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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.     )

 Filed by the Registrant   x
 Filed by a Party other than the Registrant   o
 
 Check the appropriate box:

 o   Preliminary Proxy Statement
 o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
 x   Definitive Proxy Statement
 o   Definitive Additional Materials
 o   Soliciting Material Pursuant to §240.14a-12

Commerce Bancshares, Inc.

(Name of Registrant as Specified In Its Charter)

Commerce Bancshares, Inc.

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

      Payment of Filing Fee (Check the appropriate box):

 x   No fee required.
 o   Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

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SEC 1913 (02-02)Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

 

(COMMERCE LOGO)(COMMERCE LOGO)

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 21, 200420, 2005

      The annual meeting of the shareholders of Commerce Bancshares, Inc., will be held in the Plaza RoomAuditorium on the 15th Floor of the Commerce Trust Building at the Ritz-Carlton, St. Louis, 100 Carondelet Plaza, Clayton,922 Walnut Street, Kansas City, Missouri on April 21, 2004,20, 2005, at 9:30 a.m., for the following purposes:

       (1) To elect four directors to the 20072008 Class for a term of three years;
 
       (2) To approve the amendmentadoption of the Company’s Restricted Stock Plan to increase the number of shares available for issuance under the Restricted Stock Plan by 250,000 shares and to permit the deductibility of the payments pursuant to Section 162(m) of the Internal Revenue Code;2005 Equity Incentive Plan;
 
       (3) To ratify the selection of KPMG as the Company’s audit and accounting firm; and
 
       (4) To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

      Shareholders of record at the close of business February 27, 2004,18, 2005, are entitled to notice of and to vote at the meeting.

      To be sure that your shares are represented at the meeting, please either complete and promptly mail the enclosed proxy card in the envelope provided for this purpose or vote through the telephone or Internet voting procedures described on the proxy card. If your shares are registered in the name of a bank or brokerage firm, telephone or Internet voting will be available to you only if offered by your bank or broker and such procedures are described on the voting form sent to you.

      Most shareholders can elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies in the mail. Please refer to page 2122 of the proxy statement and your proxy card for further information.

 By Order of the Board of Directors
 
 J. DANIEL STINNETT SIG-s- J. DANIEL STINNETT
 
 J. DANIEL STINNETT,Daniel Stinnett,Secretary

March 12, 2004

11, 2005

     It is important that your stock be represented at the meeting. You are urged to date, sign and return the enclosed proxy promptly or register your vote by telephone or through the Internet as described on the proxy card.

 

PROXY STATEMENT

COMMERCE BANCSHARES, INC.

Annual Meeting April 21, 200420, 2005

Solicitation:Solicitation

      The Board of Directors of Commerce Bancshares, Inc. (the Company), P.O. Box 13686,419248, Kansas City, Missouri 64199-368664141-6248 solicits your proxy, and asks that you vote, sign, date and promptly mail the enclosed proxy card for use at the annual meeting of shareholders to be held in the Plaza RoomAuditorium on the 15th Floor of the Commerce Trust Building at the Ritz-Carlton, St. Louis, 100 Carondelet Plaza, Clayton,922 Walnut Street, Kansas City, Missouri on April 21, 2004,20, 2005, at 9:30 a.m. Most shareholders also have a choice of voting by using a toll-free telephone number or by voting over the Internet. Please refer to your proxy card or the information forwarded by your bank, broker or other holder of record to see which options are available to you.

      The cost of solicitation of proxies will be borne by the Company. In addition to solicitation by mail, proxies may be solicited personally or by telephone, telegram or via the Internet by regular employees of the Company. Morrow & Co. has been retained by the Company at an estimated cost of $7,500 plus reasonable out-of-pocket expenses to aid in the solicitation of proxies. Brokerage houses and other custodians, nominees and fiduciaries may be requested to forward soliciting material to their principals and the Company will reimburse them for the expense of doing so. This proxy statement and proxy will be first sent to security holders on or about March 12, 2004.

11, 2005.

      If you wish, at any time before your proxy is voted, you may revoke it by written notice to the Company, or by delivery of a later-dated proxy (including a telephone or Internet vote), or by voting in person at the meeting.

      The shares represented by all properly executed proxies will be voted as directed by you. In the absence of direction, properly executed proxies will be voted in accordance with the recommendations of the Board as set forth below.

Voting Securities and Ownership Thereof by Certain Beneficial Owners and Management:Management

      Only shares held of record at the close of business on February 27, 2004,18, 2005, are entitled to vote at the meeting, and at the close of business on said date there were outstanding 67,455,89767,328,443 shares of common stock of the Company. Each holder of common stock is entitled to one vote for each share held. In the election of directors, abstentions and broker nonvotes will be considered solely for quorum purposes and are not counted for the election of directors. On all other matters presented for shareholder vote, abstentions will be treated as votes against such matters and broker nonvotes will be treated as not entitled to vote and have no effect on the outcome.

      (a) Under applicable Securities and Exchange Commission Rules, beneficial ownership of shares includes shares as to which a person has or shares voting power and/or investment power.

      As of December 31, 2003,2004, the trust departments of the Company’s subsidiary banks beneficially owned 5,518,2685,874,289 shares representing 8.1%8.6% of the Company’s outstanding common stock as of that date. Of those shares the subsidiary banks had (i) sole voting power over 3,402,4614,437,625 shares; (ii) shared voting power over 2,052,685 shares,1,406,298 shares; (iii) sole investment power over 3,452,3993,677,867 shares and (iv) shared investment power over 1,982,1701,721,954 shares. The Company has been advised by the subsidiary banks that the shares held by them and as to which they have sole voting power will be voted at the annual meeting for Proposals One, Two and Three. Shares held in all other fiduciary accounts will be voted as specifically directed by the co-trustees and co-executors. Shares held in custodial accounts will be voted by the owners.

      (b) The following information pertains to the common stock of the Company beneficially owned, directly or indirectly, by all directors and nominees for director, the executive officers named in the Summary Compensation Table, and by all directors, nominees and executive officers of the Company as a group as of

December 31, 2003.2004. This table also includes each person known to be the beneficial owner of 5% or more of

the Company’s outstanding common stock. Such persons have sole voting and sole investment power as to such shares unless otherwise noted.
               
Number ofPercent  Number of Percent
Name and Address of Beneficial OwnerName and Address of Beneficial OwnerSharesof ClassName and Address of Beneficial Owner Shares of Class
     
Giorgio BalzerGiorgio Balzer 7,592 * Giorgio Balzer  8,474  * 
Kansas City, Missouri Kansas City, Missouri       
Kevin G. BarthKevin G. Barth 19,100 * Kevin G. Barth  33,684  * 
Leawood, Kansas 65,615(2) Leawood, Kansas  75,692(2)    
John R. CappsJohn R. Capps 4,795 * John R. Capps  5,485  * 
Creve Coeur, Missouri Creve Coeur, Missouri       
W. Thomas Grant, IIW. Thomas Grant, II 2,283 * W. Thomas Grant, II  2,899  * 
Shawnee Mission, Kansas Shawnee Mission, Kansas       
James B. HebenstreitJames B. Hebenstreit 30,726 * James B. Hebenstreit  32,935  * 
Kansas City, Missouri 40,020(7) Kansas City, Missouri  42,021(6)    
David W. KemperDavid W. Kemper 974,546 David W. Kemper  1,032,392    
Ladue, Missouri 111,959(1) Ladue, Missouri  117,554(1)    
 369,792(2)    234,649(2)    
 136,699(3)    143,533(3)    
 813,635(4)    856,057(4)    
 2,210,000(6) 6.8    2,002,562(5)  6.3 
Jonathan M. KemperJonathan M. Kemper 54,618 Jonathan M. Kemper  60,143    
Kansas City, Missouri 412,038(1) Kansas City, Missouri  426,887(1)    
 813,635(4)    856,057(4)    
 272,213(2)    292,953(2)    
 136,699(3)    143,533(3)    
 1,105,000(6) 4.1    940,746(5)  3.9 
Charles G. KimCharles G. Kim  25,505    
Clayton, Missouri  105,222(2)    
Seth M. LeadbeaterSeth M. Leadbeater 22,461 * Seth M. Leadbeater  32,647  * 
Clayton, Missouri 127,457(2) Clayton, Missouri  126,537(2)    
Thomas A. McDonnellThomas A. McDonnell 9,024 * Thomas A. McDonnell  11,068  * 
Kansas City, Missouri Kansas City, Missouri       
Terry O. MeekTerry O. Meek 27,620 * Terry O. Meek  29,517  * 
Springfield, Missouri Springfield, Missouri       
Benjamin F. Rassieur, IIIBenjamin F. Rassieur, III 5,933 * Benjamin F. Rassieur, III  6,782  * 
St. Louis, Missouri St. Louis, Missouri       
L. W. Stolzer 416,099 * 
Manhattan, Kansas 1,064,688(5) 
V. Raymond Stranghoener 5,511 * 
St. Louis, Missouri 26,153(2) 
Andrew C. TaylorAndrew C. Taylor 15,295 * Andrew C. Taylor  16,747  * 
St. Louis, Missouri St. Louis, Missouri       
Mary Ann Van LokerenMary Ann Van Lokeren 8,329 * Mary Ann Van Lokeren  9,199  * 
St. Peters, Missouri St. Peters, Missouri       
Robert H. WestRobert H. West 15,347 * Robert H. West  16,903  * 
Kansas City, Missouri Kansas City, Missouri       
All 24 directors, nominees and executive officers as a group (including those listed above) 7,983,146 
All 22 directors, nominees and executive officers as a group (including those listed above)All 22 directors, nominees and executive officers as a group (including those listed above)  6,858,417    
 1,329,838(2) 13.4    1,232,651(2)  9.9 

(1) Shared voting power and investment power.
 
(2) Shares which could be acquired within 60 days by exercise of options.

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(3) Owned by a corporation for which Messrs. David W. Kemper and Jonathan M. Kemper serve as directors. Messrs. David W. Kemper and Jonathan M. Kemper disclaim beneficial ownership as to such shares.
 
(4) Mr. Jonathan M. Kemper has sole investment power, but shares voting power with Mr. David W. Kemper.
 
(5) Represents shares owned by spouse or by trust for benefit of spouse. Mr. Stolzer disclaims beneficial ownership as to such shares.
(6) Shared voting power.
 
(7)(6) Owned by a corporation for which Mr. Hebenstreit serves as President. Mr. Hebenstreit disclaims beneficial ownership in these shares.

 *Less than 1%.

     On February 12, 2004, the Company purchased 400,000 shares from family limited partnerships established by James M. Kemper Jr., as reported in a Form 8-K filing. David W. Kemper and Jonathan M. Kemper share voting power over certain of those shares and have both direct and indirect ownership of those shares. This transaction would have reduced the total common stock ownership, as reported above, by 397,000 shares for David W. Kemper and by 2,000 shares for Jonathan M. Kemper.

THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR ALL THE
NOMINEES TO THE
CLASS OF 20072008

PROPOSAL ONE

ELECTION OF DIRECTORS

      Under the Articles of Incorporation and the By-LawsBy-laws of the Company, the Board of Directors is divided into three classes, each as nearly equal as possible, and the Board is authorized to determine the number of persons constituting the board. The board has fixed the number of directors at thirteen.twelve. Therefore, it is proposed that four directors be elected at the meeting to serve until the 20072008 annual meeting (the 20072008 Class), and until their successors shall be elected and qualified unless otherwise directed. The persons acting under the accompanying proxy intend to vote for the election of the nominees hereinafter named. Should any nominee become unable to accept nomination or election, it is intended, unless otherwise directed, that the person acting under the proxy will vote for the election of such other person as the Board of Directors of the Company may recommend. The four nominees for election as directors to the Class of 20072008 who receive the greatest number of votes cast at the meeting, a quorum being present, shall become directors. Vacancies occurring in a class during a term are filled by the Board pursuant to the Company’s By-Laws.By-laws. There are no arrangements or understandings between any nominee and any other person pursuant to which the nominee was selected.

The following information is provided with respect to each nominee:
   
Name and AgePeriods Served as Director and Business Experience During Past 5 Years
20072008 Class:
  
John R. Capps, 54Elected a director in January, 2000. Mr. Capps has served as the President and Chief Executive Officer of Plaza Motor Company since 1981. Plaza Motor Company is a retail dealership for eight luxury automobile franchises. Mr. Capps is a director of Whitfield School (from 1995-present), St. Louis Priory School (from 1988-present), Muny Opera (from 1999-present), St. Louis Art Museum (from October, 2001-present) and Contemporary Art Museum (from January, 2003-present). He is Past Chairman of the Regional Business Council. He also served as a director of Commerce Bank, N.A., a subsidiary of the Company.
W. Thomas Grant, II, 54Elected a director in June, 1983. Mr. Grant is Chairman (since October, 1995), President and Chief Executive Officer of LabOne, Inc. LabOne, Inc. is a national laboratory services provider that performs insurance, clinical and substance abuse testing.

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Name and AgePeriods Served as Director and Business Experience During Past 5 Years
James B. Hebenstreit, 59Elected a director in October, 1987. Mr. Hebenstreit has been President of Bartlett and Company since January, 1992. Bartlett and Company is engaged in grain merchandising and storage, flour and feed milling and cattle feeding. Mr. Hebenstreit is Chairman of the Company’s Committee on Governance/Directors.
David W. Kemper, 54Elected a director in February, 1982. Mr. Kemper is Chairman of the Board (since November, 1991), President and Chief Executive Officer of the Company and is Chairman of the Board, President, and Chief Executive Officer of Commerce Bank, N.A., a subsidiary of the Company. He is also a director of Ralcorp Holdings, Inc., and Tower Properties Company. Mr. David Kemper is the brother of Jonathan M. Kemper.
  The following information is provided with respect to the directors who are continuing in office for the respective periods and until their successors are elected and qualified:
2007 Class:
 
Thomas A. McDonnell, 5859 Elected a director in April, 2001. Mr. McDonnell is the President and Chief Executive Officer of DST Systems, Inc. DST Systems is a provider of computer software solutions to the financial services and other industries. He has been employed by DST since 1969 and has served as President since January, 1973 (except for a 30-month period from October, 1984 to April, 1987). He is a director of DST Systems, Inc., Computer Sciences Corporation, Blue Valley Ban Corp, BHA Group Holdings, Inc., Euronet Worldwide, Inc., Garmin, LTD and Kansas City Southern (since March, 2003).

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Name and AgePeriods Served as Director and Business Experience During Past 5 Years
Benjamin F. Rassieur, III, 4950 Elected a director in August, 1997. Mr. Rassieur is President of Paulo Products Co.Company. The company is engaged in commercial heat-treating, electroplating, and furnace brazing services. Mr. Rassieur has served as a director of Commerce Bank, N.A., a subsidiary of the Company.
 
Andrew C. Taylor, 5657 Elected a director in February, 1990. Mr. Taylor is Chairman and Chief Executive Officer of Enterprise Rent-A-Car Company (formerly Enterprise Leasing Co.) which is engaged in automobile leasing, rental and related services. He is also a director of Anheuser-Busch Companies. Mr. Taylor has served as a director of Commerce Bank, N.A., a subsidiary of the Company. Mr. Taylor is Chairman of the Company’s Compensation and Human Resources Committee.
 
Robert H. West, 6566 Elected a director in October, 1985. Mr. West retired as Chairman of the Board of Butler Manufacturing Company and from its board of directors on July 1, 1999. He is a director of Great Plains Energy, Inc., and Burlington Northern Santa Fe Corporation, and Astec Industries, Inc. (until April, 2004).Corporation. Mr. West has also served as a director of Commerce Bank, N.A., a subsidiary of the Company. Mr. West is Chairman of the Company’s Audit Committee and designated as that Committee’s financial expert.

The following information is provided with respect to the directors who are continuing in office for the respective periods and until their successors are elected and qualified:4

   
Name and AgePeriods Served as Director and Business Experience During Past 5 Years
2006 Class:
  
Giorgio Balzer, 6465 Elected a director in December, 1990. SinceFrom August of 1990 and until May, 2003, Mr. Balzer has served as Chairman and Chief Executive Officer of Business Men’s Assurance Company of America; sinceAmerica. From May, of 2003 until December 31, 2004, he has served as Chairman of the Board and Chief Executive Officer of Generali USA Life Reassurance Company. Since January 1, 2005, he has served as Chairman of the Board of Generali USA Life Reassurance Company. He is also U.S. Representative for Assicurazioni-Generali, S.p.A., U.S. Branch, an Italian insurance group, as well as Chairman of Worldwide Assistance Services, Inc., Washington, D.C. He is also a director of Transocean Holding Corp., a Generali financial company in the U.S.
 
Jonathan M. Kemper, 5051 Elected a director in January, 1997. Mr. Kemper is Vice Chairman of the Company and Vice Chairman of Commerce Bank, N.A., a subsidiary of the Company. He is a director of Tower Properties Company, Generali Life Reassurance Company (since September, 2003), Midwest Research Institute (since May, 2001) Chairman (since October, 2004 formerly Vice ChairmanChairman) of the National Trust for Historic Preservation Board of Trustees and a Trustee of the Kansas City Public Library. Mr. Jonathan Kemper is the brother of David W. Kemper.
 
Terry O. Meek, 6061 Elected a director in April, 1989. Mr. Meek is President of Meek Lumber Yard, Inc., which operates a chain of builders’ materials centers under the name Meeks Building Centers. He has served as a director of Commerce Bank, N.A., a subsidiary of the Company.
 
L.W. Stolzer, 69Elected a director in October, 1995. Mr. Stolzer is the Chairman and Chief Executive Officer of Griffith Lumber Company, Inc. Griffith Lumber is a retail lumber and building materials business located in Manhattan, Kansas, marketing to commercial, industrial and construction accounts. He has served as a director of Commerce Bank, N.A., a subsidiary of the Company.

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Name and AgePeriods Served as Director and Business Experience During Past 5 Years
Mary Ann Van Lokeren, 5657 Elected a director in April, 1996. Ms. Van Lokeren is the Chief Executive Officer of Krey Distributing Company. Krey Distributing Company is the exclusive Anheuser Busch wholesaler for St. Charles and Lincoln counties in Missouri. She is also a director of Laclede Gas Company, Masco Corporation and D & K Healthcare resourcesResources (since May, 2003). She has served as a director of Commerce Bank, N.A., a subsidiary of the Company.
2005 Class:
John R. Capps, 53Elected a director in January, 2000. Mr. Capps has served as the President and Chief Executive Officer of Plaza Motor Company since 1981. Plaza Motor Company is a retail dealership for eight luxury automobile franchises. Mr. Capps is a director of Whitfield School (from 1995-present), St. Louis Priory School (from 1988-present), Muny Opera (from 1999-present), Whitaker Foundation (from August, 2001-present), St. Louis Art Museum (from October, 2001-present) and Contemporary Art Museum (from January, 2003-present). He is Past Chairman of the Regional Business Council. He also served as a director of Commerce Bank, N.A., a subsidiary of the Company.
W. Thomas Grant, II, 53Elected a director in June, 1983. Mr. Grant became the Chairman of the Board of LabOne, Inc. in October, 1995. LabOne, Inc. is a national laboratory services provider that performs insurance, clinical and substance abuse testing.
James B. Hebenstreit, 58Elected a director in October, 1987. Mr. Hebenstreit has been President of Bartlett and Company since January, 1992. Bartlett and Company is engaged in grain merchandising and storage, flour and feed milling and cattle feeding. Mr. Hebenstreit is Chairman of the Company’s Committee on Governance/ Directors.
David W. Kemper, 53Elected a director in February, 1982. Mr. Kemper is Chairman of the Board (since November, 1991), President and Chief Executive Officer of the Company and is Chairman of the Board, President, and Chief Executive Officer of Commerce Bank, N.A., a subsidiary of the Company. He is also a director of Ralcorp Holdings, Inc., and Tower Properties Company. Mr. David Kemper is the brother of Jonathan M. Kemper.

Audit Committee:Committee

During 20032004 Messrs. John R. Capps, James B. Hebenstreit, Thomas A. McDonnell, Benjamin F. Rassieur, III and Robert H. West (Chairman) served as members of the Audit Committee. It has been determined by the Board of Directors that all members of the Audit Committee are independent pursuant to the Sarbanes-Oxley Act of 2002, NASDAQ Rule 4200 and the Federal Deposit Insurance Corporation and Improvement Act of 1991. The role of the Audit Committee is to assist the Board of Directors in its oversight of the Company’s accounting, auditing and financial reporting processes. The Audit Committee is responsible for the compensation and appointment of the Company’s public accountants for the purpose of the examination and audit of the Company’s financial statements. The Audit Committee reviews the scope of audits to be performed by the independent public accountants and the internal auditing staff of the Company, and reviews annually the program of the internal auditing staff both with respect to audits performed in the prior year and scheduled audits for the ensuing year. The Audit Committee held four meetings during 2003.2004. Complete information on the activity of the Audit Committee is provided in the Audit Committee Report on page 18.19. The Audit Committee Charter may be viewed atwww.commercebank.com/027.html.

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Compensation and Human Resources Committee:Committee

      The Board of Directors has appointed a Compensation and Human Resources Committee consisting entirely of independent directors, todirectors. The Compensation and Human Resources Committee is responsible for review and establishapproval of executive and senior management performance and pay, adequacy and effectiveness of cash compensation to be paid to officersplans, benefit plans, equity compensation plans and succession planning. Members of the CompanyCommittee are also responsible for evaluating the performance of the Chief Executive Officer on an annual basis and to grant options pursuantrecommending to the board any compensation adjustments to his overall package based upon his

5

overall performance level as it relates to the goals and objectives of the company. The Committee, in consultation with senior management, has oversight responsibility for regulatory compliance with respect to compensation matters, including overseeing the Company’s stock option plans.policies on structuring compensation programs to preserve tax deductibility. When required, the Committee will establish performance goals and certify that those performance goals have been attained for purposes of Section 162(m) of the Internal Revenue Code. Membership currently consists of Directors, Giorgio Balzer, Terry O. Meek, Andrew C. Taylor (Chairman) and Mary Ann Van Lokeren presently comprise the committee whichLokeren. The Committee held one meetingtwo meetings during 2003 for these purposes.

2004. The Compensation and Human Resources Committee Charter may be viewed at www.commercebank.com/027.html.

Committee on Governance/ Directors:Directors

The Committee on Governance/Directors consists entirely of independent directors appointed by the Board of Directors. Among its responsibilities are to identify individuals qualified to serve as Board members and to consider the re-nomination of incumbent directors. The Committee makes its recommendations to the Board of Directors. Pursuant to its Charter, the membership of the Committee is to consist of the Chairman of the Audit Committee, the Chairman of the Compensation and Human Resources Committee and such other members as the Board shall determine. The current members of the Committee are Messrs. James B. Hebenstreit (Chairman), Robert H. West, Andrew C. Taylor, W. Thomas Grant, II and Thomas A. McDonnell. The Committee met one time in 2003.2004. The Committee on Governance/Directors Charter may be viewed atwww.commercebank.com/027.html.

With respect to its recommendations of prospective candidates to the Board, the Committee may establish the criteria for director service and will consider, among other things, the independence of the candidates under NASDAQ standards and such experience and moral character as to create value to the Board, the Company and its shareholders. With respect to incumbent candidates, the Committee will also consider meeting attendance, meeting participation and ownership of Company stock. The criteria and selection process are not standardized and may vary from time to time. Relevant experience in business, government, the financial industry, education and other areas are prime measures for any nominee. The Committee will consider individuals for Board membership that are proposed by shareholders in accordance with the provisions of the Company’s By-laws. A description of those provisions can be found under“Shareholder Proposals and Nominations.”The Committee will consider individuals proposed by shareholders under the same criteria as all other individuals.

      By February of each year, the Committee will meet and make its recommendations to the Board of its proposed slate of directors for the class of directors to be elected at the next annual meeting; the date, time and place of the annual meeting and the matters to be placed on the agenda for the annual meeting.

Corporate Governance and Director Independence:Independence

The Company has adopted Governance Guidelines. Those guidelines and the charters for the Audit Committee, Compensation and Human Resources Committee and the Committee on Governance/Directors may be found on the Company’s website atwww.commercebank.com/027.html. The Company’s Code of Ethics for Senior Financial Officers can also be found on the website.

      In conjunction with regularly scheduled Board Meetings, the Board of Directors meets in Executive Session without the presence of any non-independent directors or Company Employees. Oneemployees. Two Executive Session wasSessions were held in 2003.2004. The Chairman of the Committee on Governance/Directors serves as Chairman of the Executive Session and functions as the Lead Director to communicate with management and non-independent directors. The Board of Directors plans on conducting at least twothree Executive Sessions during 2004.

2005.

      The Committee on Governance/Directors has reviewed the independent status of the members of the Board of Directors and each standing Committee. The Committee considered applicable laws and regulations and NASDAQ Rule 4200. The findings of the Committee were reported to the Board of Directors. Based on those findings, the Board of Directors has determined that all directors except for Messrs. David W. Kemper and Jonathan M. Kemper are independent. The Board also determined that Mr. Robert H. West was qualified to serve as the Financial Expert on the Audit Committee and was so designated.

6

 

      The Governance Guidelines adopted by the Board of Directors recognize the responsibility of the directors to attend meetings. A board meeting is held each year in conjunction with the annual shareholders meeting at which directors are expected to attend. In 2003 eleven2004, twelve of the thirteen board members attended the annual shareholders’ meeting.

      The Board of Directors held four meetings during 2003.2004. Each director, except Giorgio BalzerJohn C. Capps and Andrew C. Taylor attended 75% or more of the total number of meetings of the Board and meetings held by committees of the Board on which the respective director served.

      Directors and officers of the Company and the nominees for directors and their associates have deposit accounts with the subsidiary banks of the Company, and some directors, nominees for directors and officers and their associates also have other transactions with the subsidiary banks, including loans in the ordinary course of business, all of which were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and did not involve more than normal risk of collectibility or present other unfavorable features. All such loans were made pursuant to 12 USC 375(b) and Regulation O promulgated thereunder. As of December 31, 2003,2004, all such loans were current.

During 2003, subsidiaries of the Company paid Tower Properties Company $1,815,429 in rentals, $559,655 in leasing fees, $43,257 for operation of parking garages, $1,231,999 for building management fees, $1,527,567 for other property construction and repair costs and $102,752 for interest paid on deposits with the Company’s principal banking subsidiary.

      Messrs. David Kemper and Jonathan Kemper are directors of Tower Properties Company (Tower) and together with members of their immediate families own beneficially approximately 46%66% of the outstanding stock of Tower.
      During 2004, subsidiaries of the Company paid Tower Properties Company.$1,412,775 for rentals, $92,542 for leasing fees, $46,461 for operation of parking garages, $1,314,971 for building management fees, $2,472,905 for other property construction and repair costs and $127,364 for interest paid on deposits with the Company’s principal banking subsidiary.
      On December 22, 2004, Commerce Bank, N.A., a subsidiary of the Company, entered into an agreement with Tower to purchase a multi-story office building and garage in downtown Kansas City for $10,750,000. On December 29, 2004, Commerce Bank, N.A., a subsidiary of the Company, entered into an agreement with Tower to purchase a multi-story garage in downtown Kansas City, adjoining the office building and garage previously mentioned, for $7,250,000. The purpose of the purchases is to provide suitable office space and parking relating to the relocation of the bank’s back-office check and deposit operations. Tower had previously owned the multi-story office building and garage for more than ten years as well as the land for the multi-story garage. The multi-story garage building, however, was newly constructed and placed into service in December 2003. Tower’s cost of construction of the multi-story garage building was $7,403,000 while the underlying land had a cost of $584,000. On February 28, 2005, the first phase of the transaction was completed and resulted in the acquisition of the building, which has 215,000 square feet of rentable area, and an incorporated parking garage beneath the building. Approximately thirty days following that date, the purchase of the adjoining parking garage is scheduled to close. The Board of Directors and Audit Committee of the Company approved the purchase with Messrs. David W. Kemper and Jonathan M. Kemper abstaining from the vote. The Board of Directors and Audit Committee considered an independent appraisal by Integra Realty Resources of Kansas City, Missouri and an independent search for comparable alternative space within a reasonable proximity to the purchased property.
Director Compensation:

Director Compensation
      An employee of the Company or a subsidiary of the Company receives no additional compensation for serving as a director. Non-employee directors of the Company are required to participate in the Stock Purchase Plan for Non-Employee Directors. Under this Plan, all compensation payable to a non-employee director is credited to an account in the name of such director as earned and the Company contributes to the account of such director an additional amount equal to 25% of the compensation credited to the director’s account. As of the last business day of each month, the cash balance is used to purchase from the Company whole shares of common stock of the Company based on the last sale price of the Company’s common stock on such date. Each non-employee director of the Company is paid (as adjusted for the 25% contribution by the Company) the annual retainer of $10,000 (paid on a quarterly basis), fees of $3,000 for each meeting of

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the Board of Directors attended, and fees of $750 for attendance at each meeting of a committee of which the director was a member and attended. An annual fee of $5,000 is paid to all non-employee committee chairmen.

THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR
AN INCREASE IN SHARES AVAILABLE FOR ISSUANCEADOPTION OF 2005 EQUITY INCENTIVE PLAN
UNDER THE COMPANY’S RESTRICTED STOCK PLAN ANDPROPOSAL TWO
AMENDMENT OF THE COMPANY’S RESTRICTED STOCK PLANGeneral Information

PROPOSAL TWO

      On February 4, 2000,January 28, 2005, the Board of Directors adopted, an amended and restated Restricted Stocksubject to shareholder approval, the Commerce Bancshares, Inc. 2005 Equity Incentive Plan (the “Plan”“2005 Equity Incentive Plan”), which amended and restated the Company’s Restricted Stock Plan, originally adopted in 1991 and subsequently amended and restated in 1996. As amended and restated, the Plan generally provides for restricted stock awards of the Company’s common stock (collectively “Awards”) in an amount not to exceed 366,496 shares, as adjusted for previous stock splits and stock dividends. To date 260,081 shares have been granted under the Plan with 106,415 shares currently available for issuance as of December 31, 2003.

     On October 24, 2003, the Board of Directors unanimously adopted a resolution that a proposal should be submitted to the shareholders for amendments to the Plan that would (i) increase the number of shares of

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common stock authorized for issuance in Awards by 250,000 shares, thereby authorizing a total of 616,496 shares for issuance under the Plan, with 356,415 shares remaining available for issuance in future Awards, and (ii) allow for Awards issued under the Plan to constitute “performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), thereby allowing the Company to disregard the Awards for purposes of the deduction limit under Code Section 162(m) with respect to compensation in excess of $1 million paid in any year to the Company’s Chief Executive Officer or the Company’s four other most highly compensated executive officers. The proposed amendment will provide the Company with available shares to continue to grant future restricted stock awards and it also provides the Company flexibility to place greater emphasis on using restricted stock as an alternative to issuing stock options while maintaining constant compensation levels. The adoption of the amendments to the Plan are subject to the affirmative vote of a majority of the shares of the Company’s common stock, represented in person or by proxy and entitled to vote at the Annual Meeting, assuming a quorum.

     The following paragraphs provide a summary of the principal features of the plan, as amended (the “Amended Plan”), and its operation. This summary is qualified in its entirety by reference to the applicable provisions of the Amended Plan, a copy of which is set forth in the attached Appendix A to this proxy statement.

Purpose.. The purpose of the Amended2005 Equity Incentive Plan is to promote the interests of the Company and its shareholders by providing a means, throughattracting and retaining employees who are expected to contribute to the grantCompany’s growth and financial performance.

      Options are currently granted to employees pursuant to the 1996 Incentive Stock Option Plan. The 1996 Incentive Stock Option Plan will terminate on December 31, 2005 and no further options may be granted after that date. As of Awards,February 18, 2005 approximately 1,752,000 shares remained available for awards under the Incentive Stock Option Plan for the remainder of 2005. Approximately 310,000 shares are currently available for award under the Restricted Stock Plan. If the 2005 Equity Incentive Plan is adopted, the Restricted Stock Plan will terminate on December 31, 2005 and no further awards will be made under that Plan. If the 2005 Equity Incentive Plan is not adopted, additional awards may continue to be made under the Restricted Stock Plan.
      The Board believes that equity incentive compensation is essential in attracting, retaining and motivating individuals. The flexibility of the 2005 Equity Incentive Plan in types and specific terms of awards will allow future awards to be based on then-current objectives for aligning compensation with shareholder value. Shareholder approval of the 2005 Equity Incentive Plan will permit the Company to retainaward equity incentives that achieve these goals.
      The following is a summary of the material terms of the 2005 Equity Incentive Plan and attract personnel who contributeis qualified in its entirety by reference to the growth2005 Equity Incentive Plan. A copy of the 2005 Equity Incentive Plan is included as Appendix A to this proxy statement and developmentmay also be obtained from the Company free of charge upon written request.
Summary of the 2005 Equity Incentive Plan
• Re-pricing is not permitted
• No discounted awards permitted
• No more than 20% of available shares may be used for restricted stock, or stock units, performance shares and stock-based awards
• Administration by independent compensation committee
• No anticipated changes from low historical awards experience
• Restrictions on vesting
Administration
      The Compensation and Human Resources Committee (the “Committee”), which is comprised of independent directors, will administer the 2005 Equity Incentive Plan and will have full power and authority to determine when and to whom awards will be granted, consistent with the provisions of the 2005 Equity Incentive Plan. Subject to the provisions of the 2005 Equity Incentive Plan, the Committee may amend or waive the terms and conditions, or accelerate the exercisability, of an outstanding award. The Committee has authority to interpret the 2005 Equity Incentive Plan, and establish rules and regulations for the administration of the 2005 Equity Incentive Plan.

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Eligible Participants
      Any employee of the Company andor its subsidiaries, who is selected by providing additional incentivethe Committee, is eligible to such personnel by offering a greater interest inreceive an award under the continued success2005 Equity Incentive Plan. As of the Company through increased stock ownership.

Stock Subjectdate of this proxy statement, the Committee has determined that out of all employees, approximately 500 employees were eligible to receive awards under the Amended2005 Equity Incentive Plan. Under the Amended Plan, the total

Shares Available For Awards
      The aggregate number of shares of the Company’s common stock authorized for issuance through Awards shall not exceed 616,496, an increase of 250,000 shares from the amount currently authorized under the Plan, which leaves 356,415 shares available for issuance in future Awards. This limitation on the number of shares authorized for issuance will be adjusted proportionately for any increase or decrease in shares resulting from a transaction effected without receipt of consideration by the Company, such as a stock dividend or stock split. The maximum number of shares(“Common Stock”) that may be issued under all stock-based awards made under the 2005 Equity Incentive Plan will be 4,000,000. Shares related to awards that are forfeited or expire unexercised shall be added back and available again under the 2005 Equity Incentive Plan. No more than 800,000 shares may be issued in the form of restricted stock, restricted stock units, performance shares and stock-based awards.
Terms of Awards
General.Awards may be granted alone or in any one calendar yearaddition to any employee coveredother award granted under Section 162(m)(3)the 2005 Equity Incentive Plan or any other compensation plan. Awards can be granted for no cash consideration or for cash or other consideration as determined by the Committee or as required by applicable law. Awards may provide that upon the grant or exercise thereof, the holder will receive cash, or shares of Common Stock, or any combination of these in a single payment. The exercise price per share under any stock option and the grant price of any Stock Appreciation Right (“SAR”) may not be less than the fair market value on the date of grant of such option or SAR unless the award is in substitution for an award previously granted by an entity acquired by us. The fair market value of a share under the 2005 Equity Incentive Plan will be the closing price on any securities exchange or NASDAQ or other over the counter market on which the shares are listed on the date of determination. If the shares are not listed, the Committee will determine the fair market value of the shares. The term of awards will not be longer than 10 years.
      An award agreement may provide that the Company has the right to repurchase shares acquired pursuant to an award when the holder terminates employment. Any repurchase must be consistent with Section 409A of the Internal Revenue Code of 1986 (the “Code”), which governs deferred compensation. An award agreement may provide that, upon a change in control, as defined in the 2005 Equity Incentive Plan, an award that is 50,000.

Administration.not yet exercisable or is subject to restrictions shall become immediately exercisable and all restrictions shall be removed. An award agreement may also provide that upon a change in control the award will terminate.

      Awards other than options and SARs may be granted subject to the achievement of performance goals. The Amended Plan is administeredperformance goals may be established by the Compensation and Human Resources Committee from time to time. In the case of the Board of Directors (the “Compensation Committee”), which shall consist of two or more directors who are “non-employee directors” under Rule 16b-3(b)(3) promulgated under the Securities and Exchange Act of 1934,awards intended to qualify as amended, and “outside directors”“performance-based compensation” within the meaning of Treasury Regulation 1.162-27(e)(3)(i), as amended. The Compensation Committee has the full authority in its sole discretion to determine to whom Awards will be granted, the number of shares subject to each Award, the times when Awards may be granted and the times at which any Award restrictions will expire.

Eligibility. The Compensation Committee may grant Awards to any of the officers, executives and management personnel of the Company or its subsidiaries, after giving consideration to employee duties and contributions and such other factors as the Compensation Committee deems relevant. No member of the Compensation Committee and no member of the Board of Directors, unless such director is also an employee of the Company, is eligible to receive an Award. Approximately 500 employees are eligible to participate in the Amended Plan.

Grant of Awards. Each Award must be evidenced by one or more stock certificates registered in the name of the individual to whom the Award is granted (the “Participant”) and an agreement entered into between the Company and the Participant. The terms of such agreement may include the number of shares issued in the Award and a related restriction period of not more than 10 years. An Award vests upon lapse of the Award’s restriction period. Shares issued in Awards are also subject to transfer restrictions, which prohibit the shares from being transferred, assigned or otherwise disposed of during the Award’s restriction period.

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     In determining the vesting schedule for each Award, the Compensation Committee may impose conditions to vesting, as it deems appropriate. For example, the Compensation Committee may (but is not required to) provide that restricted stock will vest only if one or more performance goals are achieved. In order for an Award to qualify as “performance-based” under Section 162(m) of the Code, the Compensation Committee must useperformance goals will be one or more of the following measures in setting thebusiness criteria:

• Revenue• Return on equity
• Earnings• Efficiency ratio
• Pre-tax earnings and net profits• Asset management
• Earnings per share• Asset growth
• Stock price• Asset quality
• Market share• Budget achievement
• Costs
      The measure of performance goals under the Amended Plan: (1) revenue, (2) earnings, (3) earnings per share, (4) pre-tax earnings and net profits, (5) stock price, (6) market share, (7) costs, (8) return on equity, (9) efficiency ratio, (10) asset management, (11) asset quality, (12) asset growth, and (13) budget achievement. These performance measures aremay be set forth in the Amended Plan.

     Performance goals may vary from participantby reference to participantan absolute standard or a comparison to specified companies or groups of companies, and may be set separately for the Company as a whole or for its various groups, divisions subsidiariesor subsidiaries. All calculations and affiliatesfinancial accounting matters will be determined in accordance with General Accepted Accounting Principles, unless the Committee determines otherwise. The Committee must establish performance goals and may be established as a comparison to peers. No Award that is intended to qualify as “performance-based” shall be paid beforetarget awards for each participant no later than the Compensation Committee certifies thatlast day permitted within the participant met the requirementsparameters of Section 162(m) of the performance goal. Any performance goal will be sufficiently objective such that a third party having knowledge of the relevant facts could determine whether the performance goal has been met.

Lapse of Restrictions. If a Participant’s employment terminates by reason of death or disability, the restriction period will be deemed to have lapsed on that part of the Award which equals the portion of the restriction period completed before the death or disability. If a Participant retires in a manner provided for under the Amended Plan before the end of the restriction period, then on the date on which the restriction period ends, the Participant will become fully vested in the part of the Award equaling the portion of the restriction period completed before retirement.

Rights as a Shareholder. Participants have the right to receive cash dividends during any restriction period, vote the common stock subject to an Award and enjoy most other shareholder rights. Participants may not receive delivery of stock certificates until after the related restriction period has lapsed and may not sell, transfer, pledge, exchange or otherwise dispose of common stock issued under an Award during the related restriction period.

Change in Control. In the event of a transaction which results in a Change in Control, as defined by the Amended Plan, the restrictions applicable to any Award shall lapse and such Award shall become fully vested and transferable.

Amended Plan Benefits. The Compensation Committee has the sole discretion to determine who shall be granted Awards, as well as the size and restrictions of such Awards. For this reason, the Company cannot determine the number of Awards that might be received by Participants as a result of this proposed amendment. The Committee has the ability to grant Awards consisting solely of restricted stock or restricted stock in combination with stock options. The increased shares will permit the committee to grant more restricted stock and fewer stock options. The following table sets forth, as of December 31, 2003, the total number of Awards granted to each of the following persons and groups since the original inception of the Plan in 1991.

         
Number of
Shares ofDollar Value
Restricted Stockof Restricted
Name and PositionGranted(1)Stock($)(2)
David W. Kemper  18,661  $597,999 
Jonathan M. Kemper  6,544  $209,926 
Seth M. Leadbeater  10,278  $204,712 
V. Raymond Stranghoener  2,560  $91,638 
Kevin G. Barth  8,740  $211,362 
Executive Officer Group  118,126  $2,657,227 
Non-Executive Employee Group  179,071  $4,529,396 
Code.

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(1) The Executive Officer Group total includes grants to the named executives officers of the Company. The Non-Executive Employee Group total includes all other grants to employees, including amounts granted to employees who are no longer employed by the Company. All the grants provided for a restriction period of five years.
(2) Based upon fair market value at the date of the grant of the Award.

     Federal Income Tax Information.Minimum Vesting. The following discussion Except for stock-based awards with a fair market value of tax issues deals with general tax principles and is intended for general information only. Alternative minimum tax and state, local and foreign income taxes are not discussed. This discussion is not to be construed as tax advice.

     Participants are not required to recognize income uponless than $10,000 on the date of grant, no more than 25% of an Award, unlessaward may be vested prior to the Participant makesfirst anniversary of the date of grant, except for death, disability or retirement. Historically all options vest 25% as of the date of grant and an election, underadditional 25% on each of the following three anniversaries. The majority of restricted stock awards provide vesting on the fifth anniversary of the grant. There are no plans to deviate from this historical practice.

Stock Options. The holder of an option will be entitled to purchase a number of shares of Common Stock at a specified exercise price during a specified time period, all as determined by the Committee. The option exercise price may be payable either in cash or in previously acquired shares of Common Stock, or at the discretion of the Committee, by any other lawful means. Options will be either “incentive stock options” (“ISO”) within the meaning of Section 83(b)421 of the Code or “non-qualified stock options” and will vest and become exercisable in accordance with a vesting schedule established by the Committee, subject to be taxed at the timeminimum vesting provisions of the Award. For Participants who do not make an election under Section 83(b) ofPlan, the Code, whenexercise price will be established by the restriction period lapses, the Participant must recognize ordinary income in an amount equal toCommittee and cannot be less than the fair market value of a share on the date of grant; the exercise price of an incentive stock option granted to an employee who owns 10% or more of the combined voting power of Common Stock will not be less than 110% of the fair market value of a share on the date of grant. The aggregate fair market value of Common Stock for which ISOs are granted and which are first exercisable in any one calendar year by any one employee may not exceed $100,000 in fair market value which is determined as of the date of the grant. Options for no more than 250,000 shares may be granted to any one employee in any one fiscal year.
Stock Appreciation Rights. The holder of a SAR is entitled to receive the excess of the fair market value calculated as of the exercise date of a specified number of shares of Common Stock over the grant price of the SAR. SARs vest and become exercisable in accordance with a vesting schedule established by the Committee. During any fiscal year, no employee may be granted SARs for more than 250,000 shares of Common Stock.
Restricted Stock and Restricted Stock Units. The holder of restricted stock will own shares of Common Stock subject to restrictions imposed by the Committee for a specified time period determined by the Committee. The holder of restricted stock will be entitled to vote the shares at that time. Any disposition ofand to receive any dividends declared on the shares; however, any dividends declared in shares by a Participant after the lapse of the restriction period may result in the recognition of capital gain or loss (long-term or short-term depending upon the length of time the shares are held by the Participant after all related restriction periods have lapsed). Dividends paid in cash and received by a Participant during the restriction period will constitute ordinary income to the Participant. Any dividends paid in stock during the restriction period will be treated as an Award of additional restricted stock subject to the tax treatment described herein.

     If a Participant does make an electionsame restrictions as the underlying shares. The holder of restricted stock units will have the right, subject to any restrictions imposed by the Committee, to receive shares of Common Stock, at some future date determined by the Committee. The holder of restricted stock units will not have voting rights but will receive dividends paid with respect to the underlying shares. The Committee may award restricted stock or restricted stock units subject to satisfaction of performance goals, which may include awards intended to qualify as “performance-based compensation” under Section 83(b)162(m) of the Code. If the participant’s employment terminates during the vesting period for any other reason, the Restricted Stock and Restricted Stock Units will be forfeited, unless the Committee determines that it would be in the Company’s best interest to waive any remaining time-based restrictions. During any fiscal year, no employee may receive more than 50,000 shares of Restricted Stock or Restricted Stock Units.

Performance Awards. Performance awards give participants the right to receive payments in cash, or shares based solely upon the achievement of certain performance goals during a specified performance period. Any shares granted may be subject to any restrictions as determined by the Committee. Performance awards granted under the 2005 Equity Incentive Plan may qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code.
      The aggregate dollar value of performance units any employee may receive in any fiscal year may not exceed $2.5 million, and no employee shall receive more than 50,000 performance shares in any fiscal year.
Stock-Based Awards. The Committee may grant other equity based awards, including unrestricted shares of Common Stock, subject to terms and conditions determined by the committee and the 2005 Equity Incentive Plan limitations. The awards may be conditioned on meeting performance goals and may be structured to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code.

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Duration, Termination and Amendment. Unless discontinued or terminated by the Board, the 2005 Equity Incentive Plan will expire on December 31, 2015. No awards may be made after that date. However, unless otherwise expressly provided in an applicable award agreement, any award granted under the 2005 Equity Incentive Plan prior to expiration may extend beyond the end of such period through the award’s normal expiration date.
      The Board may amend, alter or discontinue the 2005 Equity Incentive Plan at any time, although shareholder approval must be obtained if required to maintain compliance with the Code, by any applicable law or for any action that would, absent such approval, violate the rules and regulations of any securities exchange applicable to the Company.
Prohibition on Repricing Awards
      No option or SAR may be amended to reduce its exercise or grant price, and no option or SAR may be canceled and replaced with an option or SAR having a lower exercise price, except in connection with a stock dividend or other distribution, including a stock split, merger or other similar corporate transaction or event, in order to prevent dilution or enlargement of the benefits, or potential benefits intended to be taxed atprovided under the time2005 Equity Incentive Plan.
     Transferability of Awards
      Unless otherwise provided by the Award,Committee, awards under the Participant2005 Equity Incentive Plan may only be transferred by will be requiredor by the laws of descent and distribution.
     Federal Income Tax Consequences
      Grant of Options and SARs. The grant of a stock option or SAR is not expected to result in any taxable income for the recipient.
Exercise of Options and SARs. Upon exercising a non-qualified stock option, the optionee must recognize ordinary income at the time of the Award in an amount equal to the excess of the fair market value of the shares of Common Stock acquired on the date of exercise over the exercise price, and we will generally be entitled at that time overto an income tax deduction for the same amount. The holder of an incentive stock option generally will have no taxable income upon exercising the option (except that an alternative minimum tax liability may arise), and we will not be entitled to an income tax deduction. Upon exercising a SAR, the amount paid byof any cash received and the Participant, if any, for the shares. In such a case, no additional income is recognized by the Participant upon the lapse of the restrictionsfair market value on the shares. If theexercise date of any shares of Common Stock received are forfeited during the restriction period, the Participant may not deduct the income recognized at the time of the receipt of the shares, and will have a capital loss equaltaxable to the amount paid, if any, for the shares. Any dividend income received after an election under Section 83(b) of the Code will be treatedrecipient as ordinary income which should qualifyand generally deductible by us, subject to the limits of Section 162(m) of the Code.
Disposition of Shares Acquired Upon Exercise of Options and SARs. The tax consequence upon a disposition of shares acquired through the exercise of an option or SAR will depend on how long the shares have been held and whether the shares were acquired by exercising an incentive stock option or by exercising a non-qualified stock option or SAR. Generally, there will be no tax consequence to us in connection with the disposition of shares acquired under a non-qualified option or SAR. If shares purchased pursuant to the exercise of an ISO are not disposed of by the employee within two years from the date of grant of the option or within one year after the transfer of shares to him, the entire gain, if any, realized upon disposition will be taxable to the employee as a qualified dividend.

     The Company islong-term capital gain or loss and we will not be entitled to aany federal income tax deduction fordeduction. If an Awardemployee sells or exchanges the shares acquired under an ISO before the expiration of the required holding period, the employee will realize ordinary income in the year of such disposition in an amount equal to the difference between the option price and the lesser of the fair market value of the shares on the date of exercise (minus the exercise price) or the selling price (minus the exercise price). In such event we will be entitled to a tax deduction in the year of disposition equal to the amount of ordinary income realizedrecognized by the Participant at any time the Participant recognizes such ordinary income,employee, subject to certain limitations. One such limitation isthe limits of Section 162(m) of the Code, which contains special rules regardingCode.

Awards Other than Options and SARs. As to other awards granted under the federal income tax deductibility of compensation paid to the Company’s Chief Executive Officer and to each of the other four most highly compensated executive officers. The general rule is2005 Equity Incentive Plan that annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1 million. The Company can preserve the deductibility of certain compensationare payable either in excess of $1 million, however, if the Company complies with conditions imposed by Section 162(m) of the Code. The Amended Plan is designed to permit the Compensation Committee to grant Awards that will satisfy the requirements of Section 162(m).

     Any Participant entitled to receive shares pursuant to an Award will be given notice by the Company to permit such Participant to make a cash payment to the Company for applicable withholding taxes. The Company may defer making delivery of the certificate representing the shares until indemnified with respect to any such withholding tax. A Participant may satisfy the Participant’s obligation to pay the Company withholding taxes, in whole or in part, by electing to have the Company withhold shares of common stock having a value equalCommon Stock that are either transferable or not subject to the amount required to be withheld. The Compensation Committee may disapprove any such election or may suspend or terminate the right to make such elections.

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Amendments. The Board

substantial risk of Directors may, by resolution, amendforfeiture, the Amended Plan except that, shareholder approvalholder of the award must be obtainedrecognize ordinary income equal to (a) the amount of cash received or, as applicable, (b) the excess of (i) the fair market value of the shares received (determined as of the date of receipt) less (ii) the amount (if any) paid for any such amendment if requiredthe shares by the Amendedholder of the award. We will generally be entitled at that time to an income tax deduction for the same amount.
      As to an award that is payable in shares of Common Stock that are restricted from transfer and subject to substantial risk of forfeiture, unless a special election is made by the holder of the award under the Code, the holder must recognize ordinary income equal to the excess of (i) the fair market value of the shares received (determined as of the first time the shares become transferable or not subject to substantial risk of forfeiture, whichever occurs earlier) over (ii) the amount (if any) paid for the shares by the holder of the award. The Company will generally be entitled at that time to an income tax deduction for the same amount.
Tax Deductibility and Section 162(m). Section 162(m) places a $1 million annual limit on the deductible compensation of certain executives of publicly traded corporations. The limit, however, does not apply to “qualified performance-based compensation.” The 2005 Equity Incentive Plan is designed so that awards made thereunder may qualify for the performance-based compensation exception to the deductibility limit, assuming that the 2005 Equity Incentive Plan is approved by stockholders.
Application of Section 16. Special rules may apply to individuals subject to Section 16 of the Exchange Act. In particular, unless a special election is made pursuant to the Code, shares received through the exercise of a stock option or SAR may be treated as restricted as to transferability and subject to a substantial risk of forfeiture for a period of up to six months after the date of exercise. Accordingly, the amount of any other applicable law, ruleordinary income recognized and the amount of our income tax deduction will be determined as of the end of that period.
Delivery of Shares for Tax Obligation. Under the 2005 Equity Incentive Plan, the Committee may permit participants receiving or regulation.

exercising awards, subject to the discretion of the Committee and upon such terms and conditions as it may impose, to deliver shares of Common Stock (either shares received upon the receipt or exercise of the award or shares previously owned by the holder of the option) to us to satisfy federal and state income tax obligations.

New Plan Benefits
      No benefits or amounts have been granted, awarded or received under the 2005 Equity Incentive Plan. In addition, the Committee in its sole discretion will determine the number and types of awards that will be granted. Thus, it is not possible to determine the benefits that will be received by eligible participants if the 2005 Equity Incentive Plan were to be approved by the shareholders. The closing price of a share of our Common Stock as reported on NASDAQ on February 18, 2005, was $47.66.
      THE BOARD OF DIRECTORS CONSIDERS THE PROPOSED AMENDMENT TOADOPTION OF THE RESTRICTED STOCK2005 EQUITY INCENTIVE PLAN TO BE IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE AMENDMENTADOPTION OF THE RESTRICTED STOCK2005 EQUITY INCENTIVE PLAN.

THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR
RATIFICATION OF THE SELECTION OF
KPMG LLCLLP AS THE INDEPENDENT PUBLIC ACCOUNTANTS

PROPOSAL THREE

      Pursuant to the Sarbanes-Oxley Act of 2002 the Audit Committee of the Company is responsible for the selection and approval of the Company’s public accountants for the purpose of the examination and audit of the Company’s financial statements for 2004.2005. The Audit Committee has also adopted a procedure for the preapproval of non-audit services. The Audit Committee has selected and the Board of Directors has ratified the selection of KPMG LLP as the firm to conduct the audit of the financial statements of the Company and

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its subsidiaries for 2004.2005. This selection is presented to the shareholders for ratification, however, the failure of the shareholders to ratify the selection will not change the engagement of KPMG LLP for 2004.2005. The Audit Committee will consider the vote of the shareholders for future engagements. Representatives of KPMG LLP are expected to be present at the Annual Meeting and will be available to respond to appropriate questions. The representatives will also be provided an opportunity to make a statement.

      THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE COMPANY’S SHAREHOLDERS VOTE “FOR” THE RATIFICATION OF KPMG LLP.

Employment Contracts, Termination of Employment and Change-in-Control Arrangements:Arrangements

      The Company has a Severance Agreement with each of David W. Kemper, Jonathan M. Kemper, Seth M. Leadbeater, V. Raymond StranghoenerCharles G. Kim and Kevin G. Barth which provides, among other things, that if his employment is terminated by the Corporation without “cause” or by him for “good reason” either during the twelve months before or the three years after a “change in control,” or if he voluntarily terminates for any reason during the 30 days following one year after a “change of control,” he shall receive three times the sum of his annualized base salary in effect twelve months prior to the “change in control,” and his average annual bonus for the prior three years; the greater of his actual bonus for the preceding first year or his target bonus for the current year (prorated for the year in which the termination occurs); and continuation of health and welfare benefits for him and his spouse for three years or until age 65 if sooner, at a cost equal to such rates paid from time to time by similarly situated employees of the Corporation, “grossed up” to cover any excise tax imposed by Section 4999 of the Internal Revenue Code.

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Executive Compensation:Compensation

      The following information is given as to the Chief Executive Officer (“CEO”) and as to each of the four most highly compensated executive officers of the Company, other than the CEO, who received total cash compensation of more than $100,000, during the fiscal year ended December 31, 2003.

2004.

Summary Compensation Table
                        
Long Term Compensation                        
          Long Term Compensation  
            
AwardsPayouts      Awards Payouts  
Annual Compensation
    Annual Compensation      
(f)(g)      (f) (g)    
(e)RestrictedSecurities(h)(i)      (e) Restricted Securities (h) (i)
(c)(d)Other AnnualStockUnderlyingLTIPAll Other    (c) (d) Other Annual Stock Underlying LTIP All Other
(a)(a)(b)SalaryBonusCompensationAwards(2)Options/SARsPayoutsCompensation(1)(a) (b) Salary Bonus Compensation Awards(2) Options/SARs Payouts Compensation(1)
Name and Principal PositionName and Principal PositionYear($)($)($)($)(#)($)$Name and Principal Position Year ($) ($) ($) ($) (#) ($) $
(a)(a)                
David W. KemperDavid W. Kemper 2003 691,150 521,000 0 158,841 89,250 0 78,527 David W. Kemper  2004  726,040  558,600  0  165,967  89,250  0  325,578 
Chairman, President & 2002 658,200 496,000 0 115,530 93,712 0 78,720 Chairman, President &  2003  691,150  520,000  0  158,839  93,716  0  78,527 
CEO 2001 632,850 360,000 0 166,238 84,506 0 52,565 CEO  2002  658,200  496,000  0  115,521  98,397  0  78,720 
Commerce Bancshares, Inc. Commerce Bancshares, Inc.                         
Jonathan M. KemperJonathan M. Kemper 2003 359,000 181,000 0 55,511 37,800 0 12,621 Jonathan M. Kemper  2004  376,094  200,000  0  57,445  37,800  0  7,392 
Vice Chairman 2002 345,125 173,400 0 40,421 37,587 0 10,283 Vice Chairman  2003  359,000  180,000  0  55,501  39,690  0  12,621 
Commerce Bancshares, Inc. 2001 331,750 126,000 0 59,494 35,044 0 49,336 Commerce Bancshares, Inc.  2002  345,125  173,400  0  40,399  40,516  0  10,283 
Seth M. LeadbeaterSeth M. Leadbeater 2003 270,000 136,000 0 41,828 17,850 0 8,355 Seth M. Leadbeater  2004  289,375  140,000  0  292,545  18,900  0  7,211 
Executive Vice President 2002 259,375 130,600 0 30,165 18,742 0 6,437 Vice Chairman  2003  270,000  135,000  0  41,828  18,742  0  8,355 
Commerce Bancshares, Inc. 2001 248,750 94,000 0 43,745 17,363 0 17,872 Commerce Bancshares, Inc.  2002  259,375  130,600  0  30,144  19,679  0  6,437 
V. Raymond Stranghoener 2003 235,900 107,700 0 32,080 14,700 0 8,215 
Charles G. KimCharles G. Kim  2004  241,833  131,000  0  281,122  15,750  0  6,414 
Senior Vice President 2002 226,829 100,200 0 26,934 15,435 0 6,304 Executive Vice President  2003  224,750  112,700  0  34,469  16,537  0  7,024 
Commerce Bancshares, Inc. 2001 217,938 84,000 0 32,667 15,048 0 7,468 Commerce Bancshares, Inc.  2002  214,375  107,700  0  24,943  16,785  0  4,486 
Kevin G. BarthKevin G. Barth 2003 226,875 112,000 0 34,739 14,700 0 9,493 Kevin G. Barth  2004  245,667  120,000  0  280,551  15,750  0  6,532 
Senior Vice President, 2002 214,005 108,500 0 24,996 13,230 0 7,529 Senior Vice President  2003  226,875  111,000  0  34,739  15,435  0  9,493 
Commerce Bancshares, Inc. 2001 200,640 78,000 0 27,995 11,576 0 8,225 Commerce Bancshares, Inc.  2002  214,005  108,500  0  24,943  13,891  0  7,529 

(1) All Other Compensation (i) mainly includes the total of the amounts allocated or contributed by the Company to the CERPCompany’s 401(k) Plan and 401(k) Plansthe Commerce Executive Retirement Plan (“CERP”).

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Also included are amounts assigned for the benefitGroup Term Insurance Plan of these individuals. For 2003, thisthe Company. The CERP is a non- qualified plan established to provide benefits on compensation in excess of the allowable benefits of the Company’s Pension Plan. In 2004 for the Company’s 401(k) Plan, contributions made to the Plan were based on a maximum of 1.2% of salary in column (c) for the 401(k) Plan plus the amount allocated to each individual under the CERP Plan.. For 2003,2004, those amounts for the CERP401(k) and 401(k),group term insurance, respectively are as follows: David W. Kemper — $69,910$6,150 and $7,375;$1,242; Jonathan M. Kemper — $4,004$6,150 and $7,375;$1,242; Seth M. Leadbeater — $(0)$6,150 and $7,375; V. Raymond Stranghoener$1,061; Charles G. Kim — $(0)$6,038 and $7,375;$376; and Kevin G. Barth — $1,769$6,150 and $7,375. Other amounts are$382. In 2004, CERP allocations totaling $314,964 were made for the Group Term Insurance Planbenefit of David W. Kemper and is included in column (i) above. No other named executive received any such allocations. The allocation made for David W. Kemper in 2004 was $245,054 greater than in the previous year as a result of the Company.previously announced freeze in the Company’s Pension Plan effective December 31, 2004 which resulted in the acceleration of benefit obligations in the CERP.
 
(2) As of December 31, 2003,2004, the total number of shares and their market value (based on the closing market price at December 31, 2003)2004) of restricted stock held by each of the named executive officers were as follows: David W. Kemper — 18,661 shares valued at $914,762; Jonathan M. Kemper — 6,544 shares valued at $320,787; Seth M. Leadbeater — 4,784 shares valued at $234,512; V. Raymond Stranghoener — 2,560 shares valued at $125,491; and Kevin G. Barth — 3,257 shares valued at $159,658. The Company’s practice is to pay dividends on restricted shares directly to the officers awarded the shares.

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  # Share Market Value at 12/31/04
     
David W. Kemper  23,086  $1,158,917 
Jonathan M. Kemper  8,078   405,516 
Seth M. Leadbeater  10,929   548,636 
Charles G. Kim  10,216   512,843 
Kevin G. Barth  9,412   472,482 
The Company’s practice is to pay dividends on restricted shares directly to the officer awarded the shares.
Option/ SAR Grants in Last Fiscal Year
                     
                     
Individual GrantsIndividual GrantsPotential RealizableIndividual Grants Potential Realizable
Value at Assumed  Value at Assumed
(b)Annual Rates of Stock (b)   Annual Rates of Stock
Number of(c)Price Appreciation for Number of (c)   Price Appreciation for
Securities% of TotalOption Term Securities % of Total   Option Term
UnderlyingOptions/SARS(d)
 Underlying Options/SARS (d)    
Options/SARSGranted toExercise or(e)(f)(g) Options/SARS Granted to Exercise or (e) (f) (g)
(a)GrantedEmployees inBase PriceExpiration5%10% Granted Employees in Base Price Expiration 5% 10%
Name(#)Fiscal Year($/SH)Date($)($) (#) Fiscal Year ($/SH) Date ($) ($)
            
David W. Kemper 89,250 15.69% 35.4476 3/6/2013 1,989,633 5,042,123   89,250  18.61%  47.5143  3/5/2014  2,666,922  6,758,504 
Jonathan M. Kemper 37,800 6.65% 35.4476 3/6/2013 842,668 2,135,487   37,800  7.88%  47.5143  3/5/2014  1,129,520  2,862,425 
Seth M. Leadbeater 17,850 3.14% 35.4476 3/6/2013 397,927 1,008,425   18,900  3.94%  47.5143  3/5/2014  564,760  1,431,213 
V. Raymond Stranghoener 14,700 2.58% 35.4476 3/6/2013 327,704 830,467 
Charles G. Kim  15,750  3.28%  47.5143  3/5/2014  470,633  1,192,677 
Kevin G. Barth 14,700 2.58% 35.4476 3/6/2013 327,704 830,467   15,750  3.28%  47.5143  3/5/2014  470,633  1,192,677 

      Options granted (column b) include only Non-Qualified Stock Options.Options (NQ). All substantive terms are identical — four (4) equal vesting periods with 25% exercisable at date of grant and an additional 25% exercisable on each anniversary date thereof. The exercise price is defined as the closing market price on the date of grant, and the options are not exercisable following voluntary termination. The options are not assignable but may be exercised by the optionee’s estate or beneficiary, subject to certain limitations, in the case of the death of the optionee.

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Aggregated Options/ SAR Exercises in Last Fiscal Year and FY-End Option/ SAR Values
                            
(d)(e)     (d) (e)
Number of SecuritiesValue of Unexercised     Number of Securities Value of Unexercised
(b)Underlying UnexercisedIn-the-Money (b)   Underlying Unexercised In-the-Money
Shares(c)Options/SARS atOptions/SARS at Shares (c) Options/SARS at Options/SARS at
AcquiredValueFY-EndFY-End Acquired Value FY-End FY-End
(a)on ExerciseRealized(#)($) on Exercise Realized (#) ($)
Name(#)($)Exercisable/UnexercisableExercisable/Unexercisable (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
        
David W. Kemper 0 0 369,792 6,481,684   246,152  4,410,353  234,649  3,452,317 
 134,919 1,716,988         138,392  1,283,993 
Jonathan M. Kemper 47,043 1,360,736 272,213 6,433,491   32,091  1,149,946  292,953  6,709,134 
 56,904 726,023         58,323  539,866 
Seth M. Leadbeater 27,687 746,734 127,457 2,824,273   26,176  802,442  126,537  2,592,076 
 27,097 345,084         28,464  258,883 
V. Raymond Stranghoener 0 0 26,153 375,671 
Charles G. Kim  7,570  281,839  105,222  2,158,164 
 22,504 286,983         24,276  224,606 
Kevin G. Barth 0 0 65,615 1,444,278   7,507  276,238  75,692  1,573,739 
 20,533 262,452         23,001  205,720 

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Equity Compensation Plan Information:Information

The following table provides information as of December 31, 2003,2004, with respect to compensation plans under which common shares of Commerce Bancshares, Inc. are authorized for issuance to certain officers in exchange for services provided. These compensation plans include: (1) the Commerce Bancshares, Inc. Incentive Stock Option Plan of 1986, (2) the Commerce Bancshares, Inc. 1987 Non-Qualified Stock Option Plan, (3) the Commerce Bancshares, Inc. 1996 Incentive Stock Option Plan, (4) the Commerce Bancshares, Inc. Restricted Stock Plan, (5) the Commerce Bancshares, Inc. Stock Purchase Plan for Non-Employee Directors and (6) the Commerce Bancshares, Inc. Executive Incentive Compensation Plan (deferred compensation plan). All of these compensation plans were approved by the Company’s shareholders.
            
(c)            
Number of     (c)
Common Shares     Number of
Remaining     Common Shares
Available for Future     Remaining Available
(a)Issuance Under (a)   for Future Issuance
Number of Common(b)Equity Number of Common (b) Under Equity
Shares to be IssuedWeighted AverageCompensation Plans Shares to be Issued Weighted Average Compensation Plans
upon Exercise ofExercise Price of(Excluding Shares upon Exercise of Exercise Price of (Excluding Shares
Outstanding Options,Outstanding Options,Reflected in Outstanding Options, Outstanding Options, Reflected in
Warrants and RightsWarrants and RightsColumn(a)) Warrants and Rights Warrants and Rights Column(a))
      
Plan category
           
Equity compensation plans approved by shareholders 3,778,237(1) $29.99(2) 2,671,956(3)  3,629,278(1) $31.92(2)  2,571,600(3)
Equity compensation plans not approved by shareholders — — —   —  —  — 
 
 
 
        
Total
 3,778,237 $29.99 2,671,956   3,629,278 $31.92  2,571,600 

(1) Includes an aggregate of 3,701,6863,549,025 common shares issuable upon exercise of options granted under the option plans and 76,55180,253 common shares allocated to participants’ accounts under the deferred compensation plan.
 
(2) Represents the weighted average exercise price of outstanding options under the option plans.
 
(3) Includes 2,300,5121,988,239 common shares remaining available under the option plans, 106,415322,305 common shares available under the restricted stock plan, 145,089137,442 shares available under the directors stock purchase plan, and 119,940123,614 shares under the deferred compensation plan.

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Performance Graph:Graph

(PERFORMANCE GRAPH)

(PERFORMANCE GRAPH)
Five Year Cumulative Total Return
                        
                        
199819992000200120022003
 1999 2000 2001 2002 2003 2004
Commerce CBSH 100.00 85.03 114.06 111.71 120.01 160.08   100.00  134.14  131.38  141.16  188.34  206.45 
NASDAQ Financial 100.00 99.34 107.40 117.96 121.48 164.30   100.00  108.11  118.75  122.30  165.41  193.09 
S&P 500 100.00 121.11 110.34 97.32 75.75 97.51   100.00  91.20  80.42  62.64  80.62  89.47 

 Assumes $100 invested 12/31/9899 with dividends reinvested on a Total Return basis with Commerce (CBSH)compared to the above named indices.

Retirement Benefits:Benefits

      The Company maintains the Commerce Bancshares Restated Retirement Plan (“Retirement Plan”). All employeesEmployees hired on or before June 30, 2003 arewere eligible to participate on the later of January 1st or July 1st after completion of one year of service and the attainment of age 21. The Retirement Plan provides benefits based upon earnings, age and years of participation. The Retirement Plan was amended effective July 1, 2003 to limit participation in the Retirement Plan to employees who were hired on or before June 30, 2003.

      On October 24, 2004, The Board of Directors further amended the Plan to provide that after December 31, 2004 all plan participation was to be frozen and no further amounts are to credited to a participant’s cash balance account after that date.
      The annual benefit is determined under a cash balance formula effective January 1, 1995.1995, as amended. Under the cash balance formula, a retirement account balance is maintained for each participant. At the end of each plan year beginning after December 31, 1994 and through December 31, 2004, the participant’s account iswas credited with an amounta cash balance credit equal to a percentage of total pay for the year plus the same percentage of pay in excess of 50% of the Social Security taxable wage base for the year. Pay for this purpose is limited by Section 401(a)(17) of the Internal Revenue Code. The applicable percentage is determined by the sum of the participant’s age and years of participation at the beginning of the plan year, and ranges from 1% for a sum of less than 30 to 4% for a sum of 75 or more. Interest is credited to the participant’s account at the end of each plan year beginning after 1995 at a rate not less than 5% of the account balance at the end of

16

the prior plan year (for 2003,2004, the rate of interest was 5%). At retirement, the retirement account balance is converted to various annual benefit options based on actuarial factors defined in the Retirement Plan.

15

      In addition, the participant shall receive an annual benefit equal to his annual benefit accrued through December 31, 1994 under the Retirement Plan’s prior formula, adjusted for increases in the cost of living (but not in excess of 4% per year) for each year of participation after December 31, 1994. Certain executive members of the Retirement Plan will receive a special minimum benefit based on the final five-year average pay and years of service (this provision is subject to IRS approval, which has been requested).

as of December 31, 2004.

      This Retirement Plan is fully paid for by the Company and employees covered by the Retirement Plan become fully vested after five years of service. The normal retirement age under the Retirement Plan is 65. Reduced benefits are available as early as age 55. Messrs. David Kemper, Jonathan Kemper, Leadbeater, StranghoenerKim and Barth have, respectively, 24, 21, 13, 325, 22, 14, 14 and 1920 years of service as of December 31, 2003.

2004.

      Compensation covered by the Retirement Plan for 20032004 includes salary (as reported in the Summary Compensation Schedule) and was limited by Section 401(a)(17) of the Internal Revenue Code to $200,000.$205,000. The compensation for 20032004 covered by the Retirement Plan was: Mr. David Kemper $200,000;$205,000; Mr. Jonathan Kemper $200,000;$205,000; Mr. Leadbeater $200,000;$205,000; Mr. Stranghoener $200,000Kim $205,000 and Mr. Barth $200,000.

$205,000.

      The estimated annual benefits payable at normal retirement age for Messrs. David Kemper, Jonathan Kemper, Leadbeater, StranghoenerKim and Barth are $135,217, $123,091, $78,526, $39,273$85,701, $68,534, $40,054, $38,721 and $81,059,$36,530, respectively. These benefits assume the election of a retirement allowance payable as a straight life annuity to the participant.

      The Company also maintains the Commerce Executive Retirement Plan (“CERP”), effective January 1, 1995, to provide non-qualified deferred compensation for a select group of executives. The CERP is unfunded; benefits are payable from the assets of the Company. The Board of Directors may designate the CEO as a participant; other participants are selected by the CEO.

      A participant’s benefit under the CERP is the amount by which (1) exceeds (2), where (1) is the benefit that would be payable under the Commerce Bancshares Retirement Plan if that benefit were calculated using the participant’s total pay including any bonus deferred under a non-qualified deferred compensation plan maintained by the Company and without regard to the pay limit of Section 401(a)(17) of the Internal Revenue Code and (2) is the benefit actually payable under the Commerce Bancshares Retirement Plan.

      Compensation covered by the CERP for 20032004 includes salary and bonuses as reported in the Summary Compensation Schedule. The compensation for 20032004 covered by the CERP was: Mr. David Kemper $1,192,816;$1,249,471; Mr. Jonathan Kemper $533,400;$556,094; Mr. Leadbeater $401,600;$424,375; Mr. Stranghoener $337,100Kim $354,533 and Mr. Barth $311,375.

$356,667.

      The estimated annual benefits payable under the CERP at normal retirement age for Messrs. David Kemper, Jonathan Kemper, Leadbeater, StranghoenerKim and Barth are $237,194, $61,854, $2,150, $905$143,539, $33,552, $0, $0 and $34,380,$1,134, respectively. These benefits assume the election of a retirement allowance payable as a straight life annuity to the participant.

Committee Report on Executive Compensation:Compensation

      The Company’s executiveCompensation and Human Resources Committee is responsible for the establishment and review of compensation policy is intended to be competitive with bank holding companies in geographic proximity, comparable asset size,policies and considered as direct competitors with the Company, so that total compensation received by the executive officers of the Company is believed to be comparable on a long-term basis. The policy is also intended to offer an incentiveprograms for performance to the Company’s executive officers, and managers, including the chief executive officer and the four other most highly paid executive officers (collectively with the chief executive officer,Chief Executive Officer, the “senior executives”). The overall compensation program is designed to retain and reward on both a short and long-term basis. In the caseobjectives of the Chief Executive Officer, the Committee pays particular attentioncommittee are to the totaldevelop compensation paid to the chief executive officers of the competing bank holding companies described above but taking into consideration the relative size of the companiespolicies and their financial returns. Statistical measurements including earnings per share, return on assets, return on equity, net income, and asset quality are considered over a one to five year time frame but not weighted in regard to base salary considerations.practice that:
• Align the senior executives’ interests with the long-term interests of shareholders;
• Provide total compensation programs that are competitive with bank holding companies in geographic proximity, comparable asset size and considered a direct competitor;
• Provide reward systems that are credible and consistent with the core values of the Company;

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• Reward for results rather than on the basis of seniority, tenure, or other entitlement; and
• Encourage retention of top performers to ensure the long-term success of the Company.
      During 2003,2004, the four members of the Compensation and Human Resources Committee were all non-employee directors. The principal elements of the Company’s executive compensation program for the fiscal year ended December 31, 2003,2004, applicable to the Company’s executive officers, including the senior executives, were:

       (1) Base salaryPay. Base pay reflects the external market value of a particular role as well as the experiences and qualifications that an individual brings to the role. As they are for all officers of the Company base pay levels for senior executives are reviewed annually against national salary survey data and determined annually. Considerationcompetitor data to determine whether a particular role is givenat an appropriate level. Base pay is generally targeted to the scopemedian of responsibilities andthe base pay paid by companies included in the salary surveys that best compare to positions at the similarity of positions with immediate competitors. In this regard, comparison is made with the compensation paid to the top five officers of comparable bank holding companies which, by virtue of their location, are considered immediate competitors.Company. Factors included in the comparison are relative size of companies, the financial results obtained,performance, both currently and over a period of time, and the experience and responsibility of the individuals. In establishing base pay increases the Committee does not assign any weight to any particular factor. In addition, the Committee reviews individual performance ratings, being the result of reviews conducted by an officer’s superior. The Committee also considers responsibility changes, taking into account outstanding or improved performance. The Committee approves salary increases and salary levels after considerationIn the case of both internal and external information as set forth above. In establishing base salaries,the Chief Executive Officer, the Committee does not assign any weightmeets to any particular factor. Additionally,review performance against previously outlined objectives and after completing the Committee reviewed national survey datareview, assigns a rating and competitor data prior to recommendingmakes a base salary increases during 2003.pay recommendation for full Board approval.
 
       (2) Annual Cash Bonus awards are considered annually.Bonus. The annual cash bonus plan is a short-term incentive plan to reward the senior executives for achieving annual performance goals. In awarding bonus payments, factors considered by the Compensation Committee include: (i) a review of the Company’s financial performance as determined by the level of overall net income, as well as key statistical measurements, return on assets, return on equity, asset quality and asset growth, as compared to internal trendsthe annual budget for categories such as earnings per share, efficiency ratio, and selected competitors;profitability of an individual’s market or division responsibility; (ii) the value created for shareholders in both the most recent year and over the latest five-year period as determined by market price of the Company stock compared to the NASDAQ financial indices; and (iii) the performance of individuals, to the extent measurable, in meeting budget expectations. The Committee has establishedannual goals and objectives as defined in their performance targets that affect the granting of and size of a bonus for the top executives of the Company.review. Performance of the Company in relation to competitors’ performance is considered but not weighted in the granting of a bonus. The Chief Executive Officer is also subject to the previous measurements. Bonuses earned as a percentage of base salarypay for executive officersthe senior executives for 20032004 performance ranged from 74.3%76% (in the case of the chief executive officer)Chief Executive Officer) to 2.3%43.6%.
 
       (3) Long-Term Incentive Program.Stock Options are also awarded annually. Theyand Restricted Stock grants are awarded to provide individualssenior executives with long-term incentives for profitable growth and closerto more closely align the Company’s senior executives with the interest of the Company’s shareholders. Retention and long-term reward are both factors considered in granting stock options.options and restricted stock. The Company has implemented targeted guidelines in determining option awards to all participants in the option program including senior executives. Targeted percents range from 25% to 600% of base pay depending on the salary grade of the individual officer.senior executive. Targeted percents may be exceeded when a senior executive’s individual participants’ performance exceedexceeds expectations. In addition to stock options, theThe Company also utilizes restricted stock to reward and retain key managers. The awarding of restricted stock is based on the three-year average performance of the Company.

     The overall executive compensation policy described above also applies

      With respect to the compensation of the Chief Executive Officer. The Compensation and Human ResourcesOfficer, the Committee reviews Mr. David Kemper’s performance each year and makes recommendations to the boardBoard for any increases.new awards. Mr. Kemper completes a self-appraisal, which the Committee considers before making its final recommendation. SeveralIn addition to the performance criteria above, several factors are considered in the review of Mr. Kemper’s performance with an overall focus on the increase in the franchise value of the company. Besides financial performance, the Committee also consideredconsiders factors such as growth in the human capital of the organization, the continued reinvestment and improvement of the company’sCompany’s product offerings and the overall focus on risk management.
      In evaluating the reasonableness of senior executive compensation, the Committee considers total compensation. Total compensation for 2004 includes (i) base salary paid; (ii) cash bonus earned in 2004 but paid in 2005; (iii) restricted stock and stock option awards granted in 2005 for performance in 2004 (stock option awards are valued based on Financial Accounting Standard 123 expense valuation); (iv) Company

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allocations for the Commerce Executive Retirement Plan; (v) investment income from deferred compensation plans; (vi) Company contributions from 401(k) plans; and (vii) amounts for group term life insurance. Realized and unrealized equity compensation gains along with vesting of prior equity grants are not considered. Compensation for David W. Kemper includes $3,221 attributable to personal use of the Company’s airplane for one trip in 2004. Total compensation paid to the named executive officers for 2004 was as follows: David W. Kemper — $2,860,555; Jonathan M. Kemper — $1,283,875; Seth M. Leadbeater — $703,217; Charles G. Kim — $606,360; Kevin G. Barth — $620,686. In the Committee’s opinion, the total compensation of the named executive officers for 2004 was reasonable.
      Base pay for the named executive officers was approved by the Board of Directors based on recommendations from the Committee, at the Company’s regular Board meeting on January 28, 2005. The new base pay approved for 2005 (effective 4/1/05) was as follows: David W. Kemper — $760,725; Jonathan M. Kemper — $394,125; Seth M. Leadbeater — $310,000; Charles G. Kim — $285,000; and Kevin Barth — $285,000.
      The Commerce Bancshares, Inc. Executive Incentive Compensation Plan was amended in 2002 to comply with the Section 162(m) of the Code. This Code section applies tolimits the Company’s tax deduction for non-performance based compensation paid to the named executive officers ofto $1,000,000. Although in 2004, the Company named intaxable compensation paid to the Summary Compensation Table. In 2003, the chief executive officerChief Executive Officer exceeded $1,000,000, in taxable compensation as defined in Section 162(m) and allthe entire amount was deductible by the Company. All compensation paid qualifies as performance-basedto other named executive officers was deductible by the Company.
      The Company did not use any outside paid consultants to assist the Committee in evaluating executive compensation within the meaning of the Code and the regulations thereunder.

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or in making salary recommendations.

      The Non-Qualified Stock Option Plan was amended in 1995 to provide for a formula to determine the maximum number of options, which may be granted in any one year to any one person, which means any income recognized on the exercise of a non-qualified stock option will qualify as “performance-based compensation” and will not be included in determiningdeductible by the compensation which is limited to $1,000,000.

Company.

      Executives other than senior executives also participate in both the bonus, and stock option and restricted stock programs. Other elements of compensation offered to the senior executives and to all other eligible employees include participation in a 401(k) deferred contribution plan and a Non-Qualified Deferred Compensation Plan.

Submitted by the Compensation and Human Resources Committee of the Company’s Board of Directors:
Andrew C. TaylorGiorgio BalzerMary Ann Van LokerenTerry O. Meek

Audit Committee Report:Report

The role of the Audit Committee is to assist the Board of Directors in its oversight of the Company’s accounting, auditing and financial reporting processes. As noted under theCorporate Governance and Director Independence section of this report, the Board of Directors has determined that all members of the Audit Committee are “independent.”“independent”. The Audit Committee operates pursuant to a Charter that was last amended and restated by the Board on January 30, 2004. As set forth in the Charter, management of the Company is responsible for establishing and maintaining the preparation, presentationCompany’s internal control over financial reporting and integrity offor preparing the Company’s financial statements the Company’sin accordance with generally accepted accounting and financial reporting principles and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Management is also responsible for conducting an evaluation of the effectiveness of the internal control over financial reporting based on the framework inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The Audit Committee is directly responsible for the compensation, appointment and oversight of KPMG LLP, the independent auditor for the Company. KPMG LLP is responsible for performing an independent audit of the Company’s financial statements and expressing an opinion as to their conformity with generally accepted accounting principles. KPMG LLP is also responsible for auditing management’s assessment of the effectiveness of the internal control over financial reporting and expressing an opinion as to its overall effectiveness and management’s assessment of those controls.

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      Members of the Audit Committee include Robert H. West (Chairman), James B. Hebenstreit, Benjamin F. Rassieur, III, Thomas A. McDonnell, and John R. Capps. Mr. West is designated as an “audit committee financial expert” within the meaning of that term as defined by the Securities and Exchange Commission pursuant to Section 407 of the Sarbanes-Oxley Act of 2002. The Audit Committee’s responsibility is one of oversight. Members of the Audit Committee rely on the information provided and the representations made to them by: (i) management, which has primary responsibility for establishing and maintaining appropriate internal financial controls over financial reporting, and for Commerce Bancshares, Inc. financial statements and reports and (ii) the external auditor, which is responsible for expressing an opinion that the financial statements have been prepared in accordance with generally accepted accounting principles, that management’s assessment that the Company maintained effective internal control over financial reporting is fairly stated, and that the audit of the Company’s financial statements by the external auditor has been carried out in accordance with generally accepted auditing standards.

Standards of the Public Company Accounting Oversight Board (PCAOB).

In this context the Audit Committee has considered and discussed the audited financial statements and management’s assessment on internal control over financial reporting with management and the independent auditors as of December 31, 2003.2004. The Audit Committee has also discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standard No. 61,Communication with Audit Committees, as currently in effect. Finally, the Audit Committee has received the written disclosures and the letter from KPMG LLP required by Independence Standards Board No. 1,Independence Discussions with Audit Committees, as amended by the Independence Standards Board. The Audit Committee has considered the compatibility of non-audit services with the auditors’ independence and has discussed with the external auditors their independence.

      Based on the reviews and discussions described in this report, and exercising the Audit Committee’s business judgment, the Audit Committee recommends to the Board of Directors that the audited financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20032004 to be filed with the Securities and Exchange Commission.

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      The Audit Committee has selected KPMG LLP as the Company’s external auditors for fiscal 2004.2005. Audit, audit-related and any permitted non-audit services provided to Commerce Bancshares, Inc. by KPMG LLP are subject to pre-approval by the Audit Committee.

SUBMITTED BY THE AUDIT COMMITTEE OF THE COMPANY’S BOARD OF DIRECTORS All fees paid in 2004 were pre-approved by the Audit Committee.

      Submitted By The Audit Committee of the Company’s Board of Directors:
Robert H. WestJames B. HebenstreitBenjamin F. Rassieur, IIIThomas A. McDonnellJohn R. Capps
January 30, 2004February 15, 2005

Pre-approval of Services by the External Auditor:Auditor

      The Audit Committee has adopted a policy for pre-approval of audit and permitted non-audit services provided by Commerce Bancshares, Inc.’sthe Company’s external auditor. Annually the Audit Committee will review and approve the audit services to be performed along with other permitted services including audit-related and tax services to be provided by its external auditor. The Audit Committee may pre-approve certain recurring designated services where appropriate and also services for individual projects that do not exceed $25,000.

Proposed engagements that do not meet these criteria aremay be presented to the Audit Committee at its next regular meeting or, if earlier consideration is required, to one or more ifof its members. The member or members to whom such authority is delegated shall report any specific approval of services at the next regular Audit Committee meeting. The Audit Committee will regularly review summary reports detailing all services provided to Commerce Bancshares, Inc.the Company by its external auditor.

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Fees Paid to KPMG LLP

The following is a summary of fees billed by KPMG LLP for professional services rendered during the fiscal years ended December 31, 20022004 and 2003. During 2003 all fees paid to the Company’s external auditor were pre-approved by the Audit Committee.2003:
                  
20022003  2004 2003
     
Audit feesAudit fees $373,000 $383,620 Audit fees $624,723 $402,790 
Audit related feesAudit related fees 35,000 49,400 Audit related fees  46,193  49,400 
Tax feesTax fees 1,136,036 1,229,417 Tax fees  237,860  1,229,417 
All other feesAll other fees 92,730 19,170 All other fees  —  — 
 
 
       
Total $1,636,766 $1,681,607 Total $908,776 $1,681,607 

      The audit fees billed by KPMG LLP are for professional services rendered for the audits of the Company’s annual consolidated financial statements and the audit of management’s assessment of the effectiveness of internal controls for eachthe fiscal year ended December 31, 2004 and for the reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q for that fiscal year. Audit fees also include audits of several venture capital subsidiaries, a brokerage subsidiary and a mortgage banking subsidiary.

mortgage-banking subsidiary and for miscellaneous accounting research and advice provided.

      Audit related fees are mainly for services rendered for the audits of the Company’s benefit plans and agreed upon examination procedures relating to the Company’s trust operations. Tax fees are for services includeincluding both review and preparation of corporate income tax returns and tax consulting services. All other fees include accounting advice and other agreed upon examination procedures engagements.

Compensation Committee Interlocks and Insider Participation:Participation

      During 2003,2004, the Compensation and Human Resources Committee consisted of four independent members of the Board of Directors of the Company, none of whom were officers of the Company. During 2003,2004, the Committee consisted of Ms. Mary Ann Van Lokeren and Messrs. Giorgio Balzer, Terry O. Meek and Andrew C. Taylor.

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Section 16(a) Beneficial Ownership Reporting Compliance:Compliance

      Pursuant to Section 16 of the Securities Exchange Act of 1934, the Company’s Directors and certain executive officers are required to report, within specified due dates, their initial ownership of the Company’s common stocks and all subsequent acquisitions, dispositions or other transfers of interest in such securities, if and to the extent reportable events occur which require reporting by such due dates. The Company is required to identify in its proxy statement whether it has knowledge that any person required to file such a report may have failed to do so in a timely manner. Based on that review, all of the Company’s directors and all executive officers subject to the reporting requirements satisfied such requirements in full, except for delinquent filings due to clerical errors for the following: for Kevin G. Barth an amended Form 5 was filed to correct Executive Incentive Compensation Plan transactions; for David W. Kemper an amended Form 5 was filed, corrections were made to various holdings related to family trusts, and certain 2003 transactions related to the Executive Incentive Compensation Plan were reported; for Jonathan M. Kemper an amended Form 5 was filed, an interest was reported in Tower Properties Company, and certain 2003 Executive Incentive Compensation Plan transactions were reported; for Charles G. Kim a delinquent Form 4 was filed to report a sale of stock; for Robert J. RauscherJeffery D. Aberdeen a delinquent Form 4 was filed to report an option exercise;exercise and for L.W. StolzerAndrew F. Anderson a delinquent Form 4 was filed to report his spouse’s acquisitionthe forfeiture of stock through the Commerce Bancshares, Inc. Non-Employee Directors Stock Purchase Plan; and for William A. Sullins, Jr. a delinquent Form 4 was filed to report an option grant and a restricted stock award.

stock.

Shareholder Proposals and Nominations:Nominations

      Proposals of shareholders pursuant to Rule 14a-8 for inclusion in the proxy statement for the annual meeting of shareholders to be held on April 20, 2005,19, 2006, must be received by the Company at its principal offices not later than November 12, 2004.11, 2005. For proposals other than those submitted pursuant to Rule 14a-8, the Company’s By-laws provide that shareholders must give timely written notice to the Secretary of the Company of a nomination for director or before bringing any business before the annual meeting. Notice of nominations and shareholder proposals for the annual meeting to be held on April 20, 200519, 2006 must be received by the Secretary no later than February 20, 200518, 2006 nor before January  21, 2005.19, 2006. To be considered, the notice must contain the name and record address of the shareholder; the class or series and number of shares of capital stock of the Company owned beneficially or of record by the shareholder; a description of all arrangements or understandings between such shareholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) or shareholder proposal is made; and a representation that such shareholder intends to appear in person or by proxy at the meeting to nominate the

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person or bring the business proposal before the meeting. For shareholder proposals, the notice must also set forth a brief description of the business to be brought before the meeting and the reasons for conducting such business at the meeting and any material interest of such shareholder in such business. For nominations, the notice must also set forth as to each person the shareholder proposes to nominate for election as a director the name, age, business and residence address of the person; the principal occupation or employment of the person; the class or series and number of shares of capital stock of the Company which are owned beneficially or of record by the person and any other information relating to the person nominated or the nominating shareholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities and Exchange Act of 1934. Such notice must also be accompanied by a written consent of each proposed nominee to be named a nominee and to serve as a director if elected.

Shareholder Communications:Communications

      The Board has not adopted a formal policy or process for shareholder communications. However, the Company has a longstanding policy that shareholders may communicate to the Board or any individual director through the Secretary of the Company. The Secretary will forward all such communications to the Board or any individual director. The Secretary will not forward any communications that: (i) constitute commercial advertising of products; (ii) contain offensive language or material; (iii) are not legible or coherent; or (iv) are in the nature of customer complaints that can be handled by Company management. A

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formal adoption of a policy in line with the current Company policy will be considered by the Committee on Governance/ Directors.

Other Matters:Matters

      The management does not know of any matter or business to come before the meeting other than that referred to in the notice of meeting but it is intended that, as to any such other matter or business, the person named in the accompanying proxy will vote said proxy in accordance with the judgment of the person or persons voting the same.

Electronic Access to Proxy Statement and Annual Report:Report

This proxy statement and the 20032004 annual report are available on the Company’s Internet site athttp://www.commercebank.com/irir.. Most Shareholders can elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies in the mail.

Shareholders of record can choose this option and save the Company the cost of producing and mailing these documents by filling out the online consent form by logging on to the sign-up website athttp://www.econsent.com/cbsh. and filling out the online consent form. Shareholders who choose to view future proxy statements and annual reports over the Internet will receive an e-mail message next year with instructions containing the Internet address of those materials. The election may be withdrawn at any time by accessing your account on the website and changing the election. Shareholders do not have to elect Internet access each year.

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      Shareholders who hold their Company stock through a bank, broker or other holder of record, should refer to the information provided by that entity for instructions on how to elect to view future proxy statements and annual reports over the Internet.

     Some Shareholders who hold their Company stock through a bank, broker or other holder of record and who elect electronic access will receive an e-mail next year containing the Internet address to use to access the Company’s proxy statement and annual report.

 By Order of the Board of Directors
 
 J. DANIEL STINNETT SIG-s- J. DANIEL STINNETT
 
 J. DANIEL STINNETTDaniel Stinnett
 Secretary
March 11, 2005

March 12, 2004

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APPENDIX A

AMENDED AND RESTATED

COMMERCE BANCSHARES, INC.
RESTRICTED STOCK2005 EQUITY INCENTIVE PLAN

This Restricted Stock

SECTION 1
EFFECTIVE DATE AND PURPOSE
      1.1     Effective Date. The Board of Directors of the Company has adopted the Plan originally adoptedon January 28, 2005, subject to the approval of the stockholders of the Company within twelve (12) months of such date.
      1.2     Purpose of the Plan. The Plan is designed to provide a means to attract, motivate and retain eligible Participants and to further the growth and financial success of the Company by Commerce Bancshares, Inc. onaligning the 4th dayinterests of October, 1991 is restatedParticipants through the ownership of Shares and other incentives with all amendments as of April 21, 2004.
1.Definitions.

     a. “Company” shall mean Commerce Bancshares, Inc., a Missouri corporation.

     b. “Common Stock” shall mean sharesthe interests of the Company’s $5 par value common stock.

     c. “Subsidiary”stockholders.

SECTION 2
DEFINITIONS
      2.1     The following words and phrases shall meanhave the following meanings unless a different meaning is plainly required by the context:
      2.2     “1934 Act” means the Securities Exchange Act of 1934, as amended. Reference to a specific section of the 1934 Act or regulation thereunder shall include such section or regulation, any corporation in whichvalid regulation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.
      2.3     “Award” means, individually or collectively, a grant under the Plan of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Stock-Based Awards, or Stock Appreciation Rights.
      2.4     “Award Agreement” means either (1) the written agreement setting forth the terms and provisions applicable to each Award granted under the Plan or (2) a statement issued by the Company owns to a Participant describing the terms and provisions of such Award.
      2.5     “Board”or hereafter owns, directly or indirectly, stock possessing not less than 50%“Board of Directors” means the Board of Directors of the total combined voting powerCompany.
      2.6     “Cause” means a Participant’s dishonesty, theft, embezzlement from the Company, willful violation of all classesany rules of stock in such corporation.

     d. “Restricted Stock Awards” or “Awards” shall mean Awards of Common Stock granted pursuantthe Company pertaining to the Plan.

     e. “Plan”conduct of Employees or the commission of a willful felonious act while an Employee, or violation of any, agreement related to non-competing, non-solicitation of employees or customers or confidentiality between the Company and the Participant.

      2.7     “Change in Control” shall have the meaning assigned to such term in Section 14.
      2.8     “Code” means the Commerce Bancshares, Inc. Restricted Stock PlanInternal Revenue Code of 1986, as described herein.

     f. “Committee” shall meanamended from time to time.

      2.9     “Committee” means the Compensation and Human Resources Committee of the Board of Directors of the Company, which shall consist solely of two or more directors who are “non-employee directors” under Rule 16b-3(b)(3) promulgated under the Securities Exchange Act of 1934, as amended,Directors.
      2.10     “Company” means Commerce Bancshares, Inc., a Missouri corporation, or any successor provision thereto,thereto.
      2.11     “Disability” means a permanent and “outside directors”total disability that qualifies a Participant for disability benefits under the Social Security Act; provided, however, that with respect to Restricted Stock Units, “Disability” means “disability” within the meaning of Treasury Regulation 1.162-27(e)(3)(i).section 409A of the Code.
      2.12     “Employee” means any employee of the Company or any of its Subsidiaries, whether such employee is so employed at the time the Plan is adopted or becomes so employed subsequent to the adoption of the Plan.

     g. “Participant” means individual to whom an Award is granted.A-1

     h. “Restriction Period”

      2.13     “Exercise Price” means the duration of time overprice at which a RestrictedShare may be purchased by a Participant pursuant to the exercise of an Option or Stock AwardAppreciation Right.
      2.14     “Fair Market Value” means, as of any given date, (i) the closing sales price of the Shares on any national securities exchange on which the Shares are listed; (ii) the closing sales price if the Shares are listed on The Nasdaq Stock Market or other over the counter market; or (iii) if there is to vestno regular public trading market for such Shares, the fair market value of the Shares as determined by the Committee.

     i. “Qualifying Retirement” shall mean retirement

      2.15     “Fiscal Year” means the fiscal year of the Company.
      2.16     “Grant Date” means, with respect to an Award, the date such Award is granted to a ParticipantParticipant.
      2.17     “Incentive Stock Option” means an Option to purchase Shares which is designated as an Incentive Stock Option and is intended to meet the requirements of section 422 of the Code.
      2.18     “Nonqualified Stock Option” means an Option to purchase Shares which is not an Incentive Stock Option.
      2.19     “Option” means an Incentive Stock Option or a Nonqualified Stock Option.
      2.20     “Participant” means an employee who has (i) attainedan outstanding Award under the age of 60 and (ii) agreed to the termsPlan.
      2.21     “Performance Goals” shall any or all of the covenant not to compete set forth in the Agreement.

     j. “Agreement” shall mean the Commerce Bancshares, Inc. Restricted Stock Award Agreement.

     k. “Performance Goals” shallfollowing: mean revenue, earnings, earnings per share, pre-tax earnings and net profits, stock price, market share, costs, return on equity, efficiency ratio (non-interest expense, divided by total revenue), asset management, asset quality, asset growth andor budget achievement. Performance Goals need not be the same with respect to all Covered EmployeesParticipants and may be established separately for the Company as a whole or for its various groups, divisions, subsidiaries, and affiliates and may be established as abased on performance in comparison to peers.

l. “Covered Employees”performance by unrelated businesses specified by the Committee. All calculations and financial accounting matters relevant to this Plan shall mean individualsbe determined in accordance with GAAP, except as otherwise directed by the Committee.

      2.22     “Performance Period” means the time period during which the performance objectives must be met.
      2.23     “Performance Share” means an Award granted to a Participant, as described in Section 9 herein.
      2.24     “Performance Unit” means an Award granted to a Participant, as described in Section 9 herein.
      2.25     “Period of Restriction” means the period during which Restricted Stock awarded hereunder is subject to a substantial risk of forfeiture. As provided in Section 7, such restrictions may be based on the passage of time, the achievement of target levels of performance or the occurrence of other events as determined by the Committee.
      2.26     “Plan” means the Commerce Bancshares, Inc. 2005 Equity Incentive Plan, as set forth in this instrument and as hereafter amended from time to time.
      2.27     “Restricted Stock” means an Award granted to a Participant pursuant to Section 7.
      2.28     “Restricted Stock Unit” means an Award granted to a Participant, as described in Section 7 herein.
      2.29     “Retirement” means a Termination of Service after the Participant attains age 60 and completes 10 years of continuous service, measured from the most recent date of hire.
      2.30     “Section 16 Person” means a person who, are covered employees withinwith respect to the meaning ofShares, is subject to Section 162(m)(3)16 of the Code.1934 Act, as determined by the Board.
     
2.Purpose.

     The purpose2.31     “Shares” means the shares of common stock, $5.00 par value, of the PlanCompany.

      2.32     “Stock Appreciation Right” means an Award granted to a Participant pursuant to Section 8.
      2.33     “Subsidiary” means any corporation, partnership, joint venture, limited liability company, or other entity (other than the Company) in an unbroken chain of entities beginning with the Company if, at the time

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of the granting of an Award, each of the entities other than the last entity in the unbroken chain owns more than fifty percent (50%) of the total combined voting power in one of the other entities in such chain.
      2.34     “Termination of Service” means a cessation of the employee-employer relationship between a Participant and the Company or a Subsidiary for any reason but excluding any such cessation where there is to promotea simultaneous reengagement of the interestsperson by the Company or a Subsidiary.
SECTION 3
ELIGIBILITY
      3.1     Participants. Awards may be granted in the discretion of the Committee among employees of the Company and its shareholdersSubsidiaries.
      3.2     Non-Uniformity. Awards granted hereunder need not be uniform among eligible Participants and may reflect distinctions based on title, compensation, responsibility or any other factor the Committee deems appropriate.
SECTION 4
ADMINISTRATION
      4.1     The Committee. The Plan will be administered by providingthe Committee, which, to the extent deemed necessary or appropriate by the Board, will consist of two or more persons who satisfy the requirements for a means through“non-employee director” under Rule 16b-3 promulgated under the grant1934 Act and/or the requirements for an “outside director” under section 162(m) of the Code. The members of the Committee shall be appointed from time to time by, and shall serve at the pleasure of, the Board of Directors. In the absence of such appointment, the Board of Directors shall serve as the Committee and shall have all of the responsibilities, duties, and authority of the Committee set forth herein.
      4.2     Authority of the Committee. The Committee shall have the exclusive authority to administer and construe the Plan in accordance with its provisions. The Committee’s authority shall include, without limitation, the power to (a) determine persons eligible for Awards, hereunder(b) prescribe the terms and conditions of the Awards, (c) interpret the Plan and the Awards, (d) adopt rules for the Companyadministration, interpretation and application of the Plan as are consistent therewith, and (e) interpret, amend or revoke any such rules. With respect to retainany Award that is intended to qualify as “performance-based compensation” within the meaning of section 162(m) of the Code, the Committee shall have no discretion to increase the amount of compensation that otherwise would be due upon attainment of a Performance Goal, although the Committee may have discretion to deny an Award or to adjust downward the compensation payable pursuant to an Award, as the Committee determines in its sole judgment.
      4.3     Delegation by the Committee. The Committee, in its sole discretion and attract personnel who contributeon such terms and conditions as it may provide, may delegate all or any part of its authority and powers under the Plan to one or more officers of the Company; provided, however, that the Committee may not delegate its authority and powers in any way which would jeopardize the Plan’s qualification under Rule 16b-3 and may not delegate its authority and powers with respect to any Award that is intended to qualify as performance-based compensation.
      4.4     Factors to Consider for Granting Awards. In making the determination as to the growthpersons to whom an Award shall be granted, the Committee or any delegate may take into account such individual’s salary and development oftenure, duties and responsibilities, their present and potential contributions to the Company and its Subsidiaries by providing additional incentive to such personnel by offering a greater interest in the continued success of the Company, through increased stock ownership.the recommendation of supervisors, and such other factors as the Committee or any delegate may deem important in connection with accomplishing the purposes of the Plan.
      4.5     Decisions Binding. All determinations and decisions made by the Committee and any of its delegates pursuant to Section 4.3 shall be final, conclusive, and binding on all persons, and shall be given the maximum deference permitted by law.

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SECTION 5
3.Stock Subject to Plan.

SHARES SUBJECT TO THE PLAN
      5.1     Number of Shares.Subject to the provisions ofadjustment as provided in Section 7 hereof,5.3, the total number of shares of Common Stock subject to Restricted Stock AwardsShares available for grant under the Plan shall not exceed 616,496.4,000,000 Shares. Shares subject to Awardsgranted under the Plan may be either authorized but unissued Shares or treasury Shares, or any combination thereof. No more than 800,000 Shares may be granted as Restricted Stock, Restricted Stock Units, Performance Shares and unissued shares or issued shares which are reacquiredStock-Based Awards.
      5.2     Lapsed Awards. Unless determined otherwise by the Committee, Shares related to Awards that are forfeited, terminated or expire unexercised, shall be available for grant under the Plan. Shares that are tendered by a Participant to the Company in connection with the exercise of an Award, withheld from issuance in connection with a Participant’s payment of tax withholding liability, settled in cash in lieu of Shares, or settled in such other manner so that a portion or all of the Shares included in an Award are not issued to a Participant shall not be available for grant under the Plan.
      5.3     Adjustments in Awards and heldAuthorized Shares. In the event of a stock dividend or stock split, the number of Shares subject to outstanding Awards and the numerical limits of Sections 5.1 and 6.1 shall automatically be adjusted to prevent the dilution or diminution of such Awards, except to the extent directed otherwise by the Committee. In the event of a merger, reorganization, consolidation, recapitalization, separation, liquidation, combination, or other similar change in its treasury.the corporate structure of the Company affecting the Shares, the Committee shall adjust the number and class of Shares which may be delivered under the Plan, the number, class and price of Shares subject to outstanding Awards, and the numerical limits of Sections 5.1 and 6.1 in such manner as the Committee shall determine to be advisable or appropriate to prevent the dilution or diminution of such Awards. Any such numerical limitations shall be subject to adjustment under this Section only to the extent such adjustment will not affect the status of any Award intended to qualify as “performance-based compensation” under section 162(m) of the Code or the ability to grant or the qualification of Incentive Stock Options under the Plan. In addition, other than with respect to Options, Stock Appreciation Rights, and Awards intended to constitute “performance-based compensation” under section 162(m) of the Code, the Committee is authorized to make adjustments to the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events affecting the Company, or in response to changes in applicable laws, regulations, or accounting principles. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on all Participants.
      5.4     Repurchase Option. To the extent consistent with the requirements of section 409A of the Code, the Committee may include in the terms of any Award Agreement, other than an Award Agreement with respect to Stock Appreciation Rights, that the Company shall have been awarded but which have been forfeitedthe option to repurchase Shares of any Participant acquired pursuant to Section 6(d) hereofthe Award granted under the Plan upon a Participant’s Termination of Service. The terms of such repurchase right shall be addedset forth in the Award Agreement.
      5.5     Buy-Out Provision. To the extent consistent with the requirements of section 409A of the Code, the Committee may at any time offer on behalf of the Company to buy-out, for a payment in cash or Shares, an Award previously granted, based on such terms and conditions as the Committee shall establish and communicate to the shares otherwise availableParticipants at the time such offer is made; provided, however, to the extent Sections 13(e) and/or 14(e) of the 1934 Act and the rules and regulations thereunder are applicable to any such offer, the Company shall comply with the requirements of such sections.
      5.6     Restrictions on Share Transferability. The Committee may impose such restrictions on any Award of Shares or Shares acquired pursuant to the exercise of an Award as it may deem advisable or appropriate, including, but not limited to, restrictions related to applicable Federal securities laws, the requirements of any national securities exchange or system upon which Shares are then listed or traded, and any blue sky or state securities laws.
      5.7     Minimum Vesting. Except for Awards with a value of less than $10,000 at the Grant Date, no more than 25% of an Award may be vested prior to the first anniversary of the Grant Date; provided, that an

A-4

Award may become fully vested prior to the first anniversary of the Grant Date in the event of a Termination of Service due to death, Disability or Retirement.
SECTION 6
STOCK OPTIONS
      6.1     Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Participants at any time and from time to time as determined by the Committee. The Committee shall determine the number of Shares subject to each Option. The Committee may grant Incentive Stock Options, Nonqualified Stock Options, or any combination thereof. No more than 4,000,000 Shares may be issued as Incentive Stock Options under the Plan. The maximum aggregate number of shares of Common StockShares that may be granted under Restricted Stock Awardsin the form of Options in any one calendar yearFiscal Year to any Covered Employee is 50,000.
4.Administration.

The Plana Participant shall be administered250,000.

      6.2     Award Agreement. Each Option shall be evidenced by an Award Agreement that shall specify the Committee which shall have full authority in its sole discretion to determineExercise Price, the employeesexpiration date of the Company and its Subsidiaries to whom Awards shall be granted,Option, the number of shares subjectShares to each such Award,which the time or times at which restrictions relativeOption pertains, any conditions to such Awards shall otherwise lapse or expire and the time or times when Awards may be granted. All questions of interpretation and applicationexercise of the PlanOption and such other terms and conditions as the Committee shall determine. The Award Agreement shall also specify whether the Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option.
      6.3     Exercise Price. Subject to the provisions of any Awards granted pursuant heretothis Section 6.3, the Exercise Price for each Option shall be determined by the Committee. No member of the Committee shall be liable for any action, determination or interpretation under any provision of the Plan or otherwise if done in good faith and any decision made or action taken by the Committee arising out of or in connection with the construction, administration, interpretation and effect of the Plan shall be within the absolute discretion of the Committee and shall be conclusive and binding upon all persons.
5.Eligibility.

The Committee may select from among the officers, executives and management personnel of the Company or its Subsidiaries those individuals to whom anprovided in each Award shall be granted, giving consideration to the duties of the respective employees, their contributions to the Company and its Subsidiaries, and such other factors as the Committee shall deem relevant to accomplish the purpose of this Plan. No member of the Committee and no member of the Board of Directors of the Company, unless such director is also an officer or employee of the Company or any Subsidiary, shall be eligible to receive any Restricted Stock Award under this Plan.Agreement.

6.Grant of Restricted Stock Awards.

     Each Restricted Stock Award shall be evidenced by one or more stock certificates registered in the name of the Participant and an agreement to be entered into by the Participant and the Company, the terms and conditions of which may include but are not limited to the following:

       a.6.3.1     NumberNonqualified Stock Options. In the case of Shares: The agreementa Nonqualified Stock Option, the Exercise Price shall statenot be less than one hundred percent (100%) of the total numberFair Market Value of sharesa Share on the Grant Date; provided, however, in no case shall the Exercise Price be less than the par value of Common Stock to which it pertains.such Share.
 
       b.6.3.2     Restriction Period:Incentive Stock Options. The Restriction Period for any Award granted underIn the Plancase of an Incentive Stock Option, the Exercise Price shall be determined bynot less than one hundred percent (100%) of the Committee and shall haveFair Market Value of a durationShare on the Grant Date; or one hundred ten percent (110%) of not more than ten years from the dateFair Market Value of a Share if the AwardParticipant (together with persons whose stock ownership is granted. An Award is considered to be vested when the restriction period lapses. Upon vesting, the certificate representing such Award shall be deliveredattributed to the Participant together with stock power. Restricted Stock Awards may have different Restriction Periods and an Award may provide varying Restriction Periods so aspursuant to permit the vesting of an Award in installments in the discretionsection 424(d) of the Committee.Code) owns on the Grant Date stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries; provided, however, in no case shall the Exercise Price be less than the par value of such Share.
 
       c.6.3.3     Transfer Restrictions:Substitute Options. ANotwithstanding the provisions of Sections 6.3.1 and 6.3.2, in the event that the Company consummates a transaction described in section 424(a) of the Code, persons who become Participants on account of such transaction may be granted Options in substitution for options granted by such former employer or recipient of services. If such substitute Options are granted, the Committee, consistent with section 424(a) of the Code, may determine that such substitute Options shall have an exercise price less than one hundred (100%) of the Fair Market Value of the Shares on the Grant Date.

      6.4     Expiration of Options.
      6.4.1     Expiration Dates. Except as provided in Section 6.7.3 regarding Incentive Stock Options, each Option shall terminate upon the earliest to occur of the following events:
           (a) The date(s) for termination of the Option set forth in the Award Agreement;
           (b) The date determined under Section 6.8 regarding Termination of Service; or
           (c) The expiration of ten (10) years from the Grant Date.
      6.4.2     Committee Discretion. Subject to the limits of Section 6.4.1, the Committee shall provide in each Award Agreement when each Option expires and becomes unexercisable.
      6.5     Exercisability of Options. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall determine. After an Option is granted,

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the Committee may accelerate or waive any condition constituting a substantial risk of forfeiture applicable to the Option. The Committee may not, after an Option is granted, extend the maximum term of the Option.
      6.6     Payment. Options shall be exercised by a Participant’s delivery of a written notice of exercise to the Secretary of the Company (or its designee), setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.
      Upon the exercise of an Option, the Exercise Price shall be payable to the Company in full in cash or its equivalent. The Committee may also permit exercise (a) by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Exercise Price, or (b) by any other means which the Committee determines to provide legal consideration for the Shares, and to be consistent with the purposes of the Plan.
      As soon as practicable after receipt of a written notification of exercise and full payment for the Shares purchased, the Company shall deliver to the Participant, Share certificates (which may be in book entry form) representing such Shares. Until the issuance of the stock certificates, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares as to which the Option has been exercised. No adjustment will be made for a dividend or other rights for which a record date is established prior to the date the certificates are issued.
      6.7     Certain Additional Provisions for Incentive Stock Options.
      6.7.1     Exercisability. The aggregate Fair Market Value (determined on the Grant Date(s)) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and its Subsidiaries) shall not exceed $100,000.
      6.7.2     Company and Subsidiaries Only. Incentive Stock Options may be requiredgranted only to depositParticipants who are employees of the certificateCompany or certificates for all sharesa subsidiary corporation (within the meaning of Commonsection 424(f) of the Code) on the Grant Date.
      6.7.3     Expiration. No Incentive Stock receivedOption may be exercised after the expiration of ten (10) years from the Grant Date; provided, however, that if the Option is granted to an employee who, together with persons whose stock ownership is attributed to the employee pursuant to an Award together with stock powers or other instruments of transfer appropriately endorsed in blank with the Secretarysection 424(d) of the Company. Such shares shallCode, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries, the Option may not be sold, exchanged, assigned, transferred, discounted, pledged or otherwise disposedexercised after the expiration of during the Restriction Period. The shares shall be releasedfive (5) years from the restrictionsGrant Date.
      6.8     Termination of Service.
      6.8.1     Termination for Cause. Unless otherwise specifically provided in the Award Agreement, an Option may not be exercised after a Participant’s Termination of Service by the Company or a Subsidiary for Cause.
      6.8.2     Termination Due To Death. Unless otherwise specifically provided in the Award Agreement, an Option may not be exercised more than one (1) year after a Participant’s Termination of Service due to death, but in no event after the expiration of the term of the Option.
      6.8.3     Termination Due to Disability. Unless otherwise specifically provided in the Award Agreement, an Incentive Stock Option may not be exercised more than one year from the date of Termination of Service due to Disability, and a Nonqualified Stock Option may not be exercised more than 36 months from the date of Termination of Service due to Disability, but in no event after the expiration of the term of the Option.
      6.8.4     Termination Due to Retirement. Unless otherwise specifically provided in the Award Agreement, an Incentive Stock Option may not be exercised more than three months after a Termination of Service due to Retirement, and a Nonqualified Stock Option may not be exercised more than 36 months from the date of Termination of Service due to Retirement, but in no event after the expiration of the term of the Option.

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      6.8.5     Other Voluntary Terminations. Unless otherwise specifically provided in the Award Agreement, an Option may not be exercised after the date of Termination of Service due to voluntary termination other than for Retirement.
      6.8.6     Termination For Other Reasons. Unless otherwise specifically provided in the Award Agreement, an Option may not be exercised more than three months after a Participant’s Termination of Service for any reason other than described herein, in whole orSection 6.8.1 through 6.8.5, but in installments, atno event after the expiration of the term of the Option.
      6.8.7     Leave of Absence. The Committee may make such date or datesprovision as it deems appropriate with respect to Participants on a leave of absence.
      6.9     Restriction on Option Transfer. Except as otherwise determined by the Committee and set forth in the Award Agreement, no Option may be transferred, gifted, bequeathed, pledged, assigned, or otherwise alienated or hypothecated, voluntarily or involuntarily, except that the Committee may permit a transfer, upon the Participant’s death, to beneficiaries designated by the Participant as provided in Section 11.6.
      6.10     Repricing of Options. The Company may not reprice, replace or regrant an outstanding Option either in connection with the cancellation of such Option or by amending an Award Agreement to lower the exercise price of such Option.
SECTION 7
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
      7.1     Grant of Restricted Stock/ Units. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts as the Committee shall determine. The Committee shall determine the number of Shares to be granted to each Participant. Restricted Stock Units shall be similar to Restricted Stock except that no Shares are actually awarded to the Participant on the date of grant. No more than 50,000 shares of Restricted Stock and/or Restricted Stock Units may be granted to any one Participant in any one Fiscal Year.
      7.2     Restricted Stock Agreement. Each Award of Restricted Stock and/or Restricted Stock Units shall be evidenced by an Award Agreement that shall specify the Period of Restriction, the number of Shares of Restricted Stock (or the number of Restricted Stock Units) granted, and such other terms and conditions as the Committee shall determine.
      7.3     Transferability. Except as otherwise determined by the Committee and set forth in the Award Agreement, Shares of Restricted Stock and/or Restricted Stock Units may not be sold, transferred, gifted, bequeathed, pledged, assigned, or otherwise alienated or hypothecated, voluntarily or involuntarily, until the end of the applicable Period of Restriction.
      7.4     Other Restrictions. The Committee may impose such other restrictions on Shares of Restricted Stock or Restricted Stock Units as it may deem advisable or appropriate in accordance with this Section 7.4.
      7.4.1     General Restrictions. The Committee may set restrictions based upon (a) the achievement of specific Performance Goals, (b) other performance objectives (Company-wide, divisional or individual), (b) applicable Federal or state securities laws, (c) time-based restrictions, or (d) any other basis determined by the Committee at the timeCommittee.
      7.4.2     Section 162(m) Performance Restrictions. For purposes of qualifying grants of Restricted Stock or Restricted Stock Units as “performance-based compensation” under Section 162(m) of the Award, andCode, the Committee, in its sole discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals shall be set by the Committee on or before the latest date permissible to enable the Restricted Stock or Restricted Stock Units to qualify as “performance-based compensation” under section 162(m) of the Code. In granting Restricted Stock or Restricted Stock Units that are intended to qualify under section 162(m) of the Code, the Committee shall follow any

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 a Participant’s rightprocedures determined by it in its sole discretion from time to have an Award released from the transfer restrictions shall accrue only if the Participant shall have remained in the continuous employmenttime to be necessary, advisable or appropriate to ensure qualification of the Company since the dateRestricted Stock under section 162(m) of the Award.Code.
 
       d.7.4.3     Legend on Certificates. The Committee may legend the certificates representing Restricted Stock to give appropriate notice of such restrictions. For example, the Committee may determine that some or all certificates representing Shares of Restricted Stock shall bear the following legend:

“THE SALE OR OTHER TRANSFER OF THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE, WHETHER VOLUNTARY, INVOLUNTARY, OR BY OPERATION OF LAW, IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN THE COMMERCE BANCSHARES, INC. 2005 EQUITY INCENTIVE PLAN, AND IN A RESTRICTED STOCK AGREEMENT. A COPY OF THE PLAN AND SUCH RESTRICTED STOCK AGREEMENT MAY BE OBTAINED FROM THE SECRETARY OF THE COMPANY.”
      7.4.4     Retention of Certificates. To the extent deemed appropriate by the Committee, the Company may retain the certificates representing Shares of Restricted Stock in the Company’s possession until such time as all conditions and restrictions applicable to such Shares have been satisfied or lapse.
      7.5     Removal of Restrictions. With respect to Awards of Restricted Stock, the Committee may accelerate the time at which any restrictions shall lapse and remove any restrictions. With respect to Awards of Restricted Stock Units, the Committee may accelerate or waive any condition constituting a substantial risk of forfeiture applicable to the Restricted Stock Units. However, in no event may the restrictions on Shares granted to a Section 16 Person lapse until at least six months after the grant date (or such shorter period as may be permissible while maintaining compliance with Rule 16b-3). After the end of the Period of Restriction, the Participant shall be entitled to have any legend or legends under Section 7.4.3 removed from his or her Share certificate, and the Shares shall be freely transferable by the Participant, subject to any other restrictions on transfer which may apply to such Shares. Restricted Stock Units shall be paid in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion, shall determine, as set forth in the Award Agreement.
      7.6     Voting Rights. Except as otherwise determined by the Committee and set forth in the Award Agreement, Participants holding Shares of Restricted Stock granted hereunder shall have voting rights during the Period of Restriction. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder.
      7.7     Dividends and Other Distributions. Except as otherwise determined by the Committee and set forth in the Award Agreement, Participants holding Shares of Restricted Stock or Restricted Stock Units shall be entitled to receive all dividends and other distributions paid with respect to the underlying Shares or dividend equivalents during the Period of Restriction; provided, however, that with respect to Restricted Stock Units a date shall be set each year to pay dividend equivalents earned during the preceding 12 months. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid.
      7.8     Return of Restricted Stock to Company. On the date set forth in the applicable Award Agreement, the Restricted Stock for which restrictions have not lapsed shall revert to the Company and thereafter shall be available for grant under the Plan.
      7.9     Section 83(b) Election. The Committee may provide in an Award Agreement that the Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under section 83(b) of the Code. If a Participant makes an election pursuant to section 83(b) of the Code concerning a Restricted Stock Award, the Participant shall be required to promptly file a copy of such election with the Company.

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SECTION 8
STOCK APPRECIATION RIGHTS
      8.1     Grant of Stock Appreciation Rights. Subject to the terms and provisions of the Plan, if Shares are traded on an established securities market, Stock Appreciation Rights may be granted to Participants at any time and from time to time as determined by the Committee. The Committee shall determine the number of Shares subject to each Stock Appreciation Right, provided that during any Fiscal Year, no Participant may be granted Stock Appreciation Rights covering more than 250,000 Shares.
      8.2     Award Agreement. Each Stock Appreciation Right shall be evidenced by an Award Agreement that shall specify the Exercise Price, the expiration date of the Stock Appreciation Right, the number of Shares to which the Stock Appreciation Right pertains, any conditions to exercise of the Stock Appreciation Right and such other terms and conditions as the Committee shall determine.
      8.3     Exercise Price. The Exercise Price for each Stock Appreciation Right shall be determined by the Committee and shall be provided in each Award Agreement; provided, however, the Exercise Price for each Stock Appreciation Right may not be less than one hundred percent (100%) of the Fair Market Value of a Share on the Grant Date.
      8.4     Expiration of Stock Appreciation Rights.
      8.4.1     Expiration Dates. Each Stock Appreciation Right shall terminate upon the earliest to occur of the following events:
           (a) The date(s) for termination of the Stock Appreciation Right set forth in the Award Agreement;
      (b) The date determined under Section 8.7 regarding Termination of Service; or
           (c) The expiration of ten (10) years from the Grant Date.
           8.4.2     Committee Discretion. Subject to the limits of Section 8.4.1, the Committee shall provide in each Award Agreement when each Stock Appreciation Right expires and becomes unexercisable. The Committee may not, after an Stock Appreciation Right is granted, extend the maximum term of the Stock Appreciation Right.
      8.5     Exercisability of Stock Appreciation Rights. Stock Appreciation Rights granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall determine. After a Stock Appreciation Right is granted, the Committee may accelerate or waive any restrictions constituting a substantial risk of forfeiture on the exercisability of the Stock Appreciation Right.
      8.6     Payment of Stock Appreciation. Upon the exercise of a Stock Appreciation Right, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:
      (a) The difference between the Fair Market Value of a Share on the date of exercise over the Exercise Price; by
      (b) The number of Shares with respect to which the Stock Appreciation Right is exercised.
Such payment shall be in Shares of equivalent value.
      8.7     Termination of Service
      8.7.1     Termination of Employment:for Cause. InUnless otherwise specifically provided in the event thatAward Agreement, a Stock Appreciation Right may not be exercised after a Participant’s employment terminatesTermination of Service by reasonthe Company or a Subsidiary for Cause.
      8.7.2     Termination Due To Death, Disability, or Retirement. Unless otherwise specifically provided in the Award Agreement, a Stock Appreciation Right may not be exercised more than one (1) year after a Participant’s Termination of Service due to death or more than three (3) years after a Participant’s Termination of Service due to Disability or Retirement.

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      8.7.3     Other Voluntary Terminations. Unless otherwise specifically provided in the disability (asAward Agreement, a Stock Appreciation Right may not be exercised after a Participant’s voluntary Termination of Service for any reason other than Retirement.
      8.7.4     Termination For Other Reasons. Unless otherwise specifically provided in the Award Agreement, an Stock Appreciation Right may not be exercised more than ninety (90) days after a Participant’s Termination of Service for any reason other than described in Section 8.7.1 through 8.7.3.
      8.8     Restriction on Transfer. No Stock Appreciation Right may be transferred, gifted, bequeathed, pledged, assigned, or otherwise alienated or hypothecated, voluntarily or involuntarily, except that the Committee may permit a transfer, upon the Participant’s death, to beneficiaries designated by the Participant as provided in Section 11.6.
      8.9     Voting Rights. Participants holding Stock Appreciation Rights granted hereunder shall have no voting rights.
SECTION 9
PERFORMANCE UNITS/PERFORMANCE SHARES
      9.1     Grant of Performance Units/Shares. Subject to the terms of the Plan, Performance Units and/or Performance Shares may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee. The Committee shall have complete discretion in determining the number of Performance Units and Performance Shares granted to any Participant; provided, however, that during any Fiscal Year, (a) no Participant shall receive Performance Units having an initial value greater than $2,500,000, and (b) no Participant shall receive more than 50,000 Performance Shares.
      9.2     Value of Performance Units/Shares. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The Committee shall set performance goals or Performance Measures in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units/Shares that will be paid out to the Participant.
      9.3     Performance Objectives and Other Terms. The Committee shall set performance objectives in its sole discretion which, depending on the extent to which they are met, will determine the number or value of Performance Units or Performance Shares, or both, that will be paid out to the Participants. The time period during which the performance objectives must be met shall be called the “Performance Period”. Performance Periods of Awards granted to Section 16 Persons shall, in all cases, exceed six (6) months in length (or such shorter period as may be permissible while maintaining compliance with Rule 16b-3). Each Award of Performance Units or Performance Shares shall be evidenced by an Award Agreement that shall specify the Performance Period, and such other terms and conditions as the Committee, in its sole discretion, shall determine.
      9.3.1     General Performance Objectives. The Committee may set performance objectives based upon (a) the achievement of Company-wide, divisional or individual goals, (b) applicable Federal or state securities laws, or (c) any other basis determined by the Participant establishing his eligibility to receive Social Security disability benefits)Committee in its discretion.
      9.3.2     Section 162(m) Performance Objectives. For purposes of qualifying grants of Performance Units or Performance Shares as “performance-based compensation” under section 162(m) of the Participant,Code, the Restriction Period shall be deemed to lapse as of the date of death or disability on that part of the Award which equals the portion of the Restricted Period, measured in full and partial months, completed before the date of death or disability, and the shares of Common Stock constituting such portion of the Award shall be distributed pursuant to subsection (h) hereof in the event of the Participant’s death or to the Participant in the event of disability. The Committee, shall in its sole discretion, may determine any effect of approved leaves of absence and all other matters relatingthat the performance objectives applicable to “continuous employment,” and any such determinationPerformance Units or Performance Shares, as the case may be, shall be final and conclusive. Employmentbased on the achievement of Performance Goals. The Performance Goals shall be set by the CompanyCommittee on or before the latest date permissible to enable the Performance Units or Performance Shares, as the case may be, to qualify as “performance-based compensation” under section 162(m) of the Code. In granting Performance Units or Performance Shares which are intended to qualify under section 162(m) of the Code, the Committee shall follow any procedures determined by it from time to time to be deemed to include employment by and to continue during any periodnecessary or appropriate in which a Participant is in the employment of a Subsidiary.its sole

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 In the event that a Participant’s termination of employment priordiscretion to the endensure qualification of the Restriction Period constitutes a Qualifying Retirement, and ifPerformance Units or Performance Shares, as the Participant complies with the termscase may be, under section 162(m) of the covenant not to compete set forthCode (e.g., in determining the Agreement, then, on the date on which the Restriction Period ends, Participant shall become fully vested in the part of an Award which equals the portion of the Restriction Period (measured in full and partial months) completed before the date of Qualifying Retirement and shares of Common Stock constituting such portion of the Award shall be delivered to Participant as soon as reasonably practicable thereafter. In such case, the Participant shall forfeit the remainder of the Award at the time of the Qualifying Retirement. The sale or transfer restriction shall continue to apply until the end of the Restriction Period and the portion of the Award that will vest upon the date the Restriction Period ends shall be forfeited if the Participant violates the covenant not to compete. If the Participant dies or becomes disabled (as determined by the Participant establishing his eligibility to receive Social Security disability benefits) after the date of his Qualifying Retirement, but prior to end of the Restriction Period, and if Participant has not violated the terms of the covenant not to compete as set forth in the Agreement, Participant will immediately vest in the portion that Participant would otherwise receive under this paragraph and shares of Common Stock constituting such portion shall be distributed pursuant to subsection (h) hereof in the event of Participant’s death or to Participant in the event of disability.Performance Goals).

      9.4     Earning of Performance Units/Shares. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Shares shall be entitled to receive payout on the number and value of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals or Performance Measures have been achieved.
      9.5     Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/Shares shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Units/Shares in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award. Awards shall be paid no later than the last date permitted in order for the payment to be exempted from the definition of deferred compensation under section 409A of the Code.
      9.6     Dividends and Other Distributions. At the discretion of the Committee, Participants holding Performance Units/Shares may be entitled to receive dividend equivalents with respect to dividends declared with respect to the Shares. Such dividends may be subject to the accrual, forfeiture, or payout restrictions as determined by the Committee in its sole discretion.
      9.7     Termination of Employment/Service Relationship. In the event of a Participant’s Termination of Service, all Performance Units/Shares shall be forfeited by the Participant unless determined otherwise by the Committee, as set forth in the Participant’s Award Agreement. Any such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Performance Units/Shares issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
      9.8     Nontransferability. Except as otherwise provided in a Participant’s Award Agreement, Performance Units/Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.
SECTION 10
STOCK-BASED AWARDS
      10.1     Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the Committee shall determine. The Committee shall have complete discretion in determining the amount of Stock-Based Awards granted to any Participant; provided, however, that during any Fiscal Year, no Participant shall receive Stock-Based Awards that are based on more than 50,000 Shares or on the initial value of 50,000 Shares.
      10.2     Performance Objectives and Other Terms. The Committee shall set performance objectives in its sole discretion which, depending on the extent to which they are met, will determine the number or value of Stock-Based Awards that will be paid out to the Participants. Performance Periods of Awards granted to Section 16 Persons shall, in all cases, exceed six (6) months in length (or such shorter period as may be permissible while maintaining compliance with Rule 16b-3). Each Award of Stock-Based Awards shall be evidenced by an Award Agreement that shall specify the Performance Period, and such other terms and conditions as the Committee, in its sole discretion, shall determine.
       e.10.2.1     Assignability: Except as provided in subsection (h) of this Section, no benefit payable under or interest in the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge and any such attempted action shall be void and no such benefit or interest shall be in any manner liable for or subject to debts, contracts, liabilities, engagements, or torts of any Participant or beneficiary.
f. Rights as a Stockholder:General Performance Objectives. The Participant shall haveCommittee may set performance objectives based upon (a) the right to receive cash dividends during the Restriction Period, to vote Common Stock subject to an Award and to enjoy all other stockholder rights except that (i) the Participant shall not be entitled to deliveryachievement of the stock certificate until the Restriction Period shall have lapsed and (ii) the Participant may not sell, transfer, pledge, exchange, hypothecateCompany-wide, divisional or otherwise dispose of the Stock during the Restriction Period.
g. Change in Control: Notwithstandingindividual goals, (b) applicable Federal or state securities laws, or (c) any other provision ofbasis determined by the Plan to the contrary,Committee in the event of a Change in Control the restrictions applicable to any Restricted Stock Award shall lapse, and such Restricted Stock Award shall become free of all restrictions and become fully vested and transferable.its discretion.

For purposes of the Plan, a “Change in Control” shall mean the happening of any of the following events:
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       (i)10.2.2     Section 162(m) Performance Objectives. For purposes of qualifying grants of Stock-Based Awards as “performance-based compensation” under section 162(m) of the Code, the Committee, in its sole discretion, may determine that the performance objectives applicable to Stock-Based Awards, as the case may be, shall be based on the achievement of Performance Goals. The Performance Goals shall be set by the Committee on or before the latest date permissible to enable the Stock-Based Awards to qualify as “performance-based compensation” under section 162(m) of the Code. In granting Stock-Based Awards which are intended to qualify under section 162(m) of the Code, the Committee shall follow any procedures determined by it from time to time to be necessary or appropriate in its sole discretion to ensure qualification of the Stock-Based Awards under section 162(m) of the Code (e.g., in determining the Performance Goals).
      10.3     Earning of Stock-Based Awards. Subject to the terms of this Plan, the holder of Stock-Based Awards shall be entitled to receive payout on the number and value of Stock-Based Awards earned by the Participant, to be determined as a function of the extent to which the corresponding performance goals have been achieved.
      10.4     Payment of Awards. Payment of earned Stock-Based Awards shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of the Plan, the Committee, shall pay earned Stock-Based Awards in Shares. Such Shares may be granted subject to any restrictions deemed appropriate by the Committee. Awards shall be paid no later than the last date permitted in order for the payment to be exempted from the definition of deferred compensation under section 409A of the Code.
      10.5     Termination of Employment/Service Relationship. In the event of a Participant’s Termination of Service, all Stock-Based Awards to the extent not vested shall be forfeited by the Participant to the Company unless determined otherwise by the Committee, as set forth in the Participant’s Award Agreement. Any such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Stock-Based Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
      10.6     Nontransferability. Except as otherwise provided in a Participant’s Award Agreement, Stock-Based Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.
SECTION 11
MISCELLANEOUS
      11.1     Deferrals. To the extent consistent with the requirements of section 409A of the Code, the Committee may provide in an Award Agreement or another document that a Participant is permitted to defer receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award. Any such deferral election shall be subject to such rules and procedures as shall be determined by the Committee.
      11.2     No Effect on Employment or Service. Nothing in the Plan shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant’s employment or service at any time, with or without Cause. Employment with the Company or any Subsidiary is on an at-will basis only, unless otherwise provided by an applicable employment or service agreement between the Participant and the Company or any Subsidiary, as the case may be.
      11.3     Participation. No Participant shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to be selected to receive a future Award.
      11.4     Indemnification. Each person who is or shall have been a member of the Committee, or of the Committee, to the extent permitted under state law, shall be indemnified and held harmless by the Company against and from (a) any loss, cost, liability or expense (including attorneys’ fees) that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or

A-12

failure to act under the Plan or any Award Agreement, and (b) from any and all amounts paid by him or her in settlement thereof, with the Company’s prior written approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit or proceeding against him or her; provided, however, that he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, by contract, as a matter of law or otherwise, or under any power that the Company may have to indemnify them or hold them harmless.
      11.5     Successors. All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business or assets of the Company.
      11.6     Beneficiary Designations. If permitted by the Committee, a Participant under the Plan may name a beneficiary or beneficiaries to whom any vested but unpaid Award shall be paid in the event of the Participant’s death. Each such designation shall revoke all prior designations by the Participant and shall be effective only if given in a form and manner acceptable to the Committee. In the absence of any such designation, any vested benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate and, subject to the terms of the Plan and of the applicable Award Agreement, any unexercised vested Award may be exercised by the administrator, executor or the personal representative of the Participant’s estate.
      11.7     No Rights as Stockholder. Except to the limited extent provided in Sections 7.6 and 7.7, no Participant (nor any beneficiary thereof) shall have any of the rights or privileges of a stockholder of the Company with respect to any Shares issuable pursuant to an Award (or the exercise thereof), unless and until certificates representing such Shares shall have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to the Participant (or his or her beneficiary).
      11.8     Investment Representation. As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.
      11.9     Uncertificated Shares. To the extent that the Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.
      11.10     Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, or Awards, or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
SECTION 12
AMENDMENT, TERMINATION, AND DURATION
      12.1     Amendment, Suspension, or Termination. The Board, in its sole discretion, may amend or terminate the Plan, or any part thereof, at any time and for any reason; provided, however, that if and to the extent required by law or to maintain the Plan’s compliance with the Code, the rules of any national securities exchange (if applicable), or any other applicable law, any such amendment shall be subject to stockholder approval; and further provided, that no amendment shall permit the repricing, replacing or regranting of an Option either in connection with the cancellation of such Option or by amending an Award Agreement to lower the exercise price of such Option. The amendment, suspension or termination of the Plan shall not, without the consent of the Participant, alter or impair any rights or obligations under any Award theretofore

A-13

granted to such Participant. No Award may be granted during any period of suspension or after termination of the Plan.
      12.2     Duration of the Plan. The Plan shall become effective in accordance with Section 1.1, and subject to Section 12.1 shall remain in effect until the tenth anniversary of the effective date of the Plan.
SECTION 13
TAX WITHHOLDING
      13.1     Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or the exercise thereof), the Company shall have the power and the right to deduct or withhold from any amounts due to the Participant from the Company, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state and local taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or the exercise thereof).
      13.2     Withholding Arrangements. The Committee, pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part, by (a) electing to have the Company withhold otherwise deliverable Shares, or (b) delivering to the Company Shares then owned by the Participant having a Fair Market Value equal to the amount required to be withheld. The amount of the withholding requirement shall be deemed to include any amount that the Committee agrees may be withheld at the time any such election is made, not to exceed the amount determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or delivered shall be determined as of the date that the taxes are required to be withheld.
SECTION 14
CHANGE IN CONTROL
      14.1     Change in Control. Except with respect to Restricted Stock Unit Awards or any other Award that constitutes “deferred compensation” within the meaning of section 409A of the Code, an Award Agreement may provide or be amended by the Committee to provide that Awards granted under the Plan that are outstanding and not then exercisable or are subject to restrictions at the time of a Change in Control shall become immediately exercisable, and all restrictions shall be removed, as of such Change in Control, and shall remain as such for the remaining life of the Award as provided herein and within the provisions of the related Award Agreements or that Awards may terminate upon a Change in Control. For purposes of the Plan, a Change in Control means any of the following:
      (a) any Person is or becomes the “beneficial owner” (within the meaning of Rule 13d-3 promulgated under Section 13 of the Securities Exchange Act of 1934 (the “Exchange Act”)), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates other than in

A-3

connection with the acquisition by the Company or its affiliates of a business) representing 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities; or
 
       (ii)(b) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on August 2, 1996,January  28, 2005, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds ( 2/(2/3) of the directors then still in office who either were directors on August 2, 1996January 28, 2005 or whose appointment, election or nomination for election was previously so approved; or

A-14

       (iii)(c) there is consummated a merger or consolidation of the Company (or any direct or indirect subsidiary of the Company) with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, at least 80% of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its subsidiaries other than in connection with the acquisition by the Company or its subsidiaries of a business) representing 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities; or
 
       (iv)(d) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated a sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 80% of the combined voting power of the voting securities of which are owned by Persons in substantially the same proportions as their ownership of the Company immediately prior to such sale.

 For purposes of the above definition of Change in Control, “Person” shall have the meaning set forth in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

h. Designation
      14.2     Other Awards. An Award Agreement with respect to a Restricted Stock Unit Award or any other Award that constitutes “deferred compensation” within the meaning of section 409A of the Code may provide that the Award shall vest upon a “change in control” as defined in section 409A of the Code.
SECTION 15
LEGAL CONSTRUCTION
      15.1     Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.
      15.2     Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of Beneficiary: Each Participant who shall be granted a Restricted Stock Award under the Plan may designate a beneficiary or beneficiaries and may change such designation from time to time by filing a written designation of beneficiary with the Secretary of the Company, provided that no such designation shall be effective unless received prior to the death of such Participant. In the absence of such designation or if the beneficiary or beneficiaries so designated shall not survive the Participant, the certificate or certificates evidencing the Award shall be delivered over to the estate of the Participant.
i. Other Provisions: The agreements authorized under this Plan may contain such other provisions as the Committee shall deem advisable.
     j. With respect to Covered Employees, individual Restricted Stock Awards may qualify as performance-based compensation. In so qualifying awards, the Committee, in its sole discretion, may set

A-4

restrictions on the grant of the Award that are based upon the achievement of Performance Goals. With respect to each Restricted Stock Award to a Covered Employee which the Committee determines should qualify as performance-based compensation, the following requirements shall be met:

     (i) Each Performance Goal shall be specifically defined in advance by the Committee and may include or exclude specified items of an unusual, non-recurring or extraordinary nature.
     (ii) Each Performance Goal must be sufficiently objective that a third party having knowledge of the relevant facts could determine whether the Performance Goal has been met.
     (iii) Different Awards may be set by the Committee based on achievement of certain Performance Goals or specified levels of achieving the Performance Goals. However, no Restricted Stock Award shall be paid to any Covered Employee if the applicable minimum Performance Goal(s) are not achieved.
     (iv) Performance Goals shall be set by the Committee no later than the earlier of (i) 90 days after the commencement of the period of service to which the Performance Goal relates, or (ii) the end of the period that constitutes the first twenty-five percent (25%) of the period of service to which the Performance Goal relates; provided that the outcome is substantially uncertain at the time the Committee actually establishes the Performance Goal.
     (v) The Committee shall have no discretion to increase the amount of compensation that otherwise would be due upon attainment of a Performance Goal, although the Committee may have discretion to deny an award or to adjust downward the compensation payable pursuant to a Restricted Stock Award, as, in the Committee’s sole judgment, is prudent based upon the Committee’s assessment of the Covered Employee’s performance and the Company’s performance during the relevant measuring period.
     (vi) Notwithstanding the foregoing, no award shall be paid to a Covered Employee before the Committee certifies in writing that such Covered Employee met the requirements of the applicable Performance Goal.

7.Changes in Capital Structure.

The aggregate number of shares of Common Stock on which Awards may be granted to persons participating under the Plan, and the number of shares thereof covered by each outstanding AwardPlan shall be proportionately adjusted for any increaseconstrued and enforced as if the illegal or decrease ininvalid provision had not been included.

      15.3     Requirements of Law. The grant of Awards and the numberissuance of issued shares of Common Stock resulting from a subdivision or consolidation of shares or other capital adjustment orShares under the payment of a stock dividend or other increase or decrease in such shares effected without receipt of consideration by the Company; provided, however, that any fractional shares resulting from such adjustmentPlan shall be eliminated and any additional certificates evidencing shares of Common Stock to be issued pursuant to a stock dividend or other increase in such shares shall be delivered to and held by the Secretary of the Company subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required from time to time.
      15.4     Securities Law Compliance. To the terms of the agreement entered into by the Participant and the Company.
8.Right of Company to Terminate Employment.

Neither the establishmentextent any provision of the Plan, norAward Agreement or action by the granting ofCommittee fails to comply with any applicable federal or state securities law, it shall be deemed null and void, to the extent permitted by law and deemed advisable or appropriate by the Committee.

      15.5     Governing Law. The Plan and all Award hereunderAgreements shall confer uponbe construed in accordance with and governed by the recipient thereof any right to be continued in the employlaws of the Company or a Subsidiary, and the Company and its Subsidiaries expressly reserve the right to discharge any Participant whenever the interestState of the Company or its Subsidiaries may so require without liability to the Company or its Subsidiaries, the Board of Directors of the Company or its Subsidiaries, or the Committee.
Missouri.
9.Taxes.

     a. The person entitled to receive shares of Common Stock pursuant to the Award will be given notice as far in advance as practicable to permit cash payment for applicable withholding taxes to be made to the

A-5A-15

 

Company. The Company may defer making delivery      15.6     Captions. Captions are provided herein for convenience of reference only, and shall not serve as a basis for interpretation or construction of the certificate representing the shares until indemnified to its satisfaction with respect to any such withholding tax.Plan.

b. Notwithstanding the foregoing, when an Award shall have vested and a Participant is required to pay to the Company an amount required to be withheld under applicable federal, state, local and payroll taxes, the Participant may satisfy this obligation in whole or in part by electing (the “Election”) to have the Company withhold shares of Common Stock having a value equal to the amount required to be withheld. The value of the shares to be withheld shall be based on the last sale price of the Common Stock as reported by the Automated Quotation System of the National Association of Securities Dealers on the date that the amount of tax to be withheld shall be determined (“Tax Date”). Each Election must be made on or prior to the Tax Date. The Committee may disapprove any Election or may suspend or terminate the right to make Elections. An Election is irrevocable.

10.Amendment of the Plan.

The Board of Directors of the Company may, by resolution, amend or revise the Plan except that, without shareholder approval, no such amendment shall increase the maximum aggregate number of shares which may be granted under the Plan except as provided in Section 7 or changes the class of eligible employees, and no such amendment may without the Participant’s consent amend, suspend or terminate rights or obligations pursuant to outstanding Restricted Stock Awards.

11.Effective Date.

     The Plan shall be effective as of October 4, 1991.

A-6A-16

 

Commerce Bancshares, Inc.

C/O EQUISERVE TRUST COMPANY N.A.
P.O. BOX 86918694
EDISON, NJ 08818-869108818-8694

     To our Shareholders:



To our Shareholders:
Commerce Bancshares, Inc. encourages you to vote your shares electronically this year either by telephone or via the Internet. This will eliminate the need to return your proxy card. You will need your proxy card and Social Security Number (where applicable) when voting your shares electronically. The Voter Control Number that appears in the shaded box below must be used in order to vote by telephone or via the Internet.

The EquiServe Vote by Telephone and Vote by Internet systems can be accessed 24-hours a day, seven days a week until the day prior to the meeting.

Additionally, you may choose to receive future Annual Meeting materials (annual report, proxy statement and proxy card) on-line. By choosing to receive materials on-line, you help support Commerce Bancshares, Inc. in its efforts to control printing and postage costs.
If you choose the option of electronic delivery and voting on-line, you will receive an e-mail before all future annual or/special meetings of shareholders, notifying you of the website containing the Proxy Statement and other materials to be carefully reviewed before casting your vote. To enroll to receive future proxy materials on-line, please go to www.econsent.com/cbsh.



Your vote is important. Please vote immediately.

Vote-by-Internet

1. Log on to the Internet and go to
    http://www.eproxyvote.com/cbsh		(COMPUTER)

             
  Vote-by-Internet [GRAPHIC]     Vote-by-Telephone [GRAPHIC]
  OR
1.
 Log on to the Internet and go to  
1.
  Using a touch-tone phone call
  toll-free http://www.eproxyvote.com/cbsh     1-877-PRX-VOTE (1-877-779-8683)
2.
 Enter your Voter Control Number listed above  
2.
  From outside the United States, call direct
  and follow the easy steps     1-201-536-8073.
  outlined on the secured website.        




OR

Vote-by-Telephone

1. Using a touch-tone phone call toll-free
    1-877-PRX-VOTE (1-877-779-8683)
(TELEPHONE)



If you vote over the Internet or by telephone,
please do not mail your card.




DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL

x
Please mark
votes as in
this example.		1573


The Board of Directors Recommends a Vote FOR all Nominees and FOR Items 2 and 3.

1.Election of Directors

         
x Please mark
votes as in
this example		     1573FORAGAINSTABSTAIN

The Board of Directors Recommend A Vote FOR all Nominees and FOR Items 2 and 3.

                               
                      FOR AGAINST ABSTAIN
1. Election of Directors.  Nominees:  2.  Approval to increase shares available for issuance under        
          Class of 2007     Restricted Stock Plan and        
          (1) Thomas A. McDonnell     amendment to the Restricted        
          (2) Benjamin F. Rassieur, III    Stock Plan        
          (3) Andrew C. Taylor                   
  FOR WITHHELD (4) Robert H. West                   
  ALL
NOMINEES		   FROM ALL
NOMINEES		                       
                FOR AGAINST ABSTAIN
               3.  Ratify KPMG as audit and accounting firm        
   
                
   For all nominees except as written above                  
Nominees:
Class of 2008
(1) John R. Capps
(2) W. Thomas Grant, II		2.Approve the adoption of the 2005 Equity Incentive Planooo
FOR
ALL
NOMINEES		ooWITHHELD
FROM ALL
NOMINEES		(3) James B. Hebenstreit
(4) David W. Kemper		3.Ratify KPMG LLP as audit and accounting firmFOR
o		AGAINST
o		ABSTAIN
o
o
For all nominees except as written above		         
   Mark box at right if you plan to attend the Annual Meeting. (Marking this box does not affect your vote on this proxy.)

 o
   Mark box at right if an address change or comment has been noted on the reverse side of this card.

 o
   Please sign this proxy exactly as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian, please give full title as such. The signer hereby revokes all proxies heretofore given by the signer to vote at said meeting or any adjournments thereof.

 
Signature: ________________________ Date: __________ Signature:_________________________ Date: __________

 

IMPORTANT: PLEASE VOTE BY SIGNING YOUR PROXY AND RETURNING IT IN THE
ENVELOPE PROVIDED OR TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING
AS DESCRIBED ON THE REVERSE SIDE.

ANY SHAREHOLDER WHO IS RECEIVING MULTIPLE COPIES OF THE ANNUAL
REPORT
AND ANY OTHER MAILINGS FROM COMMERCE BANCSHARES, INC. ARE
ENCOURAGED TO CALL EQUISERVE TRUST COMPANY NA, OUR TRANSFER AGENT, AT
1-800-317-4445 FOR ASSISTANCE IN CONSOLIDATING COMMON OWNERSHIP
POSITIONS. REDUCING MAILINGS WILL IMPROVE THE COMPANY’S OPERATING
EFFICIENCIES. HEARING IMPAIRED#: TDD: 1-800-952-9245.














DETACH HERE


COMMERCE BANCSHARES, INC.

Proxy Solicited on Behalf of the Board of Directors

P
R
O
X
Y

P

The undersigned hereby appoints Jonathan M. Kemper and David W. Kemper, or either of them, as agents and proxies with full power of substitution in each, to represent the undersigned at the annual meeting of shareholders to be held on April 20, 2005, or any adjournment or postponement thereof, on all matters coming before the meeting. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting and all other matters incident to the conduct of the meeting.



R
O
X
Y		The undersigned hereby appoints Jonathan M. Kemper and David W. Kemper, or either of them, as agents and proxies with full power of substitution in each, to represent the undersigned at the annual meeting of shareholders to be held on April 21, 2004, or any adjournment or postponement thereof, on all matters coming before the meeting. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting and all other matters incident to the conduct of the meeting.

You are encouraged to specify your choices by marking the appropriate boxes. SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations. Your shares cannot be voted unless you sign and return this card or you elect to vote your shares electronically by telephone or via the Internet.

PLEASE VOTE, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.

   
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
 
 
 
 
 
 
If you have written in the above space, please mark the corresponding box on the reverse side of this card.