<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1994 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Commercial BancShares, Incorporated
- --------------------------------------------------------------------------------
(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 O-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 O-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:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
<PAGE>
COMMERCIAL BANCSHARES, INCORPORATED
415 Market Street
Parkersburg, West Virginia 26101
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE is hereby given that the Annual Meeting of Stockholders of
COMMERCIAL BANCSHARES, INCORPORATED ("Commercial") will be held at the Dils
Banquet & Meeting Center, 6th Street & Williams Court Alley, Parkersburg, West
Virginia, at 3:00 p.m. on Wednesday, May 14, 1997, for the following purposes:
(1) To elect seventeen (17) Directors of Commercial;
(2) To ratify the appointment of Harman, Thompson, Mallory & Ice, A.C.,
Certified Public Accountants as independent auditors of Commercial;
(3) To consider a proposal that would increase the authorized common stock
to 5,000,000 shares of $5 par value common stock;
(4) To consider approval of a stock option plan for Commercial's
nonemployee directors;
(5) To consider approval of a long term incentive stock plan for
Commercial's employees; and
(6) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on Wednesday, April 2,
1997, are entitled to notice of and to vote at the meeting. A list of these
stockholders will be available at the meeting and for 10 days preceding the
meeting at the office of the Secretary of Commercial BancShares, 415 Market
Street, Parkersburg, West Virginia.
If you are unable to be present at the meeting, but desire to have your
shares voted, please vote, date and sign the enclosed proxy and return it in the
accompanying envelope.
By order of the Board of Directors
Larry G. Johnson
Secretary
April 18, 1997
WE URGE YOU TO VOTE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU ATTEND THE
MEETING, YOU MAY VOTE YOUR SHARES IN PERSON, EVEN THOUGH YOU HAVE PREVIOUSLY
SIGNED AND RETURNED YOUR PROXY.
<PAGE>
COMMERCIAL BANCSHARES, INCORPORATED
415 Market Street
Parkersburg, West Virginia 26101
Annual Meeting of Shareholders, May 14, 1997
------------------
PROXY STATEMENT
------------------
SOLICITATION AND REVOCABILITY OF PROXIES
Your proxy is solicited by your Board of Directors. It will be voted as
you direct. In the absence of your direction, it will be voted for the nominees
and proposals set forth below.
Without affecting any vote previously taken, any shareholder executing a
proxy may revoke it at any time before it is voted by giving a written notice of
the revocation to Larry G. Johnson, Secretary; by executing a later-dated proxy
which is received by Commercial prior to the Annual Meeting; or by attending the
meeting and giving notice of such revocation in person. Attendance at the
-----------------
meeting will not, in and of itself, constitute revocation of a proxy.
- --------------------------------------------------------------------
This proxy statement and the accompanying proxy are being mailed on or
about April 18, 1997, to all stockholders entitled to vote at the meeting.
INFORMATION AS TO VOTING SECURITIES
The Board of Directors has fixed the close of business on Wednesday, April
2, 1997, as the record date for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting. On the record date 1,616,187
shares of common stock ("Common Stock") were outstanding and entitled to vote at
the meeting. Each share of stock is entitled to one vote.
At the election for Directors, each shareholder has the right to vote the
number of shares owned for as many persons as there are Directors to be elected
and for whose election he or she has the right to vote. Cumulative voting in
the election of Directors is permitted by State statute, and the exercise of
that right is not subject to any condition precedent. Each stockholder may cast
all of his votes for a single Director or he may distribute them among the
number to be voted for as he sees fit. Shareholders desiring to cast cumulative
votes by proxy should so indicate on the proxy.
The solicitation of proxies will be made primarily by mail. Proxies may
also be solicited personally and by telephone by regular employees of Commercial
or its subsidiaries without any additional remuneration and at nominal cost.
Management intends to request banks, brokerage houses, custodians, nominees and
fiduciaries to obtain authorization for the execution of proxies. Commercial
will pay the standard charges and expenses of brokerage houses, voting trustees,
banks, associations and other custodians, nominees and fiduciaries, who are
record holders of common shares not beneficially owned by them, for forwarding
such materials to and obtaining proxies from the beneficial owners of common
shares entitled to vote at the annual meeting.
A majority of the outstanding shares of Commercial will constitute a quorum
at the meeting. Abstentions and broker non-votes are counted for purposes of
determining the presence of a quorum for the transaction of business. The
election of each director nominee requires the favorable vote of a plurality of
all votes cast by the holders of common stock at a meeting at which a quorum is
present. Only shares that are voted in favor of a particular nominee will be
counted toward such nominee's achievement of a plurality. Abstentions and
broker non-votes will not be counted toward such nominee's achievement of
plurality and thus have no effect. A broker non-vote generally occurs when a
broker who holds shares in street name for a customer does not have authority to
vote on certain matters because its customer has not provided any voting
instructions on the matter.
<PAGE>
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
------------------------------------------------------
To Commercial's knowledge, the only persons or groups that may be deemed to
own beneficially 5% or more of Commercial's outstanding common stock as of
March 25, 1997 are the following:
<TABLE>
<CAPTION>
Shares
Name and Address Beneficially Percent of
of Beneficial Owner Owned Class
- ------------------- ----- -----
<S> <C> <C>
Commercial BancShares, Inc. 153,748 9.51%
Employee Stock Ownership Trust
(with 401(k) provisions)
Parkersburg, WV
</TABLE>
COMMON STOCK OWNERSHIP OF MANAGEMENT
------------------------------------
The following table sets forth certain information regarding beneficial
ownership of Commercial's Common Stock, as of March 25, 1997, by (i) each of
Commercial's directors, (ii) each of Commercial's executive officers named in
the compensation table below and (iii) Commercial's executive officers and
directors as a group.
<TABLE>
<CAPTION>
Number of Shares Nature of Percent
Name Beneficially Owned Ownership of Class
- ---- ------------------ --------- --------
<S> <C> <C> <C>
Bruce Bingham 10,333 Direct *
2,772 Indirect *
Frank L. Christy 9,460 Direct *
4,032 Indirect *
A. Vernon Criss, III 220 Direct *
39,023 Indirect 2.41%
Gary R. Davis 26,099 Direct 1.61%
2,513 Indirect *
Wilson Davis 12,071 Direct *
Carl E. Dollman 4,151 Direct *
Larry G. Johnson 4,990 Direct *
5,964 Indirect *
Thomas M. Lookabaugh 276 Direct *
5,203 Indirect *
James A. Meagle, Jr. 4,289 Direct *
1,576 Indirect *
David L. Mendenhall 11,210 Direct *
1,925 Indirect *
William E. Mildren, Jr. 53,137 Direct 3.29%
9,884 Indirect *
Donna L. Perine 434 Direct *
2,417 Indirect *
Jack F. Poe 5,731 Direct *
Patty S. Poling 920 Direct *
1,757 Indirect *
Robert E. Richardson, Sr. 1,834 Direct *
11,680 Indirect *
W. S. Ritchie, Jr. 5,894 Direct *
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Susan S. Ross 2,200 Direct *
Donald L. Scothorn 13,506 Direct *
4,910 Indirect *
James L. Wahle 484 Direct *
Thomas N. Webster 3,029 Direct *
Morris B. Wilkins 220 Direct *
39,983 Indirect 2.47%
Executive officers and directors 265,345 Direct 16.42%
as a group (21 persons) 38,782 Indirect 2.40%
</TABLE>
______________________________
* Reflects ownership of less than 1% of the outstanding common shares.
_______________________________________
Proposal No. 1: Election of Directors
The Board of Directors of Commercial has proposed seventeen Directors be
elected to serve until the next Annual Meeting of Stockholders and until their
respective successors are duly elected and have qualified. It is intended that
shares represented by proxies solicited by the Board of Directors will, unless
contrary instructions are given, be voted in favor of the election as Directors
of the nominees listed below. Unless otherwise indicated on the proxy, one vote
per share owned will be voted in favor of each nominee. Although the Board of
Directors does not contemplate that any nominee will be unavailable for
election, if vacancies occur unexpectedly, the shares may be voted for
substitute nominees, if any.
Each nominee is currently a Director of Commercial. Twelve are currently
Directors of one or more of the banking subsidiaries, Commercial Banking and
Trust Company (CB&T), Jackson County Bank (JCB), Farmers and Merchants Bank of
Ritchie County (F&M), Dime Bank (Dime), Union Bank of Tyler County (UBTC), The
Community Bank (Community) or Bank of Paden City (Paden City).
The following information sets forth the name, age, address, principal
occupation or employment of each Director and the year the individual began
continuous service as a Director of Commercial. Except where otherwise noted,
each person has held his principal position for at least five years.
THE FOLLOWING PERSONS ARE NOMINATED FOR ELECTION:
Bruce Bingham (67), Ravenswood, West Virginia. Director since 1985. Mr.
Bingham is retired from active employment with JCB, where he served as
President from 1983-1990. He became a Director of JCB in 1968, and
Chairman of the Board of Directors of JCB in 1995.
Frank L. Christy (49), Marietta, Ohio and Vero Beach, Florida. Director since
1983. Mr. Christy is a Real Estate Developer and was a Director of CB&T
from 1977-1990.
A. Vernon Criss, III (42), Vienna, West Virginia. Director since 1985. Mr.
Criss is the President of Century Block, Inc., and Century Limestone, Inc.,
Vice President of Atlas Towing Company, and Secretary-Treasurer of
Bluestone Quarries, Inc. He was a Director of CB&T from 1984-1988.
Gary R. Davis (52) Sistersville, West Virginia. Director since 1994. Mr.
Davis has been Chairman of Union Bank of Tyler County since January 1,
1995, and Chief Executive Officer since 1974. He was President from 1974
through 1994. He has been a Director of UBTC since 1974.
Wilson Davis (73) Pennsboro, West Virginia. Director since 1994. Mr. Davis
is the retired Director of the Ritchie County Educational Trust. He is
President and Chairman of The Community Bank. He became a Director of
Community in 1974.
2
<PAGE>
Carl E. Dollman (73) Vienna, West Virginia. Director since 1987. Mr. Dollman
retired in 1986 from First Federal Savings and Loan Association of
Parkersburg where he had served as President. He became a director of CB&T
in 1987.
James A. Meagle, Jr. (51) Marietta, Ohio. Director since 1992. Mr. Meagle
has been President of The Dime Bank since 1980. He became a Director of
Dime in 1980.
David L. Mendenhall (53) Paden City, West Virginia. Director since 1994. Mr.
Mendenhall has been President and Chief Executive Officer of Bank of Paden
City since 1976. He became a Director of Paden City in 1976.
William E. Mildren, Jr. (52) Vienna, West Virginia. Director since 1983. Mr.
Mildren is Chairman, President and Chief Executive Officer of Commercial
and Chairman of CB&T. He is a Director of CB&T, JCB, Dime and UBTC. He
became a Director of CB&T in 1977, Chairman in 1987.
Jack F. Poe (74) Parkersburg, West Virginia. Director since 1983. Mr. Poe is
retired from CB&T, where he served as President for four years. He became
associated with CB&T in 1954, and has served as a Director of CB&T since
1972. He is a life trustee of Marietta College.
Robert E. Richardson, Sr. (82) Marietta, Ohio. Director since 1992. Mr.
Richardson is Chairman of Richardson Printing Company in Marietta, Ohio.
He became a Director of Dime in 1985 and has served as its Chairman since
1986.
W. S. Ritchie, Jr. (69) Ravenswood, West Virginia. Director since 1985. Mr.
Ritchie retired in 1988 as Commissioner of the West Virginia Department of
Highways. He previously was affiliated with Ashland Coal Company, Inc. and
Hobet Mining Company. He became a Director of JCB in 1967.
Susan S. Ross (53) Vienna, West Virginia. Director since 1983. Mrs. Ross is
the former Chairman of Storck Baking Company, Inc., and was a Director of
CB&T from 1982-1988.
Donald L. Scothorn (67) Parkersburg, West Virginia. Director since 1994. Mr.
Scothorn has been President and Chief Executive Officer of Commercial
Banking and Trust Company since August 1992. He has served as Chairman of
the Board and Director of F&M since November 1987. He became a Director of
CB&T in 1989 and of Paden City in 1994.
James L. Wahle (60) Doylestown, Pennsylvania. Director since 1994. Mr. Wahle
is President of Accu-Sort Systems, Inc. He was President of Kardex
Systems, Inc., in Marietta, Ohio, from 1994 to 1996. Before joining Kardex
he was President and CEO of Spacesaver Corporation.
Thomas N. Webster (77) Vienna, West Virginia. Director since 1983. Mr.
Webster is the Vice Chairman of Commercial. He is retired from CB&T, where
he served as Executive Vice President. He became a Director of CB&T in
1982, and JCB in 1985.
Morris B. Wilkins (72) Scotrun, Pennsylvania. Director since 1987. Mr.
Wilkins is President of Caesars Pocono Resorts, Scotrun, Pennsylvania. He
served as Chairman of the Board, President and Director of F&M from 1982 to
1987.
_______________________________________
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of Commercial met four times in 1996. All directors
attended 75% or more of the board and committee meetings held except for Mrs.
Ross, Mr. Ritchie, and Mr. Wilkins.
The Executive Committee is composed of Directors Mildren, Jr., Christy,
Gary Davis, Dollman, Poe, Scothorn, and Webster. In 1996 there were 6 meetings
of the Committee, which provides advice and counsel to the official staff of
BancShares and acts for the Board of Directors upon delegated authority between
meetings of the Board.
3
<PAGE>
The Audit Committee of Commercial consists of Mr. Poe as Chairman, and
Directors Criss, Wilson Davis, Dollman, Richardson and Ritchie. The Committee
reviews and evaluates significant matters related to the internal controls of
Commercial, reviews the activities of Commercial's internal audit staff, meets
with appropriate management personnel regarding internal audit results, and
reports its findings to the Board of Directors of Commercial. It met nine times
during 1996.
The Mergers and Acquisitions Committee of Commercial did not meet during
1996. The members were Directors Christy (who served as chairman), Gary Davis,
Dollman, Mildren, Jr., and Wilkins. The Committee's duties are to review and
analyze any offers or proposals to merge with Commercial. It reports its
analyses to the Executive Committee. It is also available to assist in the
analysis and preparation of proposals or offers to acquire or merge with other
corporations.
The Compensation Committee was created to review and make recommendations
regarding officers' salaries and benefits. Director Wahle served as chairman.
Other members of the Committee were Directors Ross and Dollman and outside
directors of Commercial subsidiaries: Robert L. Hartley, Neil R. Wynn, and
George G. Couch. The Committee met five times in 1996.
An Electronic Data Processing Steering Committee consists of the
Subsidiaries' Presidents and their designated representatives and
appointed members of the Boards of Directors of the subsidiary Banks. Members
included: Mr. Mildren, Jr., Timothy Aiken of UBTC, Mr. Scothorn and Robert Tebay
of CB&T, Thomas Lookabaugh and Clark Ritchie of JCB, Mrs. Donna Perine of F&M,
Mr. Meagle, Jr., and Dan Stephan, Jr. of Dime, Mrs. Patty Poling of Community,
and Larry Tracey of Paden City. There were seven meetings in 1996. The
Committee develops the budget and plan of operation for the Electronic Data
Processing Department, serves as a liaison between banks and the Department,
establishes priorities for implementation of new software, reviews standards and
procedures used within the Department, monitors its performance, prepares a
capital expenditures budget, including hardware and software, and makes
recommendations in the area of personnel.
Along with these Committees, there were several committees of the boards of
directors of Commercial's subsidiaries that are assigned duties by, and report
to, the subsidiaries' boards of directors.
COMPENSATION OF DIRECTORS
Beginning in June 1988, a monthly fee of $250 was paid by Commercial to
Directors who were not Directors of subsidiary banks. In addition during 1996,
Directors received $100 for each meeting of the Board of Directors attended.
Directors who were not active officers of Commercial or its subsidiaries also
received $100 for each committee meeting attended. Effective January 1, 1997,
the meeting fees for non-employee Directors were increased to $300 for Board
meetings and $200 for committee meetings.
Performance Adjusted Fees:
At the recommendation of outside consultants engaged to advise Commercial
regarding incentive compensation for its officers and appropriate fee levels for
Directors, Commercial adopted a system of fee adjustments based on the
performance of the company. The adjustments paid to Directors increase as
corporate objectives regarding return on assets are achieved or exceeded. In
considering the level of adjustment, the consultants also examined the fees paid
by banks and holding companies of comparable size with similar performance. For
1996, an adjustment of $1,467 along with regular Board and Committee Fees was
paid to Commercial's directors who were not active officers of Commercial.
During 1996 Directors of Commercial who were also directors of subsidiary
banks were paid for their services to the banks according to the standard
arrangements and performance adjusted fees in effect at each bank. There were
no other arrangements pursuant to which any Director was compensated for
services as a Director.
DIRECTORS DEFERRED INCOME PLAN
Commercial, CB&T, Dime, F&M, Jackson and Paden City have established
Directors Deferred Income Plans with certain Directors that defers payment of
director's fees until the director reaches age 65. For those directors whose
age was 65 or older at the time the plan was established, the payment of
directors' fees is deferred for five to seven years.
4
<PAGE>
RELATIONSHIPS AND TRANSACTIONS WITH MANAGEMENT
Certain Directors and Executive Officers of Commercial and its subsidiaries
and their associates were customers of and had transactions with Commercial and
its subsidiaries in the ordinary course of business during 1996. Loans and
commitments included in such transactions were made in the ordinary course of
business on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
others, and did not include more than normal risk of collectibility or present
other unfavorable features.
EXECUTIVE OFFICERS
A description of the executive officers of Commercial and its subsidiaries as of
April 2, 1997, follows.
<TABLE>
<CAPTION>
Name Age Position Business Experience
- ---- --- -------- -------------------
<S> <C> <C> <C>
William E. Mildren, Jr. 52 Chairman, President, and President and Chief
Chief Executive Officer Executive Officer,
of Commercial Commercial and CB&T
Gary R. Davis 52 Chairman & Chief Executive Chairman and President,
Officer of UBTC Hometown; President & CEO,
UBTC
Thomas M. Lookabaugh 45 President and Chief Executive President and Chief Executive
Officer, Jackson Officer, Jackson
James A. Meagle, Jr. 51 President and Chief Executive President and Chief Executive
Officer, Dime Officer, Dime
David L. Mendenhall 53 President and Chief Vice President, Hometown;
Executive Officer, Paden City; President and CEO, Paden City
Sr. Vice Pres., Commercial
Donna L. Perine 42 President and Chief Executive President and Chief Executive
Officer, F&M Officer, F&M
Patty S. Poling 63 Cashier and Chief Executive Cashier and Chief Executive
Officer, Community Officer, Community
Donald L. Scothorn 67 President and Chief Executive Executive Vice President
Officer, CB&T; Chairman, and Chief Lending
F&M; Senior Vice Pres., Officer, CB&T
Commercial
Larry G. Johnson 49 Executive Vice President and Secretary-Treasurer,
Chief Financial Officer, Commercial; Executive
Commercial; Corporate Vice President and Chief
Secretary, Commercial Financial Officer, CB&T
</TABLE>
5
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ending December 31,
1994, 1995 and 1996, the cash compensation paid by Commercial and its
subsidiaries, as well as certain other compensation paid or accrued for those
years, to executive officers whose total annual salary and bonus exceeded
$100,000.
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------
Other
Name and Annual All Other
Principal Compen- Compen-
Position Year Salary($) Bonus($)1 sation($)2 sation($)3
- -------- ---- -------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Wm. E. Mildren, Jr. 1996 $144,000 $49,581 $25,529 $ 9,830
Chairman, President 1995 $130,020 $51,584 $30,207 $11,168
and CEO, Commercial 1994 $108,840 $75,723 $24,803 $12,013
Donald L. Scothorn 1996 $100,020 $56,685 $12,323 $ 9,830
President and CEO, 1995 $ 92,520 $66,145 $13,760 $11,168
CB&T 1994 $ 89,280 $74,134 $12,851 $11,238
Larry G. Johnson 1996 $ 74,700 $38,560 $ 9,086 $ 8,399
Exec. Vice Pres. & 1995 $ 71,100 $41,628 $ 9,510 $10,436
CFO, Commercial 1994 $ 68,340 $56,792 $ 8,301 $ 9,212
Thomas M. Lookabaugh 1996 $ 67,500 $38,027 $ 4,200 $ 7,220
President & CEO, 1995 $ 60,000 $41,054 $ 6,810 $ 7,149
Jackson 1994 $ 51,450 $34,286 $ 5,222 $ 5,741
</TABLE>
1 Bonus is paid in January of the following year.
2 "Other Annual Compensation" includes amounts paid by Commercial and its
Subsidiaries as Directors Fees.
3 "All Other Compensation" includes contributions to Commercial BancShares
Employee Stock Ownership Plan (with 401(k) provisions) to match pre-tax elective
deferral contributions (included under Salary and Bonus) made to the Plan, and
optional corporate contributions to the Plan.
Change In Control Arrangements
Effective November 1, 1996, Commercial entered into employment continuity
agreements with Mr. Mildren, Jr., and Mr. Johnson. In effecting the agreements,
the Board recognized that, as a publicly held corporation, the possibility of a
change in control exists. The Board believes that assurances of employment
security will secure the continued services of Commercial's key operational and
management executives in the performance of both their regular duties and such
extra duties as may be required of them during periods of uncertainty, enable
Commercial to rely on such executives to manage its affairs during any such
period with less concern for personal risks, and enhance Commercial's ability to
attract new key executives as needed. The Board did not enter into the
agreements in a belief that a change in control was imminent.
The agreements have identical provisions and become operative only upon
a change in control of Commercial. A change in control occurs if: (1) any
individual, firm, corporation, partnership or other entity (other than an
employee benefit plan of the company) becomes the owner or beneficial owner of
20% or more of the combined voting power of the outstanding securities (other
than as a result of an issuance of securities initiated by Commercial, or open
market purchases approved by the Board, as long as the majority of the Board
approving the purchases are directors at the time the purchases are made); or
(2) as the direct or indirect result of, or in connection with, a cash tender or
exchange offer, a merger or other business combination, a sale of assets, a
contested election of directors, or any combination of these transactions, the
Continuing Directors cease to constitute a majority of Commercial's Board, or
any successor's board, within two years of the last of such transactions.
"Continuing Director" means any member of Commercial's Board while a member of
the Board, and who (1) was a director of Commercial before the transactions
described above or (2) whose subsequent nomination for election or election to
the Board was recommended or approved by a majority of the Continuing Directors.
6
<PAGE>
Under the agreements, if the executive is employed by Commercial on the
control change date, Commercial will continue to employ the executive for three
years, or until his normal retirement date, whichever is earlier. During that
period, the terms and conditions of the executive's employment, including
salary, bonuses, and employee benefit plans and programs, are to be fixed as of
the day before the control change date. The executive is entitled to
continued compensation if the executive's employment terminates during the
employment period, but subject to executive's offer to work that is rejected by
Commercial. The executive is entitled to continued compensation equal to three
times the executive's base period income (paid in 36 monthly installments) if
the executive is terminated by Commercial without cause ("cause" being limited
to executive's acts of theft, embezzlement, fraud, or moral turpitude), or if
executive voluntarily terminates employment within six months after (a) the
executive does not receive salary increases, bonuses, and incentive awards
comparable to the salary increases, bonuses, and incentive awards the executive
received in prior years or, if greater, that other executives in comparable
positions receive in the current year; or (b) executive's compensation or
employment related benefits are reduced; or (c) executive's status, title(s),
office(s), working conditions or management responsibilities are diminished; or
(d) executive's place of employment is changed in any way without Executive's
consent. Within 12 months after a change in control, the executive may
voluntarily terminate his employment with Commercial and, in such event, will be
entitled to receive continued compensation equal to his base period income, paid
in 12 equal monthly installments, and shall be free from the covenants not to
compete which are operative under other events of termination.
The agreements were effective as of November 1, 1996, and continue
automatically in effect through December 31, 1996, and thereafter through each
successive December 31 unless Commercial notifies the executive in writing 30
days before the end of any calendar year that the agreement shall terminate as
of the end of that calendar year. After a change in control, Commercial may not
terminate the agreement for 36 months, and the agreement automatically continues
in effect from year to year thereafter unless Commercial notifies the executive
in writing 30 days before the end of the initial 36-month period or 30 days
before any anniversary of the end of that period that the agreement shall
terminate as of that date.
Compensation Committee Report on Executive Compensation
Notwithstanding anything to the contrary set forth in any of Commercial's
previous filings under the Securities Act of 1933, as amended, or the Securities
Act of 1934, as amended, that might incorporate future filings, including this
Proxy Statement, in whole or in part, this report and the graph set forth as a
part thereof shall not be incorporated by reference into any such filings.
The Compensation Committee ("Committee") is a standing committee of the
Board of Directors of Commercial. During 1996 the role of the Committee was
reviewed and redefined by the Board of Directors. The Committee has been
assigned responsibility for establishing and administering executive total
compensation policies, assessing the competitiveness of executive compensation,
administering short-term and long-term incentive plans, and making selected top
management individual pay decisions. The decisions by the Compensation
Committee are reviewed by the Executive Committee, and communicated to the Board
of Directors.
The following report is submitted by the members of the Compensation
Committee, regarding the executive compensation policies established by the
Committee and approved by the Board of Directors. The Committee is composed of
Mr. James L. Wahle (Chair), Carl E. Dollman, Susan S. Ross, George G. Couch,
Robert L. Hartley, and Neil R. Wynn.
The compensation objectives are deemed important factors in supporting the
achievement of Commercial's business strategy. Commercial's executive
compensation strategies and desired practices are intended to achieve the
following outcomes:
. To attract highly qualified executive and management talent within the
diversified, community-oriented retail banking industry;
. To retain top performers, especially through future industry changes, and to
ensure future management continuity of the successful team;
. To create a business environment of company-wide team focus and spirit while
maintaining entrepreneurialism and innovation, ensuring superior customer
service, and achieving maximum success for shareholders;
. To provide for overall total compensation opportunities for Commercial's
executives which are consistent with performance achieved, and appropriate
with shareholder returns achieved;
7
<PAGE>
. To maintain conservative fixed costs associated with cash compensation; and
. To strive for achieving competitiveness, appropriateness, fairness and
soundness in the overall executive compensation program's implementation and
administration.
The Committee has determined that the central philosophy and operational
strategies to be employed for Commercial's overall executive compensation
programs should be competitive, in aggregate terms, and must directly link pay
to both organizational performance and individual contributions. Consistent
with marketplace business opportunities available to Commercial, a significant
portion of total executive compensation rewards should be predicated upon the
total organization's success of building longer-term economic value for
shareholders. To the extent practical, fixed costs associated with executive
compensation programs should be maintained at conservative, but competitive
levels.
In establishing base salaries for executives, the defined local/regional
competitive marketplace will serve as the basis, but for top executive
positions, will be reflective of broader national practice for key executive
positions in similarly situated organizations with comparable skills, abilities,
roles and responsibilities. Actual base salaries paid may vary depending upon
incumbent-related factors including employment history, experience, market
competitive practices, supply and demand for similar talent in the geographic
area, performance of the individual, and/or other business related factors.
Annual incentive performance goals will include a combination of (1)
Commercial's corporate goals, (2) operating business unit or departmental area
goals, and (3) individual contribution goals. Such goals will be pre-
established each year, and will serve as performance criteria for the plan.
Flexibility to adjust or modify goals within the changing environment, as
appropriate, is expected as part of the performance measurement process. The
Committee may determine that if certain corporate-wide performance goals fail to
be achieved at a threshold level, awards may be canceled under the annual
incentive plan. Target annual incentive award percentages will be established
based upon competitive marketplace opportunities. Actual award target
opportunities by participants and the weights of various goals can vary. These
are predicated upon the relevant impact of the business goals of the
participants, the desired total compensation mix, and other factors as
appropriate. Operating business unit and/or individual performance criteria
associated with annual incentive award payouts may be small or omitted entirely
as part of the relevant measures for participants with broad corporate
responsibilities, during an incentive plan year. Thus, most, or all, of some
participants' annual incentive award opportunities can be based primarily upon
overall corporate-wide performance, if deemed appropriate.
In an effort to link management compensation more closely to shareholders'
interests toward building greater long-term economic value for shareholders, the
Committee and the Board of Directors are presenting to the 1997 Annual Meeting a
proposal for a Long Term Incentive Stock Option Plan (See "Proposal No. 5.").
Commercial is committed to providing highly competitive long term incentive
plan/stock option award opportunities based upon achieving performance in direct
relationship to shareholders' interests.
Executive benefits and retirement programs at Commercial are targeted at the
competitive average of the marketplace and focused upon enhancing and ensuring
the health and welfare and retirement needs of participating executives.
Chief Executive Officer Compensation. In evaluating the compensation of
William E. Mildren, Jr., Chairman, President and Chief Executive Officer of
Commercial, the Committee considered the several factors noted above. In
November 1995, the Committee recommended, and the Board approved, an increase in
Mr. Mildren's base salary from $130,020 to $144,000. At its meeting, the
Committee referred to various published compensation surveys, noting
particularly the average compensation paid to Chief Executive Officers of
banking organizations of similar size in the state of West Virginia. Although
the Committee did not make its recommendation for 1996 compensation based on
whether particular financial goals had been achieved by Commercial, the overall
profitability of the company was considered when the decision was made. Mr.
Mildren, Jr., participates in the same annual incentive plan as all other
officers of Commercial and its subsidiaries. The plan provides increasing
amounts of bonus as the profitability of Commercial, as measured by return on
average assets, increases. No bonus is paid if the threshold return on assets,
as established by the Board of Directors, is not met.
When the Compensation Committee met in December 1996, to consider Mr.
Mildren's compensation, he requested the Committee not increase his base salary
for 1997. He made the request based on the Board of Directors' consideration of
a long term incentive (stock option) plan, and because 1996 earnings levels were
personally disappointing to him. The Committee, after considering its usual
factors, agreed to grant his request and continued his base salary at $144,000
for 1997.
By: James L. Wahle, Carl E. Dollman, Susan S. Ross, George Couch, Robert L.
Hartley, and G. Neil Wynn.
8
<PAGE>
[CHART]
TOTAL RETURN PERFORMANCE
<TABLE>
<CAPTION>
Period Ending
----------------------------------------------------------
Index 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- ----- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Commercial BancShares, Inc. 100.00 124.51 169.41 186.32 193.01 279.83
S&P 500 100.00 107.62 118.47 120.03 165.13 202.89
SNL AMEX Bank Index 100.00 131.30 141.93 153.58 225.74 291.86
</TABLE>
Return based on $100 invested on December 31, 1991, and the reinvestment of
dividends.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee (the "Committee") consists of the following
persons: James L. Wahle, Carl E. Dollman, Susan S. Ross, George Couch, Robert L.
Hartley, and Neil Wynn. Messrs. Wahle and Dollman and Mrs. Ross are non-officer
directors of Commercial. Messrs. Couch, Hartley and Wynn are non-officer
directors of subsidiaries of Commercial. None of the members of the Committee
are employees or former or current officers of Commercial or its subsidiaries.
All of the directors who are members of the Committee and their associates,
including affiliates and related interests, are customers of Commercial and/or
subsidiaries of Commercial and some of these directors and their associates,
including affiliates and related interests, are directors or officers of, or
investors in, corporations or members of partnerships or have an interest in
other entities that are customers of Commercial and/or such subsidiaries. As
such customers, they have had transactions in the ordinary course of business
with Commercial and/or such subsidiaries, including borrowings, all of which
were 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.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires Commercial's
directors and executive officers, and persons who beneficially own more than ten
percent of a registered class of Commercial's equity securities to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of Commercial.
Officers, directors and greater than ten percent shareholders are required by
SEC regulation to furnish Commercial with copies of all Section 16(a) forms they
file.
To Commercial's knowledge, based solely upon review of the copies of
such reports furnished to Commercial and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners complied,
with the following exceptions: Patty S. Poling, Donna L. Perine and Thomas M.
Lookabaugh each filed Forms 3 late; William E. Mildren, Jr., filed two Forms
4 involving 4 transactions late; Carl E. Dollman filed one Form 4 late involving
one transaction; and Donald L. Scothorn, Larry G. Johnson, A. Vernon Criss, III,
and David L. Mendenhall each filed a Form 5 late, involving one transaction.
_______________________________________
9
<PAGE>
Proposal No. 2: Selection of Auditors
It is recommended that the stockholders ratify the selection by the Board of
Directors of Harman, Thompson, Mallory & Ice, a.c., Certified Public
Accountants, as auditors for Commercial for the year ending December 31, 1997.
Harman, Thompson, Mallory & Ice, A.C., examined the financial statements of
Commercial in 1996, and, in the opinion of management and the Board of
Directors, their selection as auditors for the coming year should be ratified.
Representatives of Harman, Thompson, Mallory & Ice, A.C., are expected to be
present at the annual meeting of shareholders with an opportunity to make a
statement if they desire to do so and they are expected to be available to
respond to appropriate questions. In the event ratification of the selection of
auditors is not approved by a majority of the shares of Common Stock voting, the
Board of Directors will consider the selection of another accounting firm. If
such selection was made, it might not become effective until 1998 because of the
difficulty and expense of making a substitution.
The Directors recommend that you vote FOR the above proposal. The
enclosed proxy will be voted "FOR" the approval of the proposed selection of
Harman, Thompson, Mallory & Ice, A.C., unless otherwise directed.
_______________________________________
Proposal No. 3: Proposal To Amend The Articles of Incorporation of Commercial
BancShares, Incorporated to Increase the Number of Authorized
Shares
Description of Proposed Amendment
- ---------------------------------
Commercial's Board of Directors, at a meeting held on February 12, 1997,
unanimously adopted resolutions approving and recommending to the Stockholders
for their adoption an Amendment to the Restated Articles of Incorporation
("Articles") of Commercial. This Amendment provides that Article VI of
Commercial be amended and restated in order to increase the number of authorized
shares of Commercial from 2,000,000 shares of common stock at a par value of
$5.00 each to 5,000,000 shares of authorized common stock with a par value of
$5.00 each. Specifically, Article VI of the Articles, which now reads as
follows:
"VI. The amount of the total authorized capital stock of the Corporation
shall be Two Million Forty-three Thousand Three Hundred Twenty-eight
(2,043,328) shares which shall be divided into Two Million (2,000,000)
shares of common stock with the par value of $5.00 each and Forty-three
Thousand Three Hundred Twenty-eight (43,328) shares of preferred stock with
the par value of $100.00 each."
would be amended and restated to read:
"VI. The amount of total authorized capital stock of said Corporation
shall be Five Million Forty-three Thousand Three Hundred Twenty-eight
(5,043,328) shares which shall be divided into Five Million (5,000,000)
shares of common stock the par value of $5.00 each and Forty-three Thousand
Three Hundred Twenty-eight (43,328) shares of preferred stock of the par
value of $100.00 each."
The proposed increase in the authorized common stock has been recommended
by the Board of Directors to assure that an adequate supply of authorized,
unissued shares is available for general corporate needs, such as future stock
dividends or stock splits, acquisitions, a dividend reinvestment plan and for
other general corporate purposes, without the expense and delay incidental to
obtaining shareholder approval of an amendment to the Articles increasing the
number of authorized shares at the time of such action, except as may be
required for a particular issuance by applicable law or by the rules of any
stock exchange on which Commercial's securities may then be listed. At this
time the Board intends to use approximately 165,000 of the additional shares to
fund the Non-Employee Director Stock Option Plan and the Long-Term Incentive
Stock Plan. Both of these plans are being proposed for Stockholder approval in
these proxy materials. See discussion under captions entitled "Proposal No. 4"
--------------
and "Proposal No. 5".
If the proposed amendment is approved by the shareholders, the additional
shares of common stock so authorized could be issued, in the discretion of the
Board, for any proper corporate purpose, without further action by the
shareholders other than as may be required by applicable law. Existing
shareholders do not have preemptive rights with respect to future issuances of
common stock by Commercial and their interest in Commercial could be diluted by
such issuance with respect to any of the following: earnings per share, voting,
liquidation right and book and market value. Accordingly, the Board of
Directors will, in the exercise of their fiduciary duties to the shareholders,
weigh all the factors carefully, together with the needs and prospects of
Commercial, before committing to the issuance of further shares not requiring
shareholder approval.
10
<PAGE>
The proposed increase in the number of authorized shares of Common Stock
could enable the Board of Directors to render more difficult or discourage an
attempt by another person or entity to obtain control of Commercial. Such
additional shares could be issued by the Board in a public or private sale,
merger or similar transaction, increasing the number of outstanding shares and
thereby diluting the equity interest and voting power of a party attempting to
obtain control of Commercial.
The increase of the authorized shares, if approved will take effect on the
date the Amended and Restated Articles of Incorporation are filed with the
Secretary of State of West Virginia.
Vote Required
- -------------------
An affirmative vote of a majority of the outstanding shares of
Commercial's Common Stock is required to approve the amendment. Shares voted
"ABSTAIN" and shares not voted will have the same effect as if the shares were
voted "AGAINST" approval of the amendment.
Commercial's Board of Directors unanimously recommends that the
shareholders vote FOR adoption of the amendment to the Articles set forth
above. The enclosed proxy will be voted "FOR" the approval of the
proposed increase in authorized shares of Commercial Common Stock unless
otherwise directed.
_______________________________________
Proposal No. 4: Proposal to Approve Non-Employee Director Stock Option Plan
Introduction
- ------------
At its February 12, 1997, regular meeting, the Commercial Board of
Directors adopted by a vote of 12-3 a Non-Employee Director Stock Option Plan
(the "Non-Employee Director Plan") and directed that the Non-Employee Director
Plan be submitted to shareholders for approval. Directors Mendenhall, Gary
Davis and Wilson Davis voted against the plan. The Non-Employee Director Plan
provides for the granting of options for up to 12,100 shares of Commercial
stock. The Non-Employee Director Plan will become effective upon approval of
the shareholders of Commercial at this Annual Meeting. The Commercial Board
believes that it is in the best interest of Commercial and its shareholders to
attract and retain qualified and motivated management and that the Non-Employee
Director Plan will help Commercial achieve this goal. The Non-Employee Director
Plan is not intended to qualify as a stock option plan under Section 422 of the
Internal Revenue Code of 1986, as amended, (the "Code" generally). West
Virginia Code (S) 31-1-84 requires shareholder approval of the Non-Employee
Director Plan. The Non-Employee Director Plan is not subject to the Employee
Retirement Income Security Act of 1974 ("ERISA").
Summary of the Non-Employee Director Stock Option Plan
- ------------------------------------------------------
This section contains a summary of key terms of the Non-Employee Director
Plan. The complete Non-Employee Director Plan is attached hereto as EXHIBIT A.
The summary description of the Non-Employee Director Plan does not purport to be
complete and is qualified in its entirety by reference to the complete document
attached hereto as Exhibit A.
Purpose of the Non-Employee Director Plan
- -----------------------------------------
The Non-Employee Director Plan permits non-employee directors of the Board
of Commercial (the "Company") to acquire and hold Common Stock ("Stock") of the
Company and share in the growth of the value of the Company, thereby reinforcing
a mutuality of interest with shareholders. In the opinion of the Board of
Directors, the long-term success of Commercial is dependent upon the ability of
Commercial to attract and retain outstanding individuals and to motivate their
best efforts on behalf of Commercial's interests. The Board of Directors
believes that the Non-Employee Director Plan will be effective in providing the
directors with a proprietary interest in the business and consequently a greater
incentive to promote the long-term interests of Commercial. Approximately
eleven (11) individuals would be eligible to participate in the Non-Employee
Director Stock Option Plan.
Stock Available
- ---------------
The total number of shares of Stock that may be issued under the Non-
Employee Director Plan shall not exceed in the aggregate twelve thousand one
hundred (12,100) shares.
Initial Options
- ---------------
Upon election to the Board, a non-employee director will receive an option
to purchase two hundred twenty (220) shares of Stock.
11
<PAGE>
Annual Options
- --------------
As of the date of each annual meeting of the Company's shareholders, each
incumbent non-employee director will receive an option to purchase two hundred
twenty (220) shares of Stock.
Option Agreement
- ----------------
Each Stock option granted under the Non-Employee Director Plan will be
evidenced by an Option Agreement between the Company and the non-employee
director. These agreements will contain the terms on which the option can be
exercised.
Option Price
- ------------
The option price for purchasing a share of Stock will be the fair market
value of the Stock on the date the option is granted. When the Stock is traded
on a national securities exchange, fair market value is defined as the closing
price of the Stock on such exchange. Commercial is registered on the American
Stock Exchange. The option price can be paid by certified check or by surrender
of previously acquired shares of Stock with a fair market value on the date
surrendered equal to the exercise price.
Option Expiration
- -----------------
Each Stock option will automatically expire after ten (10) years. No Stock
option may be exercised by any person after expiration.
Option Termination
- ------------------
Each Stock option will terminate automatically one (1) year after a non-
employee director terminates service as a member of the Board.
Option Exercise
- ---------------
Each Stock option can be exercised at any time between six (6) months after
being granted and the date the option expires or is terminated.
Administration
- --------------
The Non-Employee Director Plan is administered by the Board. However, the
Board has no discretion with respect to the selection of directors to receive
Stock options, the number of shares of Stock covered by any such option, or the
price or exercise of any Stock option.
Non-Employee Director Plan Effective Date
- -----------------------------------------
The Non-Employee Director Plan is effective on the date of its adoption by
the Board of Directors. All Stock options granted before the Non-Employee
Director Plan is approved by shareholders are void until the Non-Employee
Director Plan is approved by the shareholders.
Non-Employee Director Plan Expiration
- -------------------------------------
The Non-Employee Director Plan will automatically terminate at the tenth
anniversary of the date of shareholder approval of the Non-Employee Director
Plan, or the tenth anniversary of the date the Non-Employee Director Plan is
adopted by the Board (if earlier). The term of Stock options granted before
such tenth anniversary may continue beyond that date.
Amendment and Discontinuance
- ----------------------------
The Board of Directors may at any time amend, suspend or discontinue the
Non-Employee Director Plan, provided that certain amendments may not be made by
the Board of Directors without approval of the shareholders. Amendments may not
alter the outstanding options without the consent of the optionee.
Registration of Stock
- ---------------------
Commercial will register the shares issued under the Non-Employee Director
Plan under applicable federal and state securities law, unless an applicable
exemption from registration is available.
Initial Option Grants
- ---------------------
The Executive Committee will award options to directors of the company.
The options will be nonassignable and nontransferable. All options are subject
to all terms of the Non-Employee Director Plan, including but not limited to,
those related to employment status, change in corporate structure and
restrictions on exercise.
12
<PAGE>
Federal Income Tax Consequences
- -------------------------------
The Non-Employee Director Plan permits Commercial to grant non-statutory
stock options (options that do not meet the stock option requirements under
Section 422 of the Code). Options granted under the Non-Employee Director Plan,
which are non-statutory, may be taxed to the participant depending on the
provisions of such options when granted, exercised, disposed of or when any
restrictions placed thereon lapse. Commercial will be treated as having paid
compensation to the participant and may deduct the same at the time at which and
in the same amount in which the participant is considered to have realized
compensation.
Resale of Stock by Non-Employee Director Plan Participants
- ----------------------------------------------------------
Participants who exercise options and receive Commercial common stock under
the Non-Employee Director Plan may resell the stock received without restriction
if they are not affiliates of Commercial. Those participants who are affiliates
will be subject to the resale provisions of Rule 144 under the Securities Act of
1933, as amended.
Consideration For and Against the Proposal
- ------------------------------------------
In the opinion of the Board of Directors of Commercial, the long-term
success of Commercial is dependent upon its ability to attract and retain
outstanding individuals and to motivate their best efforts on behalf of
Commercial's interests. Consequently, the Board of Directors believes that both
Commercial and its shareholders benefit by providing non-employee directors of
Commercial the option to acquire shares of Commercial Common Stock.
Under the Non-Employee Director Plan, shares may be purchased by
participants at an option price fixed on the date the options are awarded.
Generally, the options would later be exercised by the participant only if the
market price at the time of the exercise exceeds the option price. Thus the
participant may acquire Commercial Common Stock at a price below its market
value. At the time of its exercise, therefore, Commercial experiences slight
dilution in its earnings per share to the extent that the book value of
Commercial Common Stock exceeds the option price.
Vote Required
- -------------
An affirmative vote of the holders of a majority of the outstanding
shares of Commercial's Common Stock is required to adopt the Non-Employee
Director Plan. Shares voted "Abstain" and shares not voted will have the same
effect as if the shares were voted "against" approval of the plan.
Commercial's Board of Directors recommend, by the vote indicated above,
that the shareholders vote FOR the adoption of the Non-Employee Director Stock
Option Plan discussed above.
_______________________________________
Proposal No. 5: Proposal to Approve Long Term Incentive Stock Plan
Introduction
- ------------
At its February 12, 1997, regular meeting, Commercial's Board of Directors
adopted by a vote of 12-3 a Long Term Incentive Stock Plan (the "Long Term
Incentive Plan") and directed that the Long Term Incentive Plan be submitted to
Commercial's shareholders for approval. Directors Mendenhall, Gary Davis and
Wilson Davis voted against the plan. The Long Term Incentive Plan provides for
the granting of options for up to 152,900 shares of Commercial stock. The Long
Term Incentive Plan will become effective upon approval by the shareholders at
this Annual Meeting of shareholders. The Commercial Board believes that it is
in the best interest of Commercial and its shareholders to attract and retain
qualified and motivated management and that the Long Term Incentive Plan will
help Commercial achieve this goal. The Long Term Incentive Plan is intended to
qualify as an incentive stock option plan under Section 422 of the Internal
Revenue Code of 1986, as amended, (the "Code" generally) and participants will
benefit from the resulting tax consequences, as discussed below. Both Section
422 and WV Code (S) 31-1-84 require shareholder approval of the Long Term
Incentive Plan. The Long Term Incentive Plan is not subject to the Employee
Retirement Income Security Act of 1974 ("ERISA").
Summary of the Long Term Incentive Plan
- ---------------------------------------
This section contains a summary of key terms of the Long Term Incentive
Plan. The complete Long Term Incentive Plan is attached hereto as EXHIBIT B. The
summary description of the Long Term Incentive Plan does not purport to be
complete and is qualified in its entirety by reference to the complete document
attached hereto as Exhibit B.
13
<PAGE>
Purpose of the Long Term Incentive Plan.
- ----------------------------------------
The Long Term Incentive Plan permits key employees of Commercial
BancShares, Incorporated to acquire and hold Common Stock ("Stock") of
Commercial and share in the growth of the value of Commercial, thereby
reinforcing a mutuality of interest with shareholders. In the opinion of the
Board of Directors, the long-term success of Commercial is dependent upon the
ability of Commercial to attract and retain outstanding individuals and to
motivate their best efforts on behalf of Commercial's interests. The Board of
Directors believes the Long Term Incentive Plan will be effective in
providing key employees with a proprietary interest in the business and
consequently a greater incentive to promote the long-term interests of
Commercial. Approximately 70 employees would currently be eligible to
participate in the Long Term Incentive Plan.
Stock Available
- ---------------
The maximum number of shares of Stock that may be issued under the Long
Term Incentive Plan is 152,900 shares. If any awards under the Long Term
Incentive Plan expire without Stock being issued, the shares subject to the
expired awards will be added to the remaining shares available under the Long
Term Incentive Plan.
The Long Term Incentive Plan contains anti-dilution provisions, under which
the Compensation Committee may increase the number of shares available under the
Long Term Incentive Plan and the number and price of shares subject to
outstanding awards if an event such as a stock dividend, stock split, merger or
recapitalization occurs. The Long Term Incentive Plan also authorizes the
Compensation Committee to change the terms of outstanding options (including
accelerating the time at which outstanding options to buy Stock may be
exercised) and/or the securities underlying outstanding options in the event of
a change in control in Commercial.
Administration
- --------------
The Long Term Incentive Plan will be administered by the Compensation
Committee of Commercial. This administration is intended to comply with the
requirements of Securities and Exchange Commission Rule 16b-3 (which provides an
exemption from the short-swing profit liability rules of Section 16(b) of the
Securities Exchange Act of 1934) and to satisfy the requirements for exemption
from Internal Revenue Code Section 162(m) (which denies income tax deductions
for individual compensation above $1 million per year).
The Committee has authority to select the employees to whom awards may from
time to time be granted, determine the type of award granted, determine the
terms and conditions of any award granted (including the share price and any
restriction or limitation or any vesting) based on such factors as the Committee
shall determine, in its sole discretion, amend the terms of any outstanding
award, and interpret the terms and provisions of the Long Term Incentive Plan
and any award granted thereunder, and otherwise to settle all claims and
disputes arising under the Long Term Incentive Plan.
Eligibility
- -----------
The employees who are eligible to participate in the Long Term Incentive
Plan are officers and other key employees of Commercial (but excluding members
of the Committee and any person who serves as a non-employee director) who are
responsible for or contribute to the management, growth and/or profitability of
Commercial. Participation is determined by selection by the Committee.
Approximately 70 employees would currently be eligible to participate in the
Long Term Incentive Plan.
Awards
- ------
Types of Awards: The Long Term Incentive Plan authorizes the Committee to
---------------- --------------------------------------------------------
grant the following types of awards:
------------------------------------
. Stock options that qualify as "incentive stock options" under the
Internal Revenue Code, and stock options that are "non-qualified stock
options"
. Stock appreciation rights (For a definition of "stock appreciation
rights" see Exhibit C, Section 4.2)
. Shares of restricted stock (For a definition of "restricted stock" see
Exhibit C, Section 4.3)
. Performance awards (For a definition of "performance awards" see Exhibit
C, Section 4.4)
Terms of Awards: The Committee determines the time or times when awards
----------------
are granted, the number of shares subject to such awards, the price (if
any) to be paid upon receipt of Stock under the Long Term Incentive Plan,
the time or times when Stock can be received or forfeited, and all other
conditions of awards. The specific terms of each award are not required to
be the same for different employees.
14
<PAGE>
Option Agreements
- -----------------
Each employee receiving a Stock option under the Long Term Incentive Plan
will enter into an agreement with the Company stating the terms and conditions
on which the option can be exercised. (See "Stock Option Terms" below.)
Stock Option Terms
- ------------------
Option Price. The option price per share of Stock purchasable under a
-------------
Stock Option cannot be less than the fair market value of the Stock at the
time of grant. Any incentive stock option granted to an employee who, at
the time the option is granted, owns more than ten percent (10%) of the
voting power of all classes of stock of Commercial must have an exercise
price equal to or greater than one hundred and ten percent (110%) of the
fair market value per share on the date of the grant.
Option Term. Each Stock option will automatically expire at the end of a
------------
period specified by the Committee, which cannot be more than ten (10) years
from the date granted. Any incentive stock option granted to an employee
who, at the time the option is granted owns more than ten percent (10%) of
the voting power of all classes of stock of Commercial, may not have a term
of more than five (5) years.
Option Vesting. Options cannot be exercisable until six months after the
---------------
grant date. This would allow compliance with the Rule 16b-3 exemption from
the short-swing profit liability rules of Section 16(b) of the Securities
Exchange Act of 1934.
Suggested vesting for the initial grant of options is to allow
staggered exercises in accordance with the following schedule:
<TABLE>
<CAPTION>
Year Percent Exercisable
---- -------------------
<S> <C>
1 0%
2 33 1/3%
3 66 2/3%
4 100%
</TABLE>
In the case of Incentive Stock Options, the value of shares underlying
options that first become exercisable in any year cannot exceed $100,000
per optionee (based on the stock price on the grant date). No Stock option
may be exercised by any person after expiration.
Termination for Death or Retirement. If an optionee's employment by
------------------------------------
Commercial and/or any affiliate terminates by reason of death or
retirement, any Stock option held by such optionee which has vested may be
exercised for a period of up to one (1) year.
Other Termination with Cause. If an optionee's employment by Commercial
-----------------------------
and/or any affiliate terminates for any reason other than death or
retirement and without "cause," any Stock Option held by such optionee
which has vested may be exercised for a period of up to ninety (90) days.
A termination is without "cause" if it is for reasons other than the
employee's willful failure to perform his or her duties or willfully
engaging in conduct injurious to Commercial.
Termination for Cause. If an optionee's employment by Commercial and/or
----------------------
any affiliate terminates for "cause," the Stock option shall thereupon
terminate and expire immediately.
Cash-out of Option.
- -------------------
Pursuant to the terms of the Long Term Incentive Plan, the Committee may,
upon notice of exercise, elect to cash out all or part of the portion of the
option to be exercised and pay the optionee an amount equal to the excess of the
fair market value of Commercial's common stock over the option price (the
"Spread Value"). The payment of the Spread Value may be made, at the Committee's
discretion, in cash or common stock of Commercial, including, if the terms of
the option so designate, restricted shares of Commercial's common stock.
Stock Appreciation Rights.
- --------------------------
The Committee has the authority to grant "tandem" and "non-tandem" stock
appreciation rights ("Tandem SARs" and "Non-Tandem SARs", respectively) under
the Long Term Incentive Plan. Tandem SARs may be granted in conjunction with all
or part of any option or other award granted under the Long
15
<PAGE>
Term Incentive Plan and provide the holder with the right to surrender to
Commercial all or a portion of an option or other award in exchange for an
amount equal to the Spread Value. Non-Tandem SARs are granted separately from an
option or other award under the Long Term Incentive Plan and provide the holder
with the right to receive an amount equal to the difference between (a) the fair
market value, as of the exercise date, of a number of shares of Commercial's
common stock designated in the grant of the right, and (b) the fair market value
of such shares as of the date the right is granted.
A Tandem SAR will terminate and no longer be exercisable upon the
termination or exercise of the related option, except that, unless otherwise
determined by the Committee, a Tandem SAR granted with respect to less than the
full number of shares covered by a related option will not be reduced until the
number of shares covered by the termination or exercise of the option exceeds
the number of shares not covered by the Tandem SAR. Tandem SARs may be exercised
by surrendering the applicable portion of the related option. Options which are
so surrendered, in whole or in part, will no longer be exercisable to the extent
the related Tandem SARs have been exercised. Non-Tandem SARs granted under the
Long Term Incentive Plan will be subject to such terms and conditions as are
determined by the Committee in accordance with the provisions of the Long Term
Incentive Plan.
Restricted Stock.
- -----------------
The Committee may grant awards to participants consisting of shares of
restricted stock, with respect to which the Committee is authorized to condition
the vesting on the attainment of specified performance goals or such other
factors as the Committee may determine. See "Performance Goals", below. In
general, the acquisition price for shares of restricted stock may not be less
than their par value. Subject to the terms of any particular grant, shares of
restricted stock granted under the Long Term Incentive Plan will be subject to
the restrictions that, for a set period of time (the "Restriction Period"), the
grantee not sell, transfer, pledge, assign or otherwise encumber shares of
restricted stock awarded to such grantee under the Long Term Incentive Plan.
Within these limits, and subject to the terms of the Long Term Incentive Plan,
the Committee is authorized to provide for the lapse, waiver or acceleration of
such restrictions, in whole or in part, based on such factors, including
performance criteria, which the Committee determines.
Holders of shares of restricted stock granted under the Long Term Incentive
Plan will have full voting and dividend rights with respect to such shares,
provided, however, that the Committee may determine, at the time the grant is
made, to permit or require the payment of cash dividends to be deferred or
reinvested in additional shares of restricted stock. Upon termination of a
participant's employment with Commercial for any reason during the Restriction
Period, all shares still subject to restrictions will be forfeited by the
participant, provided, however, that in the case of hardship or other special
circumstances, the Committee may waive, in whole or in part, any or all
remaining restrictions with respect to shares of restricted stock held by a
participant whose employment with Commercial is involuntarily terminated without
Cause.
Notwithstanding the foregoing, no action on the part of the Committee to
provide for the lapse, waiver or acceleration of any restrictions may be taken
with respect to shares of restricted stock granted under the Long Term Incentive
Plan which are intended to qualify as "performance-based" compensation under
Section 162(m) to the extent any such action would cause the shares to fail to
so qualify.
Performance Awards.
- -------------------
The Committee may grant to eligible participants performance awards with
respect to which the participant's receipt of value will be contingent upon
attainment of one or more pre-established performance goals set by the Committee
during a particular period of time (a "Performance Period"). See "Performance
Goals", below. At the beginning of each Performance Period, the Committee will
determine the range of dollar values or number of shares of common stock to be
awarded to the participant at the end of the Performance Period if and to the
extent the relevant performance goals related to the particular performance
award are met. The Committee has the discretion, subject to the terms of the
Long Term Incentive Plan, in the event of special or unusual events or
circumstances affecting the application of any performance objective, to revise
the performance objectives applicable to any performance award to avoid
unintended windfalls or hardship.
If a participant's employment is terminated other than due to death,
Disability or Retirement, the participant will not be entitled to any payment
with respect to a performance award, except as otherwise determined by the
Committee. Unless otherwise designated by the Committee in the applicable award
agreement, upon termination of employment during a Performance Period because of
death, Disability or Retirement, such participant may be entitled to payment
with respect to an outstanding performance award at the end of the applicable
Performance Period (a) based upon the participant's performance, to the extent
relevant, for the portion of the Performance Period ending on the date of
termination and the performance of the applicable business unit for the entire
Performance Period and (b) where deemed appropriate by the Committee, prorated
for the portion of the Performance Period during which the participant was
employed by Commercial. In addition, the Committee may provide for an earlier
payment in settlement of the award in an amount and upon such terms and
conditions as the Committee deems appropriate.
16
<PAGE>
The earned portion of any performance award may be paid currently or
deferred with interest or earnings as may be determined by the Committee.
Payment may be made in the form of cash or shares of common stock of Commercial,
including shares of restricted stock, and may be paid in a lump sum or in
installments, as the Committee may determine at or after grant.
Notwithstanding the foregoing, no revision may be made, or other action
taken, with respect to any performance shares granted under the Long Term
Incentive Plan which are intended to qualify as "performance-based" compensation
under Section 162(m) to the extent any such revision or action would cause the
shares to fail to so qualify.
Performance Goals.
- ------------------
With respect to performance awards and restricted stock grants made under
the Long Term Incentive Plan, the Committee will have the discretion to set such
performance objectives as it deems appropriate. Such performance objectives may
vary from participant to participant and between groups of participants and will
be based upon such Company, business unit and/or individual performance factors
and criteria as the Committee may deem appropriate, including, but not limited
to, earnings per share and return on equity. Notwithstanding the foregoing, in
the event that any grant of performance awards or restricted stock is intended
to qualify as "performance-based" compensation under Section 162(m), such
performance objectives will be limited to stock price, market share, sales,
earnings per share, return on assets, return on equity, costs, cash flow or any
combination thereof.
Effect of Change of Control.
- ----------------------------
The Committee has the authority, in its discretion, to provide at the time
of a grant of any award under the Long Term Incentive Plan, that the terms of
the grant or the date on which an award vests or becomes exercisable may be
modified in the event of a change-of-control. Subject to the terms of the Long
Term Incentive Plan, the Committee may determine at any time at or after a
particular grant (a) the criteria used to determine whether a change-of-control
has occurred and (b) whether a change-of-control has in fact occurred.
Notwithstanding the foregoing, no modification may be made upon a change-of-
control with regard to any award intended to qualify as "performance-based"
compensation under Section 162(m) to the extent any such modification would
cause the award to fail to so qualify.
Transfer
- --------
No Stock option, stock appreciation right or other award under the Long
Term Incentive Plan may be transferred other than (a) by will or by the laws of
descent and distribution, or (b) as otherwise permitted in accordance with
Section 16 of the Securities Exchange Act of 1934 and the rules promulgated
thereunder by the Securities and Exchange Commission Rule without jeopardizing
or impairing any exemption provided for under the Rules.
Effective Date
- --------------
The Long Term Incentive Plan will become effective upon approval by the
shareholders. No award may be granted after the tenth anniversary of the date
of Board approval in effect. Awards granted before such tenth anniversary may
continue beyond that date.
Amendment and Discontinuance
- ----------------------------
The Board of Directors may at any time amend, suspend or discontinue the
Long Term Incentive Plan, provided that certain amendments may not be made by
the Board of Directors without approval of the shareholders. Amendments may not
alter the outstanding options without the consent of the optionee.
Registration of Stock
- ---------------------
Commercial will register the shares issued under the Long Term Incentive
Plan under applicable federal and state securities law, unless an applicable
exemption from registration is available.
17
<PAGE>
Compensation Committee Membership
- ---------------------------------
The Compensation Committee will be appointed from time to time by the Board
of Directors of Commercial from among its members. The Board of Directors may
remove or add members of the Compensation Committee at its discretion. The name
and address of current members of the Compensation Committee along with any
material relationship to Commercial and to its affiliates, are listed below:
<TABLE>
<CAPTION>
Relationship
Name Address to Commercial
---- ------- -------------
<S> <C> <C>
James L. Wahle Doylestown, PA Director
Carl E. Dollman Vienna, WV Director
Susan S. Ross Vienna, WV Director
Robert P. Hartley Ravenswood, WV Director of subsidiary
Neil R. Wynn Marietta, OH Director of subsidiary
George G. Couch New Martinsville, WV Director of subsidiary
</TABLE>
Initial Option Grants
- ---------------------
At its December 18, 1996, meeting, meeting, the Compensation Committee
recommended that upon shareholder approval of the Long Term Incentive Plan,
certain options be granted. These options will be effective upon approval of the
Long Term Incentive Plan by the shareholders and will be retroactive to January
1, 1997. All options are subject to all terms of the Long Term Incentive Plan,
including but not limited to, those related to employment status, change in
corporate structure and restrictions on exercise. The options granted are non-
qualified stock options. Assuming shareholder approval of the Long Term
Incentive Plan, the following individuals will receive the options indicated:
<TABLE>
<CAPTION>
Name Number of Options
<S> <C>
William E. Mildren, Jr. 8,250
Larry G. Johnson 2,200
Donald L. Scothorn 3,850
Thomas M. Lookabaugh 1,650
Gary R. Davis 1,650
James A. Meagle, Jr. 1,650
Patty S. Poling 825
David L. Mendenhall 1,650
Donna L. Perine 1,100
Executive Group (nine 22,825
individuals, as above)
Non-executive Officer Employee
Group (twelve individuals) 13,035
</TABLE>
Beyond awards for 1997, it is not possible to estimate at this time the
number of options which will be awarded or those specific individuals to whom
the options may be extended. As of March 25, 1997, the market value of
Commercial Common Stock was $39.50 per share.
Federal Income Tax Consequences of Awards.
- ------------------------------------------
The following is a brief general discussion of the anticipated income tax
treatment of the deferral of incentive awards and the grant and exercise of
awards to participants and to Commercial under current provisions of the
Internal Revenue Code.
Incentive Stock Options. The grant of an incentive stock option generally
------------------------
will have no immediate tax consequences to Commercial or the optionee. If the
optionee has remained an employee of Commercial from the date of grant until at
least the day three months before the date of exercise (one year before the date
of exercise in the case of an employee who is disabled), the optionee will
recognize no taxable income and Commercial will not be entitled to any tax
deduction at the time of exercise of an incentive stock option if the optionee
has held the option stock for the statutory holding period. However, the amount
by which the fair market value of the acquired shares at the time of exercise
exceeds the exercise price generally will be an item of adjustment to
alternative minimum taxable income for purposes of the alternative minimum tax.
If an optionee exercises an incentive stock option more than three months after
terminating employment (one year in the case of an employee who is disabled),
the exercise of the option will be treated in the same manner as the exercise of
a non-qualified stock option.
If an optionee holds the shares received upon exercise of an incentive
option for at least two years after the date of grant and for at least one year
after the date of exercise, gain or loss on a subsequent sale of the shares will
be a long-term capital gain or loss and Commercial will not be entitled to any
deduction. If an optionee disposes of shares acquired upon exercise of an
incentive stock option before these holding periods are satisfied, the optionee
generally will
18
<PAGE>
recognize compensation income in the year of disposition equal to the excess of
the fair market value of the stock on the exercise date over the exercise price.
However, if the price received for the option stock upon such a disposition
would result in a loss to the individual, the optionee generally will recognize
compensation income equal to the excess, if any, of the amount realized on the
sale over the basis of the option stock. Upon any such premature disposition by
an employee, Commercial generally will be entitled to a deduction in the amount
of compensation income included by the employee. For purposes of calculating the
alternative minimum tax for the year of the disposition of a share acquired upon
exercise of an incentive stock option, any adjustment to alternative minimum
taxable income reported upon exercise of the incentive stock option will be
included in the basis of the share.
Non-qualified Stock Options. The grant of a non-qualified stock option
----------------------------
generally will have no immediate tax consequences to Commercial or the optionee.
An optionee generally will recognize compensation income at the time of exercise
of a non-qualified option in an amount equal to the difference between the
exercise price and the fair market value on the exercise date of the acquired
shares. Commercial generally will be entitled to a deduction in the year of
exercise and in the amount the optionee includes in income as a result of the
exercise of a non-qualified option, provided that Commercial satisfies
applicable reporting requirements.
Stock Appreciation Rights ("SARs"). Grants of Tandem SARs or Non-Tandem
-----------------------------------
SARs will have no immediate tax consequences to Commercial or the participant
receiving the grant. The amount received by a participant upon the exercise of
a Tandem SAR or Non-Tandem SAR will constitute compensation income to the
participant at the time of exercise. Commercial generally will be entitled to a
deduction for compensation paid in that amount at that time.
Restricted Stock. Unless a participant makes an election under Section
-----------------
83(b) of the Internal Revenue Code, a participant generally will recognize no
income and Commercial will be entitled to no deduction at the time restricted
stock is awarded to a participant. As and when the restrictions on restricted
stock lapse or are otherwise removed, the participant will recognize
compensation income equal to the excess of the fair market value of the
restricted stock on the date the restrictions lapse or are otherwise removed
over the amount paid by the participant for the restricted stock, if any, and
Commercial will be entitled to a corresponding deduction for compensation paid,
provided that Commercial satisfies applicable reporting requirements. Dividends
paid on restricted stock during the restriction period will constitute
compensation income to the participant receiving the dividend and will give rise
to a deduction for Commercial. Upon disposition of common stock of Commercial
after the restrictions lapse or are otherwise removed, any gain or loss realized
by a participant will be treated as short-term or Long Term capital gain or loss
depending upon the period of time between the disposition and the earlier lapse
or removal of the restrictions on those shares of common stock. If a
participant files an election under Section 83(b) with the Internal Revenue
Service within 30 days after the grant of restricted stock, the participant will
recognize compensation income on the date of the grant, equal to the excess of
the fair market value of the shares of common stock of Commercial on that date
over the price paid for those shares and Commercial will be entitled to a
corresponding deduction, provided Commercial satisfies applicable reporting
requirements. Dividends paid on restricted stock after an election under
Section 83(b) of the Internal Revenue Code has been made will be taxed as
dividends and will not be deductible by Commercial. Any gain or loss realized
by a participant upon a disposition of restricted stock after an election under
Section 83(b) of the Internal Revenue Code has been made will be treated as
short-term or Long Term capital gain or loss depending upon the period of time
between the disposition and the earlier date of grant.
Performance Awards. The grant of performance awards generally will not
-------------------
have any immediate tax consequences to a participant receiving the performance
awards or to Commercial. In general, at the time Commercial pays any amount in
cash, or in unrestricted shares of common stock of Commercial, to an employee
with respect to performance awards, the participant will recognize compensation
income equal to the amount of that payment, or the fair market value of the
unrestricted shares of common stock of Commercial at the time of payment, and
Commercial will be entitled to a corresponding deduction. If the payment to an
employee with respect to performance awards is made in restricted stock, the tax
consequences described above with respect to restricted stock will apply.
19
<PAGE>
THE FEDERAL INCOME TAX DISCUSSION SET FORTH IN THIS SECTION IS INCLUDED FOR
GENERAL INFORMATION ONLY AND DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
LISTING OF ALL POTENTIAL TAX CONSEQUENCES. THE DISCUSSION DOES NOT ADDRESS THE
TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCALITY, OR FOREIGN
JURISDICTION. THE DISCUSSION IS BASED UPON THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED, TREASURY REGULATIONS THEREUNDER, AND ADMINISTRATIVE RULINGS AND
COURT DECISIONS AS OF THE DATE HEREOF. ALL OF THE FOREGOING ARE SUBJECT TO
CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THE
DISCUSSION. PLAN PARTICIPANTS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM, INCLUDING THE EFFECT OF FOREIGN, STATE, AND
LOCAL TAXES.
Resale of Stock by Long Term Incentive Plan Participants
- --------------------------------------------------------
Participants who exercise options and receive Commercial common stock under
the Long Term Incentive Plan may resell the stock received without restriction
if they are not affiliates of Commercial. Those participants who are affiliates
will be subject to the resale provisions of Rule 144 under the Securities Act of
1933, as amended.
Considerations For and Against the Proposed Plan
- ------------------------------------------------
In the opinion of the Board of Directors of Commercial, the long-term
success of Commercial is dependent upon its ability to attract and retain
outstanding individuals and to motivate their best efforts on behalf of
Commercial's interests. Consequently, the Board of Directors believes that both
Commercial and its shareholders benefit by providing key employees of Commercial
the option to acquire shares of Commercial Common Stock.
Under the Long Term Incentive Plan, shares may be purchased by
participants at an option price fixed on the date the options are awarded.
Generally, the options would later be exercised by the participant only if the
market price at the time of the exercise exceeds the option price. Thus, the
participant may acquire Commercial Common Stock at a price below its market
value. At the time of its exercise, therefore, Commercial experiences slight
dilution in its earnings per share to the extent that the book value of
Commercial Common Stock exceeds the option price.
In addition, the proposed Long Term Incentive Plan contains a change
in control provision that permits the Compensation Committee, in its discretion,
to provide at the time of the grant of any award, that the terms of the award,
including, but not limited to, the method of determining fair market value, or
the date on which an award vests or becomes exercisable, may be modified in the
event of a change in control. This provision, if exercised, could result in the
rendering more difficult or discouraging an attempt by another person or entity
to obtain control of Commercial. The options granted for 1997 will not include
a change in control provision.
Vote Required
- -------------
An affirmative vote of the holders of a majority of the outstanding
shares of Commercial's Common Stock is required to adopt the Long Term
Incentive Plan. Shares voted "Abstain" and shares not voted will have the
same effect as if the shares were voted "against" approval of the plan.
Commercial's Board of Directors recommends, by the vote indicated above,
that the stockholders vote FOR adoption of the Long Term Incentive Plan.
_______________________________________
20
<PAGE>
GENERAL INFORMATION
The Board of Directors and management would like to have you attend the meeting
in person. Please, however, mark, date, sign and return as promptly as possible
the enclosed proxy in any event. The Board of Directors strongly recommends a
vote FOR all nominees for election as Directors and, the ratification of the
selection of auditors, the auditors increase in authorized common stock,
the non-employee director stock option plan and the long term incentive stock
option plan. If a proxy does not specify otherwise, it will be voted according
to the foregoing recommendations. If you attend the meeting, you may
nonetheless vote in person by ballot if you desire.
_______________________________________
PROPOSALS OF STOCKHOLDERS
FOR PRESENTATION AT NEXT YEAR'S ANNUAL MEETING,
TO BE HELD MAY 13, 1998
Proposals which stockholders intend to present at next year's annual meeting, to
be held Wednesday, May 13, 1998, will be eligible for inclusion in Commercial's
proxy material for that meeting if they are submitted to the Secretary of
Commercial in writing not later than December 31, 1997. A proponent may submit
only one proposal. At the time of the submission of a proposal, a stockholder
also may submit a written statement in support thereof for inclusion in the
proxy statement for the meeting, if requested by the proponent; provided,
however, that a proposal and its supporting statement in the aggregate shall not
exceed 500 words.
OTHER MATTERS
As of the date hereof, the Board of Directors was not aware that any matters not
referred to in the form of proxy would be presented for action at the meeting.
If any other business should come before the meeting, the persons named in the
enclosed proxy will, as stated therein, have discretionary authority to vote the
shares represented by them according to their best judgment.
INFORMATION AVAILABLE TO SHAREHOLDERS
Commercial's 1996 Annual Report is being mailed to shareholders with this
Proxy Statement. Additional copies of the Annual Report and Commercial's
filings of Form 10-K and quarterly reports on Form 10-Q filed with the
Securities and Exchange Commission may be obtained without charge from Larry G.
Johnson, Corporate Secretary, Commercial BancShares, Inc., P O Box 1427,
Parkersburg, WV 26102.
21
<PAGE>
Exhibit "A"
Printed below is Article VI of Commercial's Articles of Incorporation in its
entirety, as it is proposed to be amended. The changed words and numbers, all
in the first paragraph, are underlined.
VI. The amount of the total authorized capital stock of the Corporation
shall be Five Million Forty-three Thousand Three Hundred Twenty-eight
----
(5,043,328) shares which shall be divided into Five Million (5,000,000)
- ---- -
shares of common stock with the par value of $5.00 each and Forty-three Thousand
Three Hundred Twenty-eight (43,328) shares of preferred stock with the par value
of $100.00 each.
A. The Board of Directors shall have the power and authority at
any time and from time to time to issue, sell or otherwise dispose of any
unissued but authorized shares of any class or classes of stock presently
provided for in the Certificate of Incorporation, or that may hereafter be
provided for by a subsequent amendment to the Certificate of Incorporation, to
such person or parties, including the holders of Common Stock or Preferred Stock
or of any such other class of stock, for such considerations (not less than the
par value, if any, thereof) and upon such terms and conditions as the Board of
Directors in its discretion may deem to be in the best interests of the
Corporation. Except as expressly provided to the contrary hereinafter, such
issuance, sale or other disposition may be made without offering such shares, or
any part or class thereof, to the holders of Common Stock or Preferred Stock or
any such other class of stock, and no such holder shall have any preemptive
right to subscribe for any such shares.
B. Each holder of Common Stock of the Corporation entitled to vote
shall have one vote for each share thereof held.
C. The Corporation may issue shares of preferred or special
classes subject to the right of the Corporation to redeem any of such shares at
the price fixed by the articles of incorporation for the redemption thereof;
entitling the holders thereof to cumulative, noncumulative or partially
cumulative dividends; having preference over any other class or classes of
shares as to the payment of dividends; having preference in the assets of the
Corporation over any other class or classes of shares upon the voluntary or
involuntary liquidation of the corporation; and convertible into shares of any
other class or into shares of any series of the same or any other class, except
a class having prior or superior rights and preferences as to dividends or
distribution of assets upon liquidation, but shares without par value, if any,
shall not be converted into shares with par value unless that part of the stated
capital of the Corporation represented by such shares without the par value is,
at the time of conversion, at least equal to the aggregate par value of the
shares into which the shares without par value are to be converted or the amount
of any such deficiency is transferred from surplus to stated capital.
D. Preferred Stock may be divided into and issued by the Board of
Directors from time to time in one or more series. All shares of Preferred
Stock shall be of equal rank and shall be identical, except in respect of the
particulars that are fixed in the Certificate of Incorporation or may be fixed
by the Board of Directors as hereinafter provided pursuant to authority which is
hereby expressly vested in the Board of Directors; and each share of each series
shall be identical in all respects with the other shares of such series, except
as to the following relative rights and preferences which may be fixed and
determined by the Board of Directors, as to which there may be variations
between different series:
(a) the rate of dividends;
(b) whether shares may be redeemed and, if so, the redemption
price and the terms and conditions of redemption;
(c) the amount payable upon shares in event of voluntary and
involuntary liquidation;
(d) sinking fund provisions, if any, for the redemption or
purchase of shares;
(e) the terms and conditions, if any, on which shares may be
converted; and
(f) voting rights, if any.
E. The Board of Directors of the Corporation shall have all of the
power and authority with respect to the shares of Preferred Stock that may be
delegated to the Board of Directors pursuant to the terms and provisions of
Chapter 31, Article 1, Sections 78 and 79 of the Code of West Virginia, as
amended, and shall exercise such power and authority by the adoption of a
resolution or resolutions as prescribed by law.
A-1
<PAGE>
Exhibit "B"
COMMERCIAL BANCSHARES, INCORPORATED
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Section 1. Purpose of the Plan.
--------------------
The name of this plan is the Commercial BancShares, Incorporated Non-
Employee Director Stock Option Plan (the "Plan"). The purpose of the Plan is to
promote the interests of Commercial and its subsidiaries by promoting the
acquisition and holding of Commercial BancShares, Incorporated stock by non-
employee directors, thereby maintaining their personal interest in the Company's
continued success and aligning their interest with other stockholders.
Section 2. Definitions.
------------
For the purposes of the Plan, the following terms shall be defined as set forth
below:
2.1 "Board" means the Board of Directors of the Company.
-----
2.2 "Company" means Commercial BancShares, Incorporated, a corporation
-------
organized under the laws of the State of West Virginia, or any successor
organization.
2.3 "Director" means an active member of the Board.
--------
2.4 "Fair Market Value" means, as of any day, the average of the closing prices
-----------------
of sales of shares of common stock on all national securities exchanges on which
the common stock may at the time be listed or, if there shall have been no sales
on such day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day the common stock shall not
be so listed, the average of the representative bid and asked prices quoted in
the National Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System for such date or the next preceding date that common stock was
traded on such market. If at any time there is no public market for the common
stock, the fair market value of the shares of common stock subject an Option on
the date an Option is granted shall be the fair market value thereof determined
in good faith by the Board.
2.5 "Option Agreement" means the agreement between the Company and a
----------------
Participant, as described in Section 5.1.
2.6 "Option Price" means the price at which a share of Stock may be purchased
------------
upon exercise of a Stock Option, as determined under Section 5.2.
2.7 "Participant" means a non-employee Director who is granted Stock Options
-----------
pursuant to this Plan.
2.8 "Plan" means Commercial BancShares, Incorporated Non-Employee Director
----
Stock Option Plan, as hereinafter amended from time to time.
2.9 "Rules" means Section 16 of the Securities Exchange Act of 1934, as
-----
amended, and the regulations promulgated thereunder.
2.10 "Stock" means the common stock, $5.00 par value per share, of the Company.
-----
2.11 "Stock Option" or "Option" means any option to purchase shares of Stock
------------ ------
granted pursuant to Section 4 below.
Except were otherwise indicated by the context, any masculine terminology used
herein also shall include the feminine and vice versa, and the definition of any
term herein in the singular shall also include the plural and vice versa.
Section 3. Stock Subject to the Plan.
--------------------------
The total number of shares of Stock that may be issued or transferred and
sold pursuant to this Plan shall not exceed in the aggregate eleven thousand
(11,000) shares, except to the extent of adjustments under Section 7 of this
Plan. Such Stock may be treasury shares or shares of original issue or a
combination of the foregoing. If and to the extent that any shares of Stock are
forfeited under the Plan, such shares shall again be available for subsequent
grants under the Plan.
B-1
<PAGE>
Section 4. Option Grants.
--------------
There hereby are granted to non-employee Directors of the Board of the Company
the following Stock Options under this Plan:
(a) With respect to each person who first becomes a non-employee Director
of the Company after the effective date of this Plan, an Option to purchase two
hundred (200) shares of Stock is granted as of the date such person first
becomes a non-employee Director.
(b) With respect to each person who, as of the date of any annual meeting
of the Company's stockholders after the effective date of this Plan, is an
incumbent non-employee Director and has previous to such meeting date received
an Option grant under (a) above, an Option to purchase two hundred (200) shares
of Stock is granted as of such meeting date.
Section 5. Terms and Conditions of Options.
--------------------------------
5.1 Option Agreement. Each Stock Option granted hereunder shall be evidenced
-----------------
by an Option Agreement substantially in the form of Exhibit A attached hereto
with the blanks appropriately filled.
5.2 Option Price. The Option Price per share of Stock covered by a Stock
------------
Option shall be the Fair Market Value per share of Stock as of the date of
grant.
5.3 Option Term. The term of each Stock Option shall be ten (10) years. No
-----------
Stock Option may be exercised by any person after expiration of the term of the
Stock Option.
5.4 Exercisability. Stock Options shall be exercisable during the term of the
--------------
Option, provided however, (i) no Stock Option shall be exercisable during the
six months following the date of the granting of the Option and (ii) no Stock
Option shall be exercisable by a Director (or his estate, if applicable) on or
after the date which is one year after the date he ceased for any reason to be a
member of the Board.
5.5 Method of Exercise. Stock Options may be exercised, in whole or in part at
------------------
any time and from time to time during the Option period, by giving written
notice of exercise to the Secretary of the Company specifying the number of
shares to be purchased. Such notice shall be accompanied by payment in full of
the purchase price, by certified check, or such other instrument as the Board
may accept. Payment in full or in part may also be made by sales of Stock
acquired in the exercise of a Stock Option (to the extent such cashless exercise
is permitted under the Rules) or any combination of Stock and certified check.
No shares of Stock shall be issued until full payment therefor has been made. A
Participant shall generally have the rights to dividends or other rights of a
shareholder with respect to shares subject to the Stock Option when the
Participant has given written notice of exercise, has paid in full for such
shares, and, if requested, has given any representations required by the Board.
Section 6. Administration.
---------------
The Plan shall be administered by the Board. Subject to the provisions of
the Plan, the Board shall be authorized to:
(a) adopt, revise and repeal such administrative rules, guidelines and
practices governing this Plan as it shall from time to time deem
advisable;
(b) interpret the terms and provisions of this Plan and any Stock Option
issued under this Plan (and any agreements relating thereto), and
otherwise settle all claims and disputes arising under this Plan;
(c) delegate responsibility and authority for the operation and
administration of the Plan, appoint employees and officers of the
Company and its affiliates to act on its behalf, and employ persons to
assist in fulfilling its responsibilities under the Plan; and
(d) otherwise supervise the administration of this Plan;
provided however, that the Board shall have no discretion with respect to the
selection of Directors to receive Stock Options hereunder, the number of shares
of Stock covered by any such Option, or the price or timing of any Stock Option
granted hereunder.
B-2
<PAGE>
Section 7. Adjustments.
------------
7.1 Computation of Stock Available for the Plan. For the purpose of computing
-------------------------------------------
the total number of shares of Stock available at any time during which the Plan
is in effect in connection with any grant of Stock Options under the Plan, there
shall be debited against the total number of shares of Stock determined to be
available pursuant to Section 3, the maximum number of shares of Stock subject
to issuance upon exercise of Stock Options granted under the Plan.
7.2 Other Adjustment. In the event of any merger, reorganization,
----------------
consolidation, recapitalization, stock dividend, or other change in corporate
structure affecting the Stock, the Board shall make such substitution or
adjustment in the aggregate number of shares of Stock reserved for issuance
under the Plan, and in the number and Option Price of shares of Stock subject to
outstanding Stock Options granted under the Plan as is necessary to avoid any
enlargement or diminution of the benefits intended to be made available
hereunder, provided that the number of shares of Stock subject to any award
shall always be a whole number.
Section 8. Effective Date.
--------------
The effective date of this Plan shall be the date of its adoption by the
Board of Directors of the Company. This Plan, and all Stock Options granted
hereunder prior to shareholder approval hereinafter mentioned, shall be void and
of no further force and effect unless this Plan and such Stock Options shall
have been approved at a meeting of the shareholders of the Company by the
favorable vote of a majority of the shares of Stock present or represented and
entitled to vote at such meeting.
Section 9. Term.
----
No Stock Option shall be granted pursuant to this Plan on or after the
tenth anniversary of the earlier of the date of shareholder approval of this
Plan or the date this Plan is adopted by the Board, but the term of Stock
Options granted before such tenth anniversary may continue beyond that date.
Section 10. Amendment and Termination.
-------------------------
The Board may amend, alter, or discontinue the Plan at any time and from
time to time; provided however, that (i) no amendment, alteration, or
discontinuation shall be made which would impair the rights of a Participant
with respect to a Stock Option which has been granted under the Plan, without
the Participant's consent and (ii) no amendment which would affect the amount
and price of Stock Options to be awarded hereunder, or the timing thereof, or
the class of individuals to whom such awards may be made hereunder, may take
effect within six (6) months of the effective date of any previous such
amendment, other than to comport with changes in the Internal Revenue Code of
1986, the Employee Retirement Income Security Act of 1974, or the rules and
regulations promulgated thereunder.
The undersigned, pursuant to the approval of the Board on February 12, 1997,
does herewith execute the Commercial BancShares, Incorporated Non-Employee
Director Stock Option Plan.
/s/ William E. Mildren, Jr.
----------------------------------
Chairman of the Board of Directors
B-3
<PAGE>
Exhibit "C"
COMMERCIAL BANCSHARES, INCORPORATED LONG TERM INCENTIVE STOCK PLAN
ARTICLE I
PURPOSE AND DEFINITIONS
-----------------------
Section 1.1 Purpose. The name of this plan is the Commercial BancShares,
-------
Incorporated, Long Term Incentive Stock Plan (the "Plan"). The purpose of the
Plan is to promote the interests of the Company and its subsidiaries by
promoting the acquisition and holding of Commercial BancShares, Incorporated
stock by key employees, thereby maintaining their personal interest in the
Company's continued success and aligning their interest with other stockholders.
The Plan is also intended to promote the Company's ability to attract, retain
and motivate key employees by sharing in the growth of the value of the Company.
Section 1.2 Definitions and Usage. For the purposes of the Plan, the following
---------------------
terms, when used with initial capital letters, shall have the meanings as set
forth below:
"Affiliate" means (a) a corporation which, for purposes of Section 422 of
---------
the Code, is a parent or subsidiary of the Company, and (b) any other
entity in which the Company has a substantial equity investment, as
designated by the Committee.
"Board" means the Board of Directors of the Company.
-----
"Cause" means, in connection with an involuntary termination by the Company
-----
of a Participant's employment, (a) the willful and continued failure by the
Participant to perform substantially the duties of the Participant's
position or (b) the willful engaging by the Participant in conduct which is
demonstrably injurious to the Company, monetarily or otherwise.
"Change in Control" means (a) a report is filed with the Securities and
-----------------
Exchange Commission (the "SEC") on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as promulgated pursuant to the
Exchange Act, disclosing that any "person", as such term is used in Section
13(d) and Section 14(d)(2) of the Exchange Act, other than the company or
any Company employee benefit plan, is or has become a beneficial owner,
directly or indirectly, of securities of the Company representing twenty-
five percent (25%) or more of the combined voting power of the Company's
then outstanding securities; (b) the Company files a report or proxy
statement with the SEC pursuant to the Exchange Act disclosing in response
to Item 1 of Form 8-K thereunder or Item 6(e) of Schedule 14A thereunder
that a Change in Control of the Company has or may have occurred or will or
may occur in the future pursuant to any then-existing contract or
transaction; (c) the Company is merged or consolidated with another
corporation and, as a result thereof, securities representing less than
fifty percent (50%) of the combined voting power of the surviving or
resulting corporation's securities (or of the securities of a parent
corporation in case of a merger in which the surviving or resulting
corporation becomes a wholly owned subsidiary of the parent corporation)
are owned in the aggregate by holders of the Company's securities
immediately prior to such merger or consolidation; (d) all or substantially
all of the assets of the Company are sold in a single transaction or a
series of related transactions to a single purchaser or a group of
affiliated purchasers; or (e) during any period of twenty-four (24)
consecutive months, individuals who were Directors of the Company at the
beginning of such period cease to constitute at least a majority of the
Company's Board unless the election, or nomination for election by the
Company's shareholders, of more than one-half of any new Directors of the
Company was approved by a vote of at least two-thirds of the Directors of
the Company then still in office who were Directors of the Company at the
beginning of such twenty-four (24) month period, either actually or by
prior operation of this clause (e).
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time, and any successor thereto.
"Committee" means, subject to Section 5.1 hereof, the Compensation
---------
Committee of the Board or any subcommittee thereof established by the Board
for fulfilling the defined responsibilities set forth herein.
"Company" means Commercial BancShares, Incorporated, a corporation
-------
organized under the laws of the State of West Virginia, or any successor
organization.
"Disinterested Person" shall mean a director who is not, during the one-
--------------------
year period prior to service as an administrator of the Plan, or during
such service, granted or awarded equity securities pursuant to the Plan or
any other Plan of the Company or its Affiliates, or such other definition
as shall apply for purposes of the Rules.
C-1
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Fair Market Value" means, as of any day, the average of the closing prices
-----------------
of sales of shares of common stock on all national securities exchanges on
which the common stock may at the time be listed or, if there shall have
been no sales on such day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day the
common stock shall not be so listed, the average of the representative bid
and asked prices quoted in the National Association of Securities Dealers,
Inc. Automated Quotation ("NASDAQ") System for such date or the next
preceding date that common stock was traded on such market. If at any time
there is no public market for the common stock, the fair market value of
the shares of common stock subject an Option on the date an Option is
granted shall be the fair market value thereof determined in good faith by
the Board.
"Incentive Stock Option" means any Stock Option intended to qualify as an
----------------------
"incentive stock option" within the meaning of Section 422 of the Code.
"Insider" means a Participant who is subject to the requirements of the
-------
Rules.
"Non-Qualified Stock Option" means any Stock Option that is not an
--------------------------
Incentive Stock Option.
"Outside Director" shall have the meaning set forth in Treasury Regulation
----------------
Section 1.162-27(e)(3).
"Participant" means an employee to whom an award is granted pursuant to the
-----------
Plan.
"Performance Award" means an award made pursuant to Article IV below that
-----------------
is payable in cash and/or Stock (including Restricted Stock) in accordance
with the terms of the grant, based on the Company, business unit and/or
individual performance over a period of time.
"Plan" means the Commercial BancShares Long Term Incentive Stock Plan, as
----
hereinafter amended from time to time.
"Restricted Stock" means an award of shares of Stock that is subject to
----------------
restrictions pursuant to Section 4.3.
"Retirement" means a Participant's retirement from active employment with
----------
the Company and each of its Affiliates pursuant to which the Participant is
entitled to receive a pension under the retirement plan maintained by the
Company.
"Rules" means Section 16 of the Exchange Act and the regulations
-----
promulgated thereunder.
"Stock" means the common stock, $5.00 par value per share, of the Company.
-----
"Stock Appreciation Right" means the rights granted pursuant to an award
------------------------
under Section 4.2.
"Stock Option" or "Option" means any option to purchase shares of Stock
------------ ------
(including an option to purchase Restricted Stock, if the Committee so
determines) granted pursuant to Section 4.1.
Except where otherwise indicated by the context, any masculine terminology used
herein also shall include the feminine and vice versa, and the definition of any
term herein in the singular also shall include the plural and vice versa.
References herein to Articles, Sections and Subsections are references to
provisions in this Plan.
ARTICLE II
STOCK SUBJECT TO THE PLAN
-------------------------
Section 2.1 Stock Subject to Plan. The Stock to be subject or related to
---------------------
awards under the Plan may be either authorized and unissued or held in the
treasury of the Company. The maximum number of shares of Stock authorized with
respect to grant of awards under the Plan, subject to adjustment in accordance
with Section 2.5 below, shall be one hundred fifty-two thousand nine hundred
(152,900) shares.
Section 2.2 Annual Per-Participant Limitations. The maximum number of shares
----------------------------------
of Stock covered by awards under the Plan provided to any Participant for any
year shall not exceed twenty thousand (20,000) shares, subject to adjustment in
accordance with Section 2.5 below. In addition, for awards settled in cash (in
whole or in part), the maximum cash amount payable with respect awards under the
Plan to any Participant for any year shall not exceed the greater of the Fair
Market Value of the number of shares of Stock set forth in the preceding
sentence at the date of grant or the date of settlement of the award.
C-2
<PAGE>
Section 2.3 Computation of Stock Available for the Plan. For the purpose of
-------------------------------------------
computing the total number of shares of Stock generally available under the Plan
for award at any time during which the Plan is in effect, there shall be debited
against the total number of shares of Stock determined to be available under
this Article II, the maximum number of shares of Stock subject to issuance upon
exercise of options or other stock based awards made under the Plan.
Section 2.4 Unused, Forfeited and Reacquired Shares. The shares related to the
---------------------------------------
unexercised or undistributed portion of any terminated, expired, forfeited or
surrendered award under the Plan shall be made available in connection with
future awards under the Plan in addition to the shares determined available
pursuant to Sections 2.1, 2.2 and 2.3; provided, however, that the foregoing
shall not apply to any forfeited shares awarded as Restricted Stock pursuant to
Section 4.3.
Section 2.5 Other Adjustment. In the event of any merger, reorganization,
----------------
consolidation, recapitalization, Stock dividend, Stock split or other change in
corporate structure affecting the Stock, the Committee shall take any action
which in its discretion it deems necessary to preserve benefits to Participants
in this Plan, including, without limitation, substitution or adjustment in the
aggregate number of shares reserved for issuance under the Plan, in the number
and option price of shares subject to outstanding Options granted under the Plan
and in the number and price of shares subject to other awards made under the
Plan, or substitution of property or other securities for Stock, Stock Options
or Restricted Stock covered by any awards under this Plan.
ARTICLE III
ELIGIBILITY
-----------
Section 3.1 Eligibility. Officers and other key employees of the Company or an
-----------
Affiliate (but excluding members of the Committee and any person who serves only
as a director) who are responsible for or contribute to the management, growth
and/or profitability of the business of the Company and/or its Affiliates are
eligible, upon selection by the Committee, to be granted awards under the Plan.
ARTICLE IV
STOCK INCENTIVE AWARDS
----------------------
Section 4.1 Stock Options. Stock Options may be granted alone, in addition
-------------
to or in tandem with other awards granted under the Plan. Any Stock Option
granted under the Plan shall be in such form as the Committee may from time to
time approve.
The Committee shall have the authority to grant any optionee Incentive Stock
Options, Non-Qualified Stock Options or both types of Stock Options (in each
case with or without Stock Appreciation Rights). To the extent that any Stock
Option does not qualify as an Incentive Stock Option, it shall constitute a
separate Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised, so
as to disqualify the Plan under Section 422 of the Code, or, without the consent
of the optionee(s) affected, to disqualify any Incentive Stock Option under such
Section 422 of the Code.
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem
appropriate:
(a) Option Price. The option price per share of Stock purchasable under a
------------
Stock Option shall be determined by the Committee at the time of grant but shall
be not less than one hundred percent (100%) of the Fair Market Value of the
Stock at the time of grant. Notwithstanding the preceding, the Committee, in
its discretion, may determine a Stock Option price of less than the Fair Market
Value of the Stock at the time of grant, if such Stock Option is granted as a
substitute for a stock option granted by an entity which has been merged with or
acquired by the Company or an Affiliate and such substitute grant is made in
connection with such merger or acquisition. Any Incentive Stock Option granted
to any optionee who, at the time the option is granted, owns more than ten
percent (10%) of the voting power of all classes of stock of the Company or of
an Affiliate shall have an exercise price no less than one hundred and ten
percent (110%) of Fair Market Value per share on date of the grant.
C-3
<PAGE>
(b) Option Term. The term of each Stock Option shall be fixed by the
-----------
Committee, but no Stock Option shall be exercisable more than ten (10) years
after the date the Option is granted. However, any Incentive Stock Option
granted to any optionee who, at the time the option is granted owns more than
ten percent (10%) of the voting power of all classes of stock of the Company or
of an Affiliate may not have a term of more than five (5) years. No Option may
be exercised by any person after expiration of the term of the Option.
(c) Exercisability. Stock Options shall be exercisable at such time or
--------------
times and subject to such terms and conditions as shall be determined by the
Committee at or after grant; provided, however, that, except as provided in
Section 4.1(d), (e) and (f) and Section 5.5, and unless otherwise determined by
the Committee at or after grant, no Stock Option shall be exercisable during the
six (6) months following the date of the granting of the Option. If the
Committee provides, in its discretion, that any Stock Option is exercisable only
in installments, the Committee may waive such installment exercise provisions at
any time at or after grant in whole or in part, based on such factors as the
Committee shall determine, in its sole discretion, subject to the restriction
that any such waiver with respect to any Incentive Stock Option shall be made in
accordance with Section 422 of the Code.
(d) Termination by Reason of Death or Retirement. If an optionee's
--------------------------------------------
employment by the Company and/or any Affiliate terminates by reason of death or
Retirement, any Stock Option held by such optionee which has vested and become
exercisable may be exercised (to the extent exercisable upon the optionee's
termination) by the optionee or by the legal representative of the estate or by
the legatee of the optionee under the will of the optionee, for a period of one
(1) year (or such shorter period as the Committee may specify at grant) from the
date of such termination or until the expiration of the stated term of such
Stock Option, whichever period is the shorter. In the event of termination of
employment by reason of Retirement, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of Section
422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified
Stock Option.
(e) Other Termination without Cause. Unless otherwise provided in this
-------------------------------
Plan, or otherwise determined by the Committee at or after grant, if an
optionee's employment by the Company and/or any Affiliate terminates for any
reason other than death or Retirement, the Stock Option shall thereupon
terminate, except that such Stock Option may be exercised (to the extent
exercisable upon the optionee's termination) for the lesser of ninety (90) days
or the balance of such Stock Option's term if the optionee voluntarily leaves
the employ of the Company or is involuntarily terminated by the Company without
Cause.
(f) Termination for Cause. Unless otherwise provided in this Plan, or
---------------------
otherwise determined by the Committee at or after grant, if an optionee's
employment by the Company and/or any Affiliate terminates for Cause, the Stock
Option shall thereupon terminate and expire.
(g) Incentive Stock Option Limitations. To the extent required for
----------------------------------
"incentive stock option" status under Section 422 of the Code, the aggregate
Fair Market Value (determined as of the time of grant) of the stock with respect
to which Incentive Stock Options are exercisable for the first time by the
optionee during any calendar year under the Plan and/or any other stock option
plan of the Company (within the meaning of Section 424 of the Code) shall not
exceed one hundred thousand dollars ($100,000).
(h) Exercise of Stock Options. An optionee may exercise a Stock Option in
-------------------------
whole or in part at any time and from time to time during the period within
which a Stock Option may be exercised. To exercise a Stock Option, an optionee
shall give written notice of exercise to the Secretary of the Company specifying
the number of shares of Stock to be purchased; and provide payment of the Option
price for such shares of Stock by certified check payable to the order of the
Company, by Stock owned by the optionee or by sale of shares of Stock acquired
in the exercise of a Stock Option (to the extent such cashless exercise is
permitted under rules promulgated by the Committee and under the Rules) or any
combination of Stock and cash or check. If payment of the Option exercise price
of a Non-Qualified Stock Option is made in whole or in part in the form of
unrestricted Stock already owned by the Participant, the Company may require
that the Stock be owned by the Participant for a period of six (6) months or
longer.
An optionee shall be treated for all purposes as the owner of record of the
number of shares of Stock purchased pursuant to exercise of the Stock Option (in
whole or in part) as of the date the conditions set forth in preceding paragraph
are satisfied. Notwithstanding the foregoing, no exercise of a Stock Option
shall be effective until the shares of Stock subject to this Plan have been
registered or qualified for sale under applicable Federal and state securities
laws, and no Stock Option shall be deemed granted until this Plan is approved by
the holders of Company stock having a majority of the voting power of all
stock represented at a meeting duly held in accordance with West Virginia law
within twelve (12) months after this Plan is adopted by the Board.
C-4
<PAGE>
Upon the effective exercise of a Stock Option (in whole or in part) in
accordance with Subsection (h), the Committee shall deliver to the optionee the
number of shares of Stock for which the Stock Option is exercised, adjusted for
any shares of Stock sold or withheld in connection with such exercise.
(i) Cash-out of Option; Settlement of Spread Value in Restricted Stock. On
------------------------------------------------------------------
receipt of written notice to exercise, the Committee may, in its sole
discretion, elect to cash out all or part of the portion of the Option(s) to be
exercised by paying the optionee an amount, in cash or Stock, equal to the
excess of the Fair Market Value of the Stock over the option price (the "Spread
Value") on the effective date of such cash-out.
In addition, if the option agreement so provides at grant or is amended after
grant and prior to exercise to so provide (with the optionee's consent), the
Committee may require that all or part of the shares to be issued with respect
to the Spread Value of an exercised option take the form of Restricted Stock,
which shall be valued on the date of exercise on the basis of the Fair Market
Value of such Restricted Stock determined without regard to the forfeiture
restrictions involved.
Section 4.2 Stock Appreciation Rights. Both Tandem Stock Appreciation Rights
-------------------------
and Non-Tandem Stock Appreciation Rights, as described below, may be granted to
Participants in the Plan.
(a) Tandem Stock Appreciation Rights. A Tandem Stock Appreciation Right is
--------------------------------
the right, granted under this Subsection, to surrender to the Company all (or a
portion) of a Stock Option or other award under this Plan in exchange for an
amount equal to the Spread Value, as defined in Section 4.1(i), of the Stock (or
portion of the Stock) covered by the associated Stock Option. Tandem Stock
Appreciation Rights may be granted in conjunction with all or part of any Stock
Option or other award granted under the Plan. In the case of an Incentive Stock
Option, such rights may be granted only at the time of the grant of such Stock
Option.
A Stock Appreciation Right or applicable portion thereof granted with respect to
a given Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Stock Option, except that, unless
otherwise determined by the Committee, in its sole discretion, at the time of
grant, a Stock Appreciation Right granted with respect to less than the full
number of shares covered by a related Stock Option shall not be reduced until
the number of shares covered by an exercise or termination of the related Stock
Option exceeds the number of shares not covered by the Stock Appreciation Right.
A Stock Appreciation Right may be exercised by an optionee, in accordance with
this Subsection, by surrendering the applicable portion of the related Stock
Option. Upon such exercise and surrender, the optionee shall be entitled to
receive an amount determined in the manner prescribed in this Subsection. Stock
Options which have been so surrendered, in whole or in part, shall no longer be
exercisable to the extent the related Stock Appreciation Rights have been
exercised.
Tandem Stock Appreciation Rights shall be subject to such terms and conditions,
not inconsistent with the provisions of the Plan, as shall be determined from
time to time by the Committee.
(b) Non-Tandem Stock Appreciation Rights. A Non-Tandem Stock Appreciation
------------------------------------
Right is a right granted pursuant to this Subsection to receive an amount equal
to the difference between (i) the Fair Market Value, as of the date such Right
is exercised, of a number of shares of Stock specified in the grant of such
Right, and (ii) the Fair Market Value of such shares of Stock as of the date
such Right is granted.
Non-Tandem Stock Appreciation Rights shall be subject to such terms and
conditions, not inconsistent with the provisions of the Plan, as shall be
determined from time to time by the Committee.
Section 4.3 Restricted Stock.
-----------------
(a) Administration. Shares of Restricted Stock may be issued either alone
--------------
or in addition to other awards granted under the Plan. The Committee may
condition the vesting of Restricted Stock upon the attainment of specified
performance goals or such other factors as the Committee may determine, in its
sole discretion; provided, however, that specified performance goals intended to
satisfy the requirements of Section 162(m) of the Code shall be preestablished
and objective in accordance with Section 162(m) and the regulations thereunder,
may vary among Participants and among groups of Participants, and shall be based
upon such Company, business unit and/or individual objective performance factors
and criteria as the Committee may deem appropriate, including and limited to
stock price, market share, sales, earnings per share, return on assets, return
on equity, costs, cash flow and any combination thereof.
C-5
<PAGE>
(b) Restrictions and Conditions. Each award of Restricted Stock hereunder
---------------------------
shall be subject to the following:
(i) The prospective recipient of a Restricted Stock award shall not
have any rights with respect to such award, unless and until such
recipient has executed an agreement evidencing the award and has
delivered a fully executed copy thereof to the Company and has
otherwise complied with the applicable terms and conditions of
such award.
(ii) Each Restricted Stock award agreement shall provide that the
Restricted Stock covered by the agreement shall be subject to a
"substantial risk of forfeiture" (within the meaning of Section 83
of the Code) for a period to be determined by the Committee (the
"Restriction Period"). Subject to the provisions of this Plan and
the Restricted Stock agreement, during the Restriction Period, the
Participant shall not be permitted to sell, transfer, pledge,
assign or otherwise encumber shares of Restricted Stock awarded
under the Plan. Within these limits, the Committee, in its sole
discretion, may provide for the lapse of such restrictions in
installments and may accelerate or waive such restrictions in
whole or in part, based on service, performance and/or such other
factors or criteria as the Committee may determine, in its sole
discretion; provided, however, that in no event shall any such
lapse, acceleration or waiver of restrictions occur with respect
to Restricted Stock that is intended to qualify as performance-
based compensation under Section 162(m) of the Code (to the extent
such lapse, acceleration or waiver would cause such Restricted
Stock to fail to so qualify).
(iii) Awards of Restricted Stock must be accepted within a period, to
be determined by the Committee at the time of the grant, after the
award date, by executing a Restricted Stock agreement and paying
whatever price (if any) is required under this Section.
(iv) The purchase price for shares of Restricted Stock may be equal to
or less than their par value and may be zero, unless otherwise
required under applicable state law.
(v) Except as otherwise specified by the Committee, each Participant
receiving a Restricted Stock award shall be issued a stock
certificate in respect of such shares of Restricted Stock. Such
certificate shall be registered in the name of such Participant
and shall bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such award,
substantially in the following form:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK
REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS
(INCLUDING FORFEITURE) OF THE COMMERCIAL BANCSHARES,
INCORPORATED LONG TERM INCENTIVE STOCK PLAN AND AN AGREEMENT
ENTERED INTO BETWEEN THE REGISTERED OWNER AND COMMERCIAL
BANCSHARES, INCORPORATED. COPIES OF SUCH PLAN AND AGREEMENT ARE
ON FILE IN THE OFFICES OF THE COMMERCIAL BANCSHARES,
INCORPORATED.
(vi) The Committee may require that the stock certificates evidencing
such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition
of any Restricted Stock award, the Participant shall have
delivered a stock power, endorsed in blank, relating to the Stock
covered by such award.
(vii) Except as provided above, the Participant shall have, with
respect to the shares of Restricted Stock, all of the rights of a
stockholder of the Company, including the right to vote the shares
and the right to receive any cash dividends. The Committee, in
its sole discretion, as determined at the time of award, may
permit or require the payment of cash dividends to be deferred
and, if the Committee so determines, reinvested in additional
Restricted Stock to the extent shares are available under Article
II.
(viii) Subject to the applicable provisions of the Restricted Stock
agreement and this Section and unless otherwise determined by the
Committee, upon termination of a Participant's employment with the
Company for any reason during the Restriction Period, all shares
still subject to restriction shall be forfeited by the
Participant.
(ix) In the event of hardship or other special circumstances of a
Participant whose employment with the Company is involuntarily
terminated (other than for Cause), the Committee may, in it sole
C-6
<PAGE>
discretion, waive in whole or in part any or all remaining
restrictions with respect to such Participant's shares of
Restricted Stock, based on such factors as the Committee may deem
appropriate; provided, however, that in no event shall any such
waiver of restrictions occur with respect to Restricted Stock that
is intended to qualify as performance-based compensation under
Section 162(m) of the Code (to the extent such waiver would cause
such Restricted Stock to fail to so qualify).
(x) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction
Period, the certificates for such shares shall be delivered to the
Participant promptly.
Section 4.4 Performance Awards.
-------------------
(a) Awards and Administration. Performance Awards may be awarded either
-------------------------
alone or in addition to other awards granted under the Plan. The Committee
shall determine the nature, length and starting date of the performance period
(the "Performance Period") for each Performance Award, which shall be subject to
Section 5.5, and shall determine the performance objectives to be used in
valuing Performance Awards and determining the extent to which such Performance
Awards have been earned. Performance objectives may vary from Participant to
Participant and between groups of Participants and shall be based upon such
Company, business unit and/or individual performance factors and criteria as the
Committee may deem appropriate, including, but not limited to, earnings per
share or return on equity; provided, however, that performance objective
intended to satisfy the requirements of Section 162(m) of the Code shall be
preestablished and objective, and such performance factors and criteria shall be
limited to stock price, market share, sales, earnings per share, return on
assets, return on equity, costs, cash flow, and any combination thereof.
Performance Periods may overlap and Participants may participate simultaneously
with respect to Performance Awards that are subject to different Performance
Periods and/or different performance factors and criteria.
At the beginning of each Performance Period, the Committee shall determine for
each Performance Award subject to such Performance Period the range of dollar
values or number of shares of Stock to be awarded to the Participant at the end
of the Performance Period if and to the extent that the relevant measure(s) of
performance for such Performance Award is (are) met. Such dollar values or
number of shares of Stock may be fixed or may vary in accordance with such
performance and/or other criteria as may be specified by the Committee, in its
sole discretion; provided, however, that Performance Awards payable in cash
shall not exceed the Participant's base salary for such Performance Period.
(b) Adjustment of Awards. In the event of special or unusual events or
---------------------
circumstances affecting the application of one or more performance objectives to
a Performance Award, the Committee may revise the performance objectives and/or
underlying factors and criteria applicable to the Performance Awards affected,
to the extent deemed appropriate by the Committee, in its sole discretion, to
avoid unintended windfalls or hardship; provided, however, that in no event
shall any such revision result in the increase in a Performance Award or waiver
of a performance goal if such Award or goal is intended to comply with Section
162(m) of the Code.
(c) Termination of Employment. Subject to Section 5.5 and unless otherwise
--------------------------
provided in the applicable award agreement(s), if a Participant terminates
employment with the Company during a Performance Period because of death,
Disability or Retirement, such Participant may be entitled to payment with
respect to each outstanding Performance Award at the end of the applicable
Performance Period as follows:
(i) to the extent relevant under the terms of the award, based upon
the Participant's performance for the portion of such Performance
Period ending on the date of termination and the performance of
the applicable business unit(s) for the entire Performance Period,
and
(ii) where deemed appropriate by the Committee, prorated for the
portion of the Performance Period during which the Participant was
employed by the Company, all as determined by the Committee, in
its sole discretion.
Notwithstanding the preceding, the Committee may provide for an earlier
payment in settlement of such award in such amount and under such terms
and conditions as the Committee deems appropriate.
Subject to Section 5.5, if a Participant terminates employment with the
Company during a Performance Period for any reason other than death,
Disability, or Retirement, then such Participant shall not be entitled
to any payment with respect to the Performance Awards subject to such
Performance Period, unless the Committee shall otherwise determine, in
its sole discretion.
C-7
<PAGE>
(d) Timing and Form of Payment. The earned portion of a Performance Award
---------------------------
may be paid currently or on a deferred basis with such interest or earnings
equivalent as may be determined by the Committee, in its sole discretion.
Payment shall be made in the form of cash or whole shares of Stock, including
Restricted Stock, either in a lump sum payment or in installments commencing as
soon as practicable after the end of the relevant Performance Period, all as the
Committee shall determine at or after grant.
(e) Effect of Performance Awards on Stock Available under Article IV. If
-----------------------------------------------------------------
and to the extent a Performance Award is payable in Stock and the full amount of
such value is not paid in Stock, then the shares of Stock representing the
portion of the value of the Performance Award not paid in Stock shall again
become available for award under Article IV.
ARTICLE V
ADMINISTRATION, GENERAL PROVISIONS
----------------------------------
Section 5.1 Administration. The Plan shall be administered by the Committee,
---------------
which at all times shall be comprised of not less than three (3) persons who
are: (a) Disinterested Persons, if required to qualify the Plan for an exemption
from Section 16(b) of the Exchange Act that is available under the Rules; and
(b) Outside Directors, if required to qualify compensation paid under the Plan
as performance-based compensation under Section 162(m) of the Code. Members of
the Board who qualify as Disinterested Persons and/or Outside Directors shall
perform the functions of the Committee if at any time the Board has not
appointed such members to comprise the Committee.
Section 5.2 Authority of the Committee. The Committee shall have the authority
---------------------------
to:
(a) select the officers and other key employees of the Company or an
Affiliate to whom awards may from time to time be granted hereunder,
and to determine for each such officer and other key employee the
levels and other terms and conditions of any stock-ownership
requirements for receiving awards hereunder;
(b) grant to eligible employees, pursuant to the terms of the Plan, Stock
Options, Stock Appreciation Rights, Restricted Stock, Performance
Awards and/or other permissible awards hereunder, and determine the
conditions, restrictions and procedures to be applied to each such
award;
(c) determine the terms and conditions, not inconsistent with the terms of
the Plan, of any deferral made or award granted hereunder, including,
but not limited to, the share price and any restriction or limitation
or any vesting acceleration or forfeiture waiver regarding any deferral
or award and/or the shares of Stock relating thereto, based on such
factors as the Committee shall determine, in its sole discretion;
(d) take such action as it deems appropriate to comply with the provisions
of the Code, the Exchange Act and other applicable laws, including any
such action it deems appropriate under Section 162(m) of the Code
concerning the Federal income tax deductibility of deferrals or awards
granted hereunder (including without limitation, determining
preestablished, objective performance goals and the method of computing
awards, reviewing award formulas and performance goals and criteria,
certifying whether performance goal measures have been satisfied, and
establishing a subcommittee consisting of outside, independent
directors for this purpose; provided, however, that actions of any such
subcommittee shall be subject to ratification by the Committee);
(e) amend the terms of any award granted hereunder, prospectively or
retroactively; provided, however, that any such amendment must be
consistent with the provisions of this Plan, and no such amendment
shall impair the rights of a Participant with respect to any
outstanding award under the Plan without his consent;
(f) interpret the terms and provisions of this Plan and any award granted
hereunder (and any agreements relating thereto), and otherwise settle
all claims and disputes arising under this Plan;
(g) delegate responsibility and authority for the operation and
administration of the Plan, appoint employees and officers of the
Company and Affiliates to act on its behalf, and employ persons to
assist in fulfilling its responsibilities under the Plan; and
(h) adopt, alter and repeal such administrative rules, guidelines and
practices governing the Plan as it shall, from time to time, deem
advisable, and otherwise supervise the administration of this Plan.
All decisions made by the Committee pursuant to the provisions of the Plan shall
be final and binding on all persons, including the Company and Participants.
C-8
<PAGE>
The Committee may make decisions to take action under this Plan only by majority
action of all Committee members. The Committee may act without a meeting only
by written instrument signed by all members of the Committee.
Section 5.3 Amendments and Termination. The Board may amend, alter or
---------------------------
discontinue the Plan at any time and from time to time, but no amendment,
alteration or discontinuation shall be made which would impair the rights of an
optionee or Participant with respect to any outstanding award under the Plan
without the optionee's or Participant's consent, or which, without the approval
of the Company's stockholders, would:
(a) except as expressly provided in this Plan, increase the total number of
shares reserved for the purpose of the Plan;
(b) extend the maximum Option period applicable under the Plan;
(c) otherwise cause the Plan to fail to qualify for an exemption it is
seeking to rely upon under the Rules; or
(d) otherwise cause the Plan to fail to satisfy the requirements of any
applicable securities or tax law or the applicable rules and
regulations promulgated by any national securities exchange or by the
NASDAQ.
Section 5.4 Unfunded Status of Plan. The Plan is intended to constitute an
------------------------
"unfunded" plan for incentive compensation. With respect to any payments not
yet made to a Participant or optionee by the Company, nothing contained herein
shall give any such Participant or optionee any rights that are greater than
those of a general creditor of the Company. In its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Stock or payments in lieu of or
with respect to deferrals or awards hereunder; provided, however, that, unless
the Committee otherwise determines with the consent of the affected Participant,
the existence of such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan.
Section 5.5 Change in Control Provisions. The Committee, in its discretion,
-----------------------------
may provide at the time of a grant of any award under Article IV that the terms
of the award, including, but not limited to, the method of determining Fair
Market Value, or the date on which an award vests or becomes exercisable, may be
modified in the event of a Change in Control; provided that in no event shall
such modification occur with respect to any award that is intended to qualify as
performance-based compensation under Section 162(m) of the Code (to the extent
such modification would cause the award to fail to so qualify). Except as
otherwise provided under this Plan, the Committee may determine at any time at
or after the grant of an award under Article IV, (a) the criteria used to
determine whether a Change in Control has occurred, and (b) whether a Change in
Control has in fact occurred.
Section 5.6 General Provisions.
-------------------
(a) The Committee may require each person purchasing shares pursuant to a
Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee or Participant is acquiring the shares without a view
to distribution thereof. The certificates for such shares may include any
legend which the Committee deems appropriate to reflect any restrictions on
transfer.
All certificates for shares of Stock or other securities delivered under the
Plan shall be subject to such stock-transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations and other
requirements of the Exchange Act, any stock exchange upon which the Stock is
then listed and any applicable Federal or state securities law, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
(c) The adoption of the Plan shall not confer upon any employee of the
Company or an Affiliate any right to continued employment with the Company or an
Affiliate, as the case may be, nor shall it interfere in any way with the right
of the Company or an Affiliate to terminate the employment of any of its
employees at any time.
(d) No later than the date as of which an amount first becomes includible
in the gross income of the Participant for applicable income tax purposes with
respect to any award under the Plan, the Participant shall pay to the Company,
or make arrangements satisfactory to the Committee regarding the payment of, any
Federal, state or local taxes of any kind required by law to be withheld with
respect to such amount. Unless otherwise determined by the Committee, the
minimum required withholding obligations may be settled with Stock, including
Stock that is part of the award that gives rise to the withholding requirement.
The obligations of the Company under the Plan shall be conditional
C-9
<PAGE>
on such payment or arrangements and the Company shall, to the extent permitted
by law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Participant.
(e) At the time of grant under Article IV, the Committee may provide in
connection with any grant made under this Plan that the shares of Stock received
as a result of such grant shall be subject to a right of first refusal, pursuant
to which the Participant shall be required to offer to the Company any shares
that the Participant wishes to sell, with the price being the then Fair Market
Value of the Stock, subject to such other terms and conditions as the Committee
shall specify at the time of grant.
(f) The reinvestment of dividends in additional Restricted Stock (or in
other types of Plan deferrals or awards) at the time of any dividend payment
shall only be permissible if sufficient shares of Stock are available under
Article II for such reinvestment (taking into account then outstanding Stock
Options and other Plan deferrals or awards).
(g) The Committee shall establish such procedures as it deems appropriate
for a Participant to designate a beneficiary to whom any amounts payable in the
event of the Participant's death are to be paid.
(h) The Plan and all awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of West
Virginia, to the extent not preempted by Federal law.
Section 5.7 Effective Date of Plan. This Plan shall be effective on January 1,
-----------------------
1997; provided, however, that the effectiveness of this Plan is conditioned on
its approval by an affirmative vote of the holders of Company stock represented
at a meeting duly held in accordance with West Virginia law within twelve (12)
months after the date this Plan is adopted by the Board. All awards under this
Plan shall be null and void if the Plan is not approved by such stockholders
within such twelve-month period.
Section 5.8 Term of Plan. No award under Article IV shall be granted pursuant
-------------
to the Plan on or after the tenth anniversary of the earlier of the date of
stockholder approval or the date this Plan is adopted by the Board, but awards
granted prior to such tenth anniversary may extend beyond that.
Section 5.9 Proceeds and Expenses. The proceeds received by the Company from
----------------------
the sale of shares of Stock pursuant to the exercise of Stock Options shall be
used for general corporate purposes. The Company shall bear any expenses
associated with the administration of this Plan.
Section 5.10 Severability. If any provision of this Plan shall be held illegal
-------------
or invalid for any reason, such illegality or invalidity shall not affect the
remaining provisions of this Plan, but this Plan shall be construed and enforced
as if such illegal or invalid provision had never been included herein.
Section 5.11 Assignability. No Option, Stock Appreciation Right or other
--------------
"derivative security" (as defined for purposes of the Rules) awarded under the
Plan may be transferred other than (a) by will or by the laws of descent and
distribution, or (b) as otherwise hereafter permitted in accordance with the
Rules without jeopardizing or impairing any exemption provided for under the
Rules. Any restriction on the transferability of derivative securities required
by the Rules in order to qualify for an exemption under the Rules is hereby
incorporated in the Plan to the extent necessary to obtain the applicable
exemption.
Section 5.12 Awards in Substitution for Awards Granted by Other Companies. To
-------------------------------------------------------------
the extent not otherwise provided in the Plan, awards (whether Stock Options,
Stock Appreciation Rights, Restricted Stock or Performance Awards) may be
granted under the Plan in substitution for awards held by employees of a company
who become employees of the Company or an Affiliate as a result of the
acquisition, merger or consolidation of the employer company by or with the
Company or an Affiliate. The terms, provisions and benefits of the substitute
awards so granted may vary from those set forth in or authorized by the Plan to
such extent as the Committee at the time of the grant may deem appropriate to
conform, in whole or in part, to the terms, provisions and benefits of awards in
substitution for which they are granted.
The undersigned, pursuant to the approval of the Board on February 12, 1997,
does herewith execute the Commercial BancShares, Incorporated Long Term
Incentive Stock Plan.
COMMERCIAL BANCSHARES, INCORPORATED
By: William E. Mildren, Jr.
-----------------------
Title: Chairman of the Board of Directors
----------------------------------
C-10
<PAGE>
PROXY FORM
COMMERCIAL BANCSHARES, INCORPORATED
PROXY FOR 1997 SHAREHOLDERS' MEETING
Know all men, by these presents that the undersigned shareholder(s) of
Commercial BancShares, Incorporated ("Commercial"), 415 Market Street,
Parkersburg, West Virginia, does hereby nominate, constitute and appoint Larry
G. Johnson and Barbara E. Ott or either one of them, with full power of
substitution for and in the name, place and stead of the undersigned to vote all
the common stock of Commercial BancShares, Incorporated, standing in the
undersigned's name on its books on April 2, 1997, at the 1997 Annual Meeting of
Shareholders to be held at Dils Banquet & Meeting Center, 6th Street and
Williams Court Alley, Parkersburg, West Virginia, on May 14, 1997 at 3:00 p.m.,
local time or any adjournment thereof, with all powers the undersigned would
possess if personally present as follows:
The undersigned acknowledges receipt of the Notice and Proxy Statement dated
April 18, 1997, and hereby revokes all proxies previously given by the
undersigned for said meeting.
This proxy confers authority to vote "FOR" the propositions listed below unless
otherwise indicated. The Board of Directors recommends a vote "FOR" the
proposals below. If any matter shall properly come before the meeting, or any
adjournment thereof, this proxy will be voted on such matters in accordance with
the judgment of the above proxies, based upon the conditions then prevailing and
any recommendation of the Board of Directors.
Unless a different allocation is indicated, the proxies will vote your total
cumulative vote ratably for the directors for whom you are voting unless
directed otherwise by the Board of Directors of Commercial BancShares,
Incorporated.
This proxy is solicited on behalf of the Board of Directors of Commercial
BancShares, Incorporated and may be revoked prior to its exercise.
The Board of Directors recommends a vote FOR the following seventeen nominees:
1. Proposal to elect seventeen (17) Directors.
FOR all nominees listed (except as marked to the contrary below.) [ ]
WITHHOLD AUTHORITY to vote for all nominees listed. [ ]
Bruce Bingham, Frank L. Christy, A. Vernon Criss, III, Gary R. Davis, Wilson
Davis, Carl E. Dollman, James A. Meagle, Jr., David L. Mendenhall, William E.
Mildren, Jr., Jack F. Poe, Robert E. Richardson, Sr., W. S. Ritchie, Jr., Susan
S. Ross, Donald L. Scothorn, James L. Wahle, Thomas N. Webster and Morris B.
Wilkins
If you wish to withhold your vote for any of the above nominees, so indicate by
striking the name of the nominee.
Continued, and to be marked, dated and signed, on the other side. All joint
owners must sign.
<PAGE>
[Logo of Commercial BancShares, Incorporated]
Commercial BancShares, Incorporated
c/o Corporate Trust Services
Mail Drop 1090F5
38 Fountain Square Plaza
Cincinnati, OH 45263
COMMERCIAL BANCSHARES, INCORPORATED
ANNUAL MEETING OF SHAREHOLDERS
MAY 14, 1997
3:00 p.m.
Dils Banquet & Meeting Center
6th and Williams Court Alley
Parkersburg, West Virginia
fold and detach here
................................................................................
2. Proposal to ratify the appointment of Harman, Thompson, Mallory &
Ice, A.C. Certified Public Accountants as independent auditors of
Commercial. [ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to increase the authorized common stock to 5,000,000
shares of $5 par value common stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to approve a stock option plan for Commercial's nonemployee
directors
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Proposal to approve a long term incentive stock plan for Commercial's
employees
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. Proposal to transact such other business as may properly come before the
meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated: , 1997
-------------------------
_________________________________________
By: ______________________________________
Signature or Signatures
PLEASE SIGN, DATE AND PROMPTLY
RETURN THIS PROXY IN THE ENCLOSED
ENVELOPE
