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 [_]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Enterprise Financial Service Corp
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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Notes:
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
ENTERPRISE FINANCIAL SERVICES CORP
150 N. MERAMEC
CLAYTON, MISSOURI 63105
To be held on
April 23, 2003
To the Shareholders of Enterprise Financial Services Corp:
Notice is hereby given that the Annual Meeting of Shareholders of Enterprise
Financial Services Corp (the "Company") will be held at The Marriott West, 600
Maryville Centre Drive, St. Louis, Missouri 63141, on Wednesday, April 23, 2003,
at 4:00 p.m. Central Standard time, for the following purposes:
1. To elect 21 directors to hold office until the next Annual
Meeting of Shareholders or until their successors are elected and
have qualified.
2. To consider and act upon ratification of the selection of KPMG
LLP as independent accountants for the year ending December 31,
2003.
3. To approve and adopt the 2002 Stock Incentive Plan in the form
attached as Appendix B to the proxy statement.
4. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 10, 2003, as the
record date for the determination of shareholders entitled to notice of and to
vote at the meeting.
By Order of the Board of Directors,
/s/ James C. Wagner
James C. Wagner, Secretary
Clayton, Missouri
April 4, 2003
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR
PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON.
SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON
IF THEY DESIRE.
1
PROXY STATEMENT
ENTERPRISE FINANCIAL SERVICES CORP
150 N. Meramec
Clayton, Missouri 63105
This Proxy Statement is furnished to the shareholders of Enterprise Financial
Services Corp (the "Company" or "Enterprise Financial") by the Board of
Directors of the Company in connection with the solicitation of proxies to be
voted at the Annual Meeting of Shareholders to be held at 4:00 p.m. on April 23,
2003, at The Marriott West, 600 Maryville Centre Drive, St. Louis, Missouri
63141 or any adjournment or postponement thereof. The cost of this solicitation
will be borne by the Company. The Board of Directors of the Company solicits the
proxies. In addition to solicitation by mail, officers, directors and employees
of the Company may solicit proxies by telephone, or in person. The Company may
also request banks and brokers to solicit their customers who have a beneficial
interest in the Company's common stock, par value $.01 (the "Common Stock"),
registered in the names of nominees and will reimburse such banks and brokers
for their reasonable out-of-pocket expenses. The mailing of this proxy statement
to shareholders of the Company commenced on or about April 4, 2003.
Only holders of Common Stock of record at the close of business on March 10,
2003 (the "Record Date") are entitled to notice of and to vote at the meeting.
On the Record Date, the Company had outstanding and entitled to be voted
9,532,616 shares of Common Stock. The presence in person or by proxy of the
holders of a majority of the shares of Common Stock entitled to vote at the
Annual Meeting of Shareholders constitutes a quorum for the transaction of
business. If a quorum is not present at the time the Annual Meeting is convened,
the Company may adjourn or postpone the Annual Meeting.
Each holder of Common Stock is entitled to one vote for each share of Common
Stock held with respect to each matter to be voted upon; provided, however, that
cumulative voting shall be available for the election of directors. Under
cumulative voting, each shareholder is entitled to cast a number of votes equal
to the number of shares held by such shareholder multiplied by the total number
of directors to be elected. These votes may be divided among all nominees
equally or may be voted for one or more of the nominees, either in equal or
unequal amounts, as the shareholder may elect. A plurality of votes cast at the
Annual Meeting is required for the election of each director. Approval and
adoption of the 2002 Stock Incentive Plan requires the affirmative vote of
holders of a majority of shares entitled to vote at the meeting. Ratification of
the selection of independent accountants and approval of any other proposal
which may be brought before the meeting each requires the affirmative vote of a
majority of the shares present at the meeting and entitled to vote on the
matter. An abstention from voting on a matter by a stockholder present in person
or by proxy will have no effect on the election of directors but will have the
same legal effect as a vote against any other proposal. If a broker or other
nominee holder indicates on the Proxy Card that it does not have discretionary
authority to vote the shares it holds of record on a proposal, those shares will
not be considered as present and entitled to vote on the proposal. Such broker
non-votes will have the same effect as a vote against the proposal to approve
and adopt the 2002 Stock Incentive Plan, but will not have an effect on the
votes for any other proposal.
All shares of Common Stock represented at the Annual Meeting by properly
executed proxies received prior to or at the Annual Meeting which are not
properly revoked will be voted at the Annual Meeting in accordance with the
instructions indicated on such proxies. If no instructions are indicated, such
proxies will be voted FOR the election of the Board's director nominees and FOR
the ratification of the recommended independent accountants and FOR approving
and adopting the 2002 Stock Incentive Plan.
Any proxy may be revoked at any time before it is voted by a written notice to
the Secretary of the Company sent to the address shown below, by receipt of a
proxy properly signed and dated subsequent to an earlier proxy, or by revocation
of a written proxy by request in person at the Annual Meeting. The Company's
corporate offices are located at 150 North Meramec, Clayton, Missouri 63105 and
its telephone number is (314) 725-5500.
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The date of this Proxy Statement is April 4, 2003
2
ELECTION OF DIRECTORS - Proposal No. 1
The Board of Directors has nominated for election the 21 persons named below.
All of the nominees are currently members of the Board of Directors. All of the
nominees except Peter F. Benoist, William H. Downey, Robert E. Guest Jr., Jerry
McElhatton and James J. Murphy, Jr. have previously been elected by the
shareholders of the Company. It is intended that proxies solicited will be voted
for such nominees. The Board of Directors believes that each nominee named below
will be able to serve, but should any nominee be unable to serve as a director,
the persons named in the proxies have advised that they will vote for the
election of such substitute nominee as the Board of Directors may propose.
The following biographical information is furnished with respect to each member
of the Board of Directors of the Company, some of whom also serve as directors
and/or officers of one or more of the Company's subsidiaries, including
Enterprise Bank (the "Bank").
Effective July 1, 2002, Kevin C. Eichner, Vice Chairman of the Board of
Directors since the inception of the Company, was named President and Chief
Executive Officer. Fred H. Eller, former President and Chief Executive Officer,
resigned as an employee on September 30, 2002 after a three-month transition
period with Mr. Eichner.
Effective October 1, 2002, Peter F. Benoist was named Chairman and Chief
Executive Officer of the Bank. Mr. Benoist was also named Executive Vice
President of the Company and was subsequently appointed to the Board of
Directors and Executive Committee.
There are no family relationships between or among any directors or executive
officers of the Company, other than Robert E. Guest, Jr. who is the son-in-law
of Ronald E. Henges, both of whom are members of the Board of Directors. Except
as may be noted below, none of the Company's directors or executive officers
serves as a director of (1) any company that has a class of securities
registered under or that is subject to the periodic reporting requirements of
the Securities Exchange Act of 1934, or (2) any investment company registered
under the Investment Company Act of 1940.
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Director
Name Principal Occupation and Five Year Business Experience Age Since (a)
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Kevin C. Eichner President and Chief Executive Officer of the Company since 2002; Vice 52 1995
Chairman of the Company since 1995; Chief Executive Officer,
GenAmerica Financial Corporation (financial services) 2000-2002;
Executive Vice President, General American 1997-2000; President,
Collaborative Strategies (management consulting) 1983-1997.
Paul J. McKee, Jr. Chairman of the Company since 2001; Co-founder, Paric Corporation 57 2001
(Chairman of the Board) (design/build contracting business) 1979; Director, Paric Corporation
(design/build contracting business) since 2002; Chief Executive
Officer of Environmental Management Corp (environmental operations
firm) 1982-2002; Advisory member of the Board, Environmental
Management Corp since 2002; Chief Executive Officer of McEagle
Development (real estate development and operations firm) since 1995.
Peter F. Benoist Executive Vice President of the Company and Chairman and Chief 55 2002
Executive Officer of Enterprise Bank since 2002; Executive Director,
St. Louis Regional Housing and Community Development Alliance (RCGA)
1999-2002; Regional Chairman, Firstar Corporation 1997-1999; Executive
Vice President, Mark Twain Bancshares 1984-1997.
3
Paul R. Cahn President, Elan Polo Imports, Inc. (importer of women's and children's 77 1996
casual shoes) since 1976
William H. Downey President, Kansas City Power & Light Company (electric utility) since 58 2002
2000; Executive Vice President, Great Plains Energy, Inc. since 2002;
President, Unicom Electric Services (energy market and services)
1997-1999; Vice President, Commonwealth Edison Company (electric
utility) 1982-1999.
Robert E. Guest, Jr. Partner, Benson & Guest LLP (law firm) since 1986. 48 2002
Ronald E. Henges Chairman of the Board of the Company 1995-2001; Former Chief Executive 70 1995
Officer, Creve Coeur Camera (multi-store retailer of camera and video
equipment); President and Chief Executive Officer of Henges Associates,
Inc. (manufacturer and installer of prefabricated wall systems) 1991-1995.
Richard S. Masinton Chief Administrative Officer and Chief Financial Officer, Russell 61 2000
Stover Candies (candy manufacturer) since 1997; Chief Financial
Officer Westlake Hardware (retail hardware) 1989-1997.
Jerry McElhatton President, Global Technology and Operations for Mastercard International 64 2002
(credit card services) since 1994.
William B. Moskoff President Tyler Group (veterinary pharmaceuticals) since 1996; 60 1998
President and Chief Operating Officer, Bock Pharmacal (prescription
pharmaceutical company) 1993-1996.
Birch M. Mullins President, Lindbergh Warson Properties since 1988; Vice President of 59 1996
Duke Realty Investments (real estate) 1997-1998; President, Baur
Properties (developer of commercial real estate properties) 1992-1997.
James J. Murphy, Jr. President and Chief Executive Officer, Murphy Company (mechanical 59 2002
specialty contracting firm) since 1979.
Ted A. Murray President of Grubb & Ellis/The Winbury Group (commercial real estate 54 2000
firm) since 1989.
Stephen A. Oliver President of SKO Automotive Group (owner of several car dealerships) 56 2001
since 1995.
Robert E. Saur Chairman and President, Conrad Properties (developer of commercial and 59 1995
residential real estate properties) since 1975.
Jack L. Sutherland President and Chief Operating Officer of Enterprise Bank since 2000; 59 2000
President, Aurora Products (manufacturer) 1999; Vice Chairman
Mercantile Bank Kansas City 1997-1998; Regional President and Chief
Executive Officer Mark Twain Bank Kansas City 1990-1997.
Paul L. Vogel President, Enterprise Trust (financial planning and trust division of 36 1998
Enterprise Bank) since 1998; Practice leader of the Private Client
Services Group with Arthur Andersen LLP 1997-1998.
4
Henry D. Warshaw President, Virtual Realty Enterprises (real estate investments) since 49 1996
1998; Principal, Moneta Group (provider of financial planning products
and services) 1990-1998.
Ted C. Wetterau Chairman and Chief Executive Officer, Wetterau Associates (family 76 1997
holdings) since 1992.
James L. Wilhite President, Stange Corporation (manufacturer of marketing and incentive 69 1996
items) since 1990.
James A. Williams Chief Executive Officer, Sunset Transportation (trucking brokerage 50 1996
and consulting firm) since 2002; President, Sunset Transportation
(trucking brokerage and consulting firm) 1990-2002.
(a) Excludes the period served as director of Enterprise Bank prior to its
reorganization into a wholly owned subsidiary of this Corporation in 1995.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE INDIVIDUALS LISTED
FOR ELECTION AS DIRECTORS OF THE COMPANY.
Director Compensation
In the past, the Company issued Stock Appreciation Rights (SARs) to Directors to
compensate them for their service. However, in December 2001, the Company gave
Directors who held SARs the opportunity to continue with the SAR program or
forfeit their existing SARs in favor of receiving cash compensation on a
per-meeting-attended basis. For Directors who chose to stay under the SAR Plan,
the Company has the option to pay vested SARs either in the form of cash or the
Company's Common Stock. If the cash option was chosen, Directors receive cash
payments which are currently set at $100 per board meeting and $50 per committee
meeting attended beginning with the January 16, 2002 meeting and retroactive pay
for meetings attended since the SARs were granted. Directors who are employees
of the Company are not eligible to receive any form of compensation for their
services as directors.
Beginning January 1, 2003, Directors, except Chairman McKee, who serve on the
Executive Committee, Audit Committee or serve as a Banking Unit Chairman,
receive a monthly retainer of $500 per month in addition to the meeting fees
noted above.
In October 2001, Chairman McKee began serving under a consulting agreement from
which he receives $40,000 annually.
Board and Committee Meetings
The Board met 9 times in 2002. All directors attended at least 75% of all
meetings of the full Board and of those committees on which they served in 2002
except Directors Henges, Masinton, Murray and Wetterau.
Executive Committee. In May 2002, the Board approved the formation of a new
Executive Committee. The new Executive Committee, which also serves as the
nominating committee for potential new directors, is empowered to act on behalf
of, and to exercise the powers of, the full Board of Directors in the management
of the business and affairs of the Company when the full Board of Directors is
not in session, except to the extent limited by applicable Delaware law. The
committee meets twice a month and additionally as necessary, and all actions by
the committee are reported at the next regular Board of Directors meeting. The
Executive Committee, which consists of Directors McKee, Eichner, Benoist,
Mullins, Oliver, Sauer and Warshaw, and one additional director who serves on a
rotating basis for three meetings, met 16 times in 2002.
5
Audit Committee. The Audit Committee, which consists of Directors Masinton,
Mullins and Moskoff, met 5 times in 2002. The Audit Committee oversees the
Company's financial reporting process on behalf of the Board of Directors by
reviewing all audit processes and fees, the financial information provided to
the stockholders and the Company's systems of internal financial controls. The
Audit Committee has the authority and responsibility to select and evaluate and,
where appropriate, replace the Company's independent public accountants.
The Audit Committee has not at this time designated a "financial expert" as that
term is used in the Sarbanes-Oxley Act of 2002. The Board is considering the
issues related to and the ramifications of such a designation. In addition, only
recently have rules been issued by the Securities and Exchange Commission
concerning financial experts. The Board is studying these rules. The Board may
elect to designate a financial expert at any time.
In the opinion of the Company's board, none of the Directors Masinton, Mullins
or Moskoff, has a relationship with the Company or the Bank that would interfere
with the exercise of independent judgment in carrying out their responsibilities
as director. None of them are or have been for the past three years employees of
the Company or the Bank, and none of their immediate family members are or have
for the past three years been executive officers of the Company or the Bank. In
the opinion of the Company's board, each of Directors Masinton, Mullins and
Moskoff are "independent directors", as that term is defined in Rule 4200
(a)(15) of the NASDAQ rules. Although the Company is not listed on NASDAQ, the
Company has used NASDAQ's independence criteria in making this judgment in
accordance with applicable SEC rules.
As noted in the Audit Committee's charter, the Company's management is
responsible for preparing the Company's financial statements. The Company's
independent auditors are responsible for auditing the financial statements. The
activities of the Audit Committee are in no way designed to supersede or alter
those traditional responsibilities. The Audit Committee's role does not provide
any special assurances with regard to the Company's financial statements, nor
does it involve a professional evaluation of quality of audits performed by the
independent auditors.
Audit Committee Report. The Audit Committee submits the following report:
The Audit Committee operates under a written charter approved by the Board
of Directors which is attached to this Proxy Statement as Appendix A.
Management is responsible for the Company's internal controls and financial
reporting process. The independent auditors are responsible for performing
an independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report
thereon. The Audit Committee's responsibility is to monitor and oversee
these processes.
The Audit Committee has reviewed and discussed the Company's audited
financial statements with management and the independent auditors. The
Audit Committee discussed with the independent auditors the matters
required by Statement on Auditing Standards No. 61, Communications with
Audit Committees. The Audit Committee received written disclosures from the
independent auditors as required by Independence Standards Board Standard
No. 1, Independence Discussions with Audit Committees, and considered the
compatibility of non-audit services with the auditors' independence, and
discussed with the auditors their independence. The Audit Committee has
concluded that the independent auditors are independent from the Company
and its management.
Based on the reports and discussions described above, the Audit Committee
recommended to the Board of Directors that the Company's audited financial
statements be included in its Annual
6
Report on Form 10-K for the year ended December 31, 2002 for filing
with the Securities and Exchange Commission.
Respectfully submitted by the Audit Committee,
Richard S. Masinton Birch M. Mullins William B. Moskoff
Audit Fees. The aggregate fees billed for professional services rendered by KPMG
LLP for the audit of the Company's annual consolidated financial statements for
the year ended December 31, 2002, and the reviews of the financial statements
included in the Company's Forms 10-Q filed with the Securities and Exchange
Commission for 2002 were $120,000.
Financial Information Systems Design and Implementation Fees. KPMG LLP did not
perform any services and therefore billed no fees relating to operating or
supervising the operation of the Company's information systems or local area
network or for designing or implementing the Company's financial information
management systems during 2002.
All Other Fees. The aggregate fees billed for all other services rendered by
KPMG LLP in 2002 totaled $197,847, including consultation on various accounting
matters of $61,650 and tax-related services of $136,197.
Compensation Committee. The Compensation Committee consists of Directors McKee,
Mullins, Oliver, Sauer, and Warshaw. The Compensation Committee reviews and
recommends salaries, bonuses and benefits for officers and certain other
employees of the Company. The Compensation Committee also supervises the
operation of the Company's compensation plans. The Compensation Committee met 16
times in 2002. The Compensation Committee reports back to the full board. None
of the members of the Compensation Committee is or has been an officer or
employee of the Company. During fiscal year 2002, no member of the Compensation
Committee was an executive officer of another entity on whose compensation
committee or board of directors an executive officer of the Company served.
Compensation Committee Report. The Compensation Committee submits the following
report:
Mr. Eichner's compensation as Chief Executive Officer is tied to the
performance of the Company as a whole. His salary in calendar 2002 for
the period commencing on July 1, 2002 was $150,000 with a bonus of
$150,100, or approximately 100% of his base salary. His bonus was based
on the committee's evaluation of his performance and the extent to
which he met the committee's expectations. At the beginning of each
year, the Board and Mr. Eichner establish certain targeted financial
and operating goals for that calendar year. The targets are consistent
with the financial plan adopted by the Board and may include goals such
as earnings per share, consolidated return on equity, asset quality and
performance of specific units. Mr. Eichner's compensation is largely
dependent upon meeting the targeted goals and objectives.
Each of the other executive officers of the Company develops similar
goals and objectives each year that are tailored to his or her
particular function within the Company. Like Mr. Eichner, the
compensation and bonus awarded to each executive are largely dependent
upon the fulfillment of their respective goals and objectives.
Typically, the executive officers have goals that are unit specific,
such as net operating income as defined, within a banking unit. They
also have company-wide goals to increase shareholder value and the net
worth of the Company. All factors, both financial and strategic, are
taken into consideration when determining compensation. Compensation is
also determined by employee performance, contribution to the Company,
market comparability, Company performance, and other factors. Each
executive officer's compensation is comprised of salary, bonus, options
and other benefits that are focused upon performance rather than
longevity with the Company.
7
Section 162(m) of the Internal Revenue Code generally denies a deduction to
any publicly held corporation for compensation paid in a taxable year to
the Company's chief executive officer and four other highest compensated
officers to the extent that the officer's compensation (other than
qualified performance-based compensation) exceeds $1 million. The
Compensation Committee intends to award executive compensation that meets
the Section 162(m) deductibility requirements, subject to the Compensation
Committee's exercising its discretion to award non-deductible compensation
when it considers it in the best interests of the Company and stockholders
to do so.
Respectfully submitted by the Compensation Committee,
Paul J. McKee, Jr. Birch M. Mullins Stephen A. Oliver
Robert E. Sauer Henry D. Warshaw
Executive Officers
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Name Principal Occupation and Five Year Business Experience Age
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Kevin C. Eichner President and Chief Executive Officer of the Company since 2002; Vice Chairman 52
of the Company since 1995; Chief Executive Officer, GenAmerica Financial
Corporation (financial services) 2000-2002; Executive Vice President, General
American 1997-2000; President, Collaborative Strategies (management consulting)
1983-1997.
Peter F. Benoist Executive Vice President of the Company and Chairman and Chief Executive 55
Officer of Enterprise Bank since 2002; Executive Director, St. Louis Regional
Housing and Community Development Alliance (RCGA) 1999-2002; Regional Chairman,
Firstar Corporation 1997-1999; Executive Vice President, Mark Twain Bancshares
1984-1997.
C. Duncan Burdette Senior Credit Officer, Enterprise Bank since 2000; Senior Credit Officer, 44
Mercantile Bank, Kansas City 1999; Senior Credit Officer, Mercantile Bank,
Community Banking 1997 - 1998.
Frank H. Sanfilippo Chief Financial Officer of the Company since 2001; Executive Vice President and 40
Chief Financial Officer of First Banks, Inc 1999-2001; Senior Vice President
and Director of Management Accounting, Mercantile Bancorporation Inc. 1997-1999.
Jack L. Sutherland President and Chief Operating Officer of Enterprise Bank since 2000; President, 59
Aurora Products (manufacturer) 1999; Vice Chairman Mercantile Bank Kansas City
1997-1998; Regional President and Chief Executive Officer Mark Twain Bank
Kansas City 1990-1997.
Paul L. Vogel President of Enterprise Trust (financial planning and trust division of 36
Enterprise Bank) since 1998; Practice leader of the Private Client Services
Group with Arthur Andersen LLP 1997-1998.
James C. Wagner Executive Vice President of the Company since 2001; Chief Financial Officer of 37
the Company 1997-2001; Assistant Vice President, Enterprise Bank 1988-1997.
8
Executive Compensation
The following tables show the compensation paid by the Company to the Company's
Chief Executive Officer, former Chief Executive Officer and the four other most
highly paid executive officers of the Company, including its subsidiary,
Enterprise Bank, for the years ended December 31, 2002, 2001 and 2000. The
individuals listed in this table are known as "named executive officers".
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Annual Compensation Long Term
----------------------------------------------- Compensation
------------
Awards
------------
Other Securities All
Annual Underlying Other
Name Year Salary Bonus Compensation (1) Options/SARs Compensation (2)
------------------------------------------------------------------------------------------------------------------------------
Kevin C. Eichner (3) 2002 $150,000 $150,100 $3,000 82,905 $1,175
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2001 N/A N/A N/A 5,000 N/A
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2000 N/A N/A N/A 5,000 N/A
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Fred H. Eller (4) 2002 $212,500 $100 $0 0 $231,002
------------------------------------------------------------------------------------------------------
2001 $286,250 $25,000 $0 10,000 $8,648
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2000 $275,000 $85,150 $0 9,000 $9,644
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C. Duncan Burdette 2002 $171,062 $80,990 $6,000 8,000 $17,914
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2001 $160,000 $27,200 $6,000 7,500 $4,129
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2000 $80,000 $24,000 $2,100 10,000 $3,714
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Jack L. Sutherland 2002 $259,187 $118,525 $7,200 12,000 $15,779
------------------------------------------------------------------------------------------------------
2001 $261,250 $28,000 $7,200 10,000 $3,848
------------------------------------------------------------------------------------------------------
2000 $119,792 $45,150 $2,325 20,000 $3,810
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Paul L. Vogel (5) 2002 $8,125 $12,650 $333,607 4,000 $19,610
------------------------------------------------------------------------------------------------------
2001 $136,250 $0 $289,807 5,000 $5,993
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2000 $125,000 $0 $98,385 5,000 $6,778
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James C. Wagner 2002 $148,125 $73,343 $4,200 8,500 $8,832
------------------------------------------------------------------------------------------------------
2001 $148,125 $25,000 $4,200 8,000 $4,662
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2000 $121,250 $45,150 $4,200 7,000 $6,753
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(1) Includes referral fee income, Commissions and Car allowance
(2) Includes split dollar life insurance premium, long-term disability premium,
company 401(k) match deferrals, club membership dues and non-compete
payments, when applicable.
(3) Kevin C. Eichner became President and Chief Executive Officer on July 1,
2002. Prior to becoming President and Chief Executive Officer, Mr. Eichner
served as Vice-Chairman of the Company. A discussion of the terms of Mr.
Eichner's employment agreement is presented below.
(4) Resigned as an employee on September 30, 2002 after a three-month
transition period with Mr. Eichner. Under a separation agreement dated
September 30, 2002, Mr. Eller is entitled to $675,000 paid over three years
in exchange for his non-solicitation of the Company's customers (as defined
in the agreement) or employees.
(5) In 2001, Mr. Vogel's compensation changed to a primarily incentive-based
structure. Mr. Vogel is paid a share of both the gross revenue and net
operating income generated in the Trust advisory division.
9
Options/SAR Grants in Fiscal 2002
The following table sets forth information concerning the individual grants of
stock options to each of the named executive officers during 2002. The exercise
price per share of each option was equal to the fair market value of the shares
on the date of grant, as determined by the Board of Directors. The Company has
never granted stock appreciation rights to any of the named executive officers.
The potential realizable value is calculated based on the term of the options at
its time of grant and an assumed rate of stock appreciation of 5% and 10%
compounded annually from the date the options were granted until their
expiration dates. These numbers are calculated based on the requirements of the
Securities and Exchange Commission and do not reflect the Company's estimate of
future stock price growth. Actual gains, if any, on stock option exercises will
depend on the future performance of the common stock of the Company and the date
on which the options are exercised.
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Individual Grants Potential Realizable
------------------------------------------------------------------ Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options/ Price Appreciation for
Underlying SARs Granted Option Term
Options/SARs to Employees Exercise or Expiration ---------------------------------
Name Granted in Fiscal Year Base Price Date 5% 10%
----------------------------------------------------------------------------------------------------------------------------
Kevin C. Eichner 82,905 21.5% $9.30 7/1/2012 $484,888 $1,228,802
---------------------------------------------------------------------------------------------------
Fred H. Eller --- --- --- --- --- ---
---------------------------------------------------------------------------------------------------
C. Duncan Burdette 8,000 2.1% $10.00 8/28/2012 $50,312 $127,499
---------------------------------------------------------------------------------------------------
Jack L. Sutherland 12,000 3.1% $10.25 9/24/2012 $77,354 $196,030
---------------------------------------------------------------------------------------------------
Paul L. Vogel 4,000 1.0% $10.00 8/28/2012 $25,156 $63,750
---------------------------------------------------------------------------------------------------
James C. Wagner 8,500 2.2% $10.25 9/24/2012 $54,792 $138,855
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Aggregated Option/SAR Exercises in 2002 and Year End Option/SAR Values
The following table sets forth certain information regarding the number and
value of unexercised options held by each of the named executive officers as of
December 31, 2002. Amounts described in the following table under the heading
"Value of Unexercised In-the-Money Options/SARs at Fiscal Year End" are
determined by multiplying the number of shares underlying the options by the
difference between the last reported per share sale price of the Company's
common stock on December 31, 2002 and the per share option exercise price.
----------------------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at In-the-Money Options/
Shares Exercised Fiscal Year End SARs at Fiscal Year End
--------------------------------- -------------------------------- ------------------------------
Number of
Shares Acquired Value
Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
----------------------------------------------------------------------------------------------------------------------------
Kevin C. Eichner 30,000 $252,600 33,000 89,905 $215,850 $268,296
-------------------------------------------------------------------------------------------------
Fred H. Eller 92,000 $657,050 0 0 $0 $0
-------------------------------------------------------------------------------------------------
C. Duncan Burdette --- --- 5,500 20,000 $1,125 $24,500
-------------------------------------------------------------------------------------------------
Jack L. Sutherland --- --- 10,000 32,000 $1,500 $33,000
-------------------------------------------------------------------------------------------------
Paul L. Vogel --- --- 46,200 21,800 $108,750 $40,000
-------------------------------------------------------------------------------------------------
James C. Wagner --- --- 34,400 19,100 $216,300 $23,925
----------------------------------------------------------------------------------------------------------------------------
10
Equity Compensation Plans
The following table summarizes the Company's equity compensation plans as of
December 31, 2002. Information is included for both equity compensation plans
approved by the Company shareholders and equity compensation plans not approved
by the Company shareholders.
----------------------------------------------------------------------------------------------------------------------------
Number of securities remaining
Number of securities to available for future issuance
be issued upon exercise Weighted-average exercise under equity compensation
of outstanding options, price of outstanding options, plans (excluding shares
warrants and rights warrants and rights reflected in column (a)
Plan Category (a) (b) (c)
----------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by the Company's
shareholders 1,151,738 (1) $9.93 48,050 (2)
----------------------------------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by the Company's
shareholders 132,905 (3) $9.66 617,095 (3)
----------------------------------------------------------------------------------------------------------------------------
Total 1,284,643 $9.90 665,145
----------------------------------------------------------------------------------------------------------------------------
(1) Includes the following:
a. 13,200 shares of common stock to be issued upon exercise of
outstanding stock options granted under the 1990 Stock Incentive Plan
(Plan II);
b. 415,300 shares of common stock to be issued upon exercise of
outstanding stock options granted under the 1996 Stock Incentive Plan
(Plan III);
c. 556,200 shares of common stock to be issued upon exercise of
outstanding stock options granted under the 1999 Stock Incentive Plan
(Plan IV);
d. 68,788 shares of common stock to be issued upon exercise of
outstanding stock options granted under a stock option plans inherited
with the Commercial Guaranty Bank merger in 2000.
e. 98,250 shares of common stock to be issued upon exercise of
outstanding stock options granted under the 1998 Nonqualified plan.
(2) Includes the following:
a. 41,300 shares of common stock available for issuance under the 1999
Stock Incentive Plan (Plan IV);
b. 6,750 shares of common stock available for issuance under the 1998
Nonqualified Plan.
(3) Plan V was adopted by the Company's Board of Directors on October 26, 2002
and is subject to stockholder approval at the 2003 Annual Meeting of
shareholders. Plan V has 617,095 options available for future grants.
Employment Agreements
Executive Employment Agreement with Mr. Eichner. The Company entered into an
Executive Employment Agreement with Mr. Eichner dated July 1, 2002 (the "Eichner
Agreement"). The following is intended to be a general summary of the provisions
of the Eichner Agreement. The agreement specifies that Mr. Eichner will serve as
the President and Chief Executive Officer of the Company for an initial term of
three years. The term may be extended by mutual written agreement of Mr. Eichner
and the Company. The duties and responsibilities of Mr. Eichner are specifically
identified in the Eichner Agreement and are believed to be consistent with the
duties and responsibilities of someone in that position for a financial services
company.
The Eichner Agreement provides that Mr. Eichner will receive a minimum annual
base salary of $300,000 and is further entitled to receive an annual bonus and
to participate in all present and future employee benefit, retirement and
compensation plans of the Company consistent with his salary and his position as
the President and Chief Executive Officer of the Company as determined by the
Compensation Committee. Mr. Eichner is entitled to receive a draw against his
annual targeted bonus, provided that the Board of Directors may reduce or
eliminate such draw based on its evaluation of his progress in meeting his
established targets.
11
The Eichner Agreement also grants to Mr. Eichner stock options for 82,905 common
shares at $9.30 per share. Options will vest and become exercisable at the rate
of 27,635 shares per year starting on June 30, 2003 through June 30, 2005. Mr.
Eichner will also be eligible for additional stock option grants annually as
determined by the Board of Directors under plans amended or adopted by the
Company from time to time.
The Eichner Agreement provides no exact termination date, but provides for
various potential circumstances for termination by the Company or Mr. Eichner.
These circumstances include mutual agreement, by the Company for "cause" (as
defined in the Eichner Agreement), by the Company without cause at any time (as
defined in the Eichner Agreement), by the Company due to Mr. Eichner's
disability (as defined in the Eichner Agreement), and by Mr. Eichner in regard
to "change of control" (as defined in the Eichner Agreement).
The method of termination determines the amount of compensation, if any, due to
Mr. Eichner in connection with such termination. Generally, Mr. Eichner is
entitled to payment of salary and bonus through his date of termination. If the
Company terminates him "other than for cause", he shall be paid as severance
compensation his base salary through the remaining period of the Eichner
Agreement or the one-year period commencing on the termination date (whichever
period is shorter) plus any accrued and unpaid bonus. If he is terminated in
connection with a "change of control", Mr. Eichner is entitled to an amount
equal to 24 months of his base salary and targeted bonus, as defined, plus
accrued and unpaid bonus. In the event of Mr. Eichner's death, the Company is
obligated to pay him his annual salary and bonus through the date of death.
The Eichner Agreement also includes certain restrictive covenants that limit Mr.
Eichner's ability to compete with the Company or to divulge certain confidential
information concerning the Company during his period of employment and for a
period of 12 months after termination of his employment.
Other employment agreements. Except for Mr. Burdette, each of the named
executive officers, serves pursuant to an Employment Agreement with the Company.
The Agreements do not have specific termination dates other than death or
disability of the officer. In the event of a termination for cause, (as defined)
the officer will only be entitled to payment of base salary through the date of
termination. If the officer (i) is terminated without Cause, (ii) is not offered
employment after a Change of Control or (iii) voluntarily resigns, he will be
entitled to compensation for 24 months in an annual amount equal to 100% of his
base salary as of the end of the most recent quarter plus the average of his
bonus compensation (or, in Mr. Vogel's case, he is paid at an annual rate which
approximates his commissions earned in the most recent year) for the two most
recent years prior to termination. The two-year payment period is designed to
coincide with the non-compete covenants in the agreements, which provide that
the officer will not, for the period of employment and two years thereafter,
solicit customers of the Company to become customers of another entity or
induce, or seek to induce, employees to leave the employ of the Company.
Transactions with Management
Some of the directors and officers of the Company and of its subsidiary bank,
and members of their immediate families and firms and corporations with which
they are associated, have had transactions with the Bank, including borrowings
and investments. All such loans and investments have been made in the ordinary
course of business, have been made on substantially the same terms, including
interest rate paid or charged and collateral required, as those prevailing at
the time for comparable transactions with unaffiliated persons, and did not
involve more than the normal risk of collectability or present other unfavorable
features. As of December 31, 2002, the aggregate outstanding amount of all loans
to officers and directors of the Company and to firms and corporations in which
they have at least a 10% beneficial interest was approximately $16,400,000.
12
Performance Graph
The Common Stock of the Company is not listed or traded on an exchange. It is,
however, traded over the counter and quoted on the NASDAQ Bulletin Board. The
following graph depicts the cumulative total shareholder return on the Company's
Common Stock from December 31, 1997 through December 31, 2002. The graph
compares the Common Stock of the Company with the NASDAQ Stock Market Composite
Index for United States Companies and an industry peer group. The peer group is
determined using SIC code (6710) which is a group of bank and financial holding
companies that are NASDAQ traded and are similar in nature to the Company. The
comparisons reflected in the graph, however, are not intended to forecast the
future performance of the Common Stock of the Company and may not be indicative
of such future performance. The graph assumes an investment of $100.00 in the
Common Stock and each index on December 31, 1997 and the reinvestment of all
dividends. The beginning stock price for the Company's Common Stock was $6.75
per share on December 31, 1997 and the ending price was $12.50 per share on
December 31, 2002.
Comparison of Five-Year Cumulative Total Returns
Performance Graph for
Enterprise Financial Services Group
[GRAPH APPEARS HERE]
--------------------------------------------------------------------------------------------------------------------
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
--------------------------------------------------------------------------------------------------------------------
Enterprise Financial 100.0 177.5 208.7 165.2 236.2 152.4
--------------------------------------------------------------------------------------------------------------------
Nasdaq Market 100.0 141.0 261.5 157.4 124.9 86.3
--------------------------------------------------------------------------------------------------------------------
Peer Group 100.0 102.1 97.8 114.3 125.0 127.4
--------------------------------------------------------------------------------------------------------------------
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year end, is not a trading
day, the preceding day is used.
D. The index level for all series was set to $100.00 on December 31, 1997.
E. Data for Enterprise Financial Services Corp was provided by the Company
based upon periodic trading data.
F. Market and Peer Group data was supplied by The University of Chicago
Graduate School of Business, Center for Research in Security Prices.
13
Information Regarding Beneficial Ownership of Principal Shareholders, Directors
and Management
The following table sets forth, as of March 10, 2003, certain information
regarding ownership of Common Stock by: (i) those persons or entities known by
management to beneficially own more than 5% of the Company's Common Stock (ii)
each director of the Company, the named executive officers, and (iii) all
directors and executives officers as a group. As of March 10, 2003 there were
9,532,616 shares of Common Stock outstanding.
Number of Percentage
Beneficial Owner Shares Ownership (1)(2)
---------------- --------- ----------------
Kevin C. Eichner (3) (4) (5)
150 N. Meramec
St. Louis, MO 63105 519,558 5.5%
Ronald E. Henges (3) (4) (6) (7) 416,656 4.4%
Paul R. Cahn (8) 325,629 3.4%
Robert E. Guest, Jr. (6) (9) 194,370 2.0%
Paul J. McKee, Jr. (3) (10) 191,120 2.0%
William B. Moskoff (11) 144,077 1.5%
Robert E. Saur (12) 132,435 1.4%
James C. Wagner (3) (4) (13) 99,506 1.0%
Fred H. Eller (4) (14) 99,101 1.0%
Ted C. Wetterau (15) 67,820 *
Henry D. Warshaw (3) (16) 66,242 *
Paul L. Vogel (3) (4) (17) 65,831 *
Peter F. Benoist (18) 62,800 *
Birch M. Mullins (19) 54,550 *
Richard S. Masinton (3) (20) 43,621 *
James L. Wilhite (21) 38,163 *
James J. Murphy, Jr. (22) 36,615 *
Jack L. Sutherland (3) (4) (26) 26,244 *
Ted A. Murray (3) (23) 24,383 *
Stephen A Oliver (24) 20,000 *
James A. Williams (25) 19,520 *
C. Duncan Burdette (3) (27) 14,500 *
William H. Downey (28) 6,000 *
Jerry McElhatton - *
All Directors and Executive Officers
as a Group (25 persons) 2,498,369 26.2%
* Less than 1%
14
(1) Pursuant to the rules of the Securities and Exchange Commission, certain
shares of Common Stock which a person has the right to acquire within 60
days pursuant to the exercise of stock options and warrants are deemed to
be outstanding for the purpose of computing beneficial ownership and the
percentages of ownership of that person, but are not deemed outstanding for
the purposes of computing the percentage ownership of any other person. All
directors and executive officers as a group hold options to purchase an
aggregate of 187,276 shares of Common Stock.
(2) Unless otherwise indicated, the named person has sole voting and investment
power for all shares shown.
(3) Includes options outstanding and exercisable as of March 10, 2003, or
within 60 days thereafter, including those beneficially owned by the named
person, as follows: Mr. Eichner, 33,000 shares; Mr. Henges, 32,000 shares;
Mr. McKee 1,000 shares; Mr. Wagner, 34,400 shares; Mr. Vogel, 46,200
shares; Mr. Sutherland, 10,000 shares; Mr. Warshaw, 14,462 shares; Mr.
Masinton, 3,857 shares; Mr. Murray, 3,857 shares; Mr. Burdette, 5,500
shares; all directors and named executive officers as a group, 184,276
shares.
(4) Represents shares held by EBSP III, LLC which total 72,808 shares. Mr.
Eichner, Mr. Henges, Mr. Wagner, Mr. Eller, Mr. Vogel and Mr. Sutherland
each own 1/8th interest in the LLC. Ownership for Messrs. Henges, Wagner,
Eller, Vogel and Sutherland include their respective 1/8th interest or
9,101 shares. Ownership for Mr. Eichner includes 72,808 shares.
(5) Includes 285,200 shares held by Meramec Enterprise Holdings, LLC to which
Mr. Eichner has sole voting and investment power. Includes 38,550 shares
held in the name of Mr. Eichner in which he has sole voting and investment
power and 90,000 shares held in Mr. Eichner's trust in which he has sole
voting and investment power.
(6) Represents shares held by Henges Equity L.P. which total 337,995 shares.
Mr. Henges is the General Partner and Mr. Guest is the Successor General
Partner. Ownership for Mr. Henges includes 337,995 shares. Ownership for
Mr. Guest includes 112,665 shares held by the spouse of Mr. Guest to which
Mr. Guest has shared voting and investment power.
(7) Includes 5,000 shares in an Individual Retirement Account for the benefit
of Mr. Henges to which Mr. Henges has sole voting and investment power; and
32,560 held in trust for the benefit of Mr. Henges to which Mr. Henges has
sole voting and investment power.
(8) Includes 15,000 shares held in trust for the benefit of Mr. Cahn's spouse,
to which Mr. Cahn has shared voting and investment power; 1,000 shares held
by the spouse of Mr. Cahn to which Mr. Cahn has shared voting and
investment power; and 309,629 shares held of record by Cahn Family
Partnership, L.P., to which Mr. Cahn has shared voting and investment
power.
(9) Includes 36,000 shares held jointly by Mr. Guest and his spouse to which
Mr. Guest has shared voting and investment power; 3,020 shares held in the
name of Mr. Guest to which Mr. Guest has sole voting and investment power;
8,220 shares held in an Individual Retirement Account for the benefit of
Mr. Guest's spouse to which Mr. Guest has shared voting and investment
power; 34,465 shares held in a trust for the benefit of Mr. Guest's
children to which Mr. Guest is a co-trustee and has shared voting and
investment power. Excludes 211,977 shares held in a trust to which Mr.
Guest is an administrative co-trustee.
(10) Includes 15,731 shares held in a trust for the benefit of Mr. McKee to
which Mr. McKee has sole voting and investment power; 135,411 shares held
in a trust for the benefit of Mr. McKee's spouse to which Mr. McKee has
shared voting and investment power; and 38,978 shares held in an Individual
Retirement Account for the benefit of Mr. McKee to which Mr. McKee has sole
voting and investment power.
(11) Includes 124,077 shares held of record by Vasil's L.P., of which Mr.
Moskoff is the General Partner and has shared voting and investment power
and 20,000 in an Individual Retirement Account for the benefit of Mr.
Moskoff to which Mr. Moskoff has sole voting and investment power.
(12) Includes 60 shares held in the name of Mr. Saur to which Mr. Saur has sole
voting and investment power; 116,940 shares held in a trust for the benefit
of Mr. Saur to which Mr. Saur has sole voting and investment power; and
15,435 shares held in a family partnership to which Mr. Saur has shared
voting and investment power.
(13) Includes 37,535 shares held jointly by Mr. Wagner and his spouse to which
Mr. Wagner has shared voting and investment power and 18,470 shares held in
a trust for the benefit of Mr. Wagner's children and other relatives. Mr.
Wagner is a co-trustee and has shared voting and investment power and
investment authority for this trust.
(14) Includes 90,000 shares held in the Eller Family Partnership to which Mr.
Eller has shared voting and investment power.
(15) Includes 67,820 shares held of record by Wetterau Ventures, L.P. to which
Mr. Wetterau is the General Partner and has shared voting and investment
power. (16) Includes 25,740 held in an Individual Retirement Account for
the benefit of Mr. Warshaw, to which Mr. Warshaw has sole voting and
investment power; and 25,980 shares held in an Individual Retirement
Account for the benefit of the spouse of Mr. Warshaw, to which Mr.
15
Warshaw has shared voting and investment power; and 60 shares in the name
of Mr. Warshaw to which Mr. Warshaw has sole voting and investment power.
(17) Includes 2,027 shares held in an Individual Retirement Account (SEP) for
the benefit of Mr. Vogel to which Mr. Vogel has sole voting and investment
power; and 8,503 shares held in a trust account for the benefit of Mr.
Vogel to which Mr. Vogel has sole voting and investment power.
(18) Includes 62,800 shares held jointly by Mr. Benoist and his spouse to which
Mr. Benoist has shared voting and investment power.
(19) Includes 53,550 shares held in the name of Mr. Mullins to which Mr. Mullins
has sole voting and investment power and 1,000 shares held in trust for the
benefit of Mr. Mullins to which Mr. Mullins has sole voting and investment
power.
(20) Includes 857 shares held in a trust of the spouse of Mr. Masinton, for the
benefit of the spouse of Mr. Masinton, to which Mr. Masinton has shared
voting and investment power; 500 shares held in an Individual Retirement
Account for the benefit of Mr. Masinton to which Mr. Masinton has sole
voting and investment power; and 38,407 shares held in a trust for the
benefit of Mr. Masinton to which Mr. Masinton has sole voting and
investment power.
(21) Includes 1,950 shares held in a trust for the benefit of the spouse of Mr.
Wilhite of which the spouse of Mr. Wilhite is trustee, and Mr. Wilhite has
shared voting and investment power; 3 shares in the name of Mr. Wilhite to
which Mr. Wilhite has sole voting and investment power; 15,500 shares held
in Mr. Wilhite's trust in which he has sole voting and investment power;
4,000 shares held of record by the Wilhite Family Partnership, L.P., to
which Mr. Wilhite has shared voting and investment power; and 16,710 shares
held in an Individual Retirement Account for Mr. Wilhite in which Mr.
Wilhite has sole voting and investment power.
(22) Includes 36,615 shares held in the name of Mr. Murphy to which Mr. Murphy
has sole voting and investment power.
(23) Includes 13,885 shares held in a trust of the spouse of Mr. Murray for the
benefit of the spouse of Mr. Murray to which Mr. Murray has shared voting
and investment power; 1,285 shares held in an Individual Retirement Account
for the benefit of the spouse of Mr. Murray to which Mr. Murray has shared
voting and investment power; 1,285 shares held in an Individual Retirement
Account for the benefit of Mr. Murray to which Mr. Murray has sole voting
and investment power; 2,571 shares held in the name of Mr. Murray to which
Mr. Murray has sole voting and investment power; and 1,500 shares held
jointly with his spouse to which Mr. Murray has shared voting and
investment power.
(24) Includes 20,000 shares held jointly by Mr. Oliver and his spouse to which
Mr. Oliver has shared voting and investment power.
(25) Includes 2,535 shares held in an Individual Retirement Account for the
benefit of Mr. Williams to which Mr. Williams has sole voting and
investment power; 11,985 shares held in the name of Mr. Williams in which
Mr. Williams has sole voting and investment power and 5,000 shares held in
a joint trust account with the spouse of Mr. Williams in which Mr. Williams
has shared voting and investment power.
(26) Includes 7,143 shares held jointly by Mr. Sutherland and his spouse to
which he has shared voting and investment power.
(27) Includes 9,000 shares held in the name of Mr. Burdette to which Mr.
Burdette has sole voting and investment power.
(28) Includes 6,000 shares held in name of Mr. Downey to which Mr. Downey has
sole voting and investment power.
16
INDEPENDENT PUBLIC ACCOUNTANTS - (Proposal No. 2)
The Company engaged KPMG LLP to audit the Company's financial statements for the
fiscal years ended December 31, 2002, 2001 and 2000. Representatives of KPMG LLP
are expected to be present at the Annual Meeting of Shareholders. They will have
an opportunity to make a statement if they desire to do so and will be available
to respond to appropriate questions.
The Audit Committee has selected KPMG LLP to be the independent public
accountants for calendar year 2003 and recommends that the shareholders ratify
the appointment of the auditors. Although shareholder approval is not required,
it is the policy of the Board of Directors to request, whenever possible,
shareholder ratification of the appointment or reappointment of independent
public accountants. If the shareholders do not ratify the selection of KPMG LLP,
the Audit Committee will review the selection of independent accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF KPMG LLP AS
THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS.
2002 STOCK INCENTIVE PLAN - (Proposal No. 3)
Previous stock option plans were designed to attract and retain qualified
persons to serve as key employees of the Company and its subsidiaries, as well
as to ensure additional incentive for persons who can contribute significantly
to the success of the business.
In the belief that the plans adopted earlier accomplished their objectives and
that the Company should be in a position to continue to provide incentives to
officers and other employees to contribute to the future success and prosperity
of the Company, the Board of Directors, on October 26, 2002, unanimously adopted
the 2002 Stock Incentive Plan (the "2002 Plan"), subject to approval by the
stockholders. The following is a summary of the provisions of the 2002 Plan.
The purpose of the 2002 Stock Incentive Plan (the "Plan") is to provide
favorable opportunities for officers and other key employees of the Company and
its subsidiaries to acquire shares of Common Stock of the Company or to benefit
from the appreciation thereof. Such opportunities should provide an increased
incentive for these employees to contribute to the future success and prosperity
of the Company, thus enhancing the value of the stock for the benefit of the
stockholders, and increase the ability of the Company to attract and retain
individuals of exceptional skill upon whom, in large measure, its sustained
progress, growth and profitability depend.
Pursuant to the Plan, options to purchase the Company's Common Stock ("Options")
and Stock Appreciation Rights may be granted and Restricted Stock may be awarded
by the Company. Options granted under the Plan may be either incentive stock
options, as defined in Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"), or options which do not meet the requirements of said
Section 422(b) of the Code, herein referred to as non-qualified stock options.
The Plan shall be administered by the Compensation Committee (the "Committee")
consisting of three or more members of the Board of Directors of the Company,
each of whom shall be (i) a "non-employee director" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and (ii) an "outside director" within the meaning of Section 162(m) of
the Code. The Committee shall have full authority to grant Options and Stock
Appreciation Rights, and make Restricted Stock awards, to interpret the Plan and
to make such rules and regulations and establish such procedures as it deems
appropriate for the administration of the Plan, taking into consideration the
recommendations of management. The Committee, in its sole discretion, may
delegate the Committee's authority and duties under the Plan to the Chief
Executive Officer of the Company, or to any other committee to the extent
permitted under Delaware law, under such conditions and limitations as
17
the Board of Directors or the Committee may from time to time establish, except
that only the Committee may make any determinations regarding awards to
participants who are subject to Section 16 of the Securities Exchange Act of
1934.
The Committee may, from time to time, select and grant Options and Stock
Appreciation Rights to officers (whether or not directors) and other key
employees of the Company and its subsidiaries ("optionees") and award Restricted
Stock to officers (whether or not directors) and other key employees of the
Company and its subsidiaries and shall determine the number of shares subject to
each Option or award.
The total number of shares which may be sold or awarded under the Plan and with
respect to which Options, Stock Appreciation Rights, and Restricted Stock may be
exercised shall not exceed 750,000 shares of the Company's Common Stock. The
total number of shares which may be sold or awarded under the Plan to any
optionee, including shares for which Stock Appreciation Rights may be exercised,
shall not exceed 25% of such number, as and if adjusted, over the life of the
Plan.
Options granted under the Plan may be exercised during the period and in
accordance with the conditions set forth in the Plan and the applicable Option
Agreement; provided, however, that (i) no option granted under the Plan may be
exercisable earlier than the later of (A) one year from the date of grant or (B)
the date on which the optionee completes two years of continuous employment with
the Company or one or more of its subsidiaries, and (ii) in the event of an
optionee's death, Retirement or Disability (as defined in the Plan), any options
held by such optionee shall become exercisable on his or her Retirement date,
the date his or her employment terminates on account of Disability or the date
of his or her death provided he or she has been in the continuous employment of
the Company or one or more of its subsidiaries for at least two years at such
time.
Non-qualified stock options and incentive stock options may be exercised
regardless of whether other Options granted to the optionee pursuant to the Plan
are outstanding or whether other stock options granted to the optionee pursuant
to any other plan are outstanding.
The Board of Directors of the Company may from time to time amend or revise the
terms of the Plan, or may discontinue the Plan at any time as permitted by law,
provided, however, that such amendment shall not without stockholder approval
(i) increase the aggregate number of shares with respect to which awards may be
made under the Plan; (ii) change the manner of determining the Option Price
(other than determining the fair market value of the Common Stock to conform
with applicable provisions of the Code or regulations and interpretations
thereunder); (iii) extend the term of the Plan or the maximum period during
which any Option may be exercised or (iv) make any other change which, in the
absence of stockholder approval, would cause awards granted under the Plan which
are then outstanding, or which may be granted in the future, to fail to meet the
exemptions provided by Section 162(m) of the Code. No amendments, revision or
discontinuance of the Plan shall, without the consent of an optionee or a
recipient of a Restricted Stock award, in any manner adversely affect his or her
rights under any Option theretofore granted under the Plan.
The proposal to approve the 2002 Plan requires the affirmative vote of a
majority of the votes cast by the holders of the Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL AND ADOPTION OF THE
2002 STOCK INCENTIVE PLAN.
18
Section 16 (a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires directors, certain
officers and all persons who beneficially own more than 10 percent of our Common
Stock file reports with the Securities and Exchange Commission with respect to
beneficial ownership of our Securities. We have adopted procedures to assist its
directors and executive officers in complying with the Section 16(a) filings.
Based solely upon our review of the copies of the filings that we received with
respect to the fiscal year ended December 31, 2002, or written representations
from certain reporting persons, we believe that all reporting persons except
Paul R. Cahn made all filings required by Section 16(a) in a timely manner. Mr.
Cahn failed to file a Form 4 reporting a purchase of Company shares. Mr. Cahn
has since filed the required Form 4.
PROPOSALS OF STOCKHOLDERS
Shareholders are entitled to present proposals for action at a forthcoming
Shareholders' meeting if they comply with the requirements of the SEC proxy
rules. Any proposals intended to be presented at the 2004 Annual Meeting of
Shareholders of the Company must be received at the Company's principal office
at 150 N. Meramec, Clayton, Missouri 63105 on or before December 5, 2003 in
order to be considered for inclusion in the Company's proxy statement and form
of proxy relating to such meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the Company
does not intend to present, nor has it been informed that other persons intend
to present, any matters for action at the Annual Meeting, other than those
specifically referred to herein. If, however, any other matters should properly
come before the Annual Meeting, it is the intention of the persons named on the
Proxy Card to vote the shares represented thereby in accordance with their
judgement as to the best interests of the Company on such matters.
By Order of the Board of Directors,
/s/ James C. Wagner
James C. Wagner, Secretary
19
Appendix A
Enterprise Financial Services Corp
Audit Committee Charter
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Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors to assist the Board
in fulfilling its oversight responsibilities. The Audit Committee's primary
duties and responsibilities are to:
.. Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, legal, and accounting
compliance.
.. Monitor the independence and performance of the Company's Independent
Auditors and internal auditing department.
.. Help facilitate communication among the Company's Independent Auditors,
management, internal auditing department, and the Board of Directors.
The Audit Committee has the authority to conduct any investigation appropriate
to fulfilling its responsibilities and it has direct access to the Independent
Auditors as well as anyone in the Company. The Audit Committee has the ability
to retain, at the Company's expense, independent counsel and other advisers that
it deems necessary in the performance of its duties.
The Audit Committee shall be directly responsible for the appointment,
compensation, and oversight of the work of any public accounting firm employed
by the Company (including resolution of disagreements between management and the
Independent Auditors regarding financial reporting) for the purpose of preparing
or issuing an audit report or related work, and each such public accounting firm
shall report directly to the Audit Committee.
The Company shall provide for appropriate funding, as determined by the Audit
Committee, in its capacity as a Committee of the Board of Directors, for payment
of compensation:
.. to the public accounting firm employed by the Company for the purpose of
rendering or issuing an audit report; and
.. to any advisors employed by the Audit Committee under this Charter.
Audit Committee Compensation and Meetings
The Audit Committee shall be comprised of at least three directors, as
determined by the Board, each of whom shall be independent, non-executive
directors free from any relationship that would interfere with the exercise of
his or her independent judgement. All members of the Audit Committee shall be
financially literate as determined by the Board of Directors in its business
judgment. At least one member of the Audit Committee shall have accounting or
related financial management expertise as will be determined by the Board of
Directors in its business judgment. At a minimum, this person must have, through
education and experience as a public accountant or auditor or a principal
financial officer, controller, or principal accounting officer of a company, or
from a position involving the performance of similar functions:
(i) an understanding of generally accepted accounting principles and financial
statements;
(ii) experience in the preparation or auditing of financial statements of
generally comparable issuers; and the application of such principles in
connection with the accounting for estimates, accruals, and reserves;
(iii) experience with internal accounting controls; and
(iv) an understanding of audit committee functions.
Audit Committee members shall be appointed by the Board of Directors. The Board
of Directors shall designate one of the members to serve as Committee Chairman.
20
Except in their capacity as members of the Audit Committee, the Board of
Directors or any other Board committee, the members of the Audit Committee must
not (i) accept any consulting, advisory, or other compensatory fee from the
Company; or (ii) be an affiliated person of the Company or any subsidiary
thereof.
The Audit Committee shall meet at least four times per year or more frequently
as circumstances dictate. The Audit Committee Chairman shall prepare an agenda
for each meeting. The Committee should feel free to call a meeting with any
members of the Internal Audit firm, the Independent Auditors, management, or any
employee of the Company at their discretion.
Audit Committee Responsibilities and Duties
Review Procedures
1. Review and reassess the adequacy of this charter at least annually. Submit
the charter to the Board of Directors for approval and have the document
published, at least every three years in accordance with SEC regulations.
2. In consultation with management, the Independent Auditors and the Internal
Audit firm consider the integrity of the Company's financial reporting
processes and controls. Discuss significant financial risk exposures and
the steps management has taken to control, monitor, and report such
exposures. Review significant filings prepared by the Independent Auditors
and the internal auditing department together with management responses.
3. Review with financial management and the Independent Auditors prior to
filing the Company's annual and quarterly financial results, including the
Company's disclosures under "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Discuss any significant
changes to the Company's accounting principles and any items required to be
communicated by the Independent Auditors. This review should include
discussion with management and independent auditors of significant issues
regarding accounting principles, practices, and judgments.
4. Discuss with management earnings press releases, as well as financial
information and earnings guidance provided to analysts and rating agencies
prior to the release of such information.
Independent Auditors
5. The Committee has the sole authority and responsibility to select the
Independent Auditors, evaluate their performance and, where appropriate,
replace the Independent Auditors, as the independent auditors are
ultimately accountable to the Audit Committee and such relationship will be
confirmed with the Independent Auditors by the Audit Committee.
6. Review and approve, in advance, all audit and non-audit services to be
performed by the independent auditors and the fees to be paid for such
services and review with the Independent Auditors any audit problems or
difficulties and management's response.
7. On an annual basis the Committee should review and discuss with Independent
Auditors all significant relationships they have with the Company that
could impair the Independent Auditors' independence.
8. Review the Independent Auditors' audit plan. Discuss scope, staffing,
locations, reliance upon management, internal audit, and general audit
approach.
9. Discuss the results of the year-end audit with the Independent Auditors.
10. Consider the Independent Auditors' judgment about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
11. Review with the Independent Auditors:
a. all critical accounting policies and practices to be used;
21
b. all alternative treatments of financial information within
generally accepted accounting principles that have been discussed
with management of the Company, ramifications of the use of such
alternative disclosures and treatments, and the treatment
preferred by the Independent Auditors; and
c. other material written or oral communications between the
Independent Auditors and the management of the Company, such as
any management letter or schedule of unadjusted differences.
Internal Audit Function and Legal Compliance
12. Review the planned procedures, organizational structure, and qualifications
of the Internal Audit firm or person as needed.
13. Review the appointment, performance, and replacement of the Internal Audit
function.
14. Review significant reports prepared by the Internal Audit function together
with management's response and follow up to these reports.
Compliance with Laws and Regulations Related to
Financial Reporting and Tax Matters
15. Periodically review the Company's procedures for monitoring compliance with
laws and regulations applicable to financial reporting and tax matters; and
discuss the significant findings, if any, of reviews or examinations by
regulatory agencies relating to such matters, such as the Securities and
Exchange Commission.
16. Review material pending legal proceedings including the Company and other
contingent liabilities.
17. Discuss policies with respect to risk assessment and risk management.
Complaint Procedures
The Committee shall establish procedures for:
a. the receipt, retention, and treatment of complaints received by the
Company regarding accounting, internal accounting controls, or auditing
matters; and
b. the confidential, anonymous submission by employees of the Company of
concerns regarding questionable accounting or auditing matters.
Other Audit Committee Responsibilities
18. Annually prepare a report to shareholders as required by the Securities and
Exchange Commission. This report should be included in the Company's Annual
Proxy Statement or Special Proxy Statement, if applicable.
19. Perform any other activities consistent with this charter, the Company's
Bylaws and governing law as the Committee and Board deems necessary or
appropriate.
20. Maintain minutes of meetings and periodically report to the Board of
Directors significant results of the forgoing activities.
Limitations
The Audit Committee is responsible for the duties set forth in this charter but
is not responsible for either the preparation of the financial statements or the
auditing of the financial statements. Management has the responsibility for
preparing the financial statements and implementing internal controls and the
Independent Auditors have the responsibility for auditing the financial
statements and monitoring the effectiveness of the internal controls. The review
of the financial statements by the Audit Committee is not intended to be of the
same quality, or held to the same professional standards of accounting, as the
audit performed by the Independent Auditors.
22
Appendix B
Enterprise Financial Services Corp
2002 Stock Incentive Plan
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SECTION 1. PURPOSE. The purpose of the 2002 Stock Incentive Plan (the
"Plan") is to provide favorable opportunities for officers and other key
employees of Enterprise Financial Services Corp (the "Company") and its
subsidiaries to acquire shares of Common Stock of the Company or to benefit from
the appreciation thereof. Such opportunities should provide an increased
incentive for these employees to contribute to the future success and prosperity
of the Company, thus enhancing the value of the stock for the benefit of the
stockholders, and increase the ability of the Company to attract and retain
individuals of exceptional skill upon whom, in large measure, its sustained
progress, growth and profitability depend.
Pursuant to the Plan, options to purchase the Company's Common Stock
("Options") and Stock Appreciation Rights may be granted and Restricted Stock
may be awarded by the Company. Options granted under the Plan may be either
incentive stock options, as defined in Section 422(b) of the Internal Revenue
Code of 1986, as amended (the "Code"), or options which do not meet the
requirements of said Section 422(b) of the Code, herein referred to as
non-qualified stock options.
It is intended, except as otherwise provided herein, that incentive stock
options may be granted under the Plan and that such incentive stock options
shall conform to the requirements of Section 422 and 424 of the Code and to the
provisions of this Plan and shall otherwise be as determined by the Committee
(as hereinafter defined) and, to the extent provided in the last sentence of
Section 2 hereof, approved by the Board of Directors. The terms "subsidiaries"
and "subsidiary corporation" shall have the meanings given to them by Section
424 of the Code. All section references to the Code in this Plan are intended to
include any amendments or substitutions thereof or subsequent to the adoption of
the Plan.
SECTION 2. ADMINISTRATION. The Plan shall be administered by the
Compensation Committee (the "Committee") consisting of three or more members of
the Board of Directors of the Company, each of whom shall be (i) a "non-employee
director" within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and (ii) an "outside director" within the
meaning of Section 162(m) of the Code. The Committee shall have full authority
to grant Options and Stock Appreciation Rights, and make Restricted Stock
awards, to interpret the Plan and to make such rules and regulations and
establish such procedures as it deems appropriate for the administration of the
Plan, taking into consideration the recommendations of management. The decisions
of the Committee shall be binding and conclusive for all purposes and upon all
persons unless and except to the extent that the Board of Directors of the
Company shall have previously directed that all or specified types of decisions
of the Committee shall be subject to approval by the Board of Directors.
Notwithstanding the foregoing and anything else in the Plan to the contrary, the
Committee, in its sole discretion, may delegate the Committee's authority and
duties under the Plan to the Chief Executive Officer of the Company, or to any
other committee to the extent permitted under Delaware law, under such
conditions and limitations as the Board of Directors or the Committee may from
time to time establish, except that only the Committee may make any
determinations regarding awards to participants who are subject to Section 16 of
the Exchange Act.
SECTION 3. NUMBER OF SHARES. The total number of shares which may be sold
or awarded under the Plan and with respect to which Options, Stock Appreciation
Rights, and Restricted Stock may be exercised shall not exceed 750,000 shares of
the Company's Common Stock. The total number of shares which may be sold or
awarded under the Plan to any optionee (hereinafter defined), including shares
for which Stock Appreciation Rights may be exercised, shall not exceed 25% of
such number, as and if adjusted, over the life of the Plan. The shares may be
authorized and unissued or issued and reacquired shares, as the Board of
Directors from time to time may determine. Shares with respect to which Options
or Stock Appreciation Rights are not exercised prior to termination of the
Option and shares that are part of a Restricted Stock award which are forfeited
before the restrictions lapse shall be available for Options and Stock
Appreciation Rights thereafter granted and for Restricted Stock thereafter
awarded under the Plan, to the fullest extent permitted by Rule 16b-3 under the
Exchange Act (if applicable at the time)
SECTION 4. PARTICIPATION. The Committee may, from time to time, select and
grant Options and Stock Appreciation Rights to officers (whether or not
directors) and other key employees of the Company and its subsidiaries
("optionees") and award Restricted Stock to officers (whether or not directors)
and other key employees of the Company and its subsidiaries and shall determine
the number of shares subject to each Option or award.
23
SECTION 5. TERMS AND CONDITIONS OF OPTIONS. The terms and conditions of
each Option and each Stock Appreciation Right shall be set forth in an agreement
or agreements between the Company and the optionee. Such terms and conditions
shall include the following as well as such other provisions, not inconsistent
with the Plan, as may be deemed advisable by the Committee:
(a) NUMBER OF SHARES. The number of shares subject to the Option.
(b) OPTION PRICE. The option price per share (the "Option Price"), which shall
not be less than 100% of the fair market value of the Company's Common
Stock on the date the Option is granted. Fair market value shall be deemed
to be the mean between the highest and lowest sale prices of the Common
Stock reported on the date the Option is granted.
(c) DATE OF GRANT. Subject to previous directions of the Board of Directors
pursuant to the third sentence of Section 2, the date of grant of an Option
shall be the date when the Committee meets and awards such Option.
(d) PAYMENT. The Option Price multiplied by the number of shares to be
purchased by exercise of the Option shall be paid upon the exercise
thereof. Unless the terms of an Option provide to the contrary, upon
exercise, the aggregate Option Price shall be payable by delivering to the
Company (i) cash equal to such aggregate Option Price, (ii) shares of the
Company's Common Stock owned by the grantee having a fair market value on
the day the Company's Common Stock is quoted immediately preceding the date
of exercise (determined in accordance with Section 5(b) or as otherwise
permitted by the Committee) at least equal to such aggregate Option Price,
(iii) a combination of any of the above methods which total to such
aggregate Option Price, or (iv) any other form of consideration which has
been approved by the Committee, including under any approved cashless
exercise mechanism; and payment of such aggregate Option Price by any such
means shall be made and received by the Company prior to the delivery of
the shares as to which the Option was exercised. The right to deliver in
full or partial payment of such Option Price any consideration other than
cash shall be limited to such frequency as the Committee shall determine in
its absolute discretion. A holder of an Option shall have none of the
rights of a stockholder until the shares are issued to him or her; provided
that if an optionee exercises an Option and the appropriate purchase price
is received by the Company in accordance with this Section 5(d) prior to
any dividend record date, such optionee shall be entitled to receive the
dividends which would be paid on the shares subject to such exercise if
such shares were outstanding on such record date.
(e) TERM OF OPTIONS. Each Option granted pursuant to the Plan shall be for the
term specified in the applicable option agreement (the "Option Agreement")
subject to earlier termination in all cases as provided in paragraph (g) of
this Section.
(f) EXERCISE OF OPTION. Options granted under the Plan may be exercised during
the period and in accordance with the conditions set forth in the Plan and
the applicable Option Agreement; provided, however, that (i) no option
granted under the Plan may be exercisable earlier than the later of (A) one
year from the date of grant or (B) the date on which the optionee completes
two years of continuous employment with the Company or one or more of its
subsidiaries, and (ii) in the event of an optionee's death, Retirement (as
defined below) or Disability (as defined below), any options held by such
optionee shall become exercisable on his or her Retirement date, the date
his or her employment terminates on account of Disability or the date of
his or her death provided he or she has been in the continuous employment
of the Company or one or more of its subsidiaries for at least two years at
such time. No Option may be exercised after it is terminated as provided in
paragraph (g) of this Section, and no Option may be exercised unless the
optionee is then employed by the Company or any of its subsidiaries and
shall have been continuously employed by the Company or one or more of such
subsidiaries since the date of the grant of his or her Option, except as
provided in paragraph (g) of this Section, and in the case of the
optionee's Retirement or Disability (in which case the optionee may
exercise the Option to the extent he or she was entitled to exercise it at
the time of such termination or such shorter period as may be provided in
the Option Agreement) or death (in which case the Option may be exercised
by the optionee's legal representative or legatee or such other person
designated by an appropriate court as the person entitled to exercise such
Option to the extent the optionee was entitled to exercise it at the time
of his or her death) . As used herein, "Retirement" shall mean termination
of the optionee's full-time employment on or after the earliest retirement
age under any qualified retirement plan of the Company or its subsidiaries
which covers the optionee, or age 62 with 5 continuous years of such
employment if there is no such plan and "Disability" shall mean termination
of the optionee's full-time employment for reason of disability for
purposes of at least one qualified retirement plan or long term disability
plan maintained by the Company or its subsidiaries in which the optionee
participates. Non-qualified stock options and incentive stock options may
be
24
exercised regardless of whether other Options granted to the optionee
pursuant to the Plan are outstanding or whether other stock options granted
to the optionee pursuant to any other plan are outstanding.
(g) TERMINATION OF OPTIONS. An Option, to the extent not validly exercised,
shall terminate upon the occurrence of the first of the following events:
(i) On the date specified in the Option Agreement;
(ii) 30 days after termination by the Company or one of its subsidiaries
of the optionee's employment for any reason other than in the case of
death, Retirement, Disability or deliberate gross misconduct,
determined in the sole discretion of the Committee, during which 30
day period the Option may be exercised by the optionee to the extent
the optionee was entitled to exercise it at the time of such
termination;
(iii) Concurrently with the time of termination by the Company or one of
its subsidiaries of the optionee's employment for deliberate gross
misconduct, determined in the sole discretion of the Committee (for
purposes only of this subparagraph (iii) an Option shall be deemed to
be exercised when the optionee has received the stock certificate (or
valid instructions in the case in the delivery of uncertificated
shares) representing the shares for which the Option was exercised);
or
(iv) Concurrently with the time of termination by the employee of his or
her employment with the Company or one of its subsidiaries for
reasons other than Retirement, Disability or death.
Notwithstanding the above, no Option shall be exercisable after
termination of employment unless the optionee shall have, during the
entire time period in which his or her Options are exercisable, (a)
made himself or herself available, if so requested by the Company, at
reasonable times and upon a reasonable basis to consult with, supply
information to, and otherwise cooperate with, the Company and (b)
refrained from engaging in deliberate action which, as determined by
the Committee, causes substantial harm to the interests of the
Company or, if occurring before termination of employment, would have
otherwise constituted deliberate gross misconduct for purposes of
Section 5 (g) (iii) . If these conditions are not fulfilled, the
optionee shall forfeit all rights to any unexercised Option as of the
date of the breach of the condition.
(h) NON-TRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS. Options and
Stock Appreciation Rights shall not be transferable by the optionee other
than by will or the laws of descent and distribution, and Options and Stock
Appreciation Rights shall during his or her lifetime be exercisable only by
the optionee; PROVIDED, HOWEVER, that the Committee may, in its sole
discretion, allow for transfer of Options (other than incentive stock
options, unless such transferability would not adversely affect incentive
stock option tax treatment) to other persons or entities, subject to such
conditions or limitations as it may establish to ensure that transactions
with respect to Options intended to be exempt from Section 16(b) of the
Exchange Act pursuant to Rule 16b-3 under the Exchange Act do not fail to
maintain such exemption as a result of the Committee causing Options to be
transferrable, or for other purposes; PROVIDED FURTHER, HOWEVER, that for
any Option that is transferred, other than by the laws of descent and
distribution, any related Stock Appreciation Right shall be extinguished.
(i) APPLICABLE LAWS OR REGULATIONS. The Company's obligation to sell and
deliver stock under the Option is subject to such compliance as the Company
deems necessary or advisable with federal and state laws, rules and
regulations.
(j) LIMITATIONS ON INCENTIVE STOCK OPTIONS. To the extent that the aggregate
fair market value of the Company's Common Stock, determined at the time of
grant in accordance with the provisions of Section 5 (b), with respect to
which incentive stock options granted under this or any other Plan of the
Company are exercisable for the first time by an optionee during any
calendar year exceeds $100,000, or such other amount as may be permitted
under the Code, such excess shall be considered non-qualified stock
options.
Notwithstanding anything in the Plan to the contrary, any incentive stock
option granted to any individual who, at the time of grant, is the owner,
directly or indirectly, of stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or
any subsidiary thereof, shall (i) have a term not exceeding five years from
the date of grant and (ii) shall have an option price per share of not less
than 110% of the
25
fair market value of the Company's Common Stock on the date the incentive
stock option is granted (determined in accordance with the last sentence of
Section 5 (b))
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) The Committee may, in its sole discretion, from time to time grant Stock
Appreciation Rights to certain optionees in connection with any Option
granted under this Plan. Stock Appreciation Rights may be granted either at
the time of the grant of an Option under the Plan or at any time thereafter
during the term of the Option. Stock Appreciation Rights may be granted
with respect to all or part of the stock under a particular Option.
(b) Stock Appreciation Rights shall entitle the holder of the related Option,
upon exercise, in whole or in part, of the Stock Appreciation Rights, to
receive payment in the amount and form determined pursuant to subparagraph
(ii) of paragraph (c) of this Section 6. Stock Appreciation Rights may be
exercised only to the extent that the related Option has not been
exercised. The exercise of Stock Appreciation Rights shall result in a pro
rata surrender of the related Option to the extent that the Stock
Appreciation Rights have been exercised.
(c) Stock Appreciation Rights shall be subject to such terms and conditions
which are not inconsistent with the Plan as shall from time to time be
approved by the Committee and reflected in the applicable Option Agreement
(or in a separate document, which shall be considered for purposes of the
Plan to be incorporated into and part of the applicable Option Agreement),
and to the following terms and conditions.
(i) Stock Appreciation Rights shall be exercisable at such time or times
and to the extent, but only to the extent, that the Option to which
they relate shall be exercisable.
(ii) Upon exercise of Stock Appreciation Rights, the holder thereof shall
be entitled to elect to receive therefor payment in the form of
shares of the Company's Common Stock (rounded down to the next whole
number so no fractional shares are issued), cash or any combination
thereof in an amount equal in value to the difference between the
Option Price per share and the fair market value per share of Common
Stock on the date of exercise multiplied by the number of shares in
respect of which the Stock Appreciation Rights shall have been
exercised, subject to any limitation on such amount which the
Committee may in its discretion impose. The fair market value of
Common Stock shall be deemed to be the mean between the highest and
lowest sale prices of the Common Stock reported on the date the Stock
Appreciation Right is exercised or if no transaction occurred on such
date, then on the last preceding day on which a transaction did take
place.
(iii) Any exercise of Stock Appreciation Rights by an officer or director
subject to Section 16(b) of the Exchange Act, as well as any election
by such officer or director as to the form of payment of Stock
Appreciation Rights (Common Stock, cash or any combination thereof),
shall be made during the ten-day period beginning on the third
business day following the release for publication of any quarterly
or annual statement of sales and earnings by the Company and ending
on the twelfth business day following the date of such release
("window period") . In the event that such a director or officer
exercises a Stock Appreciation Right for cash or stock pursuant to
this Section 6 during a "window period", the day on which such right
is effectively exercised shall be that day, if any, during such
"window period" which is designated by the Committee in its
discretion for all such exercises by such individuals during such
period. If no such day is designated, the day of effective exercise
shall be determined in accordance with normal administrative
practices of the Plan.
(d) To the extent that Stock Appreciation Rights shall be exercised, the Option
in connection with which such Stock Appreciation Rights shall have been
granted shall be deemed to have been exercised for the purpose of the
maximum limitations set forth in the Plan under which such Options shall
have been granted. Any shares of Common Stock which are not purchased due
to the surrender in whole or in part of an Option pursuant to this Section
6 shall not be available for granting further Options under the Plan.
SECTION 7. RESTRICTED STOCK PERFORMANCE AWARDS. The Committee may, in its
sole discretion, from time to time, make awards of shares of the Company's
Common Stock or awards of units representing shares of the Company's Common
Stock, up to 750,000 shares in the aggregate, to such officers and other key
employees of the Company and its subsidiaries in such quantity, and on such
terms, conditions and restrictions (whether based on performance standards,
periods of service or otherwise) as the Committee shall establish ("Restricted
Stock") . The terms, conditions and restrictions of any Restricted Stock award
made under this Plan shall be set forth in an agreement or agreements between
the Company and the recipient of the award.
26
(a) ISSUANCE OF RESTRICTED STOCK. The Committee shall determine the manner in
which Restricted Stock shall be held during the period it is subject to
restrictions.
(b) STOCKHOLDER RIGHTS. Beginning on the date of grant of the Restricted Stock
award and subject to the execution of the award agreement by the recipient
of the award and subject to the terms, conditions and restrictions of the
award agreement, the Committee shall determine to what extent the recipient
of the award has the rights of a stockholder of the Company including, but
not limited to, whether the employee receiving the award has the right to
vote the shares or to receive dividends or dividend equivalents.
(c) RESTRICTION ON TRANSFERABILITY. None of the shares or units of a Restricted
Stock award may be assigned or transferred, pledged or sold prior to their
delivery to a recipient or, in the case of a recipient's death, to the
recipient's legal representative or legatee or such other person designated
by an appropriate court; provided, however, that the Committee may, in its
sole discretion, allow for transfer of shares or units of a Restricted
Stock Award to other persons or entities.
(d) DELIVERY OF SHARES. Upon the satisfaction of the terms, conditions and
restrictions contained in the Restricted Stock award agreement or the
release from the terms, conditions and restrictions of a Restricted Stock
award agreement, as determined by the Committee, the Company shall deliver,
as soon as practicable, to the recipient of the award (or permitted
transferee), or in the case of his or her death to his or her legal
representative or legatee or such other person designated by an appropriate
court, a stock certificate (or proper crediting in uncertificated shares)
for the appropriate number of shares of the Company's Common Stock, free of
all such restrictions, except for any restrictions that may be imposed by
law.
(e) FORFEITURE OF RESTRICTED STOCK. Subject to Section 7(f), all of the
restricted shares or units with respect to a Restricted Stock award shall
be forfeited and all rights of the recipient with respect to such
restricted shares or units shall terminate unless the recipient continues
to be employed by the Company or its subsidiaries until the expiration of
the forfeiture period and the satisfaction of any other conditions set
forth in the award agreement.
(f) WAIVER OF FORFEITURE PERIOD. Notwithstanding any other provisions of the
Plan, the Committee may, in its sole discretion, waive the forfeiture
period and any other conditions set forth in any award agreement under
certain circumstances (including the death, Disability or Retirement of the
recipient of the award or a material change in circumstances arising after
the date of an award) and subject to such terms and conditions (including
forfeiture of a proportionate number of the restricted shares) as the
Committee shall deem appropriate.
SECTION 8. ADJUSTMENT IN EVENT OF CHANGE IN STOCK. Subject to Section 9, in
the event of a stock split, stock dividend, cash dividend (other than a regular
cash dividend), combination of shares, merger, or other relevant change in the
Company's capitalization, the Committee shall, subject to the approval of the
Board of Directors, appropriately adjust the number and kind of shares available
for issuance under the Plan, the number, kind and Option Price of shares subject
to outstanding Options and Stock Appreciation Rights and the number and kind of
shares subject to outstanding Restricted Stock awards; provided, however, that
to the extent permitted in the case of incentive stock options by Sections 422
and 424 of the Code, in the event that the outstanding shares of Common Stock of
the Company are increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company or of
another corporation, through reorganization, merger, consolidation, liquidation,
recapitalization, reclassification, stock split-up, combination of shares or
dividend, appropriate adjustment in the number and kind of shares as to which
Options may be granted and as to which Options or portions thereof then
unexercised shall be exercisable, and in the Option Price thereof, shall be made
to the end that the proportionate number of shares or other securities as to
which Options may be granted and the optionee's proportionate interests under
outstanding Options shall be maintained as before the occurrence of such event;
provided, that any such adjustment in shares subject to outstanding Options
(including any adjustments in the Option Price) shall be made in such manner as
not to constitute a modification as defined by subsection (h) (3) of Section 424
of the Code; and provided, further, that, in the event of an adjustment in the
number or kind of shares under a Restricted Stock award pursuant to this Section
8, any new shares or units issued to a recipient of a Restricted Stock award
shall be subject to the same terms, conditions and restrictions as the
underlying Restricted Stock award for which the adjustment was made.
27
SECTION 9. EFFECT OF A CHANGE OF CONTROL.
(a) For purposes of this Section 9, "Change of Control" shall, unless the Board
of Directors of the Company otherwise directs by resolution adopted prior
thereto or, in the case of a particular award, the applicable award
agreement states otherwise, be deemed to occur if (i) any "person" (as that
term is used in Sections 13 and 14(d) (2) of the Exchange Act) other than a
Permitted Holder (as defined below) is or becomes the beneficial owner (as
that term is used in Section 13 (d) of the Exchange Act), directly or
indirectly, of 50% or more of either the outstanding shares of Common Stock
or the combined voting power of the Company's then outstanding voting
securities entitled to vote generally, (ii) during any period of two
consecutive years, individuals who constitute the Board of Directors of the
Company at the beginning of such period cease for any reason to constitute
at least a majority thereof, unless the election or the nomination for
election by the Company's stockholders of each new director was approved by
a vote of at least three-quarters of the directors then still in office who
were directors at the beginning of the period or (iii) the Company
undergoes a liquidation or dissolution or a sale of all or substantially
all of the assets of the Company. No merger, consolidation or corporate
reorganization in which the owners of the combined voting power of the
Company's then outstanding voting securities entitled to vote generally
prior to said combination, own 50% or more of the resulting entity's
outstanding voting securities shall, by itself, be considered a Change in
Control. As used herein, "Permitted Holder" means (i) the Company, (ii) any
corporation, partnership, trust or other entity controlled by the Company
and (iii) any employee benefit plan (or related trust) sponsored or
maintained by the Company or any such controlled entity.
(b) Except to the extent reflected in a particular award agreement, in the
event of a Change of Control:
(i) notwithstanding any vesting schedule, or any other limitation on
exercise or vesting, with respect to an award of Options, Stock
Appreciation Rights or Restricted Stock, such Options or Stock
Appreciation Rights shall become immediately exercisable with respect
to 100 percent of the shares subject thereto, and the restrictions
shall expire immediately with respect to 100 percent of such
Restricted Stock award; and
(ii) the Committee may, in its discretion and upon at least 10 days advance
notice to the affected persons, cancel any outstanding Options, Stock
Appreciation Rights or Restricted Stock awards and pay to the holders
thereof, in cash, the value of such awards based upon the highest
price per share of Company Common Stock received or to be received by
other stockholders of the Company in connection with the Change of
Control.
SECTION 10. AMENDMENT AND DISCONTINUANCE. The Board of Directors of the
Company may from time to time amend or revise the terms of the Plan, or may
discontinue the Plan at any time as permitted by law, provided, however, that
such amendment shall not (except as provided in Section 8), without further
approval of the stockholders, (i) increase the aggregate number of shares with
respect to which awards may be made under the Plan; (ii) change the manner of
determining the Option Price (other than determining the fair market value of
the Common Stock to conform with applicable provisions of the Code or
regulations and interpretations thereunder); (iii) extend the term of the Plan
or the maximum period during which any Option may be exercised or (iv) make any
other change which, in the absence of stockholder approval, would cause awards
granted under the Plan which are then outstanding, or which may be granted in
the future, to fail to meet the exemptions provided by Section 162(m) of the
Code. No amendments, revision or discontinuance of the Plan shall, without the
consent of an optionee or a recipient of a Restricted Stock award, in any manner
adversely affect his or her rights under any Option theretofore granted under
the Plan.
SECTION 11. EFFECTIVE DATE AND DURATION. The Plan was adopted by the Board
of Directors of the Company on October 26, 2002, subject to approval by the
stockholders of the Company at their annual meeting to be held in 2003. Neither
the Plan nor any Option or Stock Appreciation Right or Restricted Stock award
shall become binding until the Plan is approved by a vote of the stockholders in
a manner which complies with Sections 162(m) and 422(b) (1) of the Code. No
Option may be granted and no stock may be awarded under the Plan before July 1,
2002 nor after June 30, 2012.
SECTION 12. TAX WITHHOLDING. Notwithstanding any other provision of the
Plan, the Company or its subsidiaries, as appropriate, shall have the right to
deduct from all awards under the Plan cash and/or stock, valued at fair market
value on the date of payment in accordance with Section 5 (b) , in an amount
necessary to satisfy all federal, state or local taxes as required by law to be
withheld with respect to such awards. In the case of awards paid in the
Company's Common Stock, the optionee or permitted transferee may be required to
pay to the Company or a subsidiary thereof, as appropriate, the amount of any
such taxes which the Company or subsidiary is required to withhold, if any, with
respect to such stock. Subject in particular cases to the disapproval of the
Committee, the Company may accept shares of the Company's Common Stock of
equivalent fair market value in payment of such withholding tax obligations if
the optionee elects to make payment in such manner.
28
SECTION 13. CONSTRUCTION AND CONDITIONS. The Plan and Options, Restricted
Stock awards, and Stock Appreciation Rights granted thereunder shall be governed
by and construed in accordance with the laws of the State of Delaware and in
accordance with such federal law as may be applicable.
Neither the existence of the Plan nor the grant of any Options or Stock
Appreciation Rights or awards of Restricted Stock pursuant to the Plan shall
create in any optionee the right to continue to be employed by the Company or
its subsidiaries. Employment shall be "at will" and shall be terminable "at
will" by the Company or employee with or without cause. Any oral statements or
promises to the contrary are not binding upon the Company or the employee.
29
ENTERPRISE FINANCIAL SERVICES CORP
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 23, 2003
The undersigned hereby appoints Paul J. McKee, Jr and Kevin C. Eichner and
each of them, with our without the other, proxies with full power of
substitution to vote as designated below, all shares of stock of Enterprise
Financial Service Corp (the "Company") that the undersigned signatory hereof
would be entitled to vote if personally present at the Annual Meeting of
Stockholders of the Company to be held at the Marriott West, 600 Maryville
Centre Drive, St. Louis, Missouri on Wednesday, April 23, 2003 at 4:00 p.m. and
adjournment or postponement thereof, all in accordance with and as more fully
described in the Notice and accompanying Proxy Statement for such meeting,
receipt of which is hereby acknowledged.
1. ELECTION OF DIRECTORS
Election of 21 directors to hold office until the next Annual Meeting of
Stockholders or until their successors shall have been duly elected and
qualified.
0 FOR all nominees listed below 0 WITHHOLD AUTHORITY to vote
(Except as marked to the contrary below) FOR all nominees as listed below
___Paul J. McKee, Jr. ___Kevin C. Eichner ___Peter F. Benoist ___Paul R. Cahn ___William H. Downey
___Robert E. Guest, Jr. ___Ronald E. Henges ___Richard S. Masinton ___Jerry McElhatton ___William B. Moskoff
___Birch M. Mullins ___James J. Murphy, Jr. ___Ted A. Murray ___Stephen A. Oliver ___Robert E. Saur
___Jack L. Sutherland ___Paul L. Vogel ___Henry D. Warshaw ___Ted C. Wetterau ___James L. Wilhite
___James A. Williams
INSTRUCTIONS: You may vote for all directors by marking where indicated
above "FOR all nominees listed below", withhold your vote until the meeting
by marking where indicated above "WITHHOLD AUTHORITY to vote" or vote for
individual director(s) by marking next to each name the number of votes to
be cast for that person.
2. Ratification and Approval of KPMG LLP as auditors for the year ending
December 31, 2003.
0 FOR 0 AGAINST 0 ABSTAIN
3. Approval and adoption of 2002 Incentive Stock Plan.
0 FOR 0 AGAINST 0 ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE ELECTION OF ALL NOMINEES LISTED IN PROPOSAL 1, PROPOSAL 2 AND
PROPOSAL 3.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Please date, sign and return this Proxy card by mail, postage prepaid.
Date: __________________________, 2003
Sign Here: _____________________________
________________________________________
(Please sign exactly as name appears on the label for this mailing. When stock
is registered jointly, all owners must sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign the full corporate name by the President or other
authorized officer. If a partnership, please sign in partnership name by an
authorized person.)
WHETHER OR NOT YOU PLAN ON ATTENDING THE ANNUAL MEETING, PLEASE COMPLETE AND
RETURN THIS PROXY.