------ ---------------------------- ------------ ------------------------ ----------
<CAPTION>
Name Principal Occupation Director Beneficial Ownership Percent
Of Director Age During Past Five Years Since (1) of Common Stock (2) of Class
- -------------------------- ------ ---------------------------- ------------ ------------------------ ----------
<S> <C> <C> <C> <C> <C>
James A. Deer 46 Secretary/Treasurer of 1996 6,232 (3) .6%
Commercial Bancshares,
Inc. and President/ CEO
of The Commercial Savings
Bank
- -------------------------- ------ ---------------------------- ------------ ------------------------ ----------
Hazel D. Franks 79 Retired trucking firm 1985 5,365 .5%
owner, Upper Sandusky,
Ohio.
- -------------------------- ------ ---------------------------- ------------ ------------------------ ----------
Raymond E. Graves 47 President and CEO, 1986 5,773 (4) .5%
Commercial Bancshares,
Inc., Upper Sandusky, Ohio.
- -------------------------- ------ ---------------------------- ------------ ------------------------ ----------
Richard A. Sheaffer 57 President, R.A. Sheaffer, 1976 4,036 (5) .4%
Inc. (a family farming
corporation).
- -------------------------- ------ ---------------------------- ------------ ------------------------ ----------
</TABLE>
(1) Directorships were with the Bank alone until April 13, 1995 and with
the Bank and the Company since such date.
(2) All shares are held of record with sole voting and investment power
unless otherwise indicated. Beneficial ownership numbers are as of
February 18, 2000.
(3) Includes 1,491 shares for which Mr. Deer has shared voting and
investment power, and 3,750 shares covered by exercisable options for
which Mr. Deer has shared investment power, but not shared voting
power.
(4) Includes 3,000 shares covered by exercisable options for which Mr.
Graves has shared investment power, but not shared voting power.
(5) Includes 3,262 shares for which Mr. Sheaffer has shared voting and
investment power.
5
<PAGE> 7
<TABLE>
CLASS I DIRECTORS
(TERMS EXPIRING IN 2001)
- -------------------------- ------ ---------------------------- ------------ ------------------------ ----------
<CAPTION>
Name of Principal Occupation Director Beneficial Ownership Percent
Director Age During Last Five Years Since (1) Of Common Stock (2) of Class
- -------------------------- ------ ---------------------------- ------------ ------------------------ ----------
<S> <C> <C> <C> <C> <C>
Edwin G. Emerson 61 Attorney, Partner with 1985 2,370 (3) .2%
Shumaker, Loop & Kendrick,
LLP
Toledo, Ohio
- -------------------------- ------ ---------------------------- ------------ ------------------------ ----------
Deborah J. Grafmiller 49 Appraiser, Co-owner of 1997 746 (4) .07%
Certified Appraisal
Service,
Upper Sandusky, Ohio
- -------------------------- ------ ---------------------------- ------------ ------------------------ ----------
Michael A. Mastro 43 President of TLM 1995 591 (5) .06%
Management, Inc., Marion,
Ohio (a restaurant
management company).
- -------------------------- ------ ---------------------------- ------------ ------------------------ ----------
Douglas C. Smith 57 Retired Executive of Baja 1985 14,229 (6) 1.4%
Marine Corporation, a boat
manufacturing firm,
Bucyrus, Ohio.
- -------------------------- ------ ---------------------------- ------------ ------------------------ ----------
</TABLE>
(1) Directorships were with the Bank alone until April 13, 1995 and with
the Bank and the Company since such date.
(2) All shares are held of record with sole voting and investment power
unless otherwise indicated. Beneficial ownership numbers are as of
February 18, 2000.
(3) Includes 930 shares for which Mr. Emerson has shared voting and
investment power. Mr. Emerson's spouse, Barbara K. Emerson, is a
general partner of Myers Properties Limited Partnership (the
"Partnership") which owns 61,716 shares of Common Stock of the Company.
Mr. Emerson disclaims beneficial ownership of the Partnership shares.
(4) Includes 323 shares for which Ms. Grafmiller has shared voting and
investment power.
(5) Includes 405 shares for which Mr. Mastro has shared voting and
investment power.
(6) Includes 12,107 shares for which Mr. Smith has shared voting and
investment power.
6
<PAGE> 8
<TABLE>
CLASS II DIRECTORS
(TERMS EXPIRING IN 2002)
- -------------------------- ------ ---------------------------- ------------ ------------------------ -----------
<CAPTION>
Name of Beneficial
Director Principal Occupation Director Ownership of Percent
Nominee Age During Last Five Years Since (1) Common Stock (2) of Class
- -------------------------- ------ ---------------------------- ------------ ------------------------ -----------
<S> <C> <C> <C> <C> <C>
Daniel E. Berg 45 Ohio Unit Business Leader, 1990 1,519 (3) .1%
Tower Automotive, Upper
Sandusky/Bluffton, Ohio.
(manufacturer of
automotive products)
- -------------------------- ------ ---------------------------- ------------ ------------------------ -----------
Loren H. Dillon 66 President and General 1990 1,074 (4) .1%
Manager, Crow Motor Sales,
Inc., Upper Sandusky, Ohio.
- -------------------------- ------ ---------------------------- ------------ ------------------------ -----------
Mark Dillon 46 President, Fairborn 1990 3,630 .3%
U.S.A., Upper Sandusky,
Ohio (manufacturer of
loading dock enclosures)
- -------------------------- ------ ---------------------------- ------------ ------------------------ -----------
William E. Ruse 65 President, Blanchard 1998 1,100 (5) .1%
Valley Health Services,
Findlay, Ohio
- -------------------------- ------ ---------------------------- ------------ ------------------------ -----------
</TABLE>
(1) Directorships were with the Bank alone until April 13, 1995 and with
the Bank and the Company since such date.
(2) All shares are held of record with sole voting and investment power
unless otherwise indicated. Beneficial ownership numbers are as of
February 18, 2000.
(3) Includes 9 shares for which Mr. Berg has shared voting and investment
power.
(4) Includes 114 shares for which Mr. Loren Dillon has shared voting and
investment power.
(5) Includes 1,100 shares for which Mr. Ruse has shared voting and
investment power.
<TABLE>
CUMULATIVE SHARE OWNERSHIP
- -------------------------- ------ --------------------------- ------------- ------------------------ ----------
<CAPTION>
Name of Principal Occupation Director Beneficial Ownership Percent
Director Age During Last Five Years Since of Common Stock (1) of Class
- -------------------------- ------ --------------------------- ------------- ------------------------ ----------
<S> <C> <C> <C> <C> <C>
All Directors and -- -- -- 47,616 (3) 4.5%
Executive Officers as
a Group (17 persons)
(2)
- -------------------------- ------ --------------------------- ------------- ------------------------ ----------
</TABLE>
(1) All shares are held of record with sole voting and investment power
unless otherwise indicated. Beneficial ownership numbers are as of
February 18, 2000.
(2) Includes all executive officers of the Company and all executive
officers of the Bank.
(3) Includes 7,325 shares covered by stock options now exercisable or
exercisable within the next 60 days.
7
<PAGE> 9
EXECUTIVE OFFICERS
The following information is furnished concerning Executive Officers of the
Company and the Bank:
<TABLE>
<CAPTION>
Name Age Position and Business Background
- ---- --- --------------------------------
<S> <C> <C>
Richard A. Sheaffer 57 Mr. Sheaffer is Chairman of the Board of Directors of the
Company and the Bank and has served in such position
since 1990. He was first elected as a Director of
the Bank in 1976.
Raymond E. Graves 47 Mr. Graves is President and Chief Executive Officer of the
Company. He has served in this capacity since 1995. He
served as President and Chief Executive Officer of the Bank
from 1986 through September, 1999. He joined the Bank in
1985 as Executive Vice-President.
James A. Deer 46 Mr. Deer is President and Chief Executive Officer of the
Bank, having been appointed to that position in September,
1999. He is also Secretary / Treasurer of the Company. He
served as Executive Vice-President of the Bank from 1993
through September, 1999. He joined the Bank in 1985 and
served as a real estate loan officer from 1985 to 1987 and
as Cashier/CFO from 1987 to 1993.
Philip Kinley 40 Mr. Kinley serves as Vice-President of the Company and of the
Bank. He joined the Bank in 1984 and served as a loan officer.
In 1989 he became the Bank's Branch Administrator and Personnel
Director. He was named Vice-President/Cashier in 1992 until
1995 when he assumed his present position.
Bruce J. Beck 48 Mr. Beck, an attorney licensed to practice in the States
of Ohio and Arizona, serves as Vice-President in charge
of the loan department of the Bank, having joined the
Bank in that capacity in 1995. Prior thereto, he was the
Bank's outside legal counsel and a partner in the law firm
of Burson and Beck, Carey, Ohio.
</TABLE>
8
<PAGE> 10
<TABLE>
<S> <C> <C>
Susan E. Brown 53 Ms. Brown joined the Bank during 1998 as Vice-President
of Retail Banking Services. Her prior banking experience
covers 32 years, including serving as District Retail
Manager for a large central Ohio bank for six years.
Steven W. Huffman 48 Mr. Huffman joined the Bank during 1995 as
Assistant Vice President of the Secondary Market
Mortgage Department. He was promoted to Vice-
President during 1998, and named to the executive management
team during 1999. Prior to joining the Bank, he was a
Special Agent with an insurance company. His duties
included counseling clients in financial planning matters
and the sale of insurance and annuity products. His prior
banking experience includes positions as Residential
Mortgage Loan Representative and Vice-President/ Secondary
Marketing Mortgage Department.
Patrick S. Smith 40 Mr. Smith joined the Bank in February, 2000 as Chief.
Financial Officer. His prior banking experience covers 16
years, including 12 years as an internal auditor. Prior to
joining the Bank, he was employed by a large Ohio savings
and loan for 9 years.
</TABLE>
SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than 10% shareholders are required to furnish
the Company with copies of all Section 16 (a) forms they file.
Based solely upon a review of the copies of such forms furnished to the
Company, all directors and officers of the Company complied with all applicable
filing requirements, with the exception of one late Form 4 filing covering one
transaction for Raymond E. Graves, and one late Form 5 filing covering one
transaction for Bruce J. Beck.
9
<PAGE> 11
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS ON EXECUTIVE COMPENSATION
This Committee consists entirely of outside directors, currently three
in number, and is responsible for the establishment of annual and long-term
goals for the executive management team of the Company and Bank. The Committee's
duties include:
o Reviewing executive management's past performance in order to formulate
salary recommendations for the upcoming year;
o Making recommendations to the Board of Directors for the granting of
stock options to eligible officers under the Company's 1997 Stock Plan.
The Company is a holding company that owns one operating subsidiary,
The Commercial Savings Bank. The membership of the Board of Directors of the
Company is the same as that of the Bank. The Bank also owns one operating
subsidiary, namely Advantage Finance, Inc. The Company has no direct employees.
All disclosures contained in this Proxy Statement relating to executive
compensation reflect compensation paid by the Bank.
During the month of September, 1999 the Board changed the management
structure of the Bank by naming James A. Deer as President and CEO. Raymond E.
Graves, formerly President and CEO of the Bank, retained his position as
President and CEO of the Company. This change was made in order to permit Mr.
Graves to focus on exploring opportunities for the Company to expand into other
segments of the financial services industry thereby enhancing shareholder value;
and to retain the services of Mr. Deer. The compensation philosophy presented in
this report applies both to Mr. Graves and Mr. Deer, as President and CEO of the
Company and Bank respectively.
This report reflects the Company's executive compensation philosophy as
endorsed by the Executive Compensation Committee and the Board of Directors. The
Company's compensation programs are designed to achieve the following goals:
o Motivate and reward executive officers for achieving strategic business
goals that provide enhanced shareholder value;
o Provide compensation opportunities that are comparable to those offered
by other peer group companies in order to attract and retain those
executive who are critical to the Company's long -term success; and
o Provide that a significant portion of executive compensation should be
payable in an annual bonus that shall be based principally upon the
financial performance of the Company.
The Company utilized a bank compensation survey of peer companies
prepared by Crowe Chizek and Company, LLP in determining salaries of the
Company's employees, including the salaries of Executive Officers. Mr. Graves'
1999 base salary, shown in the "Salary" column of the Compensation Table below,
was increased by nearly 6% from his 1998 base salary. Mr. Deer's base salary,
shown in the "Salary" column increased by 20% from his 1998 base salary. Mr.
Deer's increase is mainly attributable to his increased duties and
responsibilities as President and CEO of the Bank. The salaries of Mr. Graves
and Mr. Deer, as adjusted, are consistent with peer group
10
<PAGE> 12
companies in the industry. Both also received bonuses based on the financial
performance of the Company. The receipt and amount of bonuses received in a
given year are tied directly to the profitability of the Company in the prior
year. Bonuses paid in 1999 declined somewhat as the net income of the Company
for 1998 was slightly less than the Company's net income in 1997.
In addition, as of January 1, 1999, a committee comprised of the
outside directors of the Company's Board of Directors granted Mr. Graves an
option to purchase 9,000 shares of the Company's stock at an exercise price of
$31.50 per share. Mr. Deer was granted an option to purchase 7,500 shares at the
same exercise price. These options, granted pursuant to the Company's 1997 Stock
Option Plan, were granted as additional incentives to maximize shareholder value
and include vesting periods to encourage continued employment with the Bank and
Company. Options representing a varying number of shares were also granted to
other members of the executive officers of the Company and Bank.
THIS REPORT ON COMPENSATION IS SUBMITTED BY THE EXECUTIVE COMPENSATION COMMITTEE
MEMBERS:
Edwin G. Emerson, Richard A. Sheaffer, Douglas C. Smith
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
Mr. Edwin G. Emerson, a Director of the Company serving on the Company's
Executive Compensation Committee, is a partner in the law firm of Shumaker, Loop
& Kendrick, LLP located in Toledo, Ohio. The Company and Bank conferred from
time to time with Shumaker, Loop & Kendrick, LLP on certain legal matters during
1999.
EXECUTIVE COMPENSATION
The Company offers several compensation plans and programs to certain
executive officers of the Bank and Company and is providing the following
information relating to these programs. Certain information is presented in
tabular format. The information contained in the Summary Compensation and Stock
Option tables that follow is disclosed for the Chief Executive Officer of the
Company and for those Executive Officers whose compensation for 1999 exceeded
$100,000.00.
11
<PAGE> 13
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
Annual Compensation Awards
------------------- ----------------------
Name and Principal Year Salary ($)(1) Bonus ($) Securities All Other
Position Underlying Compensation
Options ($) (2)
(#)
<S> <C> <C> <C> <C> <C>
Raymond E. Graves, 1999 129,108.06 15,745.00 9,000 10,441.45
President and Chief 1998 122,289.46 21,700.00 9,000 12,076.22
Executive Officer 1997 120,202.02 12,635.00 9,000 4,053.21
Commercial Bancshares, Inc.
James A. Deer 1999 94,801.28 7,925.16 7,500 6,211.89
President and Chief 1998 79,217.44 10,068.09 7,500 5,947.63
Executive Officer 1997 76,377.13 6,318.00 7,500 5,765.35
Commercial Savings Bank/
Secretary / Treasurer
Commercial Bancshares, Inc.
Steven W. Huffman 1999 148,611.04 102.51 -- 4,292.90
Vice President 1998 140,060.90 102.74 -- 4,201.76
Secondary Market 1997 99,653.37 -- -- 2,795.13
Mortgage Department
Commercial Savings Bank
</TABLE>
(1) The salary figures of Mr. Graves and Mr. Deer include fees received by them
for services as Directors of the Company in 1999 ($5,600), 1998 ($5,600), and
1997 ($4,800). These figures also include salary deferred under the Bank's
Section 401(k) Plan and The Commercial Savings Bank Deferred Compensation Plan;
and includes the benefit expense for the death benefit payable to the
participant's beneficiaries under life insurance policies maintained under the
Company's Supplemental Executive Retirement Plan. The salary figure of Mr.
Huffman includes commission income tied to the Bank's residential real estate
loan production.
(2) Amounts include matching contributions made under the Bank's Section 401K
Plan for each executive officer listed and the reportable economic value to Mr.
Graves and Mr. Deer of the Bank's supplementary executive retirement plan
described below.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
This Plan was adopted in 1995 to provide certain executive officers
with annual retirement benefits that will supplement those benefits available
under the Bank's qualified retirement plan. The goal of the Plan is to provide
participants with benefits initially equaling seventy percent (70%) of the
participating executive's final annual pay. The following Pension Plan Table
shows the estimated annual benefits payable to participating executive officer
as a single life annuity upon retirement.
12
<PAGE> 14
<TABLE>
PENSION PLAN TABLE
<CAPTION>
FINAL ANNUAL PAY YEARS OF SERVICE
---------------- ----------------
- ------------------------ -------------- ------------ ------------ ----------- ----------
15 20 25 30 35
- ------------------------ -------------- ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
100,000 70,000 70,000 70,000 70,000 70,000
- ------------------------ -------------- ------------ ------------ ----------- ----------
125,000 87,500 87,500 87,500 87,500 87,500
- ------------------------ -------------- ------------ ------------ ----------- ----------
150,000 105,000 105,000 105,000 105,000 105,000
- ------------------------ -------------- ------------ ------------ ----------- ----------
175,000 122,500 122,500 122,500 122,500 122,500
- ------------------------ -------------- ------------ ------------ ----------- ----------
200,000 140,000 140,000 140,000 140,000 140,000
- ------------------------ -------------- ------------ ------------ ----------- ----------
</TABLE>
All of a participating executive's salary and bonus is taken into
account in calculating final annual pay and benefits under the Plan. Other
retirement income of the participant, such as social security and other
retirement benefits provided by the Company and Bank, will be applied as
offsets, reducing the target benefits derived by calculating the goal
percentage. Annual benefits are indexed to the financial performance of an
insurance policy and are designed to increase each year.
The following officers currently participate in the Company's
Supplementary Executive Retirement Plan:
Name of Executive Position Years of Service (1)
----------------- -------- --------------------
Raymond E. Graves President and CEO 14
Commercial Bancshares, Inc.
James A. Deer President and CEO 14
The Commercial Savings Bank;
Secretary / Treasurer
Commercial Bancshares, Inc.
Philip W. Kinley Vice President 14
Commercial Bancshares, Inc.
(1) The figures stated include years of service with the Bank alone until
April 13, 1995, and with the Bank and Company since that date.
Benefits earned under the Plan do not become vested until the 6th year
of employment with the Bank. The executive's vesting increases 20 percent
annually thereafter, reaching 100 percent vesting after 10 full years of
continuous employment. The Bank has purchased life insurance policies on each
participating executive that are actuarially designed to offset the annual
expenses associated with the Plan. The Bank will, given reasonable actuarial
assumptions, completely recover all Plan costs. All three of the current
participants in the Plan are 100 percent vested.
The death benefit for each executive is an endorsement of 80% of the
net-at-risk life insurance portion of each of the life insurance policies
purchased to recover the retirement plan's costs.
13
<PAGE> 15
For the year 1999, expenses of $12,663 were accrued by the Bank to
account for this obligation
DEFERRED COMPENSATION PLAN
The Bank adopted the Commercial Savings Bank Deferred Compensation
Plan, a nonqualified deferred compensation plan on December 8, 1998, effective
as of January 1, 1999. All executive officers and directors of the Bank are
eligible to participate. The purpose of the Plan is to permit participating
directors and executive officers to voluntarily defer receipt of designated
percentages or amounts of their compensation and/or director's fees, and
therefore defer taxation of deferred amounts. The deferred compensation will be
deposited in an irrevocable grantor trust and invested in common stock of the
Company. The trustee will purchase shares of the Company's common stock on a
quarterly basis. The price to be paid per share is the average of the high and
low prices of the Company's stock for the month prior to the date of purchase as
quoted on the Over-the-Counter Bulletin Board. The trustee shall attempt to
purchase the common stock on the open market at the determined price. Should the
trustee be unable to purchase sufficient shares in the open market, authorized
but unissued common stock of the Company may be purchased by the trust.
EXECUTIVE INCENTIVE STOCK OPTION PLAN
The Shareholders of the Company approved the 1997 Commercial
Bancshares, Inc. Stock Option Plan (the "Plan") at the 1997 Annual Meeting of
Shareholders held April 9, 1997. The Plan permits eligible executive officers of
the Bank and Company an opportunity to acquire or increase their share ownership
in the Company by granting them options to purchase common stock of the Company.
The following table lists the number of shares of the Company's common
stock underlying the options which were granted, the percentage of the total
options granted, the exercise price of the options, the expiration date of the
options, and the potential realizable value assuming the stated rates of annual
stock price appreciation.
14
<PAGE> 16
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
(Individual Grants)
- ------------------------------------------------------------------------------------------------- ----------------------------------
<CAPTION>
Potential Realizable Value At
Assumed Annual Rates Of Stock
Price Appreciation For Option
Individual Grants Term
- ------------------------------------------------------------------------------------------------- ----------------------------------
Number of
Securities Percent of Total
Underlying Options Granted Exercise Or
Options To Employees In Base Price
Name Granted (#)(1) Fiscal Year ($/Sh) Expiration Date 5% ($) 10% ($)
- --------------------------- ---------------- ------------------ -------------- ------------------ ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Raymond E. Graves, 9,000 25 $31.50 January 1, 2009 $178,292 $451,826
President and Chief
Executive Officer,
Commercial Bancshares, Inc.
- --------------------------- ---------------- ------------------ -------------- ------------------ ------------------ ---------------
James A. Deer, 7,500 21 $31.50 January 1, 2009 $148,576 $376,521
President and Chief
Executive Officer,
Commercial Savings
Bank
Secretary / Treasurer,
Commercial
Bancshares, Inc.
- --------------------------- ---------------- ------------------ -------------- ------------------ ------------------ ---------------
Steven W. Huffman 0 0 -- -- $0.00 $0.00
Vice President,
Secondary Market
Mortgage Department,
Commercial Savings
Bank
- --------------------------- ---------------- ------------------ -------------- ------------------ ------------------ ---------------
</TABLE>
(1) The provisions of the Plan state that unless the Committee determines
otherwise at the time options are granted, options generally will not
be exercisable for a period of up to five years from the date of grant.
The Committee approved an exception to the normal vesting schedule that
may allow vesting prior to the normal five year period. This exception
to the vesting schedule would result in immediate vesting for one-half
of the options granted and would be triggered upon the market value of
the Company's stock reaching 150% of the option exercise price.
15
<PAGE> 17
The following table sets forth certain information relating to the number and
value of exercised and unexercised options.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION VALUES
- -------------------------------------- ----------- ------------ ------------------------- --------------------------
<CAPTION>
Number of
Securities Value Of
Underlying Unexercised
Unexercised In-The-Money
Shares Options Options
Acquired Value At Fiscal Year-End (#) At Fiscal Year-End ($)
On Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable (1)
- -------------------------------------- ----------- ------------ ------------------------- --------------------------
<S> <C> <C> <C> <C>
Raymond E. Graves, President and 0 $0.00 3,000 / 22,500 $23,010 / $3,015
Chief Executive Officer, Commercial
Bancshares, Inc.
- -------------------------------------- ----------- ------------ ------------------------- --------------------------
James A. Deer, President and 0 $0.00 3,750 / 18,750 $28,763 / $2,512
Chief Executive Officer,
Commercial Savings Bank and
Secretary / Treasurer of
Commercial Bancshares, Inc.
- -------------------------------------- ----------- ------------ ------------------------- --------------------------
Steven W. Huffman, Vice 0 $0.00 0 / 0 $0.00 / $ 0.00
President, Secondary Market
Mortgage Department,
Commercial Savings Bank
- -------------------------------------- ----------- ------------ ------------------------- --------------------------
</TABLE>
(1) Calculated based on the market value of the Corporation's common stock
at the end of 1999, multiplied by the number of shares covered by
in-the-money options, less the total exercise price for such options.
PERFORMANCE GRAPH
The following graph compares the yearly percentage change and the
cumulative total shareholder return on the Company's stock during the five year
period ended December 31, 1999 with the cumulative total return on the Standard
& Poor's 500 Stock Index, and on two industry indices for Companies of
comparable size. The comparison assumes $100 was invested on January 1, 1995 in
the Company's shares and in each of the indicated indices and assumes
reinvestment of dividends.
16
<PAGE> 18
<TABLE>
COMMERCIAL BANCSHARES, INC.
Total Return Performance
<CAPTION>
PERIOD ENDING
----------------------------------------------------------------
INDEX 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial Bancshares, Inc. 100.00 114.98 151.87 248.34 286.30 251.61
S&P 500 100.00 137.58 169.03 225.44 289.79 350.78
SNL less than $250M Bank Asset-Size Index 100.00 140.62 177.67 289.92 275.60 242.00
SNL $100M-$500M Pink Bank Index 100.00 121.78 153.39 213.39 251.47 229.01
</TABLE>
17
<PAGE> 19
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company has engaged the firm of Crowe Chizek and Company, LLP,
Independent Certified Public Accountants, Columbus, Ohio to report upon the
consolidated financial statements included in the Annual Report submitted
herewith. A representative of this firm will be in attendance at the Annual
Meeting, will have the opportunity to make a statement if desired, and will be
available to respond to any questions from those in attendance. The Company has
not yet selected an accounting firm to report upon its 2000 financial
statements, although it intends to again engage Crowe, Chizek and Company, LLP
for such purpose.
OTHER BUSINESS
Management of the Company does not know of any other business that may
be presented at the Annual Meeting. If any matter not described herein should be
presented for Shareholder action at the Meeting, the persons named in the
enclosed Proxy shall vote the shares represented thereby in accordance with
their best judgment.
SHAREHOLDER PROPOSALS FOR PRESENTATION AT THE 2000 ANNUAL MEETING
The Board of Directors requests that any Shareholder proposals intended
for presentation at the 2001 Annual Meeting be submitted in writing to Raymond
E. Graves, President, at the Company's office located at 118 South Sandusky
Avenue, Upper Sandusky, Ohio 43351, by no later than November 10, 2000 for
consideration for inclusion in the Company's proxy materials for such meeting.
For proposals that a shareholder wishes to present at the 2001 Annual
Meeting, but does not seek to include in the proxy statement, the Board of
Directors requests that the proposal be submitted in writing to Raymond E.
Graves, President, at the Company's office located at 118 South Sandusky Avenue,
Upper Sandusky, Ohio 43351, by no later than January 24, 2001.
A copy of the Company's 1999 Annual Report is being delivered with this
Proxy Statement.
By Order of the Board of Directors
James A. Deer
Secretary / Treasurer
Dated March 10, 2000
TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY.
18
<PAGE> 20
COMMERCIAL BANCSHARES, INC.
118 SOUTH SANDUSKY AVENUE
UPPER SANDUSKY, OHIO 43351
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
APRIL 12, 2000. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
The undersigned, having received notice of the Annual Meeting (the
"Meeting") of Shareholders of Commercial Bancshares, Inc., an Ohio corporation
(the "Company"), to be held at 4:30 p.m. local time on Wednesday, April 12,
2000, hereby designates and appoints Loren H. Dillon, Hazel D. Franks, and
William T. Gillen, and each of them with authority to act without the others, as
attorneys and proxies for the undersigned, with full power of substitution, to
vote all shares of Common Stock, without par value, of the Company held of
record by the undersigned on February 18, 2000, such proxies being directed to
vote as specified below and in their discretion on any other business that may
properly come before the Meeting or any adjournment thereof.
1. ELECTION OF DIRECTORS. To elect the following four (4) nominees as
Class III Directors: JAMES A. DEER, HAZEL D. FRANKS, RAYMOND E. GRAVES, RICHARD
A. SHEAFFER.
FOR ALL NOMINEES (EXCEPT AS MARKED BELOW)
--------
WITHHOLD AUTHORITY FOR ALL NOMINEES
--------
IF YOU WISH TO WITHHOLD AUTHORITY FOR INDIVIDUAL NOMINEE(S), ENTER THE NAME(S)
ON THIS LINE :
------------------------------------------------------------------
THE BOARD OF DIRECTORS AND MANAGEMENT UNANIMOUSLY RECOMMENDS A VOTE FOR
ELECTION OF THE NAMED NOMINEES.
THIS PROXY WILL BE VOTED (1) AS DIRECTED ON THE MATTERS LISTED ABOVE;
(2) IN ACCORDANCE WITH THE DIRECTORS' RECOMMENDATION WHERE A CHOICE IS NOT
SPECIFIED; AND (3) IN ACCORDANCE WITH THE JUDGMENT OF THE PROXIES ON ANY OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
The undersigned reserves the right to revoke this Proxy at any time
prior to the Proxy being voted at the Meeting. The Proxy may be revoked by
delivering a signed revocation to the Company at any time prior to the Meeting,
by submitting a later-dated Proxy, or by attending the Meeting and voting in
person. The undersigned hereby revokes any proxy previously given to vote such
shares at the Meeting.
Please sign the Proxy as your name appears on your stock
certificate(s). JOINT OWNERS SHOULD EACH SIGN PERSONALLY. When signing as
attorney, executor, administrator, trustee, guardian, or corporate officer,
please give your full title as such.
Dated:
-----------------------------------------
Number of Shares
-------------- -----------------------------------------------
Printed Name of Shareholder
-----------------------------------------------
Signature of Shareholder
-----------------------------------------------
Signature of Shareholder (if held jointly)
______ Please mark this line if you are receiving multiple copies of the Annual
Report and wish us to discontinue mailing the Annual Report for this
account.
PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY.
