SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check
the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Exchange National Bancshares, Inc.
__________________________________
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
______________________________________________________________
2) Form, Schedule or Registration Statement No.:
______________________________________________________________
3) Filing Party:
______________________________________________________________
4) Date Filed:
______________________________________________________________
EXCHANGE NATIONAL BANCSHARES, INC.
132 EAST HIGH STREET,
JEFFERSON CITY, MISSOURI 65101
April 27, 2005
Dear Shareholder:
You are cordially invited to attend the annual meeting of shareholders of
Exchange National Bancshares, Inc., to be held at The Exchange National Bank of
Jefferson City's facility, located at 132 East High Street, Jefferson City,
Missouri, on Wednesday, June 8, 2005, commencing at 9:00 a.m., local time. The
business to be conducted at this meeting is described in the accompanying notice
of annual meeting and proxy statement. In addition, there will be an opportunity
to meet with members of senior management and review the business and operations
of our Company.
Your board of directors joins with me in urging you to attend the meeting.
Whether or not you plan to attend the meeting, however, please sign, date and
return the enclosed proxy card promptly. A prepaid return envelope is provided
for this purpose. You may revoke your proxy at any time before it is exercised
and it will not be used if you attend the meeting and prefer to vote in person.
Sincerely yours,
James E. Smith
Chairman of the Board
and Chief Executive Officer
EXCHANGE NATIONAL BANCSHARES, INC.
132 EAST HIGH STREET
JEFFERSON CITY, MISSOURI 65101
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 8, 2005
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of
Exchange National Bancshares, Inc., a Missouri corporation, will be held at The
Exchange National Bank of Jefferson City's facility, located at 132 East High
Street, Jefferson City, Missouri, on Wednesday, June 8, 2005, commencing at 9:00
a.m., local time, and thereafter as it may from time to time be adjourned, for
the following purposes:
1. To elect three Class I directors to hold office for a term expiring
at the 2008 annual meeting of the shareholders of our Company and
until their respective successors are duly elected and qualified or
until their respective earlier resignation or removal;
2. To consider and act upon ratification and approval of the selection
of the accounting firm of KPMG LLP as the independent auditors of
our Company for the year ending December 31, 2005; and
3. To transact such other business as properly may come before the
meeting.
Our board of directors has fixed the close of business on April 1, 2005 as
the record date for determination of the shareholders entitled to notice of, and
to vote at, the annual meeting.
All shareholders are cordially invited to attend the meeting. Whether or
not you intend to be present at the meeting, our board of directors solicits you
to sign, date and return the enclosed proxy card promptly. A prepaid return
envelope is provided for this purpose. You may revoke your proxy at any time
before it is exercised and it will not be used if you attend the meeting and
prefer to vote in person. Your vote is important and all shareholders are urged
to be present in person or by proxy.
By Order of the Board of Directors
James E. Smith
Chairman of the Board
and Chief Executive Officer
April 27, 2005
Jefferson City, Missouri
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED, WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING
IN PERSON.
EXCHANGE NATIONAL BANCSHARES, INC.
132 EAST HIGH STREET
JEFFERSON CITY, MISSOURI 65101
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 8, 2005
---------------
INTRODUCTION
The board of directors of Exchange National Bancshares, Inc. solicits your
proxy for use at the annual meeting of shareholders to be held on Wednesday,
June 8, 2005, and at any adjournment or adjournments thereof. The annual meeting
will commence at 9:00 a.m., local time, and will be held at The Exchange
National Bank of Jefferson City's facility located at 132 East High Street,
Jefferson City, Missouri. Our Company's principal business activity is the
ownership, directly or indirectly, of all the issued and outstanding stock of
The Exchange National Bank of Jefferson City, Citizens Union State Bank & Trust
of Clinton, and Osage Valley Bank of Warsaw.
Our principal executive offices are located at 132 East High Street,
Jefferson City, Missouri, 65101. This proxy statement and the enclosed form of
proxy were first mailed to shareholders on or about April 27, 2005.
INFORMATION ABOUT THE MEETING AND VOTING
PURPOSE OF THE MEETING
The purposes of the annual meeting are:
- to elect three Class I directors to hold office for a term expiring
at the 2008 annual meeting of the shareholders of our Company;
- to consider and vote upon ratification and approval of the selection
of the accounting firm of KPMG LLP as the independent auditors of
our Company for the current year; and
- to transaction such other business as may properly come before the
annual meeting, including a proposal to adjourn or postpone the
meeting.
SHAREHOLDERS ENTITLED TO VOTE AT THE MEETING
Shareholders of record as of the close of business on the April 1, 2005
record date are entitled to notice of, and to vote at, the annual meeting or any
adjournment or adjournments thereof. As of the record date, 4,169,847 shares of
our Company's common stock were issued and outstanding and an additional 128,506
shares were issued and held in treasury. Each issued and outstanding share of
common stock as of the record date is entitled to one vote on each matter
properly to come before the annual meeting.
ATTENDING THE MEETING AND VOTING IN PERSON
If you plan to attend the annual meeting and vote in person, we will give
you a ballot when you arrive. However, if your shares are held in the name of
your broker, bank or other nominee (commonly referred to as being held in
"street" name), proof of ownership may be required for you to be admitted to the
meeting. A recent brokerage statement or letter from a bank or broker are
examples of proof of ownership. If you want to vote your shares of common stock
held in street name in person at the meeting, you will have to get a written
proxy in your name from the broker, bank or other nominee who holds your shares.
VOTING BY PROXY
This proxy statement is being sent to you by our board of directors for
the purpose of requesting that you allow your shares of common stock to be
represented at the annual meeting by the persons named in the enclosed proxy
card. We urge you to complete, date and sign the enclosed form of proxy and
return it promptly in the enclosed postage prepaid envelope. If you properly
complete and sign your proxy card and send it to us in time to vote, the shares
represented by your proxy will be voted as you have directed. If you sign the
proxy card but do not make specific voting instructions, your shares will be
voted as follows:
- "FOR" the election of the nominees for director named in this proxy
statement, and
- "FOR" ratification of the selection of the accounting firm of KPMG
LLP as our Company's independent auditors for the current year.
If any other matter is properly brought before the annual meeting, your
shares will be voted in accordance with the discretion and judgment of the
appointed proxies. A shareholder who has given a proxy may revoke it at any time
before it is exercised at the annual meeting by filing written notice of
revocation with the Secretary of our Company, by executing and delivering to the
Secretary of our Company a proxy bearing a later date, or by appearing at the
annual meeting and voting in person.
If your shares of common stock are held in street name, you will receive
instructions from your broker, bank or other nominee that you must follow in
order to have your shares voted. Your broker or bank may allow you to deliver
your voting instructions via the telephone or the Internet.
QUORUM REQUIREMENT
A quorum of shareholders is necessary to hold a valid meeting. The
presence in person or by proxy of shareholders holding a majority of the total
outstanding shares of our Company's common stock will constitute a quorum at the
annual meeting. Shares of common stock represented by a proxy which directs that
the shares be voted to abstain or to withhold a vote on any matter will be
counted in determining whether a quorum is present. Shares of common stock as to
which there is a broker non-vote (i.e., when a broker holding shares for clients
in street name is not permitted to vote on certain matters without instruction)
also will be counted for quorum purposes. If a quorum should not be present, the
annual meeting may be adjourned from time to time until a quorum is obtained.
REQUIRED VOTE TO APPROVE EACH PROPOSAL
Election of Directors. Directors are elected by a majority of the votes
cast, in person or by proxy, of shareholders entitled to vote at the annual
meeting for that purpose. Shareholders can withhold authority to vote for one or
more nominees for director. Votes withheld from a particular nominee will have
the same effect as a vote against the nominee. Shareholders do not have
cumulative voting rights in the election of directors.
Selection of Auditors and Other Matters. The affirmative vote of a
majority of the shares of our Company's common stock, represented in person or
by proxy and entitled to vote at the annual meeting, is required for (i) the
ratification of the selection of KPMG LLP as our Company's independent auditors,
and (ii) the approval of such other matters as properly may come before the
annual meeting or any adjournment thereof. Shareholders can abstain from voting
on these proposals. If you abstain from voting on any of these proposals, it has
the same effect as a vote against the proposal.
Effect of Broker Non-Votes. If your broker does not vote your shares on
any proposal, such "broker non-votes" do not count as shares present for
purposes of such proposal. This means that a broker non-vote would reduce the
number of affirmative votes that are necessary to approve the proposal.
SOLICITATION OF PROXIES
This solicitation of proxies for the annual meeting is being made by our
Company's board of directors. Our Company will bear all costs of such
solicitation, including the cost of preparing and mailing this proxy statement
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and the enclosed form of proxy. After the initial mailing of this proxy
statement, proxies may be solicited by mail, telephone, facsimile transmission
or personally by directors, officers, employees or agents of our Company,
Exchange National Bank, Citizens Union State Bank or Osage Valley Bank.
Brokerage houses and other custodians, nominees and fiduciaries will be
requested to forward soliciting materials to beneficial owners of shares held of
record by them, and their reasonable out-of-pocket expenses, together with those
of our Company's transfer agent, will be paid by our Company.
A list of shareholders entitled to vote at the annual meeting will be
available for examination at least ten days prior to the date of the annual
meeting during normal business hours at the registered office of our Company
located at 132 East High Street, Jefferson City, Missouri. The list also will be
available at the annual meeting.
ITEM 1: ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS
Our Company's board of directors consists of eight directors. The articles
of incorporation of our Company divides the board of directors into three
classes of directors, with the directors serving staggered terms of three years
and until their respective successors are duly elected and qualified or until
their respective earlier resignation or removal. The present terms of Charles G.
Dudenhoeffer, Jr., Philip D. Freeman and James E. Smith, the three directors in
Class I, expire at this annual meeting. Directors in Class II (David R. Goller,
James R. Loyd and Gus S. Wetzel, II) and Class III (Kevin L. Riley and David T.
Turner) have been elected to terms expiring at the time of the annual meeting of
shareholders in 2006 and 2007, respectively.
One of the purposes of this annual meeting is to elect three directors in
Class I to serve for a three-year term expiring at the annual meeting of
shareholders in 2008 and until their respective successors are duly elected and
qualified or until their respective earlier resignation or removal. The board of
directors has designated Charles G. Dudenhoeffer, Jr., Philip D. Freeman and
James E. Smith as the three nominees proposed for election at the annual
meeting. Unless authority to vote for the nominees or a particular nominee is
withheld, it is intended that the shares represented by properly executed
proxies in the form enclosed will be voted for the election as directors of
these three nominees. In the event that one or more of the nominees should
become unavailable for election, it is intended that the shares represented by
the proxies will be voted for the election of such substitute nominee or
nominees as may be designated by the board of directors, unless the authority to
vote for all nominees or for the particular nominee who has ceased to be a
candidate has been withheld. Each of the nominees has indicated his willingness
to serve as a director if elected, and the board of directors has no reason to
believe that any nominee will be unavailable for election.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF
CHARLES G. DUDENHOEFFER, JR., PHILIP D. FREEMAN AND JAMES E. SMITH AS CLASS I
DIRECTORS.
NOMINEES AND DIRECTORS CONTINUING IN OFFICE
The following table sets forth certain information with respect to each
person nominated by the board of directors for election as a Class I director at
the annual meeting and each director whose term of office will continue after
the annual meeting.
POSITION COMPANY
NAME AGE WITH OUR COMPANY DIRECTOR SINCE
---- --- ---------------- --------------
NOMINEES
CLASS I: TERM TO EXPIRE IN 2008
Charles G. Dudenhoeffer, Jr. 65 Director 1993
Philip D. Freeman 51 Director 1993
James E. Smith 60 Chairman, CEO 1997
and Director
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DIRECTORS CONTINUING IN OFFICE
CLASS II: TERM TO EXPIRE IN 2006
David R. Goller 73 Director 1993
James R. Loyd 73 Director 1993
Gus S. Wetzel, II 64 Director 1999
CLASS III: TERM TO EXPIRE IN 2007
Kevin L. Riley 49 Director 1995
David T. Turner 48 President and Director 1997
The business experience during the last five years of each person
nominated by the board of directors for election as a Class I director at the
annual meeting and each director whose term of office will continue after the
annual meeting is as follows:
Charles G. Dudenhoeffer, Jr. has served as a Director of Exchange National
Bank since 1978 and of our Company since 1993. Mr. Dudenhoeffer served as Vice
President and Trust Officer of Exchange National Bank from 1974 until June 1992.
He served as Senior Vice President and Trust Officer of Exchange National Bank
from June 1992 until June 2000. He served as Senior Vice President of our
Company from 1993 through June 2000.
Philip D. Freeman has served as a Director of Exchange National Bank since
1990 and of our Company since 1993. He has been the Owner/Manager of Freeman
Mortuary, Jefferson City, Missouri since 1974. Mr. Freeman also serves on our
Company's Audit and Compensation Committees.
James E. Smith has served as a Director of Citizens Union State Bank since
1975, of our Company since 1997, of Osage Valley Bank since January 2000 and of
Exchange National Bank since March 2002. He served as Vice Chairman of our
Company from 1998 through March 2002 when he assumed the responsibilities of
Chairman and Chief Executive Officer, as President and Secretary of Citizens
Union State Bank from 1975 through May 2000 when he was promoted to Chairman and
Chief Executive Officer, and as President of Osage Valley Bank from January 2000
through October 2002 when he was promoted to Vice Chairman.
David R. Goller has served as a Director of Exchange National Bank since
1975 and of our Company since 1993. He has been an attorney with the law firm of
Goller, Gardner & Feather, P.C. (formerly Goller & Associates, P.C.), Jefferson
City, Missouri, counsel for Exchange National Bank, since 1975. Mr. Goller also
serves on our Company's Audit and Compensation Committees.
James R. Loyd has served as a Director of Exchange National Bank since
1974 and of our Company since 1993. He served as Executive Vice President of
Exchange National Bank from 1974 until October 1996 and as Executive Vice
President of our Company from 1993 until October 1996. Mr. Loyd also serves on
our Company's Audit and Compensation Committees.
Gus S. Wetzel, II has served as a Director of Citizens Union State Bank
since 1974, and of our Company since 1999. He served as Chairman of Citizens
Union State Bank from 1974 until May 2000. Dr. Wetzel has served as a
physician/surgeon with the Wetzel Clinic, Clinton, Missouri since 1972. He also
serves on our Company's Audit and Compensation Committees.
Kevin L. Riley has served as a Director of Exchange National Bank since
1995 and of our Company since 1995. He has been co-owner of Riley Chevrolet,
Inc. and Riley Oldsmobile, Cadillac, Inc., each a Jefferson City, Missouri
automobile dealership, since 1986 and 1992, respectively. Mr. Riley also serves
on our Company's Audit and Compensation Committees.
David T. Turner has served as a Director of Exchange National Bank and of
our Company since January 1997 and of Citizens Union State Bank since April
2002. Mr. Turner served as Vice Chairman of our Company from June 1998 through
March 2002 when he assumed the position of President. From 1993 until June 1998,
he
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served as Senior Vice President of our Company. Mr. Turner served as President
of Exchange National Bank from January 1997 through March 2002 when he assumed
the position of Chairman, Chief Executive Officer and President. He served as
Senior Vice President of Exchange National Bank from June 1992 through December
1996 and as Vice President from 1985 until June 1992.
There is no arrangement or understanding between any director and any
other person pursuant to which such director was selected as a director.
COMPENSATION OF DIRECTORS
Only outside (non-employee) members of our Company's board of directors
receive compensation for their service to our Company as a director. Each of
these outside (non-employee) directors was paid $300 for each meeting of the
Board attended in person through June 2004. Beginning July 2004, the meeting fee
was increased to $600 per meeting attended in person. Each member of our
Company's Audit Committee receives $700 for each committee meeting attended.
Each member of our Company's Compensation Committee receives $300 for each
meeting attended.
All directors of our Company (other than Mr. Wetzel) are also directors of
Exchange National Bank, and in that capacity may receive compensation from
Exchange National Bank. Each of Exchange National Bank's outside (non-employee)
directors is paid a monthly $500 retainer and $300 for each meeting of the Board
attended in person. In addition, these directors are eligible for a $2,400 bonus
if Exchange National Bank meets certain financial goals and the director attends
at least 80% of the Board meetings held (which could include one telephone
conference meeting). None of Exchange National Bank's non-employee directors
received this bonus for 2004. Currently, any director deferring receipt of this
bonus will have 124 shares of Exchange National Bank stock imputed to his
account under the Exchange National Bank's Director Deferred Compensation Plan
on the last day of the year. These imputed shares accumulate from year to year
but do not represent actual shares or the right to receive payment of the value
of such shares. Each year the director is credited an amount in his Plan account
equal to Exchange National Bank's net income per share multiplied by the number
of imputed shares in the director's Plan account as of the beginning of the
year.
Three of our Company's directors -- Mr. Smith, Mr. Turner and Mr. Wetzel
-- also are directors of Citizens Union State Bank. Mr. Smith and Mr. Turner are
not eligible to receive compensation for their service to Citizens Union State
Bank as a director. For his service to Citizens Union State Bank as a director,
Mr. Wetzel is paid a quarterly $300 retainer plus $300 for each meeting of the
Board that he attends in person. Mr. Wetzel also receives $100 for each meeting
of Citizens Union State Bank's Trust Committee held, and $50 for each meeting of
Citizens Union State Bank's Loan (Discount) Committee that he attends. One of
our Company's directors -- Mr. Smith-- also is a director of Osage Valley Bank,
but is not eligible to receive compensation for his service in that capacity.
MEETINGS OF THE BOARD AND COMMITTEES
BOARD OF DIRECTORS. During 2004 the board of directors of our Company held
four regular, two special and one reorganization meeting. During 2004, each
director attended at least 75% of the regular meetings of the board of directors
and of the committees of the board on which he served. Our Company's directors
discharge their responsibilities throughout the year, not only at such board of
directors and committee meetings, but through personal meetings and other
communications with members of management and others regarding matters of
interest and concern to our Company.
Directors are encouraged by our Company to attend our annual meeting of
shareholders if their schedules permit, but our Company does not otherwise have
a policy regarding such attendance. All directors except Mr. Goller were present
at the annual meeting of the shareholders held in June 2004. The board of
directors typically meets immediately following the annual meeting of
shareholders, which facilitates the directors' ability to attend the annual
meeting of shareholders.
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COMMITTEES. Our Company's board of directors has established an Audit
Committee and a Compensation Committee. In addition, our board of directors has
provided for the establishment of a Nominating and Corporate Governance
Committee, but has not yet appointed its members. There currently are no other
standing compensation, executive, nominating or other committees of our
Company's board of directors, or committees performing similar functions of the
Board.
Audit Committee. The Audit Committee assists the Board in fulfilling its
responsibilities with respect to accounting and financial reporting practices
and the scope and expense of audit and related services provided by external
auditors, among others. The Audit Committee is responsible for apprising the
Board of management's compliance with Board mandated policies, internal
procedures and applicable laws and regulations. The committee works with the
internal audit department and external auditors and supervises the internal
audit function directly, reviews and approves the hiring of audit personnel and
evaluates the performance of the internal audit function and the external
auditors. The committee also has the duty to make, or cause to be made, a
suitable examination and audit of the financial affairs of our Company and its
subsidiaries at least annually, and to report thereon to the board of directors.
A more complete description of the Audit Committee's functions is provided in
its charter, a copy of which was attached to the proxy statement with respect to
the 2004 annual meeting of shareholders. Members of the Audit Committee
currently are Messrs. Freeman, Goller, Loyd, Riley and Wetzel, each of whom
satisfies the definition of an "independent" director as established in the
National Association of Securities Dealers listing standards. The Board of
Directors has determined that Messrs. Goller and Loyd qualify as "audit
committee financial experts" within the meaning of the rules and regulations of
the Securities and Exchange Commission. The Audit Committee met seven times
during 2004.
Compensation Committee. In January 2000, our Company established a
Compensation Committee which assumed the responsibility to make recommendations
to the board of directors regarding the compensation and benefits of our
executive officers and directors and the establishment and administration of our
Company's executive compensation program. In June 2003, our board of directors
expanded the responsibilities of the Compensation Committee to include the
construction, interpretation and administration of our Incentive Stock Option
Plan, and to exercise exclusive authority over the grant of options under the
Plan. A more complete description of the Compensation Committee's functions is
provided in its charter, a copy of which is available on our internet website
(www.exchangebancshares.com) under "Governance Documents." Members of the
Compensation Committee currently are Messrs. Freeman, Goller, Loyd, Riley and
Wetzel. The Compensation Committee met three times during 2004.
Nominating and Corporate Governance Committee. Until recently, our board
of directors did not find it necessary to have a separate nominating committee
because of the low turnover of board of director seats, among other reasons.
Each member of the board of directors, including directors who are not
"independent" under the applicable Nasdaq listing standards, participates in the
consideration of director nominees. The Board believes that it should be
comprised of directors with varied, complementary backgrounds, and that
directors should, at a minimum, have expertise that may be useful to our
Company. Directors should also possess the highest personal and professional
ethics and should be willing and able to devote the required amount of time to
our Company's business. In determining whether a director should be retained and
stand for re-election, the Board also considers the director's past attendance
at meetings and participation in and contributions to the activities of the
Board.
In May 2004, our board of directors authorized the establishment of a
Nominating and Corporate Governance Committee. This committee will be
responsible for the director nomination process, including evaluating and
recommending director nominees and Board committee appointments, and will be
responsible for various other governance related matters, including an annual
Board assessment. A more complete description of the committee's functions is
provided in its charter, a copy of which is available on our internet website
(www.exchangebancshares.com) under "Governance Documents."
The members of the Nominating and Corporate Governance Committee have not
yet been appointed and, therefore, the committee has not yet met. It is
anticipated that each member of the committee will be a person who satisfies the
definition of an "independent" director as established in the National
Association of Securities Dealers listing standards.
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SHAREHOLDER COMMUNICATIONS WITH DIRECTORS
Our board of directors has not established a formal process for
shareholders to follow to send communications to the Board or its members, as
our Company's policy has been to forward to the directors any shareholder
correspondence it receives that is addressed to them. Shareholders who wish to
communicate with our directors may do so by sending their correspondence
addressed to the director or directors at our Company's headquarters at 132 East
High Street, Jefferson City, Missouri 65101. As more fully described under
"Advance Notice Of Shareholder Proposals," our Company's articles of
incorporation and bylaws provide a mechanism for shareholders to use in
submitting nominations for Board membership. Our policy is to consider nominees
who are submitted in accordance with that mechanism. Each such nominee will be
considered on a case by case basis. All nominees, including those submitted by
shareholders, will be evaluated using generally the same methods and criteria,
although those methods and criteria are not standardized and may vary from time
to time.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
REPORT ON EXECUTIVE COMPENSATION
This report has been prepared by the Compensation Committee of our
Company's board of directors (the "Committee") which has general responsibility
for the establishment, direction and administration of all aspects of the
compensation policies and programs for the executive officers of our Company and
its affiliate banks. Under an agreement between our Company and Exchange
National Bank, employees of our Company and Exchange National Bank, including
persons who are employees of both our Company and Exchange National Bank, are
compensated as such by Exchange National Bank. Our Company's executive
compensation program, insofar as it pertains to the Chairman of the Board and
Chief Executive Officer (the "Chief Executive Officer") and the President (the
"President") of our Company, is administered by the Committee. The Committee is
composed of five independent outside directors, none of whom is an officer or
employee of our Company or any affiliate bank. Our Company's executive
compensation program, insofar as it pertains to executive officers other than
the Chief Executive Officer and the President, is administered by the Chief
Executive Officer and the President. Mr. James Smith, the Chief Executive
Officer, and certain other executive officers of our Company and affiliate
banks, may attend meetings of the Committee, but are not present during
discussions or deliberations regarding their own compensation.
COMPENSATION POLICY. Our Company's executive compensation policy is
premised upon three basic goals: (1) to attract and retain qualified individuals
who provide the skills and leadership necessary to enable our Company and its
affiliate banks to achieve earnings growth, capital compliance and return on
investment objectives, while maintaining a commitment to equal employment
opportunity and affirmative action guidelines and practices; (2) to create
incentives to achieve company and individual performance objectives through the
use of performance-based compensation programs; and (3) to create a mutuality of
interest between executive officers and shareholders through compensation
structures that create a direct link between executive compensation and
shareholder return.
In determining the structure and levels of each of the components of
executive compensation needed to achieve these goals, all elements of the
compensation package are considered in total, rather than any one component in
isolation. As more fully described below, the determination of such levels of
executive compensation is a subjective process in which many factors are
considered, including our Company's and/or affiliate banks' performance and the
individual executive's specific responsibilities, historical and anticipated
personal contribution to our business, and length of service with our Company or
affiliate banks.
COMPENSATION COMPONENTS. The Committee, as well as the Chief Executive
Officer and the President, reviews our Company's compensation program annually
to ensure that compensation levels and incentive opportunities are competitive
and reflect the performance of our Company and its affiliate banks as well as
performance of the individual executive officer. The particular elements of the
compensation program for executive officers are base salary, incentive
compensation and periodic stock option grants. The Committee believes that these
compensation components together advance both the short- and long-term interests
of our shareholders. In this regard, the Committee believes that the long-term
interests of our shareholders are advanced by designating a portion of executive
compensation to be at risk: namely, incentive compensation (which permits
individual performance to be recognized on an annual and long-term basis based,
in part, on an evaluation of the executive's contribution to our Company's
and/or affiliate bank's performance) and the grant of stock options (which
directly
7
ties a portion of the executive's long-term remuneration to stock price
appreciation realized by shareholders). Each of the components of the
compensation program is addressed separately below.
Base Salary. The base salary for each executive officer is reviewed from
the previous year. In determining whether to adjust base salary levels,
management's recommendations and subjective assessments of each executive's
growth and effectiveness in the performance of his or her duties are taken into
account. In addition, the performance of our Company and/or the affiliate bank
is considered. The increases in the base salaries of executives of our Company
and affiliate banks for 2004 were based primarily upon a subjective analysis of
our Company's and/or the banks' performance during the period since the last
salary increase and the individual executive's role in generating that
performance. In this regard, the analysis of performance included a review of
our Company's and/or affiliate bank's earnings and return on investment for the
prior year. The analysis of the role played by each individual executive in
generating our Company's and/or bank's performance included a consideration of
the executive's specific responsibilities, contributions to our Company's and/or
bank's business, and length of service. The factors impacting base salary levels
are not independently assigned specific weights. Rather, all of these factors
are reviewed, and specific base pay recommendations are made which reflect an
analysis of the aggregate impact of these factors. The Committee and the Chief
Executive Officer and the President believe that base pay levels for the
executive officers are maintained within a range that is considered to be
appropriate and necessary.
Incentive Compensation. After careful analysis of our Company's needs and
an examination of the competitive practices among peer companies, the Committee
recommended, and the full board of directors approved, the adoption of an
incentive bonus program. As a result, our Company's and affiliate banks'
officers are eligible to receive incentive bonus awards. Each of the officers
who are eligible to receive bonus awards are assigned to one of four bonus
tiers, which assignments are made primarily according to job category. Tier one
consists of the Chief Executive Officer. Tier two consists of our Company's
President and affiliate bank presidents. Tier three consists of senior officers
of our Company and affiliate banks. Tier four includes officers of affiliate
banks.
Officers identified by the Chief Executive Officer and the President and
the Committee are eligible to receive incentive bonuses. These officers may earn
annual awards only upon the achievement of performance objectives which are
established at the beginning of the year. Threshold, target and maximum levels
of awards are established, and no awards are paid if the threshold is not met.
The performance objectives are weighted based upon their relative importance to
each individual. The performance objectives for participants may include
corporate performance objectives and personal targeted objectives for
performance. The performance objectives may include functional or operating unit
objectives. Each participant's target bonus is expressed as a percentage of his
or her base salary, dependent on responsibility and function. The target award
is 30% of base salary in the case of the Chief Executive Officer, and in the
case of the Presidents, senior officers and other officers, the target award
ranges from 20% to 10% of base pay. Earned awards may range from 0% to 150% of
the target award. In 2004, the Committee granted an incentive bonus award of
$67,500, or 26% of base pay, to Mr. Smith for the 2003 fiscal year.
Incentive bonus awards to the Presidents are allocated based upon the
recommendation of the Chief Executive Officer. In allocating bonus awards among
the other participants, the Chief Executive Officer and our Company's President
exercise their discretion and judgment after considering the individual
participant's performance, responsibilities and contributions to our Company
and/or affiliate banks, and subjectively analyzing the basis of their aggregate
impact on the success of our Company and/or affiliate banks for the preceding
year.
Stock Options. The Committee believes that in order to enhance long-term
shareholder value it must provide incentives that provide motivation beyond
short-term results. In February 2000, our board of directors adopted, and our
shareholders subsequently approved, a stock option plan. The objective of stock
option grants is to advance the longer term interests of our Company and its
shareholders and complement incentives tied to annual performance by rewarding
executives upon the creation of incremental shareholder value. Stock options
only produce value to executives if the price of our Company' common stock
appreciates, thereby directly linking the interests of executives with those of
shareholders. Therefore, in order to provide long-term incentives to executive
officers and other employees related to long-term growth in the value of our
Company's common stock, it is intended that stock options be granted to such
persons under our Company' stock option plan. The selection of the persons
eligible to receive stock options and the designation of the number of stock
options to be granted to such persons are made by our Company's Compensation
Committee after taking into account management's assessment
8
of each person's relative level of authority and responsibility with the Bank,
years of service and base salary, among other factors.
COMPENSATION COMMITTEE
Philip D. Freeman David R. Goller Kevin L. Riley James R. Loyd Gus S. Wetzel, II
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Members of the Compensation Committee are Mr. Freeman, the Chairman, Mr.
Goller, Mr. Loyd, Mr. Riley and Dr. Wetzel, II. As discussed above under "Report
on Executive Compensation", in 2004 Mr. Smith, the Chief Executive Officer,
administered the executive compensation program insofar as it pertained to
executive officers other than the Chief Executive Officer. All decisions
relating to the compensation of executive officers are reviewed by, and subject
to the approval of, the Compensation Committee. Among the members of the banks'
board of directors, Mr. Smith and Mr. Turner are officers and employees of the
Company and affiliate banks.
None of the members of the Committee were an officer or employee of our
Company or any of its subsidiaries during 2004. Messrs. Loyd, Riley and Wetzel,
and certain corporations and firms in which such persons have interests, have
obtained loans from the affiliate banks. Each of such loans are believed to have
been made to such persons, corporations or firms in the ordinary course of
business, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, and did not involve more than the normal risk of collectability
or present other unfavorable features.
EXECUTIVE OFFICERS
Executive officers of our Company are appointed by the board of directors
and serve at the discretion of the Board. The following table sets forth certain
information with respect to all executive officers of our Company.
NAME AGE POSITION
---- --- --------
James E. Smith 60 Chairman, Chief Executive Officer and Director
David T. Turner 48 President and Director
Richard G. Rose 53 Treasurer
Kathleen L. Bruegenhemke 39 Senior Vice President and Secretary
The business experience of the executive officers of our Company (with the
exception of those executive officers previously described under the caption
"Election of Directors--Nominees and Directors Continuing in Office") during the
last five years is as follows:
Richard G. Rose has served as Treasurer of our Company since July 1998 and
as Senior Vice President and Controller of Exchange National Bank since July
1998. Prior to that he served as Senior Vice President and Controller of the
First National Bank of St. Louis from June 1979 until June 1998.
Kathleen L. Bruegenhemke has served as Senior Vice President and Secretary
of our Company since November 1997. From January 1992 until November 1997, she
served as Internal Auditor of Exchange National Bank. Prior to joining Exchange
National Bank, Ms. Bruegenhemke served as a Commissioned Bank Examiner for the
Federal Deposit Insurance Corporation.
There is no arrangement or understanding between any executive officer and
any other person pursuant to which such executive officer was selected as an
officer.
9
EXECUTIVE COMPENSATION
Our Company does not pay compensation to its officers. The following table
sets forth for the years ended December 31, 2004, 2003 and 2002, respectively,
the compensation paid or accrued by our Company's subsidiaries to the chief
executive officer of our Company in 2004 and the only other executive officers
whose remuneration for 2004 was in excess of $100,000 for services to our
Company and its subsidiaries in all capacities:
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
--------------------------------------------------
Other Annual Securities All Other
Name and Compen- Underlying Compen-
Principal Position Year Salary Bonus sation (1) Options/SARs sation (2)
------------------ ---- -------- --------- ------------ ------------ ----------
James E. Smith 2004 $272,000 $ 67,500 $ 0 7,376 $ 20,380
Chairman and 2003 $259,615 $ 62,500 $ 0 8,323 $ 12,981
CEO 2002 $221,138 $ 28,000 $ 0 7,500 $ 11,057
David T. Turner 2004 $196,252 $ 63,252 $ 0 5,458 $ 20,380
President 2003 $192,400 $ 46,250 $ 0 6,600 $ 29,785
2002 $175,326 $ 36,000 $ 0 7,758 $ 29,834
Richard G. Rose 2004 $102,661 $ 12,077 $ 0 1,428 $ 11,449
Treasurer 2003 $100,645 $ 17,252 $ 0 1,804 $ 17,620
2002 $ 95,846 $ 15,504 $ 0 2,541 $ 16,669
-------------
(1) Excludes perquisites and other benefits, unless the aggregate amount of
such compensation is equal to the lesser of either $50,000 or 10% of the
total of annual salary and bonus reported for the named executive officer.
(2) All Other Compensation includes (i) Citizens Union State Bank's
contributions to the Exchange National Bancshares, Inc. Profit-Sharing
401(k) Plan (and its predecessor plans) for 2004, 2003 and 2002 of
$20,380, $12,981 and $11,057, respectively, allocated to Mr. Smith's
account, and (ii) Exchange National Bank's contributions to the Exchange
National Bancshares, Inc. Profit-Sharing 401(k) Plan (and its predecessor
plans) for 2004, 2003 and 2002 of $20,380, $29,785 and $29,834,
respectively, allocated to Mr. Turner's account, and $11,449, $17,620 and
$16,669, respectively, allocated to Mr. Rose's account.
OPTION GRANTS
The following table sets forth information concerning grants of stock
options to each named executive officer during 2004.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
--------------------------
Percent of
Total Potential Realizable Value at
Number of Options Assumed Annual Rates of
Securities Granted to Stock Price Appreciation for
Underlying Employee Exercise or Option Term (3)
Options in Fiscal Base Price Expiration ------------------------------
Name Granted (1) Year ($/Share)(2) Date 0% 5% 10%
---- ----------- ----------- ------------ ---------- ------- ------- ----------
James E. Smith 7,376 (4) 27.83 35.25 2/19/14 0 163,526 414,384
David T. Turner 5,458 (5) 20.60 35.25 2/19/14 0 121,004 306,630
Richard G. Rose 1,428 (6) 5.39 35.25 2/19/14 0 31,659 80,225
--------------
(1) All stock options are incentive stock options.
10
(2) All grants were made at 100% of the fair market value as of the grant
date.
(3) The dollar amounts under these columns are the result of calculations
at the 5% and 10% assumed annual growth rates mandated by the
Securities and Exchange Commission and, therefore, are not intended to
forecast possible future appreciation, if any, in the common stock
price. The calculations were based on the exercise prices and the
10-year term of the options. No gain to the optionees is possible
without an increase in stock price which will benefit all shareholders
proportionately. The "Potential Realizable Value" to all Exchange
shareholders as a group which would result from the application of the
same assumptions to the 4,169,847 shares of common stock outstanding at
December 31, 2004, at the $28.87 per share fair market value of our
Company's common stock on the last trading day of 2004 is an
incremental gain of $0, $75,724,422 and $191,854,661 for 0%, 5% and
10%, respectively.
(4) These stock options vest with respect to 1,452 shares on the first
anniversary of the grant date, 252 shares on the third anniversary,
2,836 shares on the fourth anniversary and 2,836 shares on the fifth
anniversary.
(5) These stock options vest with respect to 1,317 shares on the third
anniversary of the grant date, 2,836 shares on the fourth anniversary,
1,305 shares on the fifth anniversary.
(6) These stock options vest 25% each year on the first four anniversaries
of the grant date.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to each named
executive officer concerning the exercise of options during 2004 and unexercised
options held as of December 31, 2004.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND DECEMBER 31, 2004
OPTION/SAR VALUES
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Shares Options/SARs at Money Options/SARs at
Acquired December 31, 2004 December 31, 2004(1)
on Value ---------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
--------------- -------- -------- ----------- ------------- ----------- -------------
James E. Smith -- -- 12,931 18,227 $ 140,866 $ 54,582
David T. Turner -- -- 13,495 14,847 $ 148,989 $ 52,239
Richard G. Rose -- -- 4,514 4,052 $ 49,016 $ 16,076
-------------------
(1) Based on the $28.87 per share fair market value of our Company's common
stock on the last trading day of 2004, less the option exercise price.
PROFIT-SHARING 401(k) PLAN
Exchange National Bank established a profit-sharing plan and trust in 1951
which has been amended and restated from time to time and was most recently
amended October 29, 2004.
Effective November 1, 2004, a 401(k) plan for the benefit of employees of
Citizens Union State Bank and a 401(k) plan for the benefit of employees of
Osage Valley Bank were merged into this profit-sharing plan. As a part of this
merger, the employees of Missouri State Trust and of Citizens State Bank of
Calhoun who had become employees of Citizens Union State Bank could also be
eligible to participate in the plan. The agreement for the merger of the plans
provided that the prior service of employees with a bank in the controlled group
would be counted back to date of acquisition for purposes of determining
eligibility and vesting. As a part of the merger of the plans, the sponsorship
of the profit-sharing plan was transferred to our Company from Exchange National
Bank, and the name of the plan was changed to "Exchange National Bancshares,
Inc. Profit-Sharing 401(k) Plan." The trustee of the profit-sharing plan was
changed from Exchange National Bank to Capital Bank and Trust Company, which is
an affiliate of American Funds.
In connection with the merger of the plans, the basic design of the
profit-sharing plan was changed in a few respects. All employees of the
controlled group of corporations (namely, Exchange National Bancshares, Exchange
11
National Bank, Citizens Union State Bank, and Osage Valley Bank) who have
completed one year of service and attained age 21 are eligible to participate in
the plan. The members of the controlled group may make a discretionary
contribution to the trust associated with the plan. In general, the
contributions by members of the controlled group to the trust for any given year
are allocated to the accounts of the participants in direct proportion to the
compensation of the participants for such year. There is, however, a special
allocation rule for contributions and forfeitures for the 2004 plan year in
order to take into account the circumstances of the merger of plans described
above. As of November 1, 2004 the plan permits eligible participants to make
elective deferrals up to a maximum dollar amount as set forth by law. These
deferrals and earnings thereon are fully vested. There is no employer match to
such deferrals.
Each participant may direct the trustee as to investment of his or her
account. At the direction of a participant, the trustee can "invest" assets in a
participant's account in our Company's common stock. Each participant may direct
the trustee with respect to the voting of shares of our Company's stock
allocated to his account on such matters upon which shareholders are entitled to
vote. As of March 1, 2005, the trust held 149,274 shares (or 3.58%) of our
Company's common stock.
The interest of a participant in employer contributions is subject to
graded vesting over five years. After five years a participant becomes fully
vested in the value of his or her employer contribution account. A participant
whose employment terminates because of his or her normal retirement, death, or
permanent disability is also fully vested. Payments are made to participants
upon termination of service. A participant may withdraw his or her own
contributions, but a participant may not borrow from the trust. The plan and the
trust is administered by a retirement committee which is appointed by our
Company's board of directors. As of December 31, 2004, the trust held assets
with an aggregate market value of $4,483,338.
STOCK OPTION PLAN
On February 29, 2000, our board of directors adopted the Exchange National
Bancshares, Inc. Incentive Stock Option Plan. The Plan is sponsored by our
Company for key employees of our Company and its subsidiaries, and is intended
to encourage such employees to participate in the ownership of our Company, and
to provide additional incentive for them to promote the success of our business
through sharing in the future growth of our business. As of March 1, 2005,
options to purchase a total of 125,391 shares of common stock pursuant to the
Plan were outstanding.
The Plan is administered by a committee composed of Messrs. Freeman,
Goller, Riley, Loyd and Wetzel. The Plan committee has the power to determine in
its discretion the persons to whom options are granted under the Plan, the
number of shares covered by those options, and the time at which an option
becomes exercisable, subject in each case to the limitations set forth in the
Plan. Options can be granted under the Plan only to key employees of our Company
or any of its subsidiary corporations. The eligibility of the persons to whom
options may be granted under the Plan is limited to those persons whom the Plan
committee determines have made, or are expected to make, material contributions
to the successful performance of our Company. The period of up to ten years
during which an option may be exercised, and the time at which it becomes
exercisable, are fixed by the Plan committee at the time the option is granted.
No option granted under the Plan is transferable by the holder other than by
will or the laws of descent and distribution.
The aggregate number of shares of our common stock that may be issued
pursuant to the exercise of options granted under the Plan is limited to 450,000
shares, subject to increase or decrease in the event of any change in our
Company's capital structure. As of March 1, 2005, options for 303,217 shares
remained available for grant under the Plan. Shares subject to options granted
under the Plan which expire or terminate without being exercised in full become
available, to the extent unexercised, for future grants under the Plan. No
consideration is paid to our Company by any optionee in exchange for the grant
of an option. The per share exercise price for an option granted under the Plan
is determined by the Plan committee but may not be less than the greater of the
par value or the fair market value of our common stock on the date that the
option is granted. The Plan provides for automatic adjustments to prevent
dilution or enlargement of the optionee's rights in the event of a stock split,
stock dividend, reorganization, merger, consolidation, liquidation, combination
or exchange of shares, or other change in the capital structure of our Company.
12
PENSION PLAN
Concurrently with the creation of the profit-sharing plan and trust in
1951, Exchange National Bank established a defined benefit plan for its
employees, which has been amended and restated from time to time, and was most
recently amended and restated effective January 1, 2002. Under the plan, all
full-time employees become participants on the earlier of the first of June or
the first of December coincident with or immediately following the later to
occur of (i) the completion of one year of service or (ii) the attainment of the
age of 21, and continue to participate so long as they continue to be full-time
employees, until their retirement, death or termination of employment prior to
normal retirement date. The plan has a five-year vesting schedule under which a
participant becomes fully vested in his accrued benefit after completing five
years of service. This plan provides for the payment of retirement and death
benefits that are funded by investments which, at December 31, 2004, had an
aggregate market value of $5,599,968.
The normal retirement benefits provided under the plan for an employee
with at least 25 years of continuous service are based upon 45% of his/her
average compensation over a ten-year period, less 50% of his social security
benefit. Compensation covered by the plan includes wages, salaries and overtime
pay but excludes directors' fees, commissions, bonuses, expense allowances, and
other extraordinary compensation. Amounts reported in the compensation table
include salaries, directors' fees, commissions and bonuses. For employees with
less than 25 years of continuous service, retirement benefits are reduced
proportionally. Provision is made for early or late retirement and optional
payment provisions are available.
The table below illustrates the projected amount of annual retirement
income, based on a straight line annuity, available under the plan for a person
retiring at 65 years of age at various levels of average annual compensation and
years of service classifications, with an assumed annual social security benefit
of $10,000.
AVERAGE TEN-
YEAR ANNUAL 10 YEARS 15 YEARS 20 YEARS 25 YEARS
COMPENSATION SERVICE SERVICE SERVICE SERVICE
------------ -------- -------- -------- --------
$ 50,000 $ 7,000 $ 10,000 $ 14,000 $ 17,500
100,000 16,000 24,000 32,000 40,000
150,000 25,000 37,500 50,000 62,500
200,000 34,000 51,000 68,000 85,000
The amounts shown above reflect benefits payable in the normal payment
form. For a married participant, payment is by monthly benefit to the
participant during his or her lifetime, and 50% of that amount is paid to the
spouse monthly during the spouse's life after the participant's death. For an
unmarried participant, payment is by a lifetime monthly benefit, with payments
guaranteed for the first 120 months.
Mr. Turner has 26 years of continuous service under the plan. Mr. Smith is
not a participant in the plan. Mr. Rose has 7 consecutive years of service.
SMITH EMPLOYMENT AGREEMENT
Our Company has entered into an employment agreement with James E. Smith.
The agreement had an initial three-year term which expired on November 3, 2000,
but is subject to automatic extensions of one additional year upon the
expiration of each year prior to Mr. Smith's 62nd birthday (unless either party
gives notice not to so extend the term). The agreement provides for an
annualized base salary of $110,000, and eligibility for merit-based increases.
In addition to base salary, the agreement also provides that Mr. Smith is
eligible to participate in bonus and other incentive compensation plans made
available to employees having responsibilities comparable to those of Mr. Smith.
Mr. Smith's employment is subject to early termination in the event of his
death, disability or adjudication of legal incompetence, and otherwise may be
terminated only for cause (as defined). The employment agreement prevents Mr.
Smith from competing with our Company, soliciting customers or hiring employees
during the term of the agreement and for a period of two years thereafter. In
addition, the employment agreement requires Mr. Smith to maintain the
confidentiality of our Company's confidential information prior to its
disclosure by our Company.
13
CHANGE OF CONTROL AGREEMENT
Our Company has entered into change of control agreements with 11
executive officers, including Messrs. Smith, Turner and Rose. These agreements
provide that if, within two years after a change in control (as defined below),
our Company or any subsidiary that is the primary employer of the executive
terminates the executive's employment other than by reason of the executive's
death, disability or for cause (as defined) or if the executive terminates his
or her employment for good reason (as defined), the executive will be entitled
to receive:
- an amount equal to one to three years' of the executive's salary
(based on the executive's highest monthly base salary for the
preceding twelve-month period);
- an amount equal to one to three times the executive's incentive
bonus for the preceding year;
- the proportionate amount of any incentive bonus and other
compensation, payments and benefits which would otherwise have been
received by the executive for the year in which employment was
terminated; and
- any accrued and unpaid vacation pay.
The total payments made under the change of control agreements and under any
other agreements, plans or arrangements as a result of a change in control is
not permitted to be in excess of 5% of the aggregate cash consideration that our
shareholders would receive as a result of a change of control. Our Company will
reimburse the executive for any excise taxes that result from any of such
payments being considered "excess parachute payments" under Section 280G of the
Internal Revenue Code of 1986, and will make a gross-up payment to reimburse the
executive for any income or other tax attributable to the excess parachute
payment and to the tax reimbursement payments themselves. The change of control
agreements require the executives to maintain the confidentiality of our
confidential information prior to its disclosure by our Company.
A "change in control" generally is defined to take place when (a) a person
or group (other than our Company and various affiliated persons or entities)
becomes the beneficial owner, directly or indirectly, of 50% or more of the
total voting power of our Company's outstanding securities, (b) our shareholders
approve a merger or consolidation involving our Company in which at least 50% of
the total voting power of the voting securities of the surviving corporation is
held by persons who were not previously shareholders of our Company, or (c) our
shareholders approve a plan of complete liquidation of our Company or an
agreement for the sale or disposition by our Company of all or substantially all
of its assets.
COMPANY PERFORMANCE
The following performance graph shows a comparison of cumulative total
returns for our Company, the Nasdaq Stock Market (U.S. Companies) and a peer
index of financial institutions having total assets of between $500 million and
$1 billion (as calculated by SNL Securities LC) for the period from January 1,
2000, through December 31, 2004. The cumulative total return on investment for
each of the periods for our Company, the Nasdaq Stock Market (U.S. Companies)
and the peer index is based on the stock price or index at January 1, 2000. The
performance graph assumes that the value of an investment in our Company's
common stock and each index was $100 at January 1, 2000 and that all dividends
were reinvested. The information presented in the performance graph is
historical in nature and is not intended to represent or guarantee future
returns.
14
[TOTAL RETURN PERFORMANCE LINE GRAPH]
The comparison of cumulative total returns presented in the above graph was
plotted using the following index values and common stock price values:
12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
-------- -------- -------- -------- -------- --------
Exchange National Bancshares $100.00 $79.98 $ 92.59 $122.71 $203.62 $166.78
Nasdaq Stock Market (U.S.
Companies) $100.00 $60.82 $ 48.16 $ 33.11 $ 49.93 $ 54.49
Peer Index $100.00 $95.72 $124.18 $158.54 $228.61 $259.07
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of March 1, 2005
regarding the beneficial ownership of our Company's common stock by each person
known to the board of directors to own beneficially 5% or more of our Company's
common stock, by each director of our Company, by each executive officer named
in the Summary Compensation Table under "Executive Officers and
Compensation--Executive Compensation" and by all directors and officers of our
Company as a group. All information with respect to beneficial ownership has
been furnished by the respective directors, officers or 5% or more shareholders,
as the case may be.
15
AMOUNT AND NATURE OF PERCENTAGE OF
NAME BENEFICIAL OWNERSHIP(1) SHARES OUTSTANDING(1)
---- ----------------------- ---------------------
Donald L. Campbell (2) 215,589.00 5.2%
Charles G. Dudenhoeffer, Jr. (3) 51,256.00 1.2
Philip D. Freeman (4) 30,000.00 *
David R. Goller (5) 60,813.00 1.5
James R. Loyd 96,597.00 2.3
Kevin L. Riley (6) 7,400.00 *
James E. Smith (7) 36,681.90 *
David T. Turner (8) 42,017.53 1.0
Gus S. Wetzel, II (9) 62,058.92 1.5
Richard G. Rose (10) 8,895.42 *
All directors & executive officers
as a group (10 persons) (11) 411,584.79 9.8
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and/or investment power with respect to those securities. Unless otherwise
indicated, the persons or entities identified in this table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them. Percentage ownership calculations are based on
4,169,847 shares of common stock outstanding.
(2) Includes 155,178 shares owned of record by Campbell Family L.P., and
55,699 shares held in the Donald L. Campbell Trust under agreement dated
September 27, 1997, and 4,712 shares owned solely by Mr. Campbell. Mr.
Campbell has sole voting and investment power over all the shares owned.
The address for Mr. Campbell is 601 Eagle Trace, Jefferson City, Missouri
65109. Information obtained from Mr. Campbell's Schedule 13G/A dated
February 10, 2005.
(3) Includes 18,450 shares held of record by Mr. Dudenhoeffer as co-trustee of
a trust for his spouse's benefit. Mr. Dudenhoeffer and his spouse share
voting and investment power with respect to the 18,450 shares.
(4) All 30,000 shares are held of record by a revocable living trust, of which
Mr. Freeman is a trustee, for the benefit of Mr. Freeman and his spouse.
(5) Includes 29,154 shares held of record by Mr. Goller as trustee of the
David R. Goller Trust. Also includes 11,155 shares held of record by the
Goller, Gardner & Feather, P.C. Profit Sharing Trust, of which Mr. Goller
is trustee, and 20,504 shares held of record by two family trusts for
which he acts as sole trustee.
(6) Includes 7,400 shares held jointly by Mr. Riley and his spouse, as to
which they share voting and investment power.
(7) Includes 16,298.07 shares held jointly by Mr. Smith and his spouse, as to
which they share voting and investment power, and 17,481 shares issuable
upon the exercise of outstanding stock options.
(8) Includes 2,099.56 shares held jointly by Mr. Turner and his spouse,
17,490.41 shares held in the Exchange National Bancshares, Inc.
Profit-Sharing 401(k) Plan for his benefit and 16,526 shares issuable upon
the exercise of outstanding stock options. Mr. Turner and his spouse share
voting and investment power with respect to 2,099.56 shares.
(9) Includes 61,994 shares held by Wetzel Investments, Ltd.
(10) Includes 786.94 shares held jointly by Mr. Rose and his spouse, 2,150.72
shares held in the Exchange National Bancshares, Inc. Profit-Sharing
401(k) Plan for his benefit and 5,958 shares issuable upon the exercise of
outstanding stock options. Mr. Rose and his spouse share voting and
investment power with respect to 786.94 shares.
(11) Includes 44,762 shares issuable upon the exercise of outstanding stock
options.
16
TRANSACTIONS WITH DIRECTORS AND OFFICERS
As part of the consideration provided by our Company for its November 1997
acquisition of Union State Bancshares, Inc. and Union State Bank, our Company
issued a promissory note to James E. Smith in the principal amount of
$2,000,000, a promissory note to Gus S. Wetzel, II in the principal amount of
$5,000,000, and four promissory notes to Mr. Wetzel's children in the aggregate
principal amount of $892,472. The six promissory notes each matured on November
1, 2002, with quarterly installments of accrued interest being made on each
February 1, May 1, August 1 and November 1 of the loan term at the rate of 7%
per annum. Upon maturity, the six notes were renewed through January 1, 2004 at
a variable rate of interest tied to the London interbank offered rate (LIBOR).
The promissory notes, and one other promissory note issued to a former
shareholder of Union, were secured by Union's pledge of the shares of Union
State Bank capital stock owned by it. On January 1, 2004, all outstanding
promissory notes were paid in full.
The officers and directors of our Company and of its subsidiaries, some of
their family members and our Companies with which some of the directors are
associated, were customers of, and had banking transactions with, Exchange
National Bank, Citizens Union State Bank and Osage Valley Bank in the ordinary
course of Exchange National Bank's, Citizens Union State Bank's and Osage Valley
Bank's respective businesses during 2004. During that year Exchange National
Bank, Citizens Union State Bank and Osage Valley Bank each continued its policy
of making loans and loan commitments in the ordinary course of business to its
employees, officers and directors, and their affiliates, only on substantially
the same terms, including interest rates, collateral and repayment terms, as
those prevailing at the time for comparable transactions with other persons. In
the opinion of the board of directors of Exchange National Bank, Citizens Union
State Bank and of Osage Valley Bank, respectively, none of its transactions with
such persons involved more than a normal risk of collectability or other
unfavorable features.
Jeffrey C. Smith, the son of James E. Smith, our Company's Chairman of the
Board and Chief Executive Officer, is employed by Citizens Union State Bank as
the Senior Vice President of its Lee's Summit branch. Sarah C. Wagoner, the
daughter of James E. Smith, also is employed by Citizens Union State Bank. The
salary, bonus and other benefits provided to Jeffrey Smith and Sarah Wagoner
during 2004 were comparable to those provided to other similarly situated
employees of our Company and its affiliated banks.
ITEM 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of our board of directors has selected the independent
certified public accounting firm of KPMG LLP as our Company's independent
auditors to audit the books, records and accounts of our Company for the year
ending December 31, 2005. Shareholders will have an opportunity to vote at the
annual meeting on whether to ratify the Audit Committee's decision in this
regard.
KPMG LLP has served as our Company's independent auditors since our
Company commenced business operations in 1993. A representative of KPMG LLP is
expected to be present at the annual meeting. Such representative will have an
opportunity to make a statement if he or she desires to do so and will be
available to respond to appropriate questions.
Submission of the selection of the independent auditors to the
shareholders for ratification will not limit the authority of the Audit
Committee to appoint another independent certified public accounting firm to
serve as independent auditors if the present auditors resign or their engagement
otherwise is terminated. Shareholder ratification of the Audit Committee's
selection of KPMG LLP as our Company's independent auditors is not required by
any statute or regulation or by our Company's bylaws. Nevertheless, if the
shareholders do not ratify the selection of KPMG LLP at the annual meeting, the
selection of independent auditors for the current year will be reconsidered by
the Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
SELECTION OF KPMG LLP.
17
INDEPENDENT AUDITORS' FEES
The following table presents fees for professional audit services rendered
by KPMG LLP for the audit of our Company's annual financial statements for 2003
and 2004, and fees billed for other services rendered by KPMG LLP during such
years.
Type of Fee 2003 2004
---------------------- -------- --------
Audit Fees (1) $ 86,800 $224,500
Audit-Related Fees (2) 19,900 18,000
Tax Fees (3) 35,725 107,625
All Other Fees 0 0
-------- --------
Total $142,425 $350,125
======== ========
----------
(1) Audit Fees, including those for statutory audits, include the aggregate
fees paid by us during 2003 and 2004 for professional services rendered by
KPMG LLP for the audit of our annual financial statements and the review
of financial statements included in our quarterly reports on Form 10-Q.
2004 includes the audit of internal control over financial reporting as
required by Sarbanes-Oxley legislation.
(2) Audit Related Fees include the aggregate fees paid by us during 2003 and
2004 for assurance and related services by KPMG LLP that are reasonably
related to the performance of the audit or review of our financial
statements and not included in Audit Fees, including the audits of the
company's employee benefit plans.
(3) Tax Fees include the aggregate fees paid by us during 2003 and 2004 for
professional services rendered by the principal accountant for tax
compliance, tax advice and tax planning.
AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES
Pursuant to its charter, the Audit Committee of our board of directors is
responsible for reviewing and approving, in advance, any audit and any
permissible non-audit engagement or relationship between our Company and its
independent auditors. Our engagement of KPMG LLP to conduct the audit of our
Company for 2004 was approved by the Audit Committee on February 3, 2004.
Additionally, each permissible non-audit engagement or relationship between our
Company and KPMG LLP entered into since January 1, 2004 has been reviewed and
approved by the Audit Committee. The percentage of audit-related fees, tax fees
and all other fees that were approved by the Audit Committee for fiscal 2004 is
100% of the total fees incurred. We have been advised by KPMG LLP that
substantially all of the work done in conjunction with its audit of our
financial statements for the most recently completed fiscal year was performed
by permanent full time employees and partners of KPMG LLP.
AUDIT COMMITTEE REPORT TO SHAREHOLDERS
The Audit Committee of our board of directors assists the Board in
fulfilling its responsibilities with respect to accounting and financial
reporting practices and the scope and expense of audit and related services
provided by external auditors, among others. The Audit Committee is composed of
five directors. All committee members satisfy the definition of an "independent"
director as established in the National Association of Securities Dealers
listing standards, and the Board of Directors has determined that Messrs. Goller
and Loyd qualify as "audit committee financial experts" within the meaning of
the rules and regulations of the Securities and Exchange Commission. The Audit
Committee has adopted a written charter. In connection with the review and
reassessment of the adequacy of the Audit Committee's charter by the members of
the Audit Committee and management, the Audit Committee revised the Audit
Committee charter on June 11, 2003. A copy of the revised Audit Committee
charter was attached to the proxy statement with respect to the 2004 annual
meeting of shareholders. On June 9, 2004, the charter was reviewed and approved
without change by the Audit Committee.
18
In connection with these responsibilities, the Audit Committee reviewed,
and met with management to discuss, the December 31, 2004 financial statements.
The Audit Committee also discussed with the independent accountants the matters
required by Statement on Auditing Standards No. 61, Codification of Statements
on Auditing Standards. The Audit Committee received written disclosures from the
independent accountants required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and the Audit Committee
discussed with the independent accountants that firm's independence. The Audit
Committee has considered whether the services provided under financial
information systems design and implementation and other non-audit services are
compatible with maintaining the independence of KPMG LLP.
Based upon the Audit Committee's discussions with management and the
independent accountants, and the Audit Committee's review of the representations
of management, the Audit Committee recommended that the board of directors
include the audited consolidated financial statements in the Company's Annual
Report on Form 10-K for the year ended December 31, 2004, to be filed with the
Securities and Exchange Commission.
AUDIT COMMITTEE
Philip D. Freeman David R. Goller Kevin L. Riley James R. Loyd Gus S. Wetzel, II
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
Company's directors and executive officers, and persons who own more than 10% of
any class of equity securities of our Company registered pursuant to Section 12
of the Exchange Act, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership in such securities and
other equity securities of our Company. Securities and Exchange Commission
regulations require directors, executive officers and greater than 10%
shareholders to furnish our Company with copies of all Section 16(a) reports
they file.
To our Company's knowledge, based solely on review of the copies of such
reports furnished to our Company and written representations that no other
reports were required, during the year ended December 31, 2004, all Section
16(a) filing requirements applicable to its directors, executive officers and
greater than 10% shareholders were complied with on a timely basis, except that
Mr. Smith was late in filing a change in beneficial ownership on Form 4 which
reported three transactions totaling 200 shares.
OTHER BUSINESS OF THE MEETING
The board of directors is not aware of, and does not intend to present,
any matter for action at the annual meeting other than those referred to in this
proxy statement. If, however, any other matter properly comes before the annual
meeting or any adjournment, it is intended that the holders of the proxies
solicited by the board of directors will vote on such matters in their
discretion in accordance with their best judgment.
ANNUAL REPORT
Our Company's Annual Report to Shareholders, containing consolidated
financial statements for the year ended December 31, 2004, is being mailed with
this proxy statement to all shareholders entitled to vote at the annual meeting.
Such Annual Report is not to be regarded as proxy solicitation material.
A COPY OF OUR COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2004, EXCLUDING EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY
SHAREHOLDER OF RECORD AS OF APRIL 1, 2005, UPON WRITTEN REQUEST TO KATHLEEN L.
BRUEGENHEMKE, EXCHANGE NATIONAL BANCSHARES, INC., 132 EAST HIGH STREET,
JEFFERSON CITY, MISSOURI 65101. Our Company will provide a copy of any exhibit
to the Form 10-K report to any such person upon written request and the payment
of our Company's reasonable expenses in furnishing such exhibits. You may read
and download our Form 10-K, including exhibits, as well as our other SEC filings
over the internet from several commercial document retrieval services as well as
at the SEC's internet website (www.sec.gov).
19
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries
(including brokers) to satisfy the delivery requirements for proxy statements
and annual reports with respect to two or more shareholders sharing the same
address by delivering a single proxy statement addressed to those shareholders.
This process, which is commonly referred to as "householding," potentially means
extra convenience for shareholders and cost savings for companies.
This year, a number of brokers with account holders who are shareholders
of our Company will be "householding" our proxy materials. A single proxy
statement may be delivered to multiple shareholders sharing an address unless
contrary instructions have been received from one or more of the affected
shareholders. Once you have received notice from your broker that it will be
"householding" communications to your address, "householding" will continue
until you are notified otherwise or until you notify your broker or us that you
no longer wish to participate in "householding." If, at any time, you no longer
wish to participate in "householding" and would prefer to receive a separate
proxy statement and annual report in the future you may (1) notify your broker,
(2) direct your written request to: Kathleen L. Bruegenhemke, Exchange National
Bancshares, Inc., 132 East High Street, Jefferson City, MO 65101, or (3) contact
Kathleen L. Bruegenhemke at (573) 761-6179. Shareholders who currently receive
multiple copies of the proxy statement at their address and would like to
request "householding" of their communications should contact their broker. In
addition, we will promptly deliver, upon written or oral request to the address
or telephone number above, a separate copy of the annual report and proxy
statement to a shareholder at a shared address to which a single copy of the
documents was delivered.
SHAREHOLDER PROPOSALS FOR 2006 ANNUAL MEETING
It is anticipated that the 2006 annual meeting of shareholders will be
held on June 14, 2006. Any shareholder who intends to present a proposal at the
2006 annual meeting must deliver the proposal to our Company at 132 East High
Street, Jefferson City, Missouri 65101, Attention: President by the applicable
deadline below:
- If the shareholder proposal is intended for inclusion in our Company's
proxy materials for that meeting pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, our Company must receive the proposal no
event later than December 28, 2005. Such proposal must also comply with
the other requirements of the proxy solicitation rules of the Securities
and Exchange Commission.
- If the shareholder proposal is to be presented without inclusion in our
Company's proxy materials for that meeting, our Company must receive the
proposal no event later than April 9, 2006 in accordance with the advance
notice provisions of our Company's articles of incorporation and bylaws.
See "Advance Notice of Shareholder Proposals."
Proxies solicited in connection with the 2006 annual meeting of shareholders
will confer on the appointed proxies discretionary voting authority to vote on
shareholder proposals that are not presented for inclusion in the proxy
materials unless the proposing shareholder notifies our Company by April 9, 2006
that such proposal will be made at the meeting.
ADVANCE NOTICE OF SHAREHOLDER PROPOSALS
Our Company's articles of incorporation and bylaws provide that advance
notice of shareholder nominations for the election of directors or other
business must be given. With respect to this annual meeting, written notice of
the shareholder's intent to make a nomination at the meeting must be received by
our Company's Secretary at our Company's principal executive offices not later
than the close of business on May 10, 2005. At future meetings of shareholders,
notice of nominations or other business to be brought before the meeting must be
delivered to our Company's Secretary at our principal executive offices not less
than 60 days (30 days in the case of nominations for the election of directors)
prior to the first anniversary of the previous year's annual meeting. In the
event that the date of the annual meeting of shareholders is advanced by more
than 30 days or delayed by more than 60 days from such anniversary date,
however, notice by the shareholder to be timely must be so delivered not later
than the close of business on the later of (i) the 60th day (in the case of
nominations, the 30th day) prior to such
20
annual meeting or (ii) the tenth day following the date on which public
announcement of the date of such meeting is first made.
The shareholder's notice of nomination must contain (i) the name and
address of the nominating shareholder, of each person to be nominated and of the
beneficial owner (as defined in the articles of incorporation), if any, on whose
behalf the nomination is made, (ii) a representation that the nominating
shareholder is the holder of record of our Company's common stock entitled to
vote in the election of directors at the meeting and intends to appear at the
meeting to nominate the person or persons specified in the notice, (iii) the
number of shares of our Company's common stock owned beneficially and of record
by the nominating shareholder and by each person to be nominated, (iv) a
description of all arrangements or understandings between the nominating
shareholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the shareholder, (v) the consent of each nominee to serve as a director if so
elected, and (vi) such other information regarding each nominee proposed by the
nominating shareholder as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission, as
then in effect, if our Company were soliciting proxies for the election of such
nominees. If no such notice has been received, the chairman of the annual
meeting is entitled to refuse to acknowledge the nomination of any person which
is not made in compliance with the foregoing procedure. The board of directors
does not know if, and has no reason to believe that, anyone will attempt to
nominate another candidate for director at this annual meeting.
By Order of the Board of Directors
James E. Smith
Chairman of the Board
and Chief Executive Officer
April 27, 2005
Jefferson City, Missouri
21
A-1
P R O X Y
ANNUAL MEETING OF THE SHAREHOLDERS
OF
EXCHANGE NATIONAL BANCSHARES, INC.
JUNE 8, 2005
The undersigned hereby appoints William H. Case and Sam S. Phillips, and
each of them, jointly and severally, the agents and proxies of the undersigned,
each with full power of substitution, to attend the Annual Meeting of the
Shareholders of Exchange National Bancshares, Inc. (the "Company") to be held at
The Exchange National Bank of Jefferson City's facility located at 132 East High
Street, Jefferson City, Missouri, on Wednesday, June 8, 2005, commencing at 9:00
a.m., local time, and any adjournment thereof (the "Meeting"), and to vote all
of the stock of the Company, standing in the name of the undersigned on its
books as of the close of business on April 1, 2005, and which the undersigned
would be entitled to vote, if present, with the same force and effect as if
voted by the undersigned and especially to vote said stock with respect to the
following matters:
1. ELECTION OF THREE CLASS I DIRECTORS.
(INSTRUCTIONS: To vote FOR, or to WITHHOLD AUTHORITY to vote for (i.e.,
AGAINST) any individual nominee named below, mark the appropriate box next
to each such nominee's name. Please mark only one box next to each such
name.)
FOR the WITHHOLD AUTHORITY
nominee to vote for the nominee
|_| |_| Charles G. Dudenhoeffer, Jr.
|_| |_| Philip D. Freeman
|_| |_| James E. Smith
2. Proposal to ratify the selection of the accounting firm of KPMG LLP
as the Company's independent auditors for the current year.
|_| FOR |_| AGAINST |_| ABSTAIN
3. Such other matters, related to the foregoing or otherwise, as
properly may come before said Meeting or any adjournment thereof. The Board
of Directors has advised that at present it knows of no other business to
be presented by or on behalf of the Company or its management at the
Meeting.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement, dated April 27, 2005.
Dated: ___________________, 2005 ________________________________________
No. of Shares:
________________________________________
_______________________ (Sign exactly as your name appears on
your stock certificate. Where shares are
held in the name of two or more persons,
all should sign individually. A
corporation should sign by authorized
officer and affix corporate seal.)
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE THREE (3) PERSONS LISTED ABOVE AS
CLASS I DIRECTORS OF THE COMPANY FOR THE NEXT THREE YEARS, AND FOR THE
RATIFICATION OF THE SELECTION OF THE ACCOUNTING FIRM OF KPMG LLP AS THE
COMPANY'S INDEPENDENT AUDITORS. IN THEIR DISCRETION, THE APPOINTED PROXIES AND
AGENTS ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY BE
PRESENTED AT THE MEETING. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS AND MAY BE REVOKED PRIOR TO ITS EXERCISE.