SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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STIFEL FINANCIAL CORP.
(Name of Registrant as Specified in Its Charter)
(Name of Person Filing Proxy Statement if other than the Registrant)
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Stifel Financial Corp.
One Financial Plaza
501 North Broadway
St. Louis, Missouri 63102-2102
April 11, 2003
Dear Stockholder:
We cordially invite you to attend Stifel Financial Corp.'s annual stockholders' meeting. The meeting will be held on Monday, May 12, 2003, at 11 a.m. in the Founders Hall, 2nd Floor, One Financial Plaza, 501 North Broadway, St Louis, Missouri. One Financial Plaza is located on the southwest corner of Washington and Broadway in downtown St. Louis.
At the meeting, stockholders will vote on a number of important matters. Please take the time to carefully read each of the proposals described in the attached proxy statement.
Thank you for your support of Stifel.
Sincerely,
/s/ Ronald J. Kruszewski |
Ronald J. Kruszewski |
Chairman of the Board |
and Chief Executive Officer |
_____________________________________________________________________________________
This proxy statement and the accompanying proxy card are being mailed to
Stifel stockholders beginning about April 11, 2003.
STIFEL FINANCIAL CORP.
ONE FINANCIAL PLAZA
501 NORTH BROADWAY
ST. LOUIS, MISSOURI 63102-2102
(314) 342-2000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 12, 2003
Dear Stockholder:
The annual meeting of stockholders of Stifel Financial Corp. will be held in the Founders Hall, 2nd Floor, One Financial Plaza, 501 North Broadway, St. Louis, Missouri, on Monday, May 12, 2003, at 11:00 a.m., for the following purposes:
1. | To elect three Class II directors to hold office for a term of three years or until their successors shall have been duly elected and qualified; |
2. | To approve and adopt the amendment and restatement of the Stifel Financial Corp. 2001 Incentive Stock Plan; |
3. | To ratify the appointment of Deloitte & Touche LLP as independent auditors for 2003; and |
4. | To consider and act upon such other business as may properly come before the meeting and any adjournment thereof. |
Our board of directors has fixed the close of business on March 17, 2003 as the record date for the determination of stockholders entitled to receive notice of and to vote at the annual meeting and any adjournment thereof. A stockholder list dated as of the record date will be available for inspection by any stockholder at our offices in St. Louis, Missouri for ten days prior to the annual meeting.
We cordially invite you to attend the annual meeting. Even if you plan to be present at the meeting in person, you are requested to date, sign and return the enclosed proxy card in the envelope provided so that your shares will be represented. The mailing of an executed proxy card will not affect your right to vote in person should you later decide to attend the annual meeting.
By Order of the Board of Directors |
/s/ Marcia J. Kellams |
Marcia J. Kellams, Secretary |
April 11, 2003 |
St. Louis, Missouri |
ABOUT THE ANNUAL MEETING
WHO IS SOLICITING MY VOTE?
Our board of directors is soliciting your vote at the 2003 annual meeting of stockholders.
WHAT WILL I BE VOTING ON?
- Election of directors (see page 6).
- Approval and adoption of the amendment and restatement of our 2001 Incentive Stock Plan (see page 16).
- Ratification of Deloitte & Touche LLP as our independent auditors for 2003 (see page 22).
HOW MANY VOTES DO I HAVE?
You will have one vote for every share of common stock you owned on the record date, March 17, 2003, for each of the directors to be elected and on each proposal presented at the annual meeting. There is no cumulative voting in the election of directors.
HOW MANY VOTES CAN BE CAST BY ALL STOCKHOLDERS?
7,101,577, consisting of one vote for each of the shares of common stock that were outstanding on the record date.
HOW MANY VOTES MUST BE PRESENT TO HOLD THE MEETING?
3,550,789 votes, which represents a majority of the votes that can be cast at the annual meeting. We urge you to vote by proxy even if you plan to attend the annual meeting so that we will know as soon as possible that enough votes will be present for us to hold the meeting.
DOES ANY SINGLE STOCKHOLDER CONTROL AS MUCH AS 5 PERCENT OF ANY CLASS OF STIFEL'S COMMON STOCK?
There are five stockholders that beneficially own over 5 percent of our common stock (see page 5).
HOW DO I VOTE?
You can vote either by proxy with or without attending the annual meeting or in person at the annual meeting.
To vote by proxy, you must either:
- If your shares are registered in your name at UMB Bank, n.a. (our transfer agent), you must fill out the enclosed proxy card, date and sign it, and return it in the enclosed postage-paid envelope.
- If you hold your stock through a securities broker (that is, in street name), you must either:
- fill out the enclosed proxy card, date and sign it, and return it in the enclosed postage-paid envelope,
- vote by telephone (instructions are on the proxy card), or
- vote by Internet (instructions are on the proxy card).
Our employees who participate in our employee benefit plans may vote on our Intranet or may have their proxy card mailed to them.
If you want to vote in person at the annual meeting, and you hold your stock through a securities broker (that is, in street name), you must obtain a proxy from your broker and bring that proxy to the meeting.
CAN I CHANGE MY VOTE?
Yes. Just send in a new proxy card with a later date, or cast a new vote by telephone, Internet or Intranet, or send a written notice of revocation to our corporate secretary at the address on the cover of this proxy statement. If you attend the annual meeting and want to vote in person, you can request that your previously submitted proxy not be used.
WHAT IS THE VOTE REQUIRED TO ELECT DIRECTORS OR TO APPROVE THE TWO PROPOSALS?
- A plurality of votes cast is required to elect directors, therefore, the three nominees receiving the highest vote totals will be elected as directors.
- Approval and adoption of the amendment and restatement of our 2001 Incentive Stock Plan requires a majority of votes cast on the proposal, provided that the total vote cast on the proposal represents over 50 percent of our outstanding shares.
- Ratification of Deloitte & Touche LLP as our independent auditors for 2003 requires that a majority of the shares present at the annual meeting be cast in favor of the ratification.
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WHAT IF I DON'T VOTE FOR SOME OF THE MATTERS LISTED ON MY PROXY CARD?
If you return a proxy card without indicating your vote, your shares will be voted for all of the nominees listed on the card, in favor of the amendment and restatement of our 2001 Incentive Stock Plan and in favor of the ratification of the appointment of Deloitte & Touche LLP as our auditors for 2003.
WHAT IF I VOTE "WITHHOLD AUTHORITY" OR "ABSTAIN"?
Shares voted to "withhold authority" in the election of directors will be deemed to be present at the meeting but not voted for a nominee. A vote to "abstain" on the proposal to approve and adopt the amendment and restatement of our 2001 Incentive Stock Plan or the proposal to ratify Deloitte & Touche LLP as our independent auditors for 2003 will be counted as a share present at the meeting and will have the effect of a vote against the proposal.
CAN MY SHARES BE VOTED IF I DON'T RETURN MY PROXY CARD AND DON'T ATTEND THE ANNUAL MEETING?
If you don't vote your shares held in street name, your broker can vote your shares on any routine matter scheduled to come before the meeting.
The election of directors and the ratification of auditors are typically considered routine matters for voting purposes. If your broker does not have discretion to vote your shares held in street name on a particular proposal and you don't give your broker instructions on how to vote your shares, the votes will be broker "non-votes," and will not be voted. If you don't vote your shares held in your name, your shares will not be voted.
COULD OTHER MATTERS BE DECIDED AT THE ANNUAL MEETING?
We don't know of any other matters that will be considered at the annual meeting. If a stockholder proposal that was excluded from this proxy statement is brought before the meeting, we will vote the proxies against the proposal. If any other matters arise at the annual meeting, the proxies will be voted at the discretion of the proxy holders.
WHAT HAPPENS IF THE MEETING IS POSTPONED OR ADJOURNED?
Your proxy will still be good and may be voted at the postponed or adjourned meeting.
HOW CAN I ACCESS STIFEL'S PROXY MATERIALS AND ANNUAL REPORT ELECTRONICALLY?
This proxy statement and the 2002 annual report are available on our Internet site atwww.stifel.com. Most stockholders can elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies in the mail.
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STIFEL FINANCIAL CORP.
501 NORTH BROADWAY
ST. LOUIS, MISSOURI 63102
(314) 342-2000
PROXY STATEMENT
For Annual Meeting of Stockholders to be
Held on Monday, May 12, 2003
GENERAL
This proxy statement is furnished in connection with the solicitation of proxies by the board of directors of Stifel Financial Corp. for use at the annual meeting of stockholders to be held on Monday, May 12, 2003, at 11:00 a.m., in the Founders Hall, 2nd Floor, One Financial Plaza, 501 North Broadway, St. Louis, Missouri, and any adjournment thereof, for the purposes set forth in the accompanying notice of annual meeting of stockholders.
This proxy statement, the notice of annual meeting and the accompanying proxy card were first mailed to our stockholders on April 11, 2003.
All proxies will be voted in accordance with the instructions contained in the proxy. If no choice is specified, proxies will be voted in favor of the election of each of the nominees for director proposed by the board of directors in Proposal I, in favor of the amendment and restatement of our 2001 Incentive Stock Plan in Proposal II and in favor of the ratification of the appointment of Deloitte & Touche LLP as our independent auditors for 2003 in Proposal III, each as recommended by the board of directors. A stockholder who executes a proxy may revoke it at any time before it is voted by delivering another proxy to us bearing a later date, by submitting written notice of such revocation to the corporate secretary or by personally appearing at the annual meeting and casting a vote in person.
A plurality of the votes cast is required for the election of directors, which means that the three nominees for director receiving the highest vote totals will be elected as directors. As a result, a designation on the proxy that the stockholder is "withholding authority" to vote for any or all nominees does not have an effect on the results of the vote for the election of directors, although shares voted in this manner will be considered as present for quorum purposes. Each share will have one vote for the election of each director. There is no cumulative voting in the election of directors.
The approval of the amendment and restatement of our 2001 Incentive Stock Plan requires the affirmative vote of a majority of votes cast on the proposal, provided that the total vote cast on the proposal represents over 50 percent of our outstanding shares. Therefore, shares subject to abstention will be considered as present for quorum purposes and will have the effect of a vote against this proposal. A broker "non-vote" will have no effect on this proposal.
The ratification of the appointment of Deloitte & Touche LLP as our independent auditors requires the affirmative vote of a majority of the shares present and entitled to vote at the meeting. For purposes of determining the vote required for the approval of this matter, abstentions and broker "non-votes" will be treated as present and entitled to vote on such matter. Therefore, abstentions and broker "non-votes" will have the effect of a vote against the ratification of Deloitte & Touche LLP as auditors. A broker "non-vote" occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner. Broker "non-votes" are counted for purposes of determining whether a quorum exists only if such shares are voted on a matter presented at the meeting.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The close of business on March 17, 2003 has been fixed as the record date for the determination of stockholders entitled to notice of and to vote at the annual meeting. On March 17, 2003, there were 7,101,577 shares of our common stock outstanding and entitled to vote.
Ownership of Directors, Nominees and Executive Officers
The following table sets forth information regarding the amount of common stock beneficially owned, as of March 17, 2003, by each of our directors, each nominee for election as a director, the executive officers named in the Summary Compensation Table and all of our directors and executive officers as a group:
Name | Number of Shares BeneficiallyOwned (1)(2) | Percent of Outstanding Common Stock (3) | Unvested Stock |
George H. Walker III | 551,194(5) | 7.70% | -- |
Ronald J. Kruszewski | 468,792 | 6.27 | 30,279 |
Scott B. McCuaig | 232,739 | 3.21 | 21,069 |
James M. Zemlyak | 175,588 | 2.43 | 25,131 |
James M. Oates | 52,813 | (6) | -- |
Walter F. Imhoff | 40,269 | (6) | -- |
John J. Goebel | 34,286(5) | (6) | -- |
Charles A. Dill | 24,600 | (6) | -- |
Bruce A. Beda | 23,205 | (6) | -- |
Robert E. Lefton | 17,569 | (6) | -- |
Richard F. Ford | 7,881 | (6) | -- |
Thomas Prince | 6,217 | (6) | 2,528 |
Robert J. Baer | 3,636 | (6) | -- |
Directors and Executive Officers | 1,627,533 | 20.67% | 79,007 |
(1) Except as otherwise indicated, each individual has sole voting and investment power over the shares listed beside his name.
(2) Includes the following shares that such persons and group have the right to acquire currently or within 60 days following March 17, 2003 upon the exercise of stock options: Mr. Walker - 61,031; Mr. Kruszewski - 187,079; Mr. McCuaig - 70,934; Mr. Zemlyak - 53,600; Mr. Oates - 6,712; Mr. Imhoff - 4,800; Mr. Goebel - 5,610; Mr. Dill - 12,788; Mr. Beda - 8,116; Mr. Lefton - 4,455; Mr. Ford - 1,200; Mr. Prince - 2,800; Mr. Baer - 1,000; and directors and executive officers as a group - 420,125. Also includes the following shares allocated to such persons and group under the Stifel Financial Corp. Stock Ownership Plan and Trust: Mr. Walker - 5,542; Mr. Kruszewski - 222; Mr. McCuaig - 205; Mr. Zemlyak - 155; Mr. Imhoff - 98; Mr. Prince - 130; and directors and executive officers as a group - 6,352. Also includes the following shares allocated to such persons and group underlying stock units vested currently or within 60 days following March 17, 2003: Mr. Kruszewski - 186,666; Mr. McCuaig - 79,365; Mr. Zemlyak - 63,968; Mr. Oates - 5,101; Mr. Goebel - 4,574; Mr. Dill - 5,197; Mr. Beda - 5,034; Mr. Lefton - 1,567; Mr. Prince - 455; Mr. Baer - 1,636; and directors and executive officers as a group - 353,563. Also includes the following shares allocated to such persons and group under the Stifel, Nicolaus & Company, Incorporated Profit Sharing 401(k) Plan: Mr. Walker - 5,044; Mr. Zemlyak - 1,157; Mr. Imhoff - 7; and directors and officers as a group - 6,208.
(3) Based upon 7,101,577 shares of common stock issued and outstanding as of March 17, 2003 and, for each director or officer or the group, the number of shares subject to options or stock units which the director or officer or the group has the right to acquire currently or within 60 days following March 17, 2003.
(4) Includes shares underlying stock units that such persons or group hold but which are not convertible to our common stock within the 60-day period after March 17, 2003 and, therefore, under the rules of the Securities and Exchange Commission, are not deemed to be "beneficially owned" as of March 17, 2003. The stock units generally will be transferred into common stock at the end of a three- to five-year period after the date of grant contingent upon the holder's continued employment with us.
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(5) Includes 11,256 shares held by the George Herbert Walker Foundation as to which Messrs. Walker and Goebel, as co-trustees, share voting power.
(6) Shares beneficially owned do not exceed 1 percent of the outstanding shares of our common stock.
Ownership of Certain Beneficial Owners
As of March 17, 2003, the following persons were the only persons known to us to be beneficial owners of more than 5 percent of our common stock:
Name and Address | Number of Shares | Percent of Outstanding Common Stock |
Western and Southern Life Insurance Co | 1,019,812(1) | 14.36% |
George H. Walker III | 551,194(2) | 7.70 |
Ronald J. Kruszewski | 468,792(3) | 6.27 |
Stifel Financial Corp. Stock | 413,652(4) | 5.82 |
Dimensional Fund Advisors Inc | 358,210(5) | 5.04 |
__________________________
(1) The information shown is based on a Schedule 13G, dated January 8, 1998, of Western and Southern Life Insurance Company. The number of shares beneficially owned has been adjusted to reflect the 5 percent stock dividends declared by us on each of January 20, 1998 and January 27, 1999. The information in the Schedule 13G indicates that Western and Southern has the sole power to vote and dispose of such shares.
(2) See notes 1, 2 and 5 to the preceding table.
(3) See notes 1 and 2 to the preceding table.
(4) With respect to 242,843 allocated shares of our common stock of the Stifel Financial Corp. Stock Ownership Plan and Trust, each participant in the plan has the right to instruct the trustee of the plan with respect to the voting of the common stock in the participant's account. The trustee is authorized to vote any shares of common stock with respect to which the trustee has not received timely directions as to the voting thereof. As of March 17, 2003, we had 170,809 unallocated shares in the Stock Ownership Plan. These unallocated shares will be released for allocation to the participants based upon employer contributions to fund an internal loan between us and the Stock Ownership Plan. The trustee is authorized to vote these unallocated shares in the same proportion as the trustee votes those shares for which the trustee has received timely directions from the participants.
(5) The information shown is based on a Schedule 13G, dated February 17, 2003, of Dimensional Fund Advisors Inc. The information in the Schedule 13G indicates that Dimensional Fund Advisors Inc. has the sole power to vote and dispose of such shares.
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PROPOSAL I.
ELECTION OF DIRECTORS
In accordance with our by-laws, the board of directors has fixed the number of directors at eleven, divided into three classes, with the terms of office of each class ending in successive years. The board of directors has nominated Charles A. Dill, Richard F. Ford and Walter F. Imhoff for election as Class II directors to hold office until the 2006 annual meeting of stockholders or until their respective successors are elected and qualified or until their earlier death, resignation or removal.
Shares represented by your proxy will be voted in accordance with your direction as to the election as directors of the persons listed below as nominees. In the absence of direction, the shares represented by your proxy will be voted FOR the election of each nominee. The three nominees receiving the highest number of votes cast at the meeting will be elected as our directors in Class II for the term of such class. In the event any person listed as a nominee becomes unavailable as a candidate for election, it is intended that the shares represented by your proxy will be voted for the remaining nominees and any substitute nominee recommended by the board of directors.
Certain information with respect to each of the nominees and each of the continuing directors is set forth below, including any positions they hold with us and our principal subsidiary, Stifel, Nicolaus & Company, Incorporated.
Name | Age | Positions or Officeswith the Company andStifel, Nicolaus | Served as Director Continuously Since |
CLASS II-NOMINEES FOR TERMS ENDING IN 2006 |
|
|
|
Charles A. Dill | 63 | Director of Stifel Financial Corp. | 1995 |
Richard F. Ford | 66 | Director of Stifel Financial Corp. | 1984 |
Walter F. Imhoff | 71 | Senior Vice President of Stifel, Nicolaus | 2000 |
CLASS III-DIRECTORS WITH TERMS ENDING IN 2004 |
|
|
|
Robert E. Lefton | 71 | Director of Stifel Financial Corp. | 1992 |
James M. Oates | 56 | Director of Stifel Financial Corp | 1996 |
George H. Walker III | 72 | Chairman Emeritus of Stifel Financial Corp. | 1981 |
Scott B. McCuaig | 54 | Senior Vice President of Stifel Financial Corp. and President and Co-Chief Operating Officer of Stifel, Nicolaus | 2001 |
CLASS I-DIRECTORS WITH TERMS ENDING IN 2005 |
|
|
|
Robert J. Baer | 65 | Director of Stifel Financial Corp. | 2002 |
Bruce A. Beda | 62 | Director of Stifel Financial Corp. | 1997 |
Ronald J. Kruszewski | 44 | Chairman, President and Chief Executive Officer of Stifel Financial Corp. and Chairman and Chief Executive Officer of Stifel, Nicolaus | 1997 |
The following are brief summaries of the business experience during the past five years of each of the nominees for election as a director and our other directors whose terms of office as directors will continue after the annual meeting, including, where applicable, information as to the other directorships held by each of them.
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Nominees
Charles A. Dill has been a venture capital and private equity investor since November 1995. In addition to several direct private equity investments, Mr. Dill has been a general partner of Gateway Partners, L.P., a private venture capital fund, since 1995 and of Two Rivers Ventures, a private venture capital fund since January 2003. From 1991 to 1995, Mr. Dill was the President, Chief Executive Officer and a director of Bridge Information Systems, Inc., a company providing online information and trading services. Mr. Dill is a director of three public companies: Zoltek Companies, Inc.; TransAct Technologies Incorporated; and DT Industries, Inc.
Richard F. Ford is a managing general partner of the management companies which act as a general partner of Gateway Mid-America Partners, L.P., Gateway Venture Partners II, L.P., Gateway Venture Partners III, L.P. and Gateway Partners, L.P., private venture capital funds formed in 1984, 1987, 1990 and 1995, respectively. Mr. Ford is a director of CompuCom Systems, Inc., D&K Healthcare Resources, Inc. and TALX Corporation.
Walter F. Imhoff has served as Senior Vice President of Stifel, Nicolaus since January 12, 2000. Prior thereto, Mr. Imhoff served as Chairman, President and Chief Executive Officer of Hanifen, Imhoff Inc., a Colorado-based broker-dealer, from 1979 until it was acquired by us on January 12, 2000.
We recommend a vote "FOR" the election of each of our nominees for director.
Continuing Directors
Robert E. Lefton, Ph.D. has been President and Chief Executive Officer of Psychological Associates, Inc., an international training and consulting firm, since 1958.
James M. Oates has been Chairman of Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.), a financial services company, since 1996 and Managing Director of The Wydown Group, a consulting firm that specializes in start-ups, turn-arounds and defining growth strategies, since 1994. Mr. Oates is a director of Phoenix Funds, Phoenix Duff & Phelps Institutional Mutual Funds and Phoenix-Aberdeen Series Fund. Mr. Oates is Chairman of the Board of Emerson Investment Management, Inc.
George H. Walker III has been our Chairman Emeritus since April 2001. Mr. Walker joined Stifel, Nicolaus in 1976, served as Chief Executive Officer of Stifel, Nicolaus from December 1978 to October 1992 and served as Chairman of Stifel, Nicolaus from July 1982 to April 2001. Mr. Walker served as our President and Chief Executive Officer from the time of its organization until 1992 and served as our Chairman from the time of its organization until 1985 and from 1988 until April 2001. Mr. Walker is a director of Western and Southern Life Insurance Company, Laidlaw Corporation and Macroeconomic Advisers, LLC. Mr. Walker is Chairman of the Advisory Board of the School of Business and Technology, Webster University and is a member of Washington University's National Council for the Olin School of Business. He is also Founder and Chairman of the Steering Committee to bring about "Home Rule" for the City of St. Louis.
Scott B. McCuaig has been Senior Vice President of Stifel Financial Corp. and the President and Co-Chief Operating Officer and a director of Stifel, Nicolaus since January 1998. Prior thereto, Mr. McCuaig served as Managing Director, head of marketing and regional sales manager of Robert W. Baird & Co. Incorporated, a broker-dealer, from June 1988 to January 1998.
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Robert J. Baer has served as President Emeritus of UniGroup, Inc., the holding company for several household goods transportation companies including United Van Lines, LLC and Mayflower Transit, LLC, since April 2002. Mr. Baer served as President of UniGroup, Inc. from 1987 to April 2002. Prior thereto, Mr. Baer served as President of United Van Lines from 1982 to 1987 and as Vice President and General Manager of United Van Lines from 1977 to 1987. Mr. Baer is a director of U.S. Bancorp and a member of Civic Progress, a group composed of the St. Louis area's top civic leaders.
Bruce A. Beda has been Chief Executive Officer of Orion Partners, LLC, a private investment and consulting company, since 1996 and Chief Executive Officer of Kilbourn Capital Management, LLC, an asset manager, since 2001.
Ronald J. Kruszewski has been Chairman of the Board of Directors of Stifel Financial Corp. and Stifel, Nicolaus since April 2001 and President and Chief Executive Officer of Stifel Financial Corp. and Stifel, Nicolaus since September 1997. Prior thereto, Mr. Kruszewski served as Managing Director and Chief Financial Officer of Baird Financial Corporation and Managing Director of Robert W. Baird & Co. Incorporated from 1993 to September 1997. Mr. Kruszewski is a member of the Saint Louis Chapter of the Young Presidents' Organization as well as The Regional Business Council in St. Louis and the New York Stock Exchange Regional Firms Advisory Committee. Mr. Kruszewski also serves on the Board of Directors of SBI Incorporated and the Advisory Board of Southern Products Company.
Board of Directors and Committees
During 2002, our board of directors met four times, including both regularly scheduled and special meetings. During the year, all of the incumbent directors attended at least 75 percent of all meetings held by the board of directors and all committees on which they serve.
The standing committees of our board of directors are the Executive Committee, Audit Committee, Compensation Committee and Nominating Committee.
Executive Committee. Messrs. Kruszewski (Chairman), Beda, Goebel, Walker and Oates are the current members of the Executive Committee. Except to the extent limited by law, the Executive Committee performs the same functions and has all the authority of our board of directors between meetings of the full board. The Executive Committee met once during 2002.
Audit Committee. Messrs. Beda (Chairman), Baer, Dill, Ford, Goebel, Lefton and Oates are the current members of the Audit Committee. The Audit Committee monitors and assesses the adequacy of our systems and procedures for providing reliable financial statements for us and our subsidiaries, as well as suitable internal financial controls, reviews and approves the scope and performance of the independent external and internal auditors' work, makes such recommendations as it deems necessary to the board of directors regarding our financial statements, financial controls and related matters and reviews and monitors our consolidated financial condition. The Audit Committee met four times during 2002.
Compensation Committee. Messrs. Lefton (Chairman), Beda, Ford and Oates are the current members of the Compensation Committee. The Compensation Committee recommends salary and bonus levels for our senior officers and our subsidiaries and administers our employee stock plans. The Compensation Committee met four times during 2002.
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Nominating Committee. Messrs. Oates (Chairman), Beda, Ford and Lefton are the current members of the Nominating Committee. The Nominating Committee identifies, evaluates and selects potential director nominees. The Nominating Committee considers nominees recommended by stockholders and reviews the qualifications and contributions of the directors standing for election each year. Any stockholder wishing to nominate a candidate for director at a stockholders' meeting must provide advance notice as described under "Stockholder Proposals" and must furnish certain information about the proposed nominee. The Nominating Committee met fourtimes during 2002.
Compensation of Directors
Non-employee directors are paid an annual retainer of $15,000 and are compensated $500 for each board meeting and $300 for each committee meeting they attend ($350 for the Chairman of the committee) and are reimbursed for expenses incurred in attending these meetings. A non-employee director may defer all or any portion of his director fees. A non-employee director who elects to defer his director fees receives a matching credit from us equal to 25 percent of the total amount deferred by the director. Directors who are also our employees do not receive any compensation for their service as directors, but we pay their expenses for attendance at meetings of the board of directors.
Pursuant to the Equity Incentive Plan for Non-Employee Directors, each new non-employee director is granted options to purchase 5,000 shares of our common stock at the current market price on the date the individual first becomes a director. In addition, stock options to purchase 1,000 shares of our common stock are granted automatically to each non-employee director each January 1st through 2009.
Compensation Committee Interlocks and Insider Participation
During 2002, the Compensation Committee was composed of Messrs. Lefton, Beda, Ford and Oates, each of whom is an independent director under the rules of the New York Stock Exchange. There are no interlocks or insider participation matters to report.
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EXECUTIVE COMPENSATION
The following table presents summary information concerning compensation earned in the three most recently completed years by our chief executive officer and each of our four most highly compensated other executive officers for services rendered to us and our subsidiaries.
Summary Compensation Table
Annual Compensation Bonus(1) | Long -Term Compensation | ||||||
Name and Principal Position | Year | Salary($) | Cash($) | Stock | Stock | Options(#) | All OtherCompensation($)(3) |
Ronald J. Kruszewski | 2002 | $200,000 | $510,000 | $ 90,000 | $82,500 | 40,000 | $13,858 |
Scott B. McCuaig | 2002 | 175,000 | 297,500 | 127,500 | 31,875 | 20,000 | 6,939 |
James M. Zemlyak | 2002 | 175,000 | 262,500 | 112,500 | 28,125 | 20,000 | 6,361 |
Thomas Prince | 2002 | 150,000 | 128,932 | 18,750 | 4,688 | 4,000 | 22,653 |
George H. Walker III | 2002 | 142,731(5) | -- | -- | -- | -- | 500 |
(1) Represents bonuses paid under the executive compensation plans described in the section entitled "Compensation Committee Report on Executive Compensation" of this proxy statement.
(2) Pursuant to the Stifel, Nicolaus & Company, Incorporated Wealth Accumulation Plan, participants in the plan receive, on a mandatory basis, stock units as a portion of their incentive compensation earned. In addition, participants may elect to receive stock units with respect to any remaining portion of incentive compensation earned by such individuals. Each individual also receives stock units with a fair market value equal to 25 percent of that portion of the incentive compensation that the individual receives in stock units. All stock units are issued to participants based upon the fair market value of our common stock on the date of issuance. Units received on a mandatory basis vest ratably over a three-year period following the date of issuance. Units that the participant elects to receive are fully vested on the date of issuance. Units issuable as the 25 percent match vest at the end of the three-year period following the date of issuance. Units received as part of a participant's inc entive compensation are reported under the "Bonus" column, while units issuable as the 25 percent match are reported under the "Long-Term Compensation" column. The aggregate value of stock units held by Messrs. Kruszewski, McCuaig, Zemlyak and Prince at December 31, 2002 was $2,416,767, $1,118,835, $992,563 and $33,231, respectively, based upon a last transaction price of $11.14 on December 31, 2002. The aggregate number of stock units held by Messrs. Kruszewski, McCuaig, Zemlyak and Prince at December 31, 2002 was 216,945, 100,434, 89,099 and 2,983, respectively.
(3) For 2002, we contributed $500 to our profit sharing plan for each of Messrs. Kruszewski, McCuaig, Zemlyak, Prince and Walker, $1,282, $1,282, $1,282 and $434 to the Stifel Financial Corp. 1998 Employee Stock Purchase Plan for each of Messrs. Kruszewski, McCuaig, Zemlyak and Princeand$484 to the Stifel Financial Corp. Stock Ownership Plan and Trust for each of Messrs. Kruszewski, McCuaig, Zemlyak and Prince and $345 for Mr. Walker. The amount disclosed also includes $12,076, $5,157, $4,579 and $51 for each of Messrs. Kruszewski, McCuaig, Zemlyak and Prince, respectively, for the payment of dividends on stock units. In addition, with respect to Mr. Prince, the amount disclosed includes $1,668 of interest forgiven by us and $20,000 of principal forgiven by us with respect to a $100,000 loan from us to Mr. Prince.
(4) Mr. Prince has served as our Senior Vice President and General Counsel since June 1, 2000 at a salary of $150,000 per year. Prior thereto, Mr. Prince served as Branch Manager of the Little Rock, Arkansas Private Client Group of Stifel, Nicolaus. Prior to joining Stifel, Nicolaus, Mr. Prince was a principal in the law firm of Jack, Lyon & Jones, PA in Little Rock, Arkansas from January 1990 to August 1999.
(5) Represents salary and commissions.
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Option Grants In Last Year
The following table sets forth information concerning stock option grants made during 2002 to the individuals named in the Summary Compensation Table.
| Individual Grants |
| |||||
Name | Number of Securities Underlying Options Granted (1)(#) | Percent of Total Options Granted to Employees in Fiscal Year | Exercise Price($/Sh)(2) |
| Expiration Date(3) | Potential Realizable Value At Assumed Annual Rates of Stock Price Appreciation for Option Term(4) | |
|
|
|
|
|
| 5%($) | 10%($) |
Ronald J. Kruszewski | 40,000 | 13.63% | $10.40 |
| 01/02/12 | $261,620 | $662,997 |
Scott B. McCuaig | 20,000 | 6.81% | 10.40 |
| 01/02/12 | 130,810 | 331,498 |
James M. Zemlyak | 20,000 | 6.81% | 10.40 |
| 01/02/12 | 130,810 | 331,498 |
Thomas A. Prince | 4,000 | 1.36% | 10.40 |
| 01/02/12 | 26,162 | 66,300 |
George H. Walker III | -- | -- | -- |
| -- | -- | -- |
(1) Except as otherwise indicated, each option is granted at 100 percent of the market value on the date of grant and will be exercisable with respect to 25 percent of the total number of shares underlying the option on each of the first, second, third and fourth anniversaries of the date of award.
(2) The exercise price may be paid in cash or, at the discretion of our board of directors or the Compensation Committee of the board of directors, by shares of our common stock already owned by the participant valued at fair market value on the date of exercise, or by a combination of cash and our common stock.
(3) The options terminate on the earlier of ten years after grant or, generally, immediately upon termination of the optionee's employment for reasons other than retirement, disability or death.
(4) The indicated 5 percent and 10 percent rates of appreciation are provided to comply with Securities and Exchange Commission regulations and do not necessarily reflect our views as to the likely trend in our common stock price. Actual gains, if any, on stock option exercises and common stock holdings will be dependent on, among other things, the future performance of our common stock and overall market conditions. There can be no assurance that the amounts reflected above will be achieved. Additionally, these values do not take into consideration the provisions of the options providing for nontransferability or delayed exercisability.
Fiscal Year-End Option Values
The following table sets forth information concerning the number of exercisable and unexercisable stock options at December 31, 2002 held by the individuals named in the Summary Compensation Table.
| Shares Underlying | Value of Unexercised, | ||
Name | Exercisable | Unexercisable | Exercisable | Unexercisable |
|
|
|
|
|
Ronald J. Kruszewski | 154,409 | 81,003 | $ 61,680 | $48,137 |
George H. Walker III | 60,244 | 787 | 329,745 | 1,225 |
Scott B. McCuaig | 49,486 | 46,914 | 13,833 | 24,434 |
James M. Zemlyak | 34,311 | 51,689 | 46,003 | 48,161 |
Thomas Prince | 2,000 | 6,000 | 18 | 2,972 |
(1) Based on the last reported share price of our common of stock of $11.14 on December 31, 2002.
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Employment Agreements and Other Compensation Arrangements
We entered into an employment letter with Ronald J. Kruszewski as of September 25, 1997. Under the employment letter, Mr. Kruszewski receives an annual salary of at least $200,000 and he is eligible to participate in the executive bonus pool and in all other employee benefits we provide to senior executive officers.
In connection with an outstanding loan from us, Mr. Kruszewski delivered to us a promissory note in the amount of $143,237 in December 1998. The promissory note was forgiven over a period of five years ending in 2003.
Stifel, Nicolaus and Scott B. McCuaig entered into an arrangement on January 26, 1998 which provides for the employment of Mr. McCuaig at a base salary of $175,000 per annum. Mr. McCuaig is eligible to participate in our executive bonus pool and in all other employee benefits provided to our senior executive officers.
Stifel, Nicolaus and James M. Zemlyak entered into an arrangement on February 1, 1999 which provides for the employment of Mr. Zemlyak at a base salary of $175,000 per annum. Mr. Zemlyak is eligible to participate in all other employee benefits provided to our senior executive officers.
Thomas Prince delivered a promissory note to us in June 1999 in the principal amount of $100,000. The promissory note will be forgiven in equal annual installments commencing August 1, 2000 and ending August 1, 2004, or in certain other specified circumstances, contingent in any event upon Mr. Prince's continued employment us. Additionally, on March 5, 2002, Mr. Prince executed a promissory note to us in the principal amount of $110,000 to cover relocation expenses. The note bears interest at 3 percent per annum, and is payable without recourse in specified amounts ranging from $15,000 to $30,000 per year from annual bonuses paid by us to Mr. Prince during the years 2003 through 2007.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the board of directors furnishes the following report:
Compensation Philosophy
The Compensation Committee approves the policies for and structure and amount of compensation of our senior executive officers, including our chief executive officer and the other executive officers named in the Summary Compensation Table. The committee's goal is to establish compensation programs that will attract and retain highly qualified executives and provide an incentive to such executives to focus their efforts on our strategic goals by aligning their financial interests closely with stockholder interests. The committee is composed entirely of independent directors.
A significant component of our executive officer compensation program is cash remuneration in the form of base salaries and annual incentive bonuses. Bonuses are determined based upon the performance of the company, the individual executive and his operating unit during the year. In evaluating performance, financial, non-financial and strategic objectives are considered. Base salaries generally are average relative to comparable firms in the industry. Bonuses make up a significant portion of the executive officers' total compensation (as much as 75 percent for 2002). The committee believes that basing a substantial portion of an executive officer's compensation on performance motivates the executive to perform at the highest possible level.
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As another component of our executive officer compensation program, the committee may award executive officers options or restricted stock units for shares of our common stock. The committee believes that stock options provide a highly efficient form of compensation from both a cost and an accounting perspective, and that such awards provide an incentive to achieve our longer-term strategic goals by aligning the long-term financial interests of the executive officers with those of our stockholders.
In addition, the committee has implemented a deferred compensation program whereby a portion of each executive officer's annual bonus will be deferred, on a mandatory basis, into stock units. The executive officer may also defer on an elective basis an additional portion of his annual bonus into stock units. The percentages of the mandatory and elective deferrals are set annually by our committee. The mandatory and elective deferrals are matched in our stock units equal to 25 percent of the amount of the combined deferral. The mandatory portion of the stock unit award vests ratably over a three-year period. The elective portion of the stock unit award is fully vested. The matching portion of the stock unit award vests at the end of a three-year period.
The committee believes that the stock option, restricted stock units and deferred compensation components of our executive officer compensation program over time will increase the levels of beneficial ownership of our executive officers. This aligns the interests of those persons who have the greatest ability to affect our financial results closely with the interests of our stockholders. The committee also believes that significant levels of beneficial ownership and ownership potential will assist us in retaining the services of the executive officers.
Chief Executive Officer Compensation
In keeping with the general compensation policy outlined above, Mr. Kruszewski's base salary for 2003 will be $200,000 which is unchanged from his date of hire in October, 1997. In determining Mr. Kruszewski's bonus for 2002, the committee considered many factors, including the following:
- 2002 represented the seventh consecutive year of record net revenues for us;
- 2002 net revenue increased 6% over 2001;
- Our record revenues in 2002 for Equity Capital Markets;
- Our financial performance in conjunction with difficult market conditions and overall results for the securities industry in 2002;
- The facts and circumstances surrounding our litigation expenses in both 2002 and 2001; and
- The compensation of chief executive officers of other brokerage firms, including similar brokerage firms, as of their most recent proxy statements.
Compensation of Other Senior Executives
The committee approved individual salary levels and bonus amounts for each executive officer other than Mr. Kruszewski following a presentation by Mr. Kruszewski of his evaluation of each executive officer's individual and business unit performance and his bonus recommendation for such executive officer. Mr. Kruszewski also summarized for the committee the performance of each executive officer relative to the financial and non-financial objectives established for such executive officer at the beginning of the year. In his presentation to the committee, Mr. Kruszewski utilized historical compensation information prepared by a third-party organization for a group of regional brokerage firms for background on competitive salary levels within the industry.
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The committee also reviewed and approved the terms of specific compensation arrangements entered into by us with certain executive officers. The committee believes that such arrangements were evaluated and approved on a basis consistent with our overall compensation philosophy.
Conclusion
Through the program described above, a significant portion of our executive compensation is linked directly to individual and corporate performance and stock price appreciation. The committee intends to continue the policy of linking executive compensation to individual and corporate performance and returns to stockholders, recognizing that the business cycle from time to time may result in an imbalance for a particular period.
2002 Compensation Committee
Robert E. Lefton, Chairman
Bruce A. Beda
Richard F. Ford
James M. Oates
April 4, 2003
* * *
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STOCKHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the cumulative stockholder returns, including the reinvestment of dividends, of our common stock on an indexed basis with a Peer Group Index, consisting of companies that operate under the same model within the same industry with similar market capitalizations, and the Standard and Poor's 500 ("S&P 500") Index for the period beginning December 31, 1997 and ending December 31, 2002.
[PERFORMANCE GRAPH]
