10-K

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

FORM 10-K

x	Annual Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
	For the fiscal year ended December 31, 2004
o	Transition Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
	For the transition period from               to
	Commission file number 001-15373

ENTERPRISE FINANCIAL SERVICES CORP
( Exact Name of Registrant as Specified in its Charter)
Delaware	43-1706259
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
150 North Meramec, Clayton, MO	63105
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:  314-725-5500

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. 

Yes   x No   o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of Form 10-K    o

The aggregate market value of the common stock held by non-affiliates of the Registrant as of March 9, 2005:
Common Stock, par value $.01, $155,322,473

The number of shares outstanding of the Registrant’s common stock as of March 9, 2005 was:
Common Stock, par value $.01, 9,972,250 shares outstanding

Indicate by check mark whether the Registrant is an accelerated filer as defined in Rule 12b-2 of the Securities Exchange Act of 1934. 

Yes   x No   o

ENTERPRISE FINANCIAL SERVICES CORP

2004 ANNUAL REPORT ON FORM 10-K

		Page
Part I
Item 1:	Business	1
Item 2:	Properties	5
Item 3:	Legal Proceedings	5
Item 4:	Submission of Matters to Vote of Security Holders	6
Part II
Item 5:	Market for Common Stock and Related Stockholder Matters and Issuer Purchase of Equity Securities	6
Item 6:	Selected Financial Data	7
Item 7:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 7A:	Quantitative and Qualitative Disclosures About Market Risk	39
Item 8:	Financial Statements and Supplementary Data	40
Item 9:	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	40
Item 9A:	Controls and Procedures	40
Item 9B:	Other Information	40
Part III
Item 10:	Directors and Executive Officers of the Registrant	40
Item 11:	Executive Compensation	40
Item 12:	Security Ownership of Certain Beneficial Owners and Management	41
Item 13:	Certain Relationships and Related Party Transactions	41
Item 14:	Principal Accountant Fees and Services	41
Part IV
Item 15:	Exhibits, Financial Statement Schedules	41
	Independent Auditors’ Report	42
	Consolidated Financial Statements	43
Signatures		82
Exhibit Index		83

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Readers should note that in addition to the historical information contained herein, some of the information in this report contains forward-looking statements within the meaning of the federal securities laws.  Forward-looking statements typically are identified with use of terms such as “may,” “will,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently.  You should be aware that Enterprise Financial Services Corp’s actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including: burdens imposed by federal and state regulation, including changes in accounting regulation or standards; of banks, credit risk; exposure to general and  local economic conditions; risks associated with rapid increase or decrease in prevailing interest rates; consolidation within the banking industry; competition from banks and other financial institutions; and technological developments; all of which could cause Enterprise Financial Services Corp’s actual results to differ from those set forth in the forward-looking statements.

PART I

ITEM 1: BUSINESS

General

Enterprise Financial Services Corp, formerly known as Enterbank Holdings Inc. (the “Company”) was incorporated under the laws of the State of Delaware on December 30, 1994, for the purpose of providing a holding company structure for the ownership of Enterprise Bank, (the “Bank”) which commenced operations in 1988.  The Company acquired the Bank in May 1995 through a tax-free exchange with the Bank’s shareholders.  In January 2004 the Bank changed its legal name to Enterprise Bank & Trust.  In June of 2000, the Company and Commercial Guaranty Bancshares, Inc. (“CGB”), the parent company for First Commercial Bank, N.A. (the “Kansas Bank”), merged under a tax-free reorganization.  The holding company ownership structure gives the Bank a source of capital and financial strength and allows the Company some flexibility in expanding the products and services offered to clients.  In 2000, the Company elected to change its status from a bank holding company to a financial holding company. 

From 1988 through 1996, the Bank provided commercial banking services to its customers from a single location in the City of Clayton, St. Louis County, Missouri.  During 1997, the Bank opened two additional facilities located in St. Charles County, Missouri and the City of Sunset Hills, located in St. Louis County, Missouri.  During 1998, the Bank opened an operations facility in St. Louis County, Missouri. 

Enterprise Trust (“Trust”), formerly referred to as Enterprise Financial Advisors (“EFA”), a division of the Bank, was organized in late 1998 to provide fee-based trust services, personal financial planning, estate planning, and corporate planning services to the Company’s target market.

The Kansas Bank began operations on February 20, 1996 as a new Kansas banking corporation in Overland Park, Kansas located in Johnson County.  The Kansas Bank acquired First National Bank of Humboldt in December of 1997, adding three additional locations in Humboldt, Chanute and Iola, all located in Southeast Kansas.  In June of 2000, the Company completed a merger transaction under which the Kansas Bank became a subsidiary of the Company.  On January 1, 2001, the Kansas Bank changed its legal name to Enterprise Banking, N.A. and on September 30, 2001 Enterprise Banking, N.A. merged into Enterprise Bank with Enterprise Bank as the surviving entity.

On April 4, 2003, the Company transferred loans of $27.2 million, fixed assets of $1.1 million, and deposits of $48.2 million when it sold its Humboldt, Chanute and Iola, Kansas branches (“Southeast Kansas branches”) to Emprise Financial Corporation based in Wichita, Kansas.  Assets of $36.4 million and deposits of $50.1 million associated with these branches were shown as “held for sale” on the Company’s consolidated balance sheet at December 31, 2002.  The Company received a 2.0% premium on loans and a 4.75% premium on deposits, which generated a $3.1 million pretax gain less a $150,000 write-off of related goodwill associated with these branches.  All other items were sold at book value.  There were approximately $352,000 in expenses incurred related to the sale.  The Southeast Kansas branches were included in the Enterprise Banking segment.  These branches were sold because they were not a strategic fit for the Company and allowed the Company to redeploy bank capital and management resources to the key markets of St. Louis and Kansas City.

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The Company’s executive offices are located at 150 North Meramec, Clayton, Missouri 63105.  The Company’s telephone number is (314) 725-5500.

Strategy

The Company’s strategy is to provide a complete range of financial services designed to appeal to closely-held businesses, their owners and to professionals in the St. Louis and Kansas City metropolitan areas.  The Company’s goal is to grow its operations within its defined market niche by being well-managed, well-capitalized, and disciplined in its approach to managing and expanding its operations as growth opportunities arise.  The Company believes its goals can be achieved while providing attractive returns to shareholders. Net income, earnings per share growth, and long term return on shareholders’ equity are the financial performance indicators the Company considers most critical in measuring success.

The Bank

The Bank is a Missouri state chartered trust company which offers a broad range of commercial and personal banking services to clients.  Loans include commercial, commercial real estate, financial and industrial development, real estate construction and development, residential real estate, and a smaller amount of consumer loans.  Other services include treasury management and safe-deposit boxes.

The Bank’s primary source of funds has historically been customer deposits.  The Bank offers a variety of accounts for depositors designed to attract both short-term and long-term deposits.  These accounts include certificates of deposit, savings accounts, money market accounts, commercial sweep accounts, checking and negotiable order of withdrawal accounts, and individual retirement accounts.  Interest-bearing accounts earn interest at rates established by management based on competitive market factors and management’s desire to increase or decrease certain types of deposits. 

The Bank experiences significant competition in attracting depositors and borrowers.  Competition in lending activities comes principally from other commercial banks, savings associations, insurance companies, governmental agencies, credit unions, brokerage firms, and pension funds.  The primary factors in competing for loans are interest rates, loan structure and loan officer capability and service level.  Competition for deposits comes from other commercial banks, savings associations, money market and mutual funds, credit unions, insurance companies, and brokerage firms.  The primary factors in competing for deposits are overall deposit services, interest rates paid on deposits, account liquidity, convenience of office location and overall financial condition.  Management believes that the Bank’s size provides the flexibility which enables it to offer an array of banking products and services.  Management also believes that the Bank’s financial condition also contributes to a favorable competitive position in the markets it serves.

Management believes the Bank is able to compete effectively in its markets because: 1) the Bank’s relationship officers and management maintain close working relationships with their clients; 2) the Bank’s management structure enables it to react to customer requests for loan and deposit services more quickly than many competitors; 3) the Bank’s management and officers have significant experience in the communities served by the Bank; and 4) the Bank is highly focused on the closely-held business and professional market.  Additionally, industry consolidation has resulted in fewer independent banks and fewer banks serving the Banks target market niche.  Management believes the Bank is one of only a few with a comprehensive business model specifically designed for closely-held businesses, their owners and the professional markets.

The Bank’s historical growth strategy has been both client and asset driven.  The Bank continuously seeks to add clients that fit its target market.  This strategy enables the Bank to attract clients whose borrowing needs have grown along with the Bank’s increasing capacity to fund client loan requests.  Additionally, the Bank increased its loan portfolio based on lending opportunities developed by relationship officers.  The Bank funds loan growth by attracting deposits from business and professional clients, by borrowing from the Federal Home Loan Bank, and by issuing brokered certificates of deposits which are priced at or below the Bank’s alternative cost of funds.

The Bank can expand its customer relationships and control operating costs by:  1) operating a small number of offices with a high per office asset base; 2) emphasizing commercial loans which tend to be larger than retail loans; 3) employing an experienced staff, all of whom are rewarded on the basis of performance and customer service; 4) improving data processing and operational systems to increase productivity and to control risk; 5) leasing rather than owning facilities where possible so that capital can be deployed more effectively to support growth in earning assets; and 6) outsourcing services where possible.

2

Each of the banking units has its own advisory board of directors, as does the Wealth Management business segment.  Each advisory board is comprised of business owners and professionals who fit the target client profile. Each board of directors takes an active role in the business development activities of its respective unit.  Input and understanding of the needs of the Bank’s current and target clients has been critical in the Bank’s past success and will be important in the Bank’s plans for future growth.

Wealth Management

In 1998, the Bank entered the trust and financial planning business on a full time basis when the Bank was granted trust powers. As a part of the organization of trust operations (“Trust” or “Enterprise Trust”), the Bank entered into solicitation and referral agreements with Moneta Group, Inc. (“Moneta”), a large financial planning company based in St. Louis, Missouri.  On December 24, 2003, the Bank entered into a new agreement with Moneta that superseded all previous agreements.  The new agreement calls for Moneta to provide training for new Trust employees, ongoing training for Trust employees, compliance and technical expertise, and access to institutional services for Trust in exchange for a flat fee in the form of cash.  Moneta will refer clients to Trust and in return will receive a portion of the revenue earned by Trust in the form of cash.  Moneta will continue to refer banking business to the Bank.

Enterprise Trust provides fee-based personal and corporate financial consulting and trust services to the Company’s target market. Personal financial consulting includes estate planning, investment management, and retirement planning.  Corporate consulting services are focused in the areas of retirement plans, management compensation and management succession planning.  Some investment management services are provided through Argent Capital Management LLC (“Argent”), a money management company that invests principally in large capitalization companies.  The Company owns approximately 4.8% of Argent’s outstanding shares.

In addition, the Company acquired approximately 11% of Retirement Plan Services, LLC (“RPS”) in October of 2000 and in December of 2000 elected to move its 401(k) plan from the Principal Group to RPS.  RPS provides retirement plan administration to small and medium size businesses.  During 2001, the Company increased its ownership percentage to approximately 20% and actively refers business to RPS on a fee sharing arrangement.

In 2004, the Company established Enterprise Business Consulting (“EBC”) and Enterprise Wealth Products Group (“WPG”).  Along with Trust, these products and service offerings make up the Company’s Wealth Management business segment.  Through a network of independent professionals and a referral fee arrangement, EBC offers business consulting services such as strategic planning, executive recruiting, compensation analysis and marketing, and WPG offers an array of life, annuity, disability income, long-term care and selected mutual funds through a licensed insurance general agency and a branch of an outside broker-dealer.

Market Areas and Approach to Expansion

In the St. Louis metropolitan area, the Bank has facilities in Clayton, St. Charles County, and the city of Sunset Hills.  The Bank also has facilities in Johnson County, Kansas and an office in the Country Club Plaza on the Missouri side of Kansas City.  The Company chose to locate in all of these markets based on high expectations for growth, high concentration of closely-held businesses and the high number of professionals in those markets.  As mentioned above, the Company believes that local management and the involvement of an advisory board of directors comprised of local business persons and professionals are key ingredients for success.  Management believes that credit decisions, pricing matters, business development strategies, and other decisions should be made locally by managers who have an equity stake in the Company while complying with the Bank’s policies, procedures and overall strategy.  The Company, as part of its expansion effort, plans to continue its strategy of operating a small number of offices with a high per office asset base, emphasizing commercial loans and employing experienced staff who are rewarded on the basis of performance and customer service.

3

Enterprise Merchant Banc

The Company had organized Enterprise Merchant Banc, Inc. (“Merchant Banc”) (formerly Enterprise Capital Resources, Inc.) in 1995 as a wholly owned subsidiary to provide merchant banking services to closely-held business and their owners. Its operations included a minority investment in Enterprise Merchant Banc, LLC (“EMB LLC”), which focused on providing equity capital and equity-linked debt investments to growing companies in need of additional capital to finance internal and acquisition-related growth. 

After experiencing significant losses on merchant banking investments in 2001, the Company considered that the merchant banking investments were no longer a viable part of its long term business strategy and ceased such operations.

Investments

The Bank’s investment policy is designed to enhance its net income and return on equity through: prudent management of risk; ensuring liquidity to meet cash-flow requirements; managing interest rate risk: ensuring availability of collateral for public deposits, advances and repurchase agreements; and to seek asset diversification.  The Company, through its Asset/Liability Management Committee (“ALCO”), monitors the Bank’s investment activity and manages its liquidity by structuring the maturity dates of its investments to maintain an appropriate relationship between assets and liabilities while maximizing interest rate spreads.  Accordingly, the ALCO monitors the sensitivity of its assets and liabilities with respect to changes in interest rates and maturities and directs the overall acquisition and allocation of funds.  ALCO also utilizes derivative financial instruments to assist in the management of interest rate sensitivity by modifying the repricing, maturity and option characteristics of certain assets and liabilities. 

Employees

At December 31, 2004 the Company had approximately 214 full time equivalent employees. None of the Company’s employees is covered by a collective bargaining agreement.  Management believes that its relationship with its employees is good.

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ITEM 2: PROPERTIES

All of the Company’s St. Louis banking facilities are leased under agreements that expire in 2010, 2008, 2012 and 2017, for Clayton, St. Louis County, the City of Sunset Hills, and St. Peters, respectively.  The Company has one future rental option for the Clayton facility with future rentals to be agreed upon. The Company has the option to renew the St. Louis County facility lease for two additional five-year periods. The first five year period is at a set rent with rent for the second five year period based upon a formula.  The Company has the option to renew the Sunset Hills facility lease for two additional five-year periods with future rentals to be agreed upon.  The Company has no future rental options for the St. Peters facility; however, during the term of the lease, the monthly rentals are adjusted periodically based on then-current market conditions and inflation. The Company’s Kansas City Country Club Plaza banking facility is leased under an agreement that expires in 2011.  The Company has the option to renew the Plaza facility lease for one 5 year term.  The banking facility in Overland Park, Kansas is owned by the Company. 

The following is a list of the Company’s current facilities:

Facility	Address	Description
Enterprise Bank & Trust, Clayton	150 North Meramec Clayton, Missouri 63105	Commercial and Retail Banking
Enterprise Bank & Trust, St. Peters	300 St. Peters Centre Blvd.  St. Peters, Missouri 63376	Commercial and Retail Banking
Enterprise Bank & Trust, Sunset Hills	3890 South Lindbergh Blvd. Sunset Hills, Missouri 63127	Commercial and Retail Banking
Enterprise Bank & Trust, Overland Park	12695 Metcalf Avenue Overland Park, Kansas  66213	Commercial and Retail Banking
Enterprise Bank & Trust, Plaza	444 W 47th Street Suite 110 Kansas City, Missouri  64112	Commercial and Retail Banking
Enterprise Bank & Trust, St. Louis	1281 North Warson Road St. Louis, Missouri 63132	Operations Center

ITEM 3: LEGAL PROCEEDINGS

The Company and its subsidiaries are, from time to time, parties to various legal proceedings arising out of their businesses.  Management believes that there are no such proceedings pending or threatened against the Company or its subsidiaries which, if determined adversely, would have a material adverse effect on the business, financial condition, results of operations or cash flows of the Company or any of its subsidiaries.

5

ITEM 4: SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders in the quarter ended December 31, 2004.

PART II

ITEM 5: MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASE OF EQUITY SECURITIES

As of March 9, 2005, the Company had approximately 725 common stock shareholders of record and a market price of $19.00 per share.  The common stock was not previously traded on an exchange but was traded on the Over-The-Counter Bulletin Board. Effective February 8, 2005, the Company’s common stock began trading on the NASDAQ National Market under the symbol “EFSC”.  Below are the dividends declared by quarter along with what the Company believes are the high and low closing sales prices for the common stock.

	Market Price				Dividends Declared
	High		Low
2003
First Quarter	$	13.80	$	12.70	$	0.0200
Second Quarter		13.99		13.00	$	0.0200
Third Quarter		13.70		12.75	$	0.0200
Fourth Quarter		14.10		12.75	$	0.0200
2004
First Quarter	$	14.10	$	13.15	$	0.0250
Second Quarter		15.25		13.40	$	0.0250
Third Quarter		15.00		14.00	$	0.0250
Fourth Quarter		19.80		14.50	$	0.0250

There may have been other transactions at prices not known to the Company.

The information contained in Note 14 “Compensation Plans” on page 69 of this Form 10-K is incorporated by reference in response to this item.

The Company has authorized the repurchase of up to 500,000 shares of its common stock.  In the quarter ended December 31, 2004, the Company repurchased no shares of its common stock.

Dividends

The holders of shares of common stock of the Company are entitled to receive dividends when declared by the Company’s Board of Directors out of funds legally available for the purpose of paying dividends. The amount of dividends, if any, that may be declared by the Company will be dependent on many factors, including future earnings, bank regulatory capital requirements and business conditions as they affect the Bank.  As a result, no assurance can be given that dividends will be paid in the future with respect to the Company’s common stock.  In addition, the Company currently plans to retain most of its earnings for growth.

Common Stock

The authorized capital stock of the Company consists of 20,000,000 shares of common stock, par value $.01 per share.  Holders of the common stock are entitled to one vote per share on all matters on which the holders of common stock are entitled to vote. In all elections of directors, holders of common stock have the right to cast votes equaling the number of shares of common stock held by such stockholder multiplied by the number of directors to be elected.  All of such votes may be cast for a single director or may be distributed among the number of directors to be elected, or any two or more directors, as such stockholder elects. Holders of common stock have no preemptive, conversion, redemption, or sinking fund rights.  In the event of a liquidation, dissolution or winding-up of the Company, holders of common stock are entitled to share equally and ratably in the assets of the Company, if any, remaining after the payment of all liabilities of the Company.

6

ITEM 6: SELECTED FINANCIAL DATA

The following selected financial data should be read in connection with and are qualified by reference to the consolidated financial statements, related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this report.  This selected financial data presented below is derived from the Company’s audited consolidated financial statements as of and for the years ended: December 31, 2004, 2003, 2002, 2001, and 2000.

(Dollars in thousands, except per share amounts)

	Year Ended December 31,
	2004			2003			2002			2001			2000
EARNINGS SUMMARY:
Interest income	$	48,893		$	43,245		$	45,207		$	52,612		$	56,030
Interest expense		12,169			10,544			14,343			23,810			27,596
Net interest income		36,724			32,701			30,864			28,802			28,434
Provision for loan losses		2,212			3,627			2,251			3,230			1,043
Noninterest income		7,122			10,091			5,366			(2,035	)		2,863
Noninterest expense		29,331			28,215			27,364			24,830			21,845
Income before income taxes		12,303			10,950			6,615			(1,293	)		8,409
Income taxes		4,088			4,025			1,614			1,242			3,208
NET INCOME (loss)	$	8,215		$	6,925		$	5,001		$	(2,535	)	$	5,201
Net income (loss) per share-basic	$	0.85		$	0.72		$	0.53		$	(0.28	)	$	0.58
Net income (loss) per share-diluted		0.82			0.70			0.52			(0.28	)		0.54
Cash dividends per share		0.10			0.08			0.07			0.06			0.05
Book value per share		7.44			6.80			6.19			5.60			5.90
BALANCE SHEET DATA:
Year end balances:
Loans	$	898,505		$	783,878		$	679,799		$	602,747		$	516,810
Allowance for loan losses		11,665			10,590			8,600			7,296			7,097
Assets held for sale		—			—			36,401			40,575			41,222
Assets		1,059,950			907,726			877,251			795,590			711,278
Deposits		939,628			796,400			716,314			655,553			576,268
Subordinated debentures		20,620			15,464			15,464			11,340			11,340
Borrowings		20,164			24,147			31,823			15,399			11,191
Liabilities held for sale		—			—			50,053			58,800			56,169
Shareholders’ equity		72,726			65,388			58,810			51,897			53,484
Average balances:
Loans	$	847,270		$	738,572		$	693,551		$	613,539		$	517,381
Earning assets		967,854			825,973			779,194			701,582			628,222
Assets		1,008,022			868,303			820,730			743,503			662,497
Interest-bearing liabilities		748,434			647,087			629,651			583,343			529,527
Shareholders’ equity		68,854			63,175			55,361			56,623			50,132
SELECTED RATIOS:
Return on average equity		11.93	%		10.96	%		9.03	%		N/A	%		10.37	%
Return on average assets		0.81			0.80			0.61			N/A			0.79
Efficiency ratio		66.90			65.94			75.53			92.76			69.80
Average equity to average assets		6.83			7.28			6.75			7.62			7.57
Yield on average interest-earning assets		5.10			5.29			5.84			7.52			8.95
Cost of interest-bearing liabilities		1.63			1.63			2.28			4.09			5.21
Net interest rate spread		3.47			3.66			3.56			3.43			3.74
Net interest rate margin		3.84			4.01			4.00			4.12			4.55
Nonperforming loans to total loans		0.20			0.20			0.57			0.62			0.39
Nonperforming assets to total assets		0.18			0.17			0.46			0.49			0.29
Net chargeoffs to average loans		0.13			0.22			0.14			0.49			0.14
Allowance for loan losses to total loans		1.30			1.35			1.27			1.21			1.37
Dividend payout ratio - basic		11.76			11.11			13.21			N/A			8.62

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ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion and analysis is intended to review the significant factors of the financial condition and results of operations of the Company for the three-year period ended December 31, 2004.  It should be read in conjunction with the accompanying consolidated financial statements and the selected financial data presented elsewhere in this report.

The Company has prepared all of the consolidated financial information in this report in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). In preparing the consolidated financial statements in accordance with U.S. GAAP, the Company makes estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period.  There can be no assurances that actual results will not differ from those estimates.

OVERVIEW OF MANAGEMENT’S DISCUSSION AND ANALYSIS

This overview of management’s discussion and analysis highlights selected information in this document and may not contain all of the information that is important to you.  For a more complete understanding of trends, events, commitments, uncertainties, liquidity, capital resources and critical accounting estimates, you should carefully read this entire document.

Net income for 2004 was $8.2 million, or $0.82 per fully diluted share, an increase of $1.3 million or 18.6% compared to $6.9 million, or $0.70 per share for the prior year.  The Company experienced significant growth in both of its primary business segments: Banking and Wealth Management.  The improvement in earnings for 2004 was due to several factors:  1) earning asset growth funded mainly with core deposits; 2) stable interest-bearing liability rates; 3) strong asset quality; 4) strong fee income growth in wealth management; 5) minimal increases in noninterest expenses; and 6) a more favorable overall effective tax rate.  Partially offsetting these positive factors were lower gains on sale of mortgages.  Also, there was nothing to replace the gain on the sale of the Southeast Kansas branches recognized in 2003.

The majority of the Company’s revenue is net interest income in the Banking Segment.  Net interest income is a byproduct of earning asset volumes (i.e., loans and investment securities) and the net interest rate margin (i.e., the spread between earning asset yields and the overall cost of funding those assets).  The Company realized strong earning asset growth in 2004.  Along with managing credit risk and liquidity risk, managing interest rate risk is a key determinant of future earnings growth. 

Given the level of financial institution merger activity in the past year, the Company has significant opportunities for growing its client base.  The Company has hired experienced production staff from its competitors to complement the existing sales force, and is targeting increased levels of loan, deposit and wealth management sales production as a result.  Management has developed a model to capture relationship “contribution margin” and uses this tool to help make decisions on loan or deposit pricing.

Given the reliance on net interest income for revenue growth, the Company continues to develop and expand fee income opportunities.  Continued growth in new relationships and penetration of banking products into existing relationships should continue to drive service charge revenue before the earnings credit rate impact.  In addition, the Bank offers single family residential mortgages that are sold servicing-released into the secondary mortgage market.  Interest rate levels significantly impact this revenue item.  The Company believes that Wealth Management services offer an attractive value proposition to our targeted client base, and in the long run will provide the necessary fee income growth and revenue diversification the Company seeks.  Assets under administration in the Wealth Management segment exceeded $1.3 billion at December 31, 2004.

The Company is focused on leveraging its current expense base and measures the “efficiency ratio” as a benchmark for improvement.  The efficiency ratio is equal to noninterest expense divided by total revenue (net interest income plus noninterest income).  This ratio was 67% in 2004.  Continued improvement is targeted to maintain strong earnings per share growth and generate higher returns on equity.

The Company is “well capitalized” under any regulatory definition and adequately reserved against loan losses as of December 31, 2004. 

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CRITICAL ACCOUNTING POLICIES

The following accounting policies are considered most critical to the understanding of the Company’s financial condition and results of operations.  These critical accounting policies require management’s most difficult, subjective and complex judgments about matters that are inherently uncertain.  Because these estimates and judgments are based on current circumstances, they may change over time or prove to be inaccurate based on actual experiences.  In the event that different assumptions or conditions were to prevail, and depending upon the severity of such changes, the possibility of a materially different financial condition and/or results of operations could reasonably be expected.  The impact and any associated risks related to our critical accounting policies on our business operations is discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” where such policies affect our reported and expected financial results.  For a detailed discussion on the application of these and other accounting policies, see Note 1 of our consolidated financial statements.

Allowance for Loan Losses 

Subject to the use of estimates, assumptions, and judgments, management’s evaluation process used to determine the adequacy of the allowance for loan losses combines several factors: management’s ongoing review of the loan portfolio; consideration of past loan loss experience; trends in past due and nonperforming loans; risk characteristics of the various classifications of loans; existing economic conditions; the fair value of underlying collateral; and other qualitative and quantitative factors which could affect probable credit losses.  Because current economic conditions can change and future events are inherently difficult to predict, the anticipated amount of estimated loan losses, and therefore the adequacy of the allowance, could change significantly.  As an integral part of their examination process, various regulatory agencies also review the allowance for loan losses.  Such agencies may require that certain loan balances be charged off when their credit evaluations differ from those of management, based on their judgments about information available to them at the time of their examination.  The Company believes the allowance for loan losses is adequate and properly recorded in the consolidated financial statements.

Derivative Financial Instruments 

The Company employs derivative financial instruments to assist in its management of interest rate sensitivity by modifying the repricing, maturity and option characteristics of certain assets and liabilities.  The judgments and assumptions that are most critical to the application of this critical accounting policy are those affecting the estimation of fair value and hedge effectiveness.  Fair value is based on quoted market prices.  Factors that affect hedge effectiveness include the initial selection of the derivative that will be used as a hedge and how well changes in its cash flow or fair value has correlated and is expected to correlate with change in the cash flow or fair value of the underlying hedged asset or liability.  Past correlation is easy to demonstrate, but expected correlation depends upon projections and trends that may not always hold true with acceptable limits.  Changes in assumptions and conditions could result in greater than expected inefficiencies that, if large enough, could reduce or eliminate the economic benefits anticipated when the hedges were established and/or invalidate continuation of hedge accounting.  The consequence of greater inefficiency and discontinuation of hedge accounting results in increased volatility in reported earnings.  For cash flow hedges, this would result in more or all of the change in the fair value of the affected derivative being reported in income. For fair value hedges, this would result in less or none of the change in the fair value of the derivative being offset by changes in the fair value of the underlying hedged asset or liability.

Deferred Tax Assets

The Company recognizes deferred tax assets and liabilities for the estimated future tax effects of temporary differences, net operating loss carry forward and tax credits.  Deferred tax assets are recognized subject to management’s judgment based upon available evidence that realization is more likely than not.  Deferred tax assets are reduced if necessary, by a deferred tax asset valuation allowance.  In the event that management determines it would not be able to realize all or part of net deferred tax assets in the future, the Company would need to adjust the recorded value of our deferred tax assets, which would result in a direct charge to income tax expense in the period that such determination is made.  Likewise, the Company would reverse the valuation allowance when realization of the deferred tax asset is expected.

9

Goodwill and Other Intangible Assets

At December 31, 2004 the Company had $1.9 million of goodwill.  Under Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets, amortization of goodwill ceased as of January 1, 2002, and instead this asset must be periodically tested for impairment.  Goodwill arose from the acquisition of CGB.  Goodwill is tested for impairment utilizing the methodology and guidelines established in SFAS No. 142.  This methodology involves assumptions regarding the valuation of the business segments that contain the acquired entities.  Management believes that the assumptions utilized are reasonable.  However, the Company may incur impairment charges related to goodwill in the future due to changes in business prospects or other matters that could affect our valuation assumptions.

RESULTS OF OPERATIONS ANALYSIS

Performance Summary

The Company recorded net income of $8.2 million for the year ended December 31, 2004, an increase of $1.3 million or 18.6% over the $6.9 million earned in 2003.  Earnings per fully diluted share for 2004 were $0.82, a 17.1% increase over 2003 diluted earnings per share of $0.70.  Key factors behind these results were as follows:

Taxable equivalent net interest income was $37.2 million for 2004, $4.1 million or 12.3% higher than 2003.  Taxable equivalent interest income increased $5.7 million and interest expense increased $1.6 million.  This $4.1 million increase in taxable equivalent net interest income was due to increased volume of earning assets and liabilities (adding $5.1 million) partially offset by a decrease in interest rates ($1.0 million). 

The net interest rate margin for 2004 was 3.84%, compared to 4.01% in 2003. The 17 basis point (“bp”) decrease in net interest rate margin is attributable to a 19 bp decrease in interest rate spread (the net of a 19 bp lower yield on earning assets and no change in the cost of interest-bearing liabilities), and a 2 bp higher contribution from net free funds.  Lower repricing on fixed rate loan maturities, a less favorable earning asset mix, less interest income from cash flow hedges and price competition for new loans were the main factors responsible for the declining interest-earning asset yield.

Total loans were $898.5 million at December 31, 2004, an increase of $114.6 million or 14.6% over December 31, 2003.  This growth was generated internally from the Company’s sales force and funded from increases in deposits of $143.2 million.

The provision for loan losses was $2.2 million for 2004 compared to $3.6 million for 2003.  The $1.4 million decrease in the provision for loan losses from 2003 to 2004 was due to stable and low non-performing loan levels, strengthening local economies and favorable delinquency trends.  The allowance for loan losses of $11.7 million at December 31, 2004 represents 1.30% of outstanding portfolio loans versus 1.35% at the end of 2003. 

Noninterest income was $7.1 million for 2004, compared with $10.1 million in 2003.  Excluding the $2.9 million of gain on the sale of the Southeast Kansas branches in 2003, noninterest income was down $31,000.  A $250,000 increase, or 14.0%, in service charges on deposits and a $684,000 increase, or 18.9%, in wealth management income was offset by a $665,000 decrease in gains on the sale of mortgage loans and a $375,000 decrease in miscellaneous income.

Noninterest expense was $29.3 million, up $1.1 million or 4.0% over 2003.  Excluding the $554,000 charge taken in the 4^th quarter of 2004 for unamortized debt issuance costs associated with the refinancing of subordinated debentures, noninterest expense was up 2.0%.

Income tax expense increased to $4.1 million, up $63,000 from 2003.  The increase was related to higher income before income tax in 2004 offset by the reversal of $241,000 in valuation allowance on deferred tax assets and $163,000 in state income tax refunds related to amendments of prior state income tax returns. 

Net Interest Income 

Net interest income is the primary source of the Company’s revenue.  Net interest income is the difference between interest income on earning assets, such as loans and securities, and the interest expense on interest-bearing deposits and other borrowings, used to fund interest earning and other assets.  The amount of net interest income is affected by changes in interest rates and by the amount and composition of interest-earning assets and interest-bearing liabilities.  Additionally, net interest income is impacted by the sensitivity of the balance sheet to changes in interest rates which factors in characteristics such as the fixed or variable nature of the financial instruments, contractual maturities, and repricing frequencies. 

10

Net interest spread and net interest rate margin are utilized to measure and explain changes in net interest income.  Interest rate spread is the difference between the yield on interest-earning assets and the rate paid for interest-bearing liabilities that fund those assets.  The net interest rate margin is expressed as the percentage of net interest income to average interest-earning assets.  The net interest rate margin exceeds the interest rate spread because noninterest-bearing sources of funds (net free funds), principally demand deposits and shareholders’ equity, also support earning assets. 

Net interest income (presented on a tax equivalent basis) was $37.2 million for 2004, an increase of $4.1 million or 12.3% from 2003.  The increase in net interest income was attributable to a higher level of interest-earning assets partially offset by lower interest-earning asset yields and higher volumes of interest-bearing liabilities.  The net interest rate margin for 2004 was 3.84%, compared to 4.01% in 2003.  The 17 bp decrease in net interest rate margin is attributable to the net of a 19 bp decrease in net interest spread (the net of a 19 bp lower yield on interest-earning assets and no change in the cost of interest-bearing liabilities), and a 2 bp higher contribution from net free funds. 

As shown in the rate/volume analysis on page 14, changes in interest rates resulted in a $1.0 million decrease to net interest income, while increases in volume and changes to the mix of both interest-earning assets and interest-bearing liabilities added $5.1 million, for a net increase of $4.1 million in net interest income for 2004 over 2003. 

For 2004, the cost of interest-bearing liabilities remained level with 2003 at 1.63%.  Higher rates paid on interest-bearing transaction accounts and money market accounts were offset by lower rates paid on certificates of deposit, subordinated debentures, and other borrowed funds.  The rates on interest-bearing transaction accounts and money market accounts tend to track with treasury bill rates and national money market funds, both of which were rising in 2004.  The Company’s certificate of deposit portfolio repriced to lower rates during the year as renewals reflected lower rates for these products in our local markets.  The interest-bearing liability rate changes resulted in $29,000 higher interest expense in 2004.

For 2004, the yield on interest-earning assets fell 19 bp to 5.10%, driven by a 15 bp decline in the loan yield.  The average loan yield was 5.48%.  Competitive pricing pressures, refinancing to lower fixed rates and less interest income from cash flow hedges put downward pressure on loan yields in 2004.  The yield on securities and short-term investments combined was up 12 bp to 2.45%.  The interest-earning asset rate changes reduced interest income by $1.0 million, a combination of $1.2 million lower interest on loans and $0.2 million higher interest on securities and short-term investments combined.

From a volume perspective, the growth and composition change of interest-earning assets in 2004 contributed an additional $6.7 million to net interest income, while the growth and composition of interest-bearing liabilities cost an additional $1.6 million, netting a $5.1 million increase in net interest income. 

Average interest-earning assets were $967.9 million in 2004, an increase of $141.9 million or 17.2% from 2003. Loans accounted for the majority of the growth in interest-earning assets, increasing by $108.7 million or 14.7% to $847.3 million on average in 2004 and representing 87.5% of average interest-earning assets compared to 89.4% in 2003. For 2004, interest income on loans increased $6.0 million from growth, but decreased $1.2 million from the impact of the rate environment (as noted above), for a net increase of $4.8 million versus 2003 (see table on page 14).

Average interest-bearing liabilities were $748.4 million in 2004, an increase of $101.3 million or 15.7% from 2003.  The growth in earning assets was also supported by a $33.0 million or 21.8% increase in average noninterest-bearing deposits (a component of net free funds).  The growth in interest-bearing liabilities came from a $101.8 million increase in interest-bearing deposits, a $3.5 million increase in subordinated debentures, offset by a $4.0 million decrease in borrowed funds (includes Federal Home Loan Bank advances). For 2004, interest expense on interest-bearing liabilities increased $1.6 million due to this growth and the impact of rising rates increased interest expense on interest-bearing liabilities by $29,000 versus 2003.

Net interest income was $33.1 million for 2003, an increase of $2.0 million or 6.4% from 2002.  The increase in net interest income was attributable to a higher level of interest-earning assets and lower cost of interest-bearing liabilities partially offset by lower interest-earning asset yields and higher volumes of interest-bearing liabilities.  The net interest rate margin for 2003 was 4.01%, compared to 4.00% in 2002.  The 1 bp increase in net interest rate margin is attributable to the net of a 10 bp increase in net interest spread (the net of a 65 bp lower cost of interest-bearing liabilities offset by a 55 bp decrease in the yield on interest-earning assets), and a 9 bp lower contribution from net free funds. 

11

As shown in the rate/volume analysis on page 14, changes in the rates resulted in a $732,000 decrease to net interest income, while increases in volume and changes to the mix of both earning assets and interest-bearing liabilities added $2.7 million, for a combined increase of $2.0 million in net interest income for 2003 over 2002.  Rate changes on interest-bearing liabilities lowered interest expense by $4.3 million, while the changes in rates on interest-earning assets reduced interest income by $5.1 million, for a net favorable impact of $732,000.

For 2003, the cost of interest-bearing liabilities decreased 65 basis points to 1.63%, aided by the low rate environment.  The combined average cost of interest-bearing deposits was 1.36%, down 70 bp from 2002, with the most significant rate declines seen in the money market accounts down 53 bp and certificates of deposit down 116 bp.  The rates on money market balances (including corporate sweep accounts) tend to track with treasury bill rates and national money market funds, both of which were falling in 2003.  The Company’s certificate of deposit portfolio also repriced to lower rates during the year as renewals and new balances reflected lower rates for these products in our local markets.  The interest-bearing liability rate changes resulted in $4.3 million lower interest expense with $4.1 million of that total attributable to interest-bearing deposits.

For 2003, the yield on interest-earning assets fell 55 bp to 5.29%, driven by a 61 bp decline in the loan yield.  The average loan yield was 5.63%.  The lower rate environment for new originations, competitive pricing pressures and refinancing in many loan categories put downward pressure on loan yields in 2003.  The yield on securities and short term investments combined was down 23 basis points to 2.33%.  The interest-earning asset rate changes reduced interest income by $5.1 million, a combination of $4.5 million lower interest on loans and $590,000 lower interest on securities and short-term investments combined.

From a volume perspective, the growth and composition change of interest-earning assets in 2003 contributed an additional $3.2 million to net interest income, while the growth and composition of interest-bearing liabilities cost an additional $520,000, netting a $2.7 million increase to net interest income. 

Average interest-earning assets were $826.0 million in 2003, an increase of $46.8 million or 6.0% from 2002. Loans accounted for the majority of the growth in interest-earning assets, increasing by $45.0 million or 6.5% to $738.6 million on average in 2003 and representing 89.4% of average interest-earning assets compared to 89.0% in 2002. For 2003, interest income on loans increased $2.8 million from growth, but decreased $4.5 million from the impact of the rate environment (as noted above), for a net decrease of $1.7 million versus 2002 (see table on page 14).

Average interest-bearing liabilities were $647.1 million in 2003, an increase of $17.4 million or 2.8% from 2002.  The growth in earning assets was also supported by a $20.2 million or 15.4% increase in average noninterest-bearing deposits (a component of net free funds).  The growth in interest-bearing liabilities came from a $10.5 million increase in interest-bearing deposits, a $2.0 million increase in subordinated debentures, and a $4.9 million increase in borrowed funds (includes Federal Home Loan Bank advances). For 2003, interest expense on interest-bearing liabilities increased $520,000 due to this growth while the impact of declining rates reduced interest expense on interest-bearing liabilities by $4.3 million versus 2002.

The table on page 13 provides average balances of earning assets and interest-bearing liabilities, the associated interest income and expense, and the corresponding interest rates earned and paid, as well as net interest income, net interest spread and net interest rate margin on a taxable equivalent basis for the three years ended December 31, 2004. 

Please note that the balance of loans and deposits associated with the Southeast Kansas branches are included in the following tables of the section for 2002 and approximately three months of 2003.

12

												For the years ended December 31,
	2004											2003
(Dollars in Thousands)	Average Balance			Percent of Total Assets			Interest Income/ Expense		Average Yield/ Rate			Average Balance			Percent of Total Assets
Assets
Interest-earning assets:
Taxable loans (1)	$	830,267			82.37	%	$	45,082		5.43	%	$	723,752			83.35	%
Tax-exempt loans(2)		17,003			1.69			1,325		7.79			14,820			1.70
Total loans		847,270			84.06			46,407		5.48			738,572			85.05
Taxable investments in debt and equity securities		81,949			8.13			2,374		2.90			64,915			7.48
Non-taxable investments in debt and equity securities(2)		1,639			0.16			62		3.78			939			0.11
Short-term investments		36,996			3.67			522		1.41			21,547			2.48
Total securities and short-term investments		120,584			11.96			2,958		2.45			87,401			10.07
Total interest-earning assets		967,854			96.02			49,365		5.10			825,973			95.12
Noninterest-earning assets:
Cash and due from banks		30,031			2.98								29,068			3.35
Other assets		21,392			2.12								22,989			2.65
Allowance for loan losses		(11,255	)		(1.12	)							(9,727	)		(1.12	)
Total assets	$	1,008,022			100.00	%						$	868,303			100.00	%
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing transaction accounts	$	71,568			7.10	%	$	320		0.45	%	$	54,742			6.30	%
Money market accounts		403,363			40.01			4,614		1.14			357,497			41.17
Savings		4,254			0.42			14		0.33			5,499			0.63
Certificates of deposit		225,529			22.38			5,050		2.24			185,175			21.33
Total interest-bearing deposits		704,714			69.91			9,998		1.42			602,913			69.43
Subordinated debentures		19,022			1.89			1,405		7.39			15,464			1.78
Borrowed funds		24,698			2.45			766		3.10			28,710			3.31
Total interest-bearing liabilities		748,434			74.25			12,169		1.63			647,087			74.52
Noninterest-bearing liabilities:
Demand deposits		184,116			18.27								151,140			17.41
Other liabilities		6,618			0.65								6,901			0.79
Total liabilities		939,168			93.17								805,128			92.72
Shareholders’ equity		68,854			6.83								63,175			7.28
Total liabilities & shareholders’ equity	$	1,008,022			100.00	%						$	868,303			100.00	%
Net interest income							$	37,196
Net interest spread										3.47	%
Net interest rate margin(3)										3.84	%

	For the years ended December 31,
	2003					2002
(Dollars in Thousands)	Interest Income/ Expense		Average Yield/ Rate			Average Balance			Percent of Total Assets			Interest Income/ Expense		Average Yield/ Rate
Assets
Interest-earning assets:
Taxable loans (1)	$	40,451		5.59	%	$	685,455			83.52	%	$	42,785		6.24	%
Tax-exempt loans(2)		1,167		7.87			8,096			0.99			494		6.10
Total loans		41,618		5.63			693,551			84.51			43,279		6.24
Taxable investments in debt and equity securities		1,802		2.78			44,358			5.40			1,590		3.58
Non-taxable investments in debt and equity securities(2)		35		3.73			18			0.00			1		5.53
Short-term investments		198		0.92			41,267			5.03			603		1.46
Total securities and short-term investments		2,035		2.33			85,643			10.43			2,194		2.56
Total interest-earning assets		43,653		5.29			779,194			94.94			45,473		5.84
Noninterest-earning assets:
Cash and due from banks							27,496			3.35
Other assets							22,170			2.70
Allowance for loan losses							(8,130	)		(0.99	)
Total assets						$	820,730			100.00	%
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing transaction accounts	$	169		0.31	%	$	62,104			7.57	%	$	269		0.43	%
Money market accounts		3,475		0.97			332,700			40.54			5,001		1.50
Savings		24		0.44			8,571			1.04			84		0.98
Certificates of deposit		4,532		2.45			189,030			23.03			6,833		3.61
Total interest-bearing deposits		8,200		1.36			592,405			72.18			12,187		2.06
Subordinated debentures		1,270		8.21			13,453			1.64			1,152		8.56
Borrowed funds		1,073		3.74			23,793			2.90			1,004		4.22
Total interest-bearing liabilities		10,543		1.63			629,651			76.72			14,343		2.28
Noninterest-bearing liabilities:
Demand deposits							130,931			15.95
Other liabilities							4,787			0.58
Total liabilities							765,369			93.25
Shareholders’ equity							55,361			6.75
Total liabilities & shareholders’ equity						$	820,730			100.00	%
Net interest income	$	33,110										$	31,130
Net interest spread				3.66	%										3.56	%
Net interest rate margin(3)				4.01	%										4.00	%

(1)	Average balances include non-accrual loans. The income on such loans is included in interest but is recognized only upon receipt. Loan fees included in interest income are approximately $1,526,000, $1,521,000 and $1,415,000 for the years ended December 31, 2004, 2003 and 2002, respectively.
(2)	Non-taxable income is presented on a fully tax-equivalent basis assuming a tax rate of 34%. The approximate tax-equivalent adjustments were $472,000, $409,000 and $266,000 for the years ended December 31, 2004, 2003 and 2002, respectively.
(3)	Net interest income divided by average total interest-earning assets.

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The following table sets forth, on a tax-equivalent basis for the periods indicated, a summary of the changes in interest income and interest expense resulting from changes in yield/rates and volume:

	2004 Compared to 2003 Increase (decrease) Due to									2003 Compared to 2002 Increase (decrease) Due to
	Volume(1)			Rate(2)			Net			Volume(1)			Rate(2)			Net
	(Dollars in Thousands)
Interest earned on:
Loans	$	5,811		$	(1,180	)	$	4,631		$	2,303		$	(4,637	)	$	(2,334	)
Nontaxable loans (3)		170			(12	)		158			498			175			673
Taxable investments in debt and equity securities		490			82			572			625			(413	)		212
Nontaxable investments in debt and equity securities (3)		26			1			27			34			—			34
Short-term investments		186			138			324			(228	)		(177	)		(405	)
Total interest-earning assets	$	6,683		$	(971	)	$	5,712		$	3,232		$	(5,052	)	$	(1,820	)
Interest paid on:
Interest-bearing transaction accounts	$	61		$	90		$	151		$	(29	)	$	(71	)	$	(100	)
Money market accounts		479			660			1,139			350			(1,876	)		(1,526	)
Savings		(5	)		(5	)		(10	)		(23	)		(37	)		(60	)
Certificates of deposit		928			(410	)		518			(136	)		(2,165	)		(2,301	)
Subordinated debentures		272			(137	)		135			167			(49	)		118
Borrowed funds		(138	)		(169	)		(307	)		192			(123	)		69
Total interest-bearing liabilities		1,597			29			1,626			520			(4,320	)		(3,800	)
Net interest income (loss)	$	5,086		$	(1,000	)	$	4,086		$	2,712		$	(732	)	$	1,980

(1)	Change in volume multiplied by yield/rate of prior period.
(2)	Change in yield/rate multiplied by volume of prior period.
(3)	Non taxable income is presented on a fully tax-equivalent basis assuming a tax rate of 34%.
NOTE: The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the absolute dollar amounts of the change in each.

Provision for Loan Losses

The provision for loan losses was $2.2 million, $3.6 million, and $2.3 million for the years ended December 31, 2004, 2003 and 2002, respectively.

The $1.4 million decrease in the provision for loan losses from 2003 to 2004 was due to stable and low non-performing loan levels, strengthening local economies and favorable delinquency trends.

The $1.3 million increase in the provision for loan losses from 2002 to 2003 reflects strong growth in the loan portfolio and management’s perception of changes in credit risk levels in the portfolio.  Driving these risk levels were robust growth in commercial and industrial loans and commercial real estate loans in the Company’s markets amidst heavy industry competition and effects of relatively stagnant local economies during the last two years.

For a further discussion on our process for evaluating levels of credit risk in the portfolio and the impact on the allowance and provision for loan losses, see “Loans” and “Allowance for Loan Losses.”

14

Noninterest Income

The following table depicts the annual changes in various noninterest income categories:

	Years ended December 31,
	2004		2003		$ Change
Service charges on deposit accounts	$	2,031,915	$	1,781,621	$	250,294
Wealth Management income		4,306,349		3,621,927		684,422
Other service charges and fee income		394,852		369,352		25,500
Gain on sale of mortgage loans		262,258		927,395		(665,137	)
Gain on sale of securities		126,480		77,884		48,596
Gain on sale of branches		—		2,937,976		(2,937,976	)
Miscellaneous income		—		375,000		(375,000	)
Total noninterest income	$	7,121,854	$	10,091,155	$	(2,969,301	)

	Years ended December 31,
	2003		2002		$ Change
Service charges on deposit accounts	$	1,781,621	$	1,771,417	$	10,204
Wealth Management income		3,621,927		2,353,927		1,268,000
Other service charges and fee income		369,352		380,433		(11,081	)
Gain on sale of mortgage loans		927,395		771,298		156,097
Gain on sale of securities		77,884		—		77,884
Gain on sale of branches		2,937,976		—		2,937,976
Recovery from Merchant Banc investments		—		88,889		(88,889	)
Miscellaneous income		375,000		—		375,000
Total noninterest income	$	10,091,155	$	5,365,964	$	4,725,191

Total noninterest income was $7.1 million in 2004 representing a $3.0 million, or 29.4%, decrease from 2003.  Excluding the $2.9 million gain on the sale of branches in 2003 total noninterest income decreased $31,000.  An analysis of this decrease by category follows:

The $250,000 increase in service charges on deposit accounts was the result of an increase in the number of accounts and balances outstanding, an increase in the fee schedule and better collection efforts of non-sufficient fund charges in 2004.

The $684,000 increase in Wealth Management income to $4.3 million during 2004 was the result of increased assets under administration, a more favorable mix of managed versus custodial assets, and the introduction of the Company’s new Wealth Products Group in March of 2004.  Assets under administration in Enterprise Trust were $1.33 billion at December 31, 2004 versus $1.15 billion at December 31, 2003.  The Wealth Products Group had revenue of $309,000 in 2004.

The $665,000 decrease in gain on the sale of mortgage loans was due to lower levels of refinancing activities in 2004 as compared to 2003.  Gains on the sale of securities were $126,000 in 2004 compared to $78,000 in 2003.  During 2004 securities were sold to slightly adjust the interest rate risk profile of the Company’s consolidated balance sheet in anticipation of higher rates.

During 2003 the Company recognized a $3.1 million gain on the sale of the Southeast Kansas branches, less a $150,000 write-off of related goodwill.  Also, in 2003, the Company recognized $375,000 of miscellaneous income from a lawsuit settlement in connection with, but not directly related to, a charged-off loan in 2002.

Total noninterest income was $10.1 million in 2003, representing a $4.7 million increase from 2002.  The major components associated with this increase are as follows:

The $1.3 million increase in Wealth Management income to $3.6 million during 2003 was the result of increased transaction-based fees including commissions from life insurance policy sales and increased assets under administration at Enterprise Trust.  Assets under administration in Enterprise Trust were $1.15 billion at December 31, 2003 versus $866 million at December 31, 2002.

15

The increase in the gains on sale of mortgage loans was due to changes in the interest rate environment during 2003. The $156,000 increase in the gains on the sale of mortgage loans during 2003 was due to a low interest rate environment from the dramatic rate decreases during 2002 and 2001.  This low interest rate environment spurred residential mortgage loan originations and refinancing, which increased mortgage loans sold.  The Company sells its mortgage loans and the related servicing rights to various third party investors shortly after the loans close.

Gains on the sale of investment securities were $78,000 for 2003 compared to $0 for 2002.  The Company sold several investment securities during 2003 for liquidity purposes.

The Company recognized a $3.1 million gain on the sale of the Southeast Kansas branches, less a $150,000 write-off of related goodwill in 2003.

Service charges on deposit accounts increased $10,000 during 2003.  The Southeast Kansas branch activity is included in 2002.  The slight increase in service charges on deposit accounts during 2003 was a result of an increase in the number of accounts, account activity and services provided offset by decreases related to the sale of the Southeast Kansas branches.

In 2003, as noted previously, the Company recognized $375,000 of miscellaneous income from a lawsuit settlement in connection with, but not directly related to, a charged-off loan in 2002.  The $89,000 recovery from Merchant Banc investments in 2002 presents a reimbursement from a participant guarantor for a line of credit guaranteed by the Company for a Merchant Banc investment written off in 2001.

Noninterest Expense

The following table depicts changes in various noninterest expense categories:

	December 31, 2004 verses 2003							December 31, 2003 verses 2002
	2004		2003		$ Change			2003		2002		$ Change
Employee compensation and benefits	$	18,553,251	$	17,698,276	$	854,975		$	17,698,276	$	15,927,729	$	1,770,547
Occupancy		2,090,012		1,973,874		116,138			1,973,874		1,900,812		73,062
Furniture, equipment and data processing		1,516,474		1,773,706		(257,232	)		1,773,706		2,013,531		(239,825	)
Correspondent bank charges		270,207		349,621		(79,414	)		349,621		353,197		(3,576	)
Professional, legal and consulting		955,353		1,052,084		(96,731	)		1,052,084		1,182,659		(130,575	)
Losses and settlement		62,548		80,585		(18,037	)		80,585		1,371,361		(1,290,776	)
Postage, courier and armored car		658,976		668,651		(9,675	)		668,651		692,903		(24,252	)
Meals, entertainment, and travel		663,914		655,849		8,065			655,849		618,749		37,100
Stationary and office supplies		343,934		324,545		19,389			324,545		414,624		(90,079	)
Communications		244,703		302,282		(57,579	)		302,282		339,492		(37,210	)
Marketing and public relations		551,993		317,750		234,243			317,750		202,707		115,043
Director related expense		166,515		449,482		(282,967	)		449,482		171,886		277,596
Noncompete expense		180,000		380,000		(200,000	)		380,000		200,000		180,000
FDIC and other insurance		417,271		419,650		(2,379	)		419,650		425,531		(5,881	)
TRUPS amortization		599,352		40,616		558,736			40,616		38,967		1,649
Other		2,056,546		1,728,423		328,123			1,728,423		1,509,746		218,677
Total noninterest expense	$	29,331,049	$	28,215,394	$	1,115,655		$	28,215,394	$	27,363,894	$	851,500

Total noninterest expense in 2004 was $29.3 million, a $1.1 million, or 4%, increase over 2003.  An analysis of this increase by category follows:

Employee compensation and benefits increased $855,000, or 4.8%, in 2004 over 2003.  Annual merit increases and higher compensation of new middle and senior management hired during 2003 and 2004 represent $705,000 of the increase.  Payouts under the Company’s incentive bonus program and 401(k) match benefit, both of which are tied to performance targets increased $118,000.  As a result of the higher compensation, payroll taxes increased $94,000.  Employee benefits increased $151,000 due to $103,000 of increased medical and disability insurance expenses and $48,000 additional expenses related to life insurance and other benefits such as car allowances.  Also, compensation expense increased $146,000 due to the accelerating of the vesting on the Company’s outstanding stock options.  These increases were partially offset by $329,000 in lower commission expenses related to our Wealth Management operations.

16

Historically the Company had used stock options as the long term incentive component of many officers’ total compensation.  These equity instruments helped align officer and shareholder interests and have proven to be an attractive tool for both recruiting and retaining talented officers.

Beginning in late 2003 and during 2004, the Board and its Compensation Committee, like many others in public companies, became increasingly uncomfortable with the level of uncertainty and judgments required in valuing and expensing these options, since they are not publicly traded, and then having to record such uncertain amounts in future years.  In addition, the Board and management were interested in tying long term incentives even more directly to the Company’s earning per share growth rates, while retaining the recruiting and retention power of equity-based compensation.

Under the terms of the Long Term Incentive Plan (“LTIP”) adopted by the Board of Directors effective January 1, 2005 and phasing in over three years, the Company will award restricted share units (“RSU’s”) to selected personnel based on the Company’s three year rolling average increase in earnings per share in comparison to a peer group of approximately 150 financial institutions.  RSU’s will be expensed annually as they vest and will impact earnings per share accordingly in 2005 and beyond.  The amount expensed is easily determinable based on the number of RSU’s times the stock price at award date.  This is in direct contrast to options where multiple levels of inputs and potentially multiple models would be necessary.

Based on the valuation and accounting uncertainties under proposed accounting treatment for stock options at the time, and the fact that no associates had been awarded any long term incentive for eighteen months in the midst of a very competitive environment for banking talent, the Board of Directors accelerated the vesting on the Company’s outstanding stock options during the fourth quarter of 2004.

This action resulted in two financial reporting impacts.  First, the remaining fair value of all outstanding stock options was recognized in 2004 as part of the pro-forma footnote disclosures.  Secondly, the Company recognized $146,000 of compensation expense in the fourth quarter of 2004 based on the product of the number of outstanding unvested options times the spread between their weighted average stock price and the Company stock price on October 1, 2004 times the estimated option forfeiture rate of 9.5%.  The forfeiture rate is based on the Company’s history over the past several years, but actual forfeiture effects in the future will be measured and recognized in expense for any differences versus the estimate.

In summary, the acceleration of the options vesting 1) assisted in the transition with officers to an even more closely aligned business metric, 2) eliminated uncertain LTIP expense impacts on future earnings, and 3) rewarded officers for the performance of the past two years.

Occupancy expense increased $116,000 to $2.1 million in 2004.  The increase was due to scheduled rent increases on various Company facilities and additional space leased at the Company’s Operation Center.   

The $257,000 decrease in furniture, equipment and data processing is related to lower depreciation expense as some assets have become fully depreciated. 

Professional, legal and consulting expenses decreased $97,000 during 2004.  Expenses related to non-performing loan legal issues and other special matters decreased by $232,000 in 2004.  Legal issues and other special matters related to the 2003 sale of Southeast Kansas branches contributed $93,000 to the decrease.  This decrease was offset by $225,000 of additional expenses related to Sarbanes-Oxley 404 compliance and $82,000 of outside consulting for the Company’s compensation committee.  The remaining decrease was due to less work on special matters such as human resource consulting, tax consulting and various legal issues.

Losses and settlements decreased $18,000 during 2004.  In both 2004 and 2003, the Bank recognized a $50,000 legal settlement expense related to a loan dispute with another financial institution. 

Marketing and public relations expenses increased $234,000 to $552,000 in 2004.  Historically, the Company did not invest in marketing campaigns.  During 2003, the Company began several initiatives to increase its presence in its two markets, including sponsoring a “university” for private business owners, soliciting customer surveys, and advertising in local business periodicals aimed at the Company’s target market.  These efforts continued in 2004 and expanded to include radio and television spots which increased the cost of the campaign.

Director related expenses decreased $283,000 in 2004.  Approximately $175,000 of this decrease was related to director incentive and appreciation programs earned in 2003.  The remainder of the variance is due to fewer outstanding Stock Appreciation Rights (SARs) which require marking to market versus 2003.  Prior to 2001, SARs were used as compensation for director time.

17

In 2004, the Company recognized $180,000 in noncompete expenses related to the former CEO, who resigned in 2002.  In 2003, the Company recognized $380,000 in noncompete expenses related to the former CEO and another former employee. 

Trust Preferred Securities (“TRUPS”) amortization increased $559,000 in 2004 due the write-off of $554,000 of unamortized debt issuance costs related to the refinancing of $11 million of Trust Preferred Securities (TRUPS). 

The $328,000 increase in other expenses is due to $163,000 of expenses related to a nonperforming loan and $150,000 writedown on a foreclosed real estate property.

Total noninterest expense in 2003 was $28.2 million, a $852,000, or 3.1%, increase over 2002.

Employee compensation and benefits increased $1,770,547 in 2003 as compared to 2002.  Approximately $562,000 of this increase was commission expense related to higher revenues in the Trust area of the Bank where producers are paid formulas related to revenues.  $685,000 of this increase was due to increased payouts under the Company’s incentive bonus program and 401(k) match benefit, both of which are tied to performance targets.  In addition, the Company has changed its employee composition significantly.  FTE headcount has been reduced from 232 to 207.  Offsetting the expense decrease from headcount reduction is a shift in the total of new associates, many of whom are high level, experienced executives, managers and relationship managers.  The average compensation of positions eliminated was $38,000.  The average compensation of new associates in 2003 was $66,000.  This is consistent with the Company’s stated strategy to continue to attract some of the very best talent available in a consolidating industry and to raise performance expectations accordingly.

Another factor in this variance was the payment to certain employees of $177,000 in retention and severance bonuses related to the sale of the Southeast Kansas branches during 2003.  The remaining variance in this category was attributable to annual merit increases.  Payroll taxes and employee benefits decreased approximately $71,000 in 2003 as compared to 2002 and did not increase in proportion with employee compensation due to a change in the mix of employees.

Occupancy expense increased $73,000 in 2003 due to scheduled rent increases on various Company facilities offset by a decrease in building depreciation expense related to the sale of the Southeast Kansas branch buildings.

The $240,000 decrease in furniture, equipment and data processing along with the $37,000 decrease in communications expense was the result of savings from information technology and communications upgrades in 2002, and the discontinuation of depreciation on Southeast Kansas assets sold in 2003.

Professional, legal and consulting expenses decreased $131,000 during 2003 due to less work on special matters.  In 2002, these items included Merchant Banc recovery efforts, financial reporting and accounting issues, legal review on new laws and certain contracts, and implementation of tax planning work, among other items.

During 2003, the Bank recognized $25,000 in fraud losses during the first quarter of 2002, net of recoveries.  In accordance with SFAS No. 5, Accounting for Contingencies, the Company recognized $1,300,000 in expense during 2002 related to settlement of a dispute with another financial institution pursuant to an agreement signed in February of 2003.  During 2003 the Company paid $725,000 of this settlement and paid the remaining $575,000 in 2004.

The $219,000 increase in other expenses was due to 1) an $80,000 mark-to-market on the Company’s non-qualified deferred compensation program for certain executives, 2) $83,000 is related to officer, senior management and board meeting expenses throughout the year, 3) $32,000 of increased professional and social memberships and 4) $32,000 write-off of a Kansas City fund investment acquired with CGB in 2000.

Income Taxes

Income tax expense was $4.1 million, $4.0 million, and $1.6 million, for 2004, 2003, and 2002, respectively.  The effective tax rates were 33%, 37%, and 24% for 2004, 2003, and 2002, respectively.  In 2001, a valuation allowance was established in the amount of $1.0 million related to capital losses on certain merchant banking investments.  As of December 31, 2001, the Company had determined it was more likely than not that certain of the deferred tax assets related to the capital losses would not be realized.  Due to the availability of certain tax planning strategies in the fourth quarter of 2002 (i.e. the sale of the branches which would generate significant capital gains), the Company reversed $800,000 of the valuation allowance recorded in 2001.  During 2004, the Company reversed the remaining $241,000 of the valuation allowance.  The nature and deductibility of these losses were finally determined when the Company filed its 2003 income tax returns during 2004.  Also, during 2004, the Company recognized state income tax refunds of $163,000 related to amendments of prior state income tax returns.

18

Fourth Quarter Results

The Company earned $1.8 million in net income for the fourth quarter ended December 31, 2004, a $412,000 increase over net income of $1.4 million the same period in 2003.  This increase was due to several factors.

The net interest rate margin was 3.85% for the fourth quarter of 2004 as compared to 3.89% for the same period in 2003.  Net interest income in the fourth quarter of 2004 increased $1.7 million from the fourth quarter of 2003.  This increase in net interest income was the result of a $1.1 million increase in interest expense offset by a $2.8 million increase in interest income.  The cost of interest-bearing liabilities increased to 1.82% for the fourth quarter of 2004 from 1.50% for the same period in 2003.  This increase is attributed mainly to an increase in money market interest rates.  The yield on average interest-earning assets increased to 5.25% during the fourth quarter of 2004 as compared to 5.05% during the same period in 2003.  The increase in asset yield was due to several prime rate increases during 2004.

The provision for loan losses was $775,000 in the fourth quarter of 2004 versus $899,000 in 2003.  The decrease of $124,000 was due to stable and low non-performing loan levels, strengthening local economies and favorable delinquency trends.

Noninterest income was $1.9 million during the fourth quarter of 2004, a $197,000 decrease over $2.1 million in noninterest income during the same period in 2003.  This decrease was the result of increased wealth management income being offset by the recognition of a $375,000 legal settlement in the 4^th quarter of 2003.

Noninterest expense was $8.3 million during the fourth quarter of 2004 versus $7.3 million during the same period in 2003.  This represents a $1.0 million or 14% increase.  This increase was due to the following items recognized in the fourth quarter of 2004: 1) $554,000 charge for unamortized debt issuance costs related to $11 million of subordinated debentures that were refinanced; 2) a $150,000 valuation write-down on the Bank’s only foreclosed real estate asset; and 3) $146,000 of compensation expense related to the vesting acceleration of employee stock options and the Company’s new LTIP.

Income tax expense was $1.1 million during the fourth quarter of 2004 versus $829,000 in the same period in 2003.  The effective tax rates were 37% for both periods in 2004 and 2003.

The Company earned $1.4 million in net income for the fourth quarter ended December 31, 2003, an $88,000 increase over net income of $1.3 million the same period in 2002.  This increase was due to several factors.

The net interest rate margin was 3.89% for the fourth quarter of 2003 as compared to 3.83% for the same period in 2002.  Net interest income in the fourth quarter of 2003 increased $316,000 from the fourth quarter of 2002.  This increase in net interest income was the result of a $692,000 decrease in interest expense offset by a $380,000 decrease in interest income.  The cost of interest-bearing liabilities decreased to 1.50% for the fourth quarter of 2003 from 1.93% for the same period in 2002.  This decrease is attributed mainly to declines in market interest rates on deposit accounts.  The yield on average interest-earning assets decreased to 5.05% during 2003 as compared to 5.83% during the same period in 2002.  The decrease in asset yield was due to a 25 basis point decrease in the prime rate in June 2003 and a general decrease in the average yield on new fixed rate loans and investment securities.  Loan fees were $401,000 for the fourth quarter in 2003, a $95,000 increase over the fourth quarter in 2002.

The provision for loan losses was $899,000 in the fourth quarter of 2003 versus $491,000 in 2002.  The increase of $408,000 is due to strong loan growth and changing credit risks in the portfolio.  The Company had loan growth of $38.5 million during the fourth quarter of 2003 as compared to loan growth of $26.5 million during the same period in 2002.

Noninterest income was $2.1 million during the fourth quarter of 2003, a $651,000 increase over $1.5 million in noninterest income during the same period in 2002.  This increase is primarily the result of the recognition of a $375,000 legal settlement in December 2003.

Noninterest expense was $7.3 million during the fourth quarter of 2003 versus $8.2 million during the same period in 2002.  This represents a $943,000 or 11% decrease.  During 2002, the Company recognized a $1.3 legal settlement expense.  Excluding the settlement expense noninterest expenses increased $357,000 or 5% in 2003 compared to 2002.

19

Income tax expense was $829,000 in 2003 versus an income tax benefit of $585,000 in 2002.  During 2002, in conjunction with the pending sale of the Southeast Kansas branches, the Company quantified the amount of gain of the appropriate character which could be utilized to offset losses recorded in 2001 on the Merchant Banc investments.  Accordingly in 2002, the Company reversed $800,000 of the valuation allowance on a certain deferred tax asset.

BALANCE SHEET ANALYSIS

Total assets at December 31, 2004 were $1.1 billion, an increase of $152 million, or 17%, over total assets of $908 million at December 31, 2003.  The increase in total assets was related to growth in loans and investment securities.  Loans were $899 million, an increase of $115 million, or 15%, over total loans of $784 million at December 31, 2003.  The increase in loans is attributed, in part, to the success of the Company’s relationship officer’s efforts. Investment securities were $122 million, an increase of $38 million, or 45%,from a comparable balance of $84 million at December 31, 2003.  At December 31, 2004, investment securities included $30 million of short term discount agency securities which matured in January 2005.  These investments were used as an alternative to overnight funds to obtain more yield.

Total deposits at December 31, 2004 were $940 million, an increase of $143 million, or 18%, over total deposits of $796 million at December 31, 2003.  This deposit growth occurred in demand deposits, interest-bearing transaction deposits, money market deposits and certificates of deposit $100,000 and over as a result of new client relationships and increased sales penetration of existing clients.  Demand deposits grew $32 million, or 20%, during 2004.  Money market deposits were $432 million, an increase of $61 million, or 16%, over money market deposits at December 31, 2003.  Certificates of deposit $100,000 and over were $179 million, an increase of $25 million, or 16%, over December 31, 2003 balances.

Total shareholders’ equity at December 31, 2004 was $73 million, an increase of $7 million compared to shareholders’ equity at December 31, 2003.  The increase in equity was due to net income of $8.2 million for the year ended December 31, 2004 and the exercise of incentive stock options offset by dividends paid to shareholders and changes in accumulated other comprehensive income.

Total assets at December 31, 2003 were $908 million, an increase of $31 million, or 3%, over total assets of $877 million at December 31, 2002.  The increase in total assets was related to loan growth which was partially offset by the transfer of $28 million in assets and $48 million in deposits at the closing of the sale of the Southeast Kansas branches on April 4, 2003.  Loans and leases, net of unearned loan fees, were $784 million, an increase of $104 million, or 15%, over total loans and leases of $680 million at December 31, 2002.  The increase in loans was attributed, in part, to the success of the Company’s relationship officer’s efforts. Federal funds sold, interest-bearing deposits and investment securities were $84 million and $100 million at December 31, 2003 and December 31, 2002, respectively.  The reduction of these balances in aggregate since December 31, 2002 partially offset the shortfall in deposit growth to fund new loan volume.

Total deposits at December 31, 2003 were $796 million, an increase of $80 million, or 11%, over total deposits of $716 million at December 31, 2002. Most of the deposit growth occurred in demand deposits, money market deposits and certificates of deposit $100,000 and over.  Demand deposits grew $9 million, or 6%, to $165 million as a result of an increase in the number of customers, an increase in commercial loan relationships and the calling efforts of the Company’s relationship officers.  Money market deposits grew $30 million, or 9%, to $372 million as a result of a targeted money market promotion.  Certificates of deposits grew $40 million, or 25%, to $197 million as a result of the Bank executing four $10 million brokered certificates of deposit during 2003.  Federal Home Loan Bank advances at December 31, 2003 were $15 million, a decrease of $15 million, or 51%, from $29 million at December 31, 2002.  This decrease was the result of the Bank not replacing maturing advances during the year.

Total shareholders’ equity at December 31, 2003 was $65 million, an increase of $6 million, or 11%, compared to shareholders’ equity of $59 million at December 31, 2002.  The increase in equity was the result of net income of $6.9 million for the year ended December 31, 2003, the exercise of incentive stock options by employees, offset by dividends paid to shareholders and a decrease in accumulated other comprehensive income.

20

Loans

Loans, less unearned loan fees, represented 84.8% of total assets as of December 31, 2004, compared to 86.4% of total assets at December 31, 2003.  Total loans, less unearned loan fees, increased $115 million to $899 million for the year ended December 31, 2004, and $104 million to $784 million for the year ended December 31, 2003.  These increases were a result of our internal business development activities in our existing markets.

The following table sets forth the composition of the Company’s loan portfolio by type of loans at the dates indicated:

		December 31,
	2004					2003					2002
	Amount		Percent Of Total Loans			Amount		Percent Of Total Loans			Amount			Percent Of Total Loans
	(Dollars in Thousands)
Commercial and industrial	$	253,594		28.22	%	$	209,928		26.79	%	$	167,842			24.69	%
Real estate:
Commercial		328,986		36.62			257,202		32.81			187,044			27.51
Construction		127,180		14.15			130,074		16.59			139,319			20.49
Residential		149,293		16.62			150,371		19.18			189,613			27.89
Consumer and other		39,452		4.39			36,303		4.63			31,275			4.60
Less: Portfolio loans held for sale		—		—			—		—			(35,294	)		(5.18	)
Net Loans	$	898,505		100.00	%	$	783,878		100.00	%	$	679,799			100.00	%

	December 31,
	2001						2000
	Amount			Percent Of Total Loans			Amount			Percent Of Total Loans
	(Dollars in Thousands)
Commercial and industrial	$	160,218			26.58	%	$	153,357			29.68	%
Real estate:
Commercial		167,378			27.77			134,133			25.95
Construction		123,788			20.54			128,779			24.92
Residential		162,100			26.89			114,212			22.10
Consumer and other		28,570			4.74			26,312			5.09
Less: Portfolio loans held for sale		(39,307	)		(6.52	)		(39,983	)		(7.74	)
Net Loans	$	602,747			100.00	%	$	516,810			100.00	%

The Company’s lending strategy emphasizes commercial, residential real estate, real estate construction and commercial real estate loans to small and medium sized businesses and their owners in the St. Louis and Kansas City metropolitan markets.  Consumer lending is minimal.  A common underwriting policy is employed throughout the Company.  Lending to these small and medium sized businesses are riskier from a credit perspective than lending to larger companies, but the risk tends to be offset with higher loan pricing and ancillary income from cash management activities. 

The Company implemented a targeted hiring program designed to attract and retain experienced commercial middle market bankers in both the St. Louis and Kansas City markets.  As a result of this strategy the Company has targeted, and will continue to target larger and more sophisticated commercial and industrial and commercial real estate clients.  It is expected that the Company’s average relationship size will increase resulting in greater efficiencies as the same level of cost can originate and service larger average relationships and their related higher revenues.  In addition, it is anticipated that the characteristics of the credit requirements of these clients will require a heavier underwriting emphasis on cash flows as the primary credit granting criteria.

Commercial and industrial loans include loans to a diverse range of industries that are made based on the borrowers’ character, experience, general credit strength, and ability to generate cash flows for repayment from income sources, even though such loans may also be secured by real estate or other assets. The credit risk related to commercial loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations.

Real estate loans are also based on the borrowers’ character, but more emphasis is placed on the estimated collateral values.  Real estate commercial loans are mainly for owner-occupied business and industrial properties, multifamily properties, and other commercial properties on which income from the property is the primary source of repayment.  Credit risk on these loan types is managed in a similar manner to commercial loans and real estate construction loans by employing sound underwriting guidelines, lending to borrowers in local markets and businesses, and formally reviewing the borrower’s financial soundness and relationship on an ongoing basis.  In many cases the Company will take additional real estate collateral to further secure the overall lending relationship.

Real estate construction loans, relating to residential and commercial properties, represent financing secured by real estate under construction for eventual sale.  Real estate construction loans are made to developers and project managers who are well known to the Company, have prior successful project experience, and are well capitalized.  Projects undertaken by these developers are carefully reviewed by the Company to ensure that they are economically viable.   The credit risk associated with real estate construction loans is confined to specific geographic areas, but is also influenced by general economic conditions.  The Company controls the credit risk on these types of loans by making loans in the Company’s primary markets to local developers with which the Company has a strong relationship.  In addition, the Company reviews the merits of each individual project and regularly monitors project progress and construction advances.

21

Real estate residential loans include residential mortgages (which consist of loans that, due to size, do not qualify for conventional home mortgages, that the Company sells into the secondary market and second mortgages) and home equity lines.  Residential mortgage loans are usually limited to a maximum of 80% of collateral value.

Consumer and other represent loans to individuals secured by personal assets such as automobiles or investment securities. Credit risk is controlled by reviewing the creditworthiness of the borrowers as well as taking appropriate collateral and guaranty positions on such loans.

Portfolio loans held for sale relate to loans originated by the Southeast Kansas branches that were sold on April 4, 2003.

Factors that are critical to managing overall credit quality are sound loan underwriting and administration, systematic monitoring of existing loans and commitments, effective loan review on an ongoing basis, early identification of potential problems, an adequate allowance for loan losses, and sound nonaccrual and charge-off policies.

The loan portfolio is widely diversified by types of borrowers and industries within our two metropolitan markets.  Significant loan concentrations are considered to exist for a financial institution when there are amounts loaned to numerous borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions.  At December 31, 2004, no significant concentrations existed in the Company’s portfolio in excess of 10% of loans.

22

Loans at December 31, 2004 mature or reprice as follows:

	Loans Maturing or Repricing
	In One Year or Less		After One Through Five Years		After Five Years		Total
	(Dollars in Thousands)
Fixed Rate Loans (1)
Commercial and industrial	$	11,596	$	37,088	$	1,507	$	50,191
Real estate:
Commercial		39,138		92,618		1,339		133,095
Construction		8,643		3,178		—		11,821
Residential		10,389		24,553		3		34,945
Consumer and other		2,567		2,373		7,115		12,055
Total	$	72,333	$	159,810	$	9,964	$	242,107
Variable Rate Loans (1) (2)
Commercial and industrial	$	203,403	$	—	$	—	$	203,403
Real estate:
Commercial		195,891		—		—		195,891
Construction		115,359		—		—		115,359
Residential		114,348		—		—		114,348
Consumer and other		27,397		—		—		27,397
Total	$	656,398	$	—	$	—	$	656,398
Loans (1) (2)
Commercial and industrial	$	214,999	$	37,088	$	1,507	$	253,594
Real estate:
Commercial		235,029		92,618		1,339		328,986
Construction		124,002		3,178		—		127,180
Residential		124,737		24,553		3		149,293
Consumer and other		29,964		2,373		7,115		39,452
Total	$	728,731	$	159,810	$	9,964	$	898,505

⁽¹⁾ Loan balances are shown net of unearned loan fees.

⁽²⁾ Not adjusted for impact of interest rate swap agreements.

As indicated in the above maturity table, most of our lending is done on a variable-rate basis (Prime).  In addition, most loan originations have one to three year maturities.  While the loan relationship has a much longer life, the shorter maturities allow the Company to revisit the underwriting and pricing on each relationship periodically.

Allowance for Loan Losses

The loan portfolio is the primary asset subject to credit risk.  Credit risk is controlled and monitored through the use of lending standards, a thorough review of potential borrowers, and ongoing review of loan payment performance.  Active asset quality administration, including early problem loan identification and timely resolution of problems, further ensures appropriate management of credit risk and minimization of loan losses.  Credit risk management for each loan type is discussed briefly in the section entitled “Loans.”

The allowance for loan losses represents management’s estimate of an amount adequate to provide for probable credit losses in the loan portfolio at the balance sheet date.  Management’s evaluation of the adequacy of the allowance for loan losses is based on management’s ongoing review and grading of the loan portfolio, consideration of past loss experience, trends in past due and nonperforming loans, risk characteristics of the various classifications of loans, existing economic conditions, the fair value of underlying collateral, and other factors that could affect probable credit losses.  Assessing these numerous factors involves significant judgment.  Management considers the allowance for loan losses a critical accounting policy (see section “Critical Accounting Policies”).

23

At December 31, 2004, the allowance for loan losses was $11.7 million compared to $10.6 million at December 31, 2003.  The $1.1 million increase was the net result of a $2.2 million provision for loan losses offset by $1.1 million of net charge-offs.  The provision for loan losses is predominantly a function of the result of the methodology and other qualitative and quantitative factors used to determine the allowance for loan losses.  As of December 31, 2004, the allowance for loan losses to total loans was 1.30% and covered 639% of nonperforming loans, compared to 1.35% and 684%, respectively, at December 31, 2003.  The tables on pages 24 and 26 provide additional information regarding activity in the allowance for loan losses, and the table on page 27 provides additional information regarding nonperforming loans.

Net charge-offs were $1.1 million or .13% of average loans for 2004, compared to $1.6 million or .22% of average loans for 2003, and were $947,000 or .14% of average loans for 2002.  Historically losses typically originate from a variety of different relationships.  However, in 2001, $2.3 million or 75% of the losses were related to one manufacturing entity that experienced significant revenue declines as a result of its reliance on the beleaguered automotive industry at the time.  Loans charged off are subject to continuous review, and specific efforts are taken to achieve maximum recovery of principal, accrued interest, and related expenses.

The following table summarizes changes in the allowance for loan losses arising from loans charged-off and recoveries on loans previously charged-off, by loan category, and additions to the allowance charged to expense.

	December 31,
	2004			2003			2002			2001			2000
	(Dollars in Thousands)
Allowance at beginning of period	$	10,590		$	8,600		$	7,296		$	7,097		$	6,758
Loans charged off:
Commercial and industrial		425			1,492			700			2,538			682
Real estate:
Commercial		577			—			25			279			48
Construction		—			—			—			—			—
Residential		100			335			417			165			32
Consumer and other		194			77			104			170			26
Total loans charged off		1,296			1,904			1,246			3,152			788
Recoveries of loans previously charged off:
Commercial and industrial		92			107			55			38			63
Real estate:
Commercial		—			66			8			25			—
Construction		—			—			—			—			—
Residential		42			38			192			52			13
Consumer and other		25			56			44			6			8
Total recoveries of loans		159			267			299			121			84
Net loans charged off		1,137			1,637			947			3,031			704
Provision for loan losses		2,212			3,627			2,251			3,230			1,043
Allowance at end of period	$	11,665		$	10,590		$	8,600		$	7,296		$	7,097
Average loans	$	847,270		$	738,572		$	693,551		$	613,539		$	517,381
Total loans		898,505			783,878			679,799			602,747			516,810
Nonperforming loans		1,827			1,548			3,888			3,749			2,005
Net charge-offs to average loans		0.13	%		0.22	%		0.14	%		0.49	%		0.14	%
Allowance for loan losses to loans		1.30			1.35			1.27			1.21			1.37

The Company’s credit management policies and procedures focus on identifying, measuring, and controlling credit exposure.  These procedures employ a lender-initiated system of rating credits, which is ratified in the loan approval process and subsequently tested in internal loan reviews and regulatory bank examinations. The system requires rating all loans at the time they are made, and at each renewal date.

Adversely rated credits, including loans requiring close monitoring, which would normally not be considered criticized credits by regulators, are included on a monthly loan watch list. Other loans are added whenever any adverse circumstances are detected which might affect the borrower’s ability to meet the terms of the loan.  This could be initiated by any of the following:

24

1)	delinquency of a scheduled loan payment,
2)	deterioration in the borrower’s financial condition identified in a review of periodic financial statements,
3)	decrease in the value of collateral securing the loan or,
4)	change in the economic environment in which the borrower operates.

Loans on the watch list require detailed loan status reports, including recommended corrective actions, prepared by the responsible loan officer every three months.  These reports are then discussed in formal meetings with the Chief Credit Officer and Chief Executive Officer of the Bank.

Downgrades of loan risk ratings may be initiated by the responsible loan officer, internal loan review, or the credit analyst department at any time.  Upgrades of risk ratings may only be made with the concurrence of the Chief Credit Officer and Loan Review.

In determining the allowance and the related provision for loan losses, three principal elements are considered:

1)	specific allocations based upon probable losses identified during a monthly review of the loan portfolio,
2)	allocations based principally on the Company’s risk rating formulas, and
3)	an unallocated allowance based on subjective factors.

The first element reflects management’s estimate of probable losses based upon a systematic review of specific loans considered to be impaired.  These estimates are based upon collateral exposure, if they are collateral dependent for collection.  Otherwise, discounted cash flows are estimated and used to assign loss.

The second element reflects the application of our loan rating system.  This rating system is similar to those employed by state and federal banking regulators.  Loans are rated and assigned a loss allocation factor for each category that is consistent with our historical losses, adjusted for environmental factors.  The higher the rating assigned to a loan, the greater the allocation percentage that is applied.

The unallocated allowance is based on management’s evaluation of conditions that are not directly reflected in the determination of the formula and specific allowances.  The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they may not be identified with specific problem credits or portfolio segments.  The conditions evaluated in connection with the unallocated allowance include the following:

• general economic and business conditions affecting our key lending areas;

• credit quality trends (including trends in nonperforming loans expected to result from existing conditions);

• collateral values;

• loan volumes and concentrations;

• competitive factors resulting in shifts in underwriting criteria;

• specific industry conditions within portfolio segments;

• recent loss experience in particular segments of the portfolio;

• bank regulatory examination results; and

• findings of our internal loan review department.

Executive management reviews these conditions quarterly in discussion with our entire lending staff.  To the extent that any of these conditions is evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management’s estimate of the effect of such conditions may be reflected as a specific allowance, applicable to such credit or portfolio segment.  Where any of these conditions is not evidenced by a specifically identifiable problem credit or portfolio segment as of the evaluation date, management’s evaluation of the probable loss related to such condition is reflected in the unallocated allowance.

Based on this quantitative and qualitative analysis, provisions are made to the allowance for loan losses.  Such provisions are reflected in our consolidated statements of income.

The allocation of the allowance for loan losses by loan category is a result of the analysis above.  The allocation methodology applied by the Company, designed to assess the adequacy of the allowance for loan losses, focuses on changes in the size and character of the loan portfolio, changes in levels of impaired and other nonperforming loans, the risk inherent in specific loans, concentrations of loans to specific borrowers or industries, existing economic conditions, and historical losses on each portfolio category.  Because each of the criteria used is subject to change, the allocation of the allowance for loan losses is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular loan category.  The total allowance is available to absorb losses from any segment of the portfolio.  Management continues to target and maintain the allowance for loan losses equal to the allocation methodology plus an unallocated portion, as determined by economic conditions and other qualitative and quantitative factors affecting the Company’s borrowers, as described above.

25

Prior to 2004, the methods of calculating the allowance requirements had not changed significantly over time. The reallocations among different categories of loans that appear between periods were the result of the redistribution of the individual loans that comprise the aggregate portfolio due to the factors listed above.  However, the perception of risk with respect to particular loans within the portfolio will change over time as a result of the characteristics and performance of those loans, overall economic and market trends, and the actual and expected trends in nonperforming loans.  Consequently, while there are no specific allocations of the allowance resulting from economic or market conditions or actual or expected trends in nonperforming loans, these factors are considered in the initial assignment of risk ratings to loans, subsequent changes to those risk ratings and to a lesser extent in the size of the unallocated reserve amount.

The following table is a summary of the allocation of the allowance for loan losses for the five years ended December 31, 2004:

	December 31,
	2004					2003					2002
	Allowance		Percent by Category to Total Loans			Allowance		Percent by Category to Total Loans			Allowance		Percent by Category to Total Loans
	(Dollars in Thousands)
Commercial and industrial	$	2,948		28.22	%	$	2,948		26.79	%	$	2,846		24.69	%
Real estate:
Commercial		3,671		36.62			3,715		32.81			1,903		27.51
Construction		1,037		14.15			1,099		16.59			1,062		20.49
Residential		1,903		16.62			2,093		19.18			2,369		27.89
Consumer and other		283		4.39			245		4.63			244		4.60
Loans held for sale		—					—		—			—		(5.18	)
Not allocated		1,823		—			490					176
Total	$	11,665		100.00	%	$	10,590		100.00	%	$	8,600		100.00	%

	December 31,
	2001					2000
	Allowance		Percent by Category to Total Loans			Allowance		Percent by Category to Total Loans
Commercial and industrial	$	2,366		26.58	%	$	3,046		29.68	%
Real estate:
Commercial		1,915		27.77			1,589		25.95
Construction		932		20.54			833		24.92
Residential		1,625		26.89			1,026		22.10
Consumer and other		198		4.74			312		5.09
Loans held for sale		—		(6.52	)		—		(7.74	)
Not allocated		260					291
Total	$	7,296		100.00	%	$	7,097		100.00	%

At December 31, 2004, the unallocated allowance was $1.8 million compared to $490,000 at December 31, 2003.  Beginning in 2004, as a part of an overall effort to further improve its risk assessment, the Company refined its methodology with special attention to the unallocated allowance.  The unallocated allowance is based on factors that cannot necessarily be associated with a specific loan or loan category.  In its assessment as of December 31, 2004, management focused on the following factors and conditions:

• There is a level of imprecision necessarily inherent in the estimates of expected loan losses, and the unallocated reserve gives reasonable assurance that this level of imprecision in our formula methodologies is adequately provided for.

• With respect to the real estate sector, management considered the continued weakness in the commercial office market with vacancy rates continuing to remain high and rents continuing to remain soft.

• Pressures to maintain and grow the loan portfolio in a slower economic environment with increasing competition from de novo institutions and larger competitors have to some degree affected credit granting criteria adversely.  The Company monitors the disposition of all credits, which have been approved through its Executive Loan Committee in order to better understand competitive shifts in underwriting criteria.  During 2004 the Company approved but was unable to fund in excess of $90 million of credit where the competition was willing to commit credit terms on a basis that the Company was unwilling to match.

• While the Bank’s target client has not changed, the Bank is focusing more of its calling efforts on larger middle market commercial and industrial companies.  This move “up market” results in larger average loans per client, and generally more complex credit structures.

While the Company has no significant specific industry concentration risk, analysis shows that over 60% of the loan portfolio is dependent on real estate collateral.  The Company has policies, guidelines, and individual risk ratings in place to control this exposure at the transaction level.  However, the percentage of the portfolio secured by commercial real estate has increased from 27.5% at December 31, 2002 to 36.6% at December 31, 2004.  Given the trend of rising rates inherent in the current economic cycle and the likely adverse impacts on borrowers’ debt service coverage ratios, management believes it prudent to increase the unallocated reserve component.

Additionally, the Company continues to be committed to a strategy of acquiring relationships with larger commercial and industrial companies.  The percentage of the portfolio represented by these clients has increased from 24.7% at December 31, 2002 to 28.2% at December 31, 2004.  Management believes it prudent to increase the percentage of the unallocated reserve to cover the risks inherent in the higher average loan size of these relationships.

Finally, management believes that the level of competition for credit relationships has increased substantially over the past year in both of our primary markets.  The entry of National City Bank and Associates Bank into the St. Louis market in addition to the six new banking charters, which have either opened or are in the application stage are examples of this increased level of competition.  To the extent that substantially increased levels of competition for credit may inherently result in an increased level of credit risk, management believes it is prudent to increase the Company’s unallocated reserve component.

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Nonperforming assets include nonaccrual loans, loans with payments past due 90 days or more and still accruing interest, restructured loans and foreclosed real estate.  The following table presents the categories of nonperforming assets and certain ratios as of the dates indicated:

	2004			2003			2002			2001			2000
	(Dollars in Thousands)
Non-accrual loans	$	1,827		$	1,548		$	2,212		$	2,506		$	1,798
Loans past due 90 days or more and still accruing interest		—			—			—			—			207
Restructured loans		—			—			1,676			1,243			—
Total noperforming loans		1,827			1,548			3,888			3,749			2,005
Foreclosed property		123			—			125			138			77
Total non performing assets	$	1,950		$	1,548		$	4,013		$	3,887		$	2,082
Total assets	$	1,059,950		$	907,726		$	875,987		$	795,250		$	710,063
Total loans		898,505			783,878			679,799			602,747			516,810
Total loans plus foreclosed property		898,628			783,878			679,924			602,885			516,887
Nonperforming loans to loans		0.20	%		0.20	%		0.57	%		0.62	%		0.39	%
Nonperforming assets to loans plus foreclosed property		0.22			0.20			0.59			0.64			0.40
Nonperforming assets to total assets		0.18			0.17			0.46			0.49			0.29
Allowance for loan losses to non-performing loans		639.00	%		684.00	%		221.00	%		195.00	%		354.00	%

Nonperforming loans are defined as loans on nonaccrual status, loans 90 days or more past due but still accruing, and restructured loans.  Loans are placed on nonaccrual status when contractually past due 90 days or more as to interest or principal payments.  Additionally, whenever management becomes aware of facts or circumstances that may adversely impact the collectibility of principal or interest on loans, it is management’s practice to place such loans on nonaccrual status immediately, rather than delaying such action until the loans become 90 days past due.  Previously accrued and uncollected interest on such loans is reversed and income is recorded only to the extent that interest payments are subsequently received in cash and a determination has been made that the principal balance of the loan is collectible.  If collectibility of the principal is in doubt, payments received are applied to loan principal.

Loans past due 90 days or more but still accruing interest are also included in nonperforming loans.  Loans past due 90 days or more but still accruing are classified as such where the underlying loans are both well secured (the collateral value is sufficient to cover principal and accrued interest) and are in the process of collection.  Also included in nonperforming loans are “restructured” loans.  Restructured loans involve the granting of some concession to the borrower involving the modification of terms of the loan, such as changes in payment schedule or interest rate.

Nonperforming loans were $1.8 million at December 31, 2004, in comparison to $1.5 million and $3.9 million at December 31, 2003 and 2002, respectively.  The decrease in nonperforming loans for 2003 was the result of successful efforts by management to encourage customers to either refinance the credit at another financial institution or liquidate collateral and reduce our exposure.  In some other cases, the nonperforming loans were charged off and recovery efforts begun.  Approximately 36% and 37% of the nonperforming loans at December 31, 2004 and 2003, respectively, relate to a printing company and the remainder consists of five and eight different borrowers, respectively.

At December 31, 2001, $1.9 million or 75% of the nonaccrual totals related to the owner of a large distribution company that filed bankruptcy.  $1.2 million of the restructured loans as of December 31, 2001 and 2002 relate to an auto dealership that had financial difficulties.  The remainder of the balances in 2001 and 2002 represent ten to twenty different borrowers.  

27

The Company’s nonaccrual loans and restructured loans meet the definition of “impaired loans” under U.S. GAAP.  As of December 31, 2004, 2003 and 2002, the Company had 8, 11, and 17 impaired loans in the aggregate amounts of $1.8 million, $1.5 million and $3.9 million, respectively, all of which are considered potential problem loans as well. 

Management believes that the allowance for loan loss levels are adequate.

Investment Portfolio

The table below sets forth the carrying value of investment securities held by the Company at the dates indicated:

	December 31,
	2004					2003					2002
	Amount		Percent Of Total Securities			Amount		Percent Of Total Securities			Amount		Percent Of Total Securities
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	98,944		81.34	%	$	51,869		61.79	%	$	38,826		57.87	%
Municipal Bonds		1,616		1.33			1,658		1.97			—		—
Mortgage-backed securities		18,514		15.22			27,814		33.13			25,812		38.47
Equity securities		2,564		2.11			2,608		3.11			2,457		3.66
	$	121,638		100.00	%	$	83,949		100.00	%	$	67,095		100.00	%

As of December 31, 2004, debt securities with an amortized cost of $8,000 were classified as held to maturity securities, and debt and equity securities with an amortized cost of $122 million were classified as available for sale securities.  The market valuation account for the available for sale securities was $(667,000) to decrease the recorded balance of such securities at December 31, 2004 to fair value on that date. The Company had no securities classified as trading at December 31, 2004.

As of December 31, 2003, debt securities with an amortized cost of $9,800 were classified as held to maturity securities, and debt and equity securities with an amortized cost of $84 million were classified as available for sale securities.  The market valuation account for the available for sale securities was $104,000 to increase the recorded balance of such securities at December 31, 2003 to fair value on that date. The Company had no securities classified as trading at December 31, 2003.

As of December 31, 2002, debt securities with an amortized cost of $13,000 were classified as held to maturity securities and debt and equity securities with an amortized cost of $66 million were classified as available for sale securities.  The market valuation account for the available for sale securities was $470,000 to increase the recorded balance of such securities at December 31, 2002 to fair value on that date.  The Company had no securities classified as trading at December 31, 2002.

The size of the investment portfolio is 5-10% of total assets and will vary within that range based on liquidity.

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The following table summarizes expected maturity (2) and yield information on the investment portfolio at December 31, 2004:

	Carrying Value		Yield (1)
	(Dollars in Thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies:
Within 1 year	$	31,219		2.30	%
1 to 5 years		67,725		3.03
5 to 10 years		—		—
No stated maturity		—		—
Total	$	98,944		2.80	%
Municipal Bonds:
Within 1 year	$	356		2.33	%
1 to 5 years		790		3.39
5 to 10 years		470		5.55
10 or more years		—		—
No stated maturity		—		—
Total	$	1,616		3.78	%
Mortgage-backed securities:
Within 1 year	$	1,557		3.03	%
1 to 5 years		16,902		3.27
5 to 10 years		55		6.25
10 or more years		—		—
No stated maturity		—		—
Total	$	18,514		3.26	%
Equity securities:
Within 1 year	$	—		—	%
1 to 5 years		—		—
5 to 10 years		—		—
No stated maturity		2,564		3.56
Total	$	2,564		3.56	%
Total
Within 1 year	$	33,132		2.33	%
1 to 5 years		85,417		3.09
5 to 10 years		525		5.62
10 or more years		—		—
No stated maturity		2,564		3.56
Total	$	121,638		2.90	%

Included in US Treasury securities and obligations of U.S. government corporations and agencies were $30 million of short term discount agency rates that matured in January 2005.  These investments were used as an alternative to overnight funds to obtain more yield given the excess liquidity.

(1)	Yields on tax exempt securities are computed on a taxable equivalent basis using a tax rate of 34%.
(2)	Expected maturities will differ from contractual maturities, as borrowers may have the right to call on repay obligations with or without prepayment penalties.

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Deposits

The following table shows, for the periods indicated, the average annual amount and the average rate paid by type of deposit:

	December 31,
	2004							2003
	Average Balance		Interest Expense		Rate			Average Balance		Interest Expense		Rate
	(Dollars in Thousands)
Noninterest-bearing demand deposits	$	184,116	$	—		—	%	$	151,140	$	—		—	%
Interest-bearing transaction accounts		71,568		320		0.45			54,742		169		0.31
Money market accounts		403,363		4,614		1.14			357,497		3,475		0.97
Savings accounts		4,254		14		0.33			5,499		24		0.44
Certificates of deposit		225,529		5,050		2.24			185,175		4,532		2.45
	$	888,830	$	9,998		1.12	%	$	754,053	$	8,200		1.09	%

	December 31,
	2002
	Average Balance		Interest Expense		Rate
	(Dollars in Thousands)
Noninterest-bearing demand deposits	$	130,931	$	—		—	%
Interest-bearing transaction accounts		62,104		269		0.43
Money market accounts		332,700		5,001		1.50
Savings accounts		8,571		84		0.98
Certificates of deposit		189,030		6,833		3.61
	$	723,336	$	12,187		1.68	%

The Company continued to experience rapid loan and deposit growth due to aggressive direct calling efforts of relationship officers. Management has pursued closely-held businesses whose management desires a close working relationship with a locally-managed, full-service bank.  Due to the relationships developed with these customers, management views large deposits from this source as a stable deposit base.  In 2002, the Company began using brokered certificates of deposit to help fund its growth.  In the future, the Bank expects to continue to use certificates of deposit sold to retail customers of regional and national brokerage firms (i.e. brokered certificates of deposit).  At December 31, 2004 and 2003, the Company had $64 million and $60 million in brokered certificates of deposit, respectively.

The following table sets forth the amount and maturity of certificates of deposit that had balances of more than $100,000 at December 31, 2004:

Remaining Maturity	Total
(Dollars in Thousands)
Three months or less	$	50,637
Over three through six months		15,696
Over six through twelve months		44,739
Over twelve months		67,779
	$	178,851

Liquidity

The objective of liquidity management is to ensure the Company has the ability to generate sufficient cash or cash equivalents in a timely and cost-effective manner to meet its commitments as they become due.  Funds are available from a number of sources, such as from the core deposit base and from loans and securities repayments and maturities.  Additionally, liquidity is provided from sales of the securities portfolio, lines of credit with major banks, the Federal Reserve and the Federal Home Loan Bank, the ability to acquire large and brokered deposits and the ability to sell loan participations to other banks.

The Company’s liquidity management framework includes measurement of several key elements, such as the loan to deposit ratio, wholesale deposits as a percentage of total deposits, and various dependency ratios used by banking regulators.  The Company’s liquidity framework also incorporates contingency planning to assess the nature and volatility of funding sources and to determine alternatives to these sources. 

30

Strong capital ratios, credit quality and core earnings are essential to retaining cost-effective access to the wholesale funding markets.  Deterioration in any of these factors could have an impact on the Company’s ability to access these funding sources and, as a result, these factors are monitored on an ongoing basis as part of the liquidity management process.

While core deposits and loan and investment repayments are principal sources of liquidity, funding diversification is another key element of liquidity management.  Diversity is achieved by strategically varying depositor types, terms, funding markets, and instruments.

We manage the parent company’s liquidity to provide the funds necessary to pay dividends to shareholders, service debt, invest in the Bank as necessary, and satisfy other operating requirements.  The parent company’s primary funding sources to meet its liquidity requirements are dividends from subsidiaries, borrowings against its $10.0 million line of credit with a major bank, and proceeds from the issuance of equity (i.e. stock option exercises).  The $10.0 million line of credit matured in January 2005 and at that time the Company negotiated a $15.0 million line of credit with another major bank to replace it.

The Bank is subject to regulations and, among other things, may be limited in its ability to pay dividends or transfer funds to the parent company.  Accordingly, consolidated cash flows as presented in the consolidated statements of cash flows may not represent cash immediately available for the payment of cash dividends to the Company’s shareholders or for other cash needs.

Another source of funding for the parent company includes the issuance of subordinated debentures.  In May of 2004, the Company issued $5.0 million of additional subordinated debentures as part of a Trust Preferred Securities Pool at a variable rate of three-month LIBOR plus 265 bp that reprices quarterly.  These securities are classified as debt but count as regulatory capital and the related interest expense is tax-deductible, which makes them very attractive.  An additional $11.0 million of subordinated debentures were issued in December 2004 to refinance $11.0 million that were redeemed.

Investment securities are an important tool to the Company’s liquidity objective.  As of December 31, 2004, nearly all of the investment portfolio was available for sale.  Of the $122 million investment portfolio available for sale, $14 million was pledged as collateral for public deposits, treasury, tax and loan notes, and other requirements.  The remaining securities could be pledged or sold to enhance liquidity if necessary.

The Bank has a variety of funding sources (in addition to key liquidity sources, such as core deposits, loan repayments, loan participations sold, and investment portfolio sales) available to increase financial flexibility.  At December 31, 2004, the Bank had $100 million available from the Federal Home Loan Bank of Des Moines under a blanket loan pledge, absent the Bank being in default of its credit agreement, and $27 million available from the Federal Reserve Bank under a pledged loan agreement.  The Bank also has access to over $70 million in overnight federal funds lines purchased from various banking institutions.  Finally, because the Bank plans to remain a “well-capitalized” institution, it has the ability to sell certificates of deposit through various national or regional brokerage firms, if needed.

Over the normal course of business, the Company enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit.  These transactions are managed through the Company’s various risk management processes.  Management considers both on-balance sheet and off-balance sheet transactions in its evaluation of the Company’s liquidity.  The Company has $297 million in unused loan commitments as of December 31, 2004.  While this commitment level would be very difficult to fund given the Company’s current liquidity resources, we know that the nature of these commitments are such that the likelihood of such a funding demand is very low. 

For the year ended December 31, 2004 and 2003, net cash provided by operating activities was materially consistent.  Net cash used in investing activities was $158 million in 2004 versus $133 million in 2003.  This increase of $25 million was driven by loan volume and investment security activity which more than offset the sale of branches in 2003.  Net cash provided by financing activities was $145 million in 2004 versus $71 million in 2003.  This increase consisted of greater deposit growth in 2004 and the issuance of subordinated debentures which was partially offset by net pay downs on Federal Home Loan Bank advances.

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Quantitative and Qualitative Disclosures about Market Risk

Market risk arises from exposure to changes in interest rates and other relevant market rate or price risk.  The Company faces market risk in the form of interest rate risk through transactions other than trading activities.  Market risk from these activities, in the form of interest rate risk, is measured and managed through a number of methods.  The Company uses financial modeling techniques that measure the sensitivity of future earnings due to changing rate environments to measure interest rate risk.  Policies established by the Company’s Asset/Liability Management Committee and approved by the Company’s Board of Directors limit exposure of earnings at risk.  General interest rate movements are used to develop sensitivity as the Company feels it has no primary exposure to a specific point on the yield curve.  These limits are based on the Company’s exposure to a 100 bp and 200 bp immediate and sustained parallel rate move, either upward or downward.

Interest Rate Risk

In order to measure earnings sensitivity to changing rates, the Company uses a static gap analysis and simulation of earnings.  The static gap analysis starts with contractual repricing information for assets, liabilities, and off-balance sheet instruments.  These items are then combined with repricing estimations for administered rate (interest-bearing demand deposits, savings, and money market accounts) and non-rate related products (demand deposit accounts, other assets, and other liabilities) to create a baseline repricing balance sheet.  In addition, mortgage-backed securities are adjusted based on industry estimates of prepayment speeds. 

The following table represents the Company’s consolidated static gap position as of December 31, 2004.  Significant assumptions used for this table included:  loans will repay at historic repayment rates; interest-bearing demand accounts and savings accounts are interest sensitive due to immediate repricing, and fixed maturity deposits will not be withdrawn prior to maturity.  A significant variance in actual results from one or more of these assumptions could materially affect the results reflected in the table. 

	3 Months or Less		Over 3 Months Through 12 Months			Over 1 Year Through 5 Years		After 5 Years or No Stated Maturity			Total
	(Dollars in thousands)
Assets:
Investments in debt and equity securities	$	30,057	$	3,075		$	85,417	$	3,089		$	121,638
Interest -bearing deposits		156		—			—		—			156
Loans (1)		607,043		51,688			229,810		9,964			898,505
Loans held for sale		2,376		—			—		—			2,376
Federal funds sold		—		—			—		—			—
Total interest-sensitive assets	$	639,632	$	54,763		$	315,227	$	13,053		$	1,022,675
Liabilities:
Interest-bearing transaction accounts	$	85,523	$	—		$	—	$	—		$	85,523
Savings and money market accounts		436,259		—			—		—			436,259
Certificates of deposit (1)		86,401		79,773			54,388		1			220,563
Subordinated debentures		—		—			—		20,620			20,620
Notes payable and other borrowings		11,370		2,150			4,475		2,169			20,164
Total interest-sensitive liabilities	$	619,553	$	81,923		$	58,863	$	22,790		$	783,129
Interest-sensitivity GAP
GAP by period	$	20,079	$	(27,160	)	$	256,364	$	(9,737	)	$	239,546
Cumulative GAP	$	20,079	$	(7,081	)	$	249,283	$	239,546		$	239,546
Ratio of interest-sensitive assets to interest-sensitive liabilities
Periodic		1.03		0.67			5.36		0.57			1.31
Cumulative GAP		1.03		0.99			1.33		1.31			1.31

(1)   Adjusted for the impact of the interest rate swaps.

As indicated in the preceding table, the Company was asset sensitive on a cumulative basis for all periods except the 3 to 12 month period and the after 5 year period at December 31, 2004 based on contractual maturities.  Asset sensitive means that assets will reprice faster than liabilities.

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Along with the static gap analysis, determining the sensitivity of short-term future earnings to a hypothetical plus or minus 100 and 200 basis point parallel rate shock can be accomplished through the use of simulation modeling.  In addition to the assumptions used to create the static gap, simulation of earnings includes the modeling of the balance sheet as an ongoing entity.  Future business assumptions involving administered rate products, prepayments for future rate-sensitive balances, and the reinvestment of maturing assets and liabilities are included.  These items are then modeled to project net interest income based on a hypothetical change in interest rates.  The resulting net interest income for the next 12-month period is compared to the net interest income amount calculated using flat rates.  This difference represents the Company’s earnings sensitivity to a plus or minus 100 basis points parallel rate shock.

The resulting simulations for December 31, 2004, projected that net interest income would increase by approximately 5.56% if rates rose by a 100 basis point shock, and projected that the net interest income would decrease by approximately 1.94% if rates fell by a 100 basis point shock.

The Company uses interest rate derivative financial instruments as an asset/liability management tool to hedge mismatches in interest rate exposure indicated by the net interest income simulation described above.  They are used to modify the Company’s exposures to interest rate fluctuations and provide more stable spreads between loan yields and the rate on their funding sources. 

As of December 31, 2004, the Company had $130 million in notional amount of outstanding interest rate swaps to reduce interest rate risk.  In 2004, the Company entered into $70 million in notional amount of interest rate swaps.  Of the remaining $60 million in notional amount of interest rate swaps outstanding at December 31, 2004, $40 million and $20 million were entered into in 2003 and 2002, respectively.  Interest rate swaps involve the exchange of fixed- and variable-rate payments without the exchange of the underlying notional amount on which the interest payments are calculated.

The maturity dates, notional amounts, interest rates paid and received and fair value of our interest rate swap agreements as of December 31, 2004 were as follows:

Hedge	Maturity Date		Notional Amount		Interest Rate Paid			Interest Rate Received			Fair Value
Cash flow		1/29/2005	$	20,000,000		5.25	%		6.97	%	$	41,377
Cash flow		3/21/2006		30,000,000		5.25			5.34			(233,239	)
Cash flow		4/29/2006		40,000,000		5.25			5.42			(319,158	)
			$	90,000,000		5.25			5.74		$	(511,020	)
Fair value		2/25/2005	$	10,000,000		2.62	%		1.70	%	$	(73,007	)
Fair value		2/17/2006		10,000,000		2.54			2.30			(121,311	)
Fair value		4/17/2006		10,000,000		2.67			2.45			(98,600	)
Fair value		2/26/2007		10,000,000		2.56			2.90			(122,550	)
			$	40,000,000		2.60	%		2.34	%	$	(415,468	)

Derivative financial instruments are also discussed in Note 6, “Derivative Instruments and Hedging Activities,” of the notes to the consolidated financial statements. 

Contractual Obligations, Off-Balance Sheet Risk, and Contingent Liabilities

Through the normal course of operations, the Company has entered into certain contractual obligations and other commitments.  Such obligations relate to funding of operations through deposits or debt issuances, as well as leases for premises and equipment.  As a financial services provider, the Company routinely enters into commitments to extend credit.  While contractual obligations represent future cash requirements of the Company, a significant portion of commitments to extend credit may expire without being drawn upon.  Such commitments are subject to the same credit policies and approval process accorded to loans made by the Company.

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The required contractual obligations and other commitments at December 31, 2004 were as follows:

	Total		Less Than 1 Year		Over 1 Year Less than 5 Years		Over 5 Years
Operating leases	$	10,022	$	1,331	$	5,530	$	3,161
Certificates of deposit		220,563		136,174		84,388		1
Subordinated debentures		20,620		—		—		20,620
Federal Home Loan Bank advances		10,299		3,655		4,475		2,169
Non compete payments		181		181		—		—
Commitments to extend credit		316,824		218,420		72,952		25,452

The Company also enters into derivative contracts under which the Company is required to either receive cash from or pay cash to counterparties depending on changes in interest rates.  Derivative contracts are carried at fair value on the consolidated balance sheet with the fair value representing the net present value of expected future cash receipts or payments based on market interest rates as of the balance sheet date.  The fair value of these contracts changes daily as market interest rates change.  Derivative liabilities are not included as contractual cash obligations as their fair value does not represent the amounts that may ultimately be paid under these contracts. 

Capital Adequacy

Risk-based capital guidelines were designed to relate regulatory capital requirements to the risk profile of the specific institution and to provide for uniform requirements among the various regulators.  Currently, the risk-based capital guidelines require the Company to meet a minimum total capital ratio of 8.0% of which at least 4.0% must consist of Tier 1 capital.  Tier 1 capital consists of (a) common shareholders’ equity (excluding the unrealized market value adjustments on the available-for-sale securities and cash flow hedges), (b) qualifying perpetual preferred stock and related additional paid in capital subject to certain limitations specified by the FDIC, and (c) minority interests in the equity accounts of consolidated subsidiaries less (d) goodwill, (e) mortgage servicing rights within certain limits, and (f) any other intangible assets and investments in subsidiaries that the FDIC determines should be deducted from Tier 1 capital.  The FDIC also requires a minimum leverage ratio of 3.0%, defined as the ratio of Tier 1 capital to average total assets for banking organizations deemed the strongest and most highly rated by banking regulators.  A higher minimum leverage ratio is required of less highly rated banking organizations.  Total capital, a measure of capital adequacy, includes Tier 1 capital, allowance for loan losses, and subordinated debentures.

The following table summarizes the Company’s risk-based capital and leverage ratios at the dates indicated:

	December 31,
	2004			2003			2002
Tier I capital to risk weighted assets		9.94	%		9.77	%		9.75	%
Total capital to risk weighted assets		11.19			11.02			10.95
Leverage ratio (Tier I capital to average assets)		8.44			8.67			7.93
Tangible capital to tangible assets		9.80			9.72			8.97

At December 31, 2004, the Company’s Tier 1 capital was $92 million compared to $78 million and $70 million at December 31, 2003 and 2002, respectively.  At December 31, 2004, the Company’s total risk-based capital was $104 million compared to $88 million and $78 million at December 31, 2003 and 2002, respectively. 

Effects of New Accounting Standards

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), Share-Based Payment (“SFAS No. 123(R)”).  SFAS No. 123(R) replaces SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.  SFAS No. 123(R) requires compensation costs related to share-based payment transactions to be recognized in the financial statements over the period that an employee provides service in exchange for the award.  The accounting provisions of SFAS 123(R) are effective for reporting periods beginning after June 15, 2005.

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We are required to adopt SFAS 123R in the third quarter of fiscal 2005. The pro forma disclosures previously permitted under SFAS 123 will no longer be an alternative to financial statement recognition. See Note 1 in our Notes to Consolidated Financial Statements for the pro forma net income and net income per share amounts, for fiscal 2002 through fiscal 2004, as if we had used a fair-value-based method similar to the methods required under SFAS 123R to measure compensation expense for employee stock incentive awards.  The Company is evaluating the effect SFAS 123R will have on its consolidated financial position, results of operations and cash flows.

In July 2004, the Derivatives Implementation Group of the FASB issued guidance on FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, Implementation Issue No. G25 (“DIG Issue G25”).  DIG Issue G25 clarifies the FASB’s position on the ability of entities to hedge the variability in interest receipts or overall changes in cash flows on a group of prime-rate based loans.  Under the new guidance these hedge relationships are allowed the use of the first payments received technique if all other conditions of FASB Statement No. 133 are met.  The effective date of DIG Issue G25 was October 1, 2004 and was applied to all hedging relationships as of that date.  If a pre-existing cash flow hedging relationship has identified the hedged transactions in a manner inconsistent with the guidance in DIG Issue G25, the hedging relationship must be de-designated at the effective date.  Any derivative gains or losses in other comprehensive income related to the de-designated hedging relationships should be accounted for under paragraphs 31 and 32 of Statement 133.  The Company had pre-existing cash flow hedging relationships in a manner inconsistent with the guidance in DIG Issue G25 which had a $32,000 loss, net of tax, in other comprehensive income as of September 30, 2004.  The Company implemented DIG Issue G25 on October 1, 2004 and de-designated its cash flow hedges which were inconsistent with the guidance.  These cash flow hedges were then re-designated as new cash flow hedging relationships under the new guidance of DIG Issue G25.  The implementation of DIG Issue G25 did not have a material effect on the Company’s consolidated financial position or results of operations.

In March 2004, the Emerging Issues Task Force (“EITF”) reached a consensus on criteria to evaluate whether to record a loss and disclose additional information about unrealized losses relating to debt and equity securities under EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. The consensus applies to investments in debt and marketable equity securities that are accounted under SFAS 115, Accounting for Certain Investments in Debt and Equity Securities, and SFAS 124, Accounting for Certain Investments Held by Not-for-Profit Organizations. The Consensus divides the procedures into three sequential steps. The Company first determines whether the investment is impaired. If so, the next step is to determine whether the impairment is other-than-temporary. If it is other-than-temporary, the third step is to recognize the impairment loss in earnings. An investment is impaired if its fair value is less than its carrying value, and an impairment is other-than-temporary if the investor does not have the “ability and intent” to hold the investment until a forecasted recovery of its carrying amount. The loss recognized from an other-than-temporary impairment should equal the difference between the investment’s carrying value and its quoted market price. This establishes a new cost basis for the investment. The EITF has proposed a delay in the effective date of the requirement to record impairment losses caused by the effect of increases in interest rates on investments. The EITF is also determining how to assess the severity of the impairment as well as the effect of selling investments on the Company’s ability and intent to hold other securities until a forecasted recovery of fair value. Consequently, we are currently awaiting additional guidance from the EITF on EITF Issue No. 03-1 and are presently unable to determine its overall impact on our consolidated financial statements or results of operations.

In December 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, a revision to FASB Interpretation No. 46, Consolidation of Variable Interest Entities issued in January 2003. This Interpretation is intended to achieve more consistent application of consolidation policies to variable interest entities and, thus to improve comparability between enterprises engaged in similar activities even if some of those activities are conducted through variable interest entities.  The provisions of this Interpretation are effective for financial statements issued for fiscal years ending after December 15, 2003.  We have two statutory and business trusts that were formed for the sole purpose of issuing trust preferred securities.  As further described in Note 9 to our Consolidated Financial Statements appearing elsewhere in this report, on December 31, 2003, we implemented FASB Interpretation No. 46, as amended, which resulted in the deconsolidation of our two statutory and business trusts.  The implementation of this Interpretation had no material effect on our consolidated financial position or results of operations.

In December 2003, the Accounting Standards Executive Committee, (“AcSEC”) issued SOP 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer, effective for loans acquired in fiscal years beginning after December 15, 2004.  The scope of SOP 03-3 applies to “problem” loans that have been acquired, either individually in a portfolio, or in an acquisition.  These loans must have evidence of credit deterioration and the purchaser must not expect to collect contractual cash flows. SOP 03-3 updates Practice Bulletin (PB) No. 6, Amortization of Discounts on Certain Acquired Loans, for more recently issued literature, including FASB Statements No. 114, Accounting by Creditors for Impairment of a Loan; No. 115, Accounting for Certain

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Investments in Debt and Equity Securities; and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinquishments of Liabilities.  Additionally, it addresses FASB Statement No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases, which requires that discounts be recognized as an adjustment of yield over a loan’s life.

SOP 03-3 states that an institution may no longer display discounts on purchased loans within the scope of SOP 03-3 on the balance sheet and may not carry over the allowance for loan losses.  For those loans within the scope of SOP 03-3, this statement clarifies that a buyer cannot carry over the seller’s allowance for loan losses for the acquisition of loans with credit deterioration.  Loans acquired with evidence of deterioration in credit quality since origination will need to be accounted for under a new method using an income recognition model. This prohibition also applies to purchases of problem loans not included in a purchase business combination, which would include syndicated loans purchased in the secondary market and loans acquired in portfolio sales.  This guidance did not have a material effect on the Company’s consolidated financial position or results of operations.

In July 2003, the Board of Governors of the Federal Reserve System issued a supervisory letter instructing bank holding companies to continue to include the trust preferred securities in their Tier I capital for regulatory capital purposes, subject to applicable limits, until notice is given to the contrary.  The Federal Reserve reviewed the regulatory implications of the accounting treatment changes, and on May 6, 2004, released a proposal allowing the continued inclusion of outstanding and prospective issuances of trust preferred securities in the Tier I capital of bank holding companies, subject to stricter quantitative limits and qualitative standards.  The proposed changes are effective March 31, 2007.  Currently these proposed guidelines would not have a material impact on the Company’s regulatory capital.

FASB Statement No. 150, Accounting for Certain Financial Instruments with Character of both Liabilities and Equity, was issued in May 2003.  This Statement establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity.  The Statement also includes required disclosures for financial instruments within its scope.  For the Company, the Statement was effective for instruments entered into or modified after May 31, 2003 and otherwise is effective as of January 1, 2004, except for mandatorily redeemable financial instruments.  For certain mandatorily redeemable financial instruments, the Statement will be effective for the Company on January 1, 2005.  The effective date has been deferred indefinitely for certain other types of mandatorily redeemable financial instruments.  The Company currently does not have any financial instruments that are within the scope of this Statement.

Effect of Inflation

Persistent high rates of inflation can have a significant effect on the reported financial condition and results of operations of all industries.  However, the asset and liability structure of commercial banks is substantially different from that of an industrial company in that virtually all assets and liabilities of commercial banks are monetary in nature.  Accordingly, changes in interest rates may have a significant impact on a commercial bank’s performance.  Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services.  Inflation does have an impact on the growth of total assets in the banking industry, often resulting in a need to increase equity capital at higher than normal rates to maintain an appropriate equity-to-assets ratio.

Supervision and Regulation

The Company and the Bank are subject to state and federal banking laws and regulations which impose specific requirements or restrictions on and provide for general regulatory oversight with respect to virtually all aspects of operations.  These laws and regulations are intended to protect depositors, not shareholders.  To the extent that the following summary describes statutory or regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions.  Any change in applicable laws or regulations may have a material effect on the business and prospects of the Company.  The numerous regulations and policies promulgated by the regulatory authorities create a difficult and ever-changing atmosphere in which to operate.  The Company and the Bank commit substantial resources in order to comply with these statutes, regulations and policies.  The Company is unable to predict the nature or the extent of the effect on its business and earnings that fiscal or monetary policies, economic control, or new federal or state legislation may have in the future.

Federal Financial Holding and Bank Holding Company Regulation

The Company is a bank holding company under the definition of the Bank Holding Company Act of 1956 (“BHCA”) and has elected to become a financial holding company as provided for under the Gramm-Leach-Bliley Act (“GLBA”) which amended the BHCA.  As a financial holding company, the Company is subject to periodic examination by the Federal Reserve and is required to file periodic reports of its operations and such additional

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information as the Federal Reserve may require.  In order to remain a financial holding company, the Company must continue to be considered well managed and well capitalized by the Federal Reserve and have at least a “satisfactory” rating under the Community Reinvestment Act.  The Company continues to be considered well managed and well capitalized and it has at least a “satisfactory” rating under the Community Reinvestment Act. 

Permissible Activities. GLBA establishes a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms and other financial service providers through the creation of financial holding companies.  GLBA permits a financial holding company and its affiliates, with certain restrictions, to engage in or acquire direct or indirect control of more than 5% of the voting shares of any company engaged in nonbanking activities that are considered “financial in nature” or incidental or complementary to such activities.  This is a much broader spectrum of permissible activities than those in which a bank holding company may engage. 

Activities which are expressly considered financial in nature include, among other things, securities and insurance underwriting and agency, investment management and merchant banking.  Some of the activities that the Federal Reserve has determined by regulation to be proper incidents to the business of banking include investment in and management of Small Business Investment Companies, making or servicing loans and certain types of leases, engaging in certain insurance and brokerage activities, performing data processing services, acting in certain circumstances as a fiduciary or investment or financial advisor, owning savings associations, and making investments in limited projects designed to promote community welfare. GLBA authorizes the Federal Reserve and the United States Treasury, in cooperation with one another, to determine what activities, in addition to those discussed previously, are permissible as financial in nature.  Maintenance of activities which are financial in nature will require financial holding companies and banks to continue to satisfy applicable well capitalized and well managed requirements.  Bank holding companies which do not qualify for FHC status are limited to non-banking activities deemed closely related to banking prior to adoption of GLBA.

Investments.  With certain limited exceptions, the BHCA requires every financial holding company or bank holding company to obtain the prior approval of the Federal Reserve before (i) acquiring substantially all the assets of any bank, (ii) acquiring direct or indirect ownership or control of any voting shares of any bank if, after such acquisition, it would own or control more than 5% of the voting shares of such bank (unless it already owns or controls the majority of such shares), or (iii) merging or consolidating with another bank holding company.  Federal legislation permits bank holding companies to acquire control of banks throughout the United States.

Privacy Regulations.  GLBA also imposes restrictions on the Company and the Bank regarding the sharing of customer non-public personal information with non-affiliated third parties unless the customer has had an opportunity to opt out of the disclosure.  GLBA also imposes periodic disclosure requirements concerning the Company and the Bank policies and practices regarding data sharing with affiliated and non-affiliated parties.

USA Patriot Act: On October 26, 2001, President Bush signed into law the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”).  Among its other provisions, the USA PATRIOT Act requires each financial institution to: (i) establish an anti-money laundering program; (ii) establish due diligence policies, procedures and controls with respect to its private banking accounts and correspondent banking accounts involving foreign individuals and certain foreign banks; and (iii) implement certain due diligence policies, procedures and controls with regard to correspondent accounts in the United States for, or on behalf of, a foreign bank that does not have a physical presence in any country. In addition, the USA PATRIOT Act contains a provision encouraging cooperation among financial institutions, regulatory authorities and law enforcement authorities with respect to individuals, entities and organizations engaged in, or reasonably suspected of engaging in, terrorist acts or money laundering activities.

Source of Strength; Cross-Guarantee.  In accordance with Federal Reserve policy, the Company is expected to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances in which the Company might not otherwise do so.  Under the BHCA, the Federal Reserve may require a bank holding company (or a financial holding company) to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company.  Further, federal bank regulatory authorities have additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution’s financial condition.

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Bank Regulation

General.  As of December 31, 2004, the Company is the holding company for Enterprise Bank & Trust, a Missouri trust company (“the Bank”).  The Bank is not a member of the Federal Reserve system.  The Missouri Division of Finance and the FDIC are primary regulators for the Bank.  These regulatory authorities regulate or monitor all areas of the Bank’s operations, including security devices and procedures, adequacy of capitalization and loss reserves, loans, investments, borrowings, deposits, mergers, issuance of securities, payment of dividends, interest rates payable on deposits, interest rates or fees chargeable on loans, establishment of branches, corporate reorganizations, maintenance of books and records, and adequacy of staff training to carry on safe lending and deposit gathering practices.  The Bank must maintain certain capital ratios and is subject to limitations on aggregate investments in real estate, bank premises, and furniture and fixtures.

Transactions With Affiliates and Insiders.  The Bank is subject to the provisions of Regulation W promulgated by the Federal Reserve, which encompasses Sections 23A and 23B of the Federal Reserve Act.  Regulation W places limits and conditions on the amount of loans or extensions of credit to, investments in, or certain other transactions with, affiliates and on the amount of advances to third parties collateralized by the securities or obligations of affiliates.  Regulation W also prohibits, among other things, an institution from engaging in certain transactions with certain affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies. 

Community Reinvestment Act.  The Community Reinvestment Act (“CRA”) requires that, in connection with examinations of financial institutions within its jurisdiction, the FDIC shall evaluate the record of the financial institutions in meeting the credit needs of their local communities, including low and moderate income neighborhoods, consistent with the safe and sound operation of those institutions.  These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility.  The Company has a satisfactory rating under CRA.

Recent Legislation - Check 21.  The Check Clearing for the 21st Century Act (“Check 21”) was signed into law on October 28, 2003, and became effective on October 28, 2004. Check 21 is designed to foster innovation in the payments system and to enhance its efficiency by reducing some of the legal impediments to check truncation.  The law facilitates check truncation by creating a new negotiable instrument called a substitute check, which permits banks to truncate original checks, to process check information electronically, and to deliver substitute checks to banks that want to continue receiving paper checks.  A substitute check is the legal equivalent of the original check and includes all the information contained on the original check. The law does not require banks to accept checks in electronic form nor does it require banks to use the new authority granted by the Act to create substitute checks.

Other Regulations.  Interest and certain other charges collected or contracted for by the Bank are subject to state usury laws and certain federal laws concerning interest rates.  The Bank’s loan operations are also subject to certain federal laws applicable to credit transactions, such as the federal Truth-In-Lending Act governing disclosures of credit terms to consumer borrowers; the Home Mortgage Disclosure Act of 1975 requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; the Equal Credit Opportunity Act prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; the Fair Credit Reporting Act of 1978 governing these and provision of information to credit reporting agencies; the Fair Debt Collection Act governing the manner in which consumer debts may be collected by collection agencies; the Soldiers’ and Sailors Civil Relief Act of 1940, governing the repayment terms of, and property rights underlying obligations of persons in military service; and the rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws. The deposit operations of the Bank are also subject to the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records, and the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to implement that act, which governs automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.

Deposit Insurance.  The deposits of the Bank are currently insured by the FDIC to a maximum of $100,000 per depositor, subject to certain aggregation rules.  The FDIC establishes rates for the payment of premiums by federally insured banks for deposit insurance.  An insurance fund is maintained for commercial banks, with insurance premiums from the industry used to offset losses from insurance payouts when banks and thrifts fail.  The FDIC has adopted a risk-based deposit insurance premium system for all insured depository institutions, including the Bank, which requires premiums from a depository institution based upon its capital levels and risk profile, as determined by its primary federal regulator on a semiannual basis.

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Other Legislation

Sarbanes-Oxley Act.  On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).  The stated goals of the Sarbanes-Oxley Act are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws.  The proposed changes are intended to allow shareholders to monitor the performance of companies and directors more easily and efficiently.

The Sarbanes-Oxley Act generally applies to all companies, both U.S. and non-U.S., that file or are required to file periodic reports with the SEC under the Securities Exchange Act of 1934.  Further, the Sarbanes-Oxley Act includes very specified additional disclosure requirements and new corporate governance rules, requires the SEC, securities exchanges and the NASDAQ Stock Market to adopt extensive additional disclosure, corporate governance and other related rules and mandates further studies of certain issues by the SEC and the Comptroller General.  Given the extensive SEC role in implementing rules relating to many of the Sarbanes-Oxley Act’s new requirements, the final scope of these requirements remains to be determined.

This Sarbanes-Oxley Act addresses, among other matters:  audit committees; certification of financial statements by the chief executive officer and the chief financial officer; management assessment of internal controls with the issuer’s auditor attesting to and reporting on such assessment; the forfeiture of bonuses and profits made by directors and senior officers in the twelve month period covered by restated financial statements; a prohibition on insider trading during pension plan black out periods; disclosure of off-balance sheet transactions; a prohibition on personal loans to directors and officers (excluding Federally insured financial institutions); expedited filing requirements for stock transaction reports by officers and directors; the formation of a public accounting oversight board; auditor independence; and various increased criminal penalties for violations of securities laws.

Management has taken various measures to comply with the requirements of the Sarbanes-Oxley Act.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

Most of the information required by this item is set forth in Item 7 under the captions “Quantitative and Qualitative Disclosures about Market Risk” and “Interest Rate Risk.”

In addition, the following table presents the scheduled repricing of market risk sensitive instruments at December 31, 2004:

	Year 1		Year 2		Year 3		Year 4		Year 5		Beyond 5 years or no stated maturity		Total
ASSETS
Investments in debt and equity securities	$	33,132	$	27,009	$	55,003	$	3,405	$	—	$	3,089	$	121,638
Interest-bearing deposits		156		—		—		—		—		—		156
Loans (1)		658,731		125,658		51,419		38,973		13,760		9,964		898,505
Loans held for sale		2,376		—		—		—		—		—		2,376
Total	$	694,395	$	152,667	$	106,422	$	42,378	$	13,760	$	13,053	$	1,022,675
LIABILITIES
Savings, NOW, and Money market deposits	$	521,782	$	—	$	—	$	—	$	—	$	—	$	521,782
Certificates of deposit (1)		166,174		34,469		11,216		8,431		272		1		220,563
Subordinated debentures		—		—		—		—		—		20,620		20,620
Other borrowings		13,520		1,525		1,250		650		1,050		2,169		20,164
Total	$	701,476	$	35,994	$	12,466	$	9,081	$	1,322	$	22,790	$	783,129

(1)   Adjusted for the impact of the interest rate swaps.

39

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Included on pages 43 through 48, below.

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

NONE

ITEM 9A: CONTROLS AND PROCEDURES

As of December 31, 2004, under the supervision and with the participation of the Company’s Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), management has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15.  Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2004, to ensure that information required to be disclosed in the Company’s periodic SEC filings is processed, recorded, summarized and reported when required.  There were no significant changes in the Company’s internal controls or in the other factors that could significantly affect those controls subsequent to the date of the evaluation.

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting.  The Company’s internal control over financial reporting is a process designed under the supervision of the CEO and CFO to provide reasonable assurance regarding reliability of financial reporting and preparation of the Company’s financial statements for external reporting purposes in accordance with U.S. GAAP.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004, based on the criteria set forth by the Committee of Sponsoring Organization of the Treadway Commission (COSO) in “Internal Control-Integrated Framework.”  Based on the assessment, management determined that, as of December 31, 2004, the Company’s internal control over financial reporting was effective based on these criteria.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report included as Exhibit 99.1 to this Form 10-K.

ITEM 9B: OTHER INFORMATION

The Company is not aware of any information required to be disclosed in a report on Form 8-K during the fourth quarter covered by their Form 10-K, but not reported, whether or not otherwise required by this Form 10-K.

Part III

MANAGEMENT

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is incorporated herein by reference to the Company’s Proxy Statement for its annual meeting to be held on Wednesday, April 20, 2005.

ITEM 11: EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference to the Company’s Proxy Statement for its annual meeting to be held on Wednesday, April 20, 2005.

40

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated herein by reference to the Company’s Proxy Statement for its annual meeting to be held on Wednesday, April 20, 2005.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The Company and the Bank have, and expect to continue to have, banking and other transactions in the ordinary course of business with directors and executive officers of the Company and their affiliates, including members of their families or corporations, partnerships or other organizations in which such directors or executive officers have a controlling interest, on substantially the same terms (including price, or interest rates and collateral) as those prevailing at the time for comparable transactions with unrelated parties.  Such transactions are not expected to involve more than the normal risk of collectibility nor present other unfavorable terms to the Company and the Bank.  The Bank is subject to limits on the aggregate amount it can lend to the Bank’s and the Company’s directors and officers as a group.  This limit is currently equal to the entity’s unimpaired capital plus reserve for loan losses.  Loans to individual directors and officers must also comply with the Bank’s lending policies and statutory lending limits, and directors with a personal interest in any loan application are excluded from the consideration of such loan application.

ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated by reference to the Company’s Proxy Statement for its annual meeting to be held on Wednesday, April 20, 2005.

ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)          The following documents are filed or incorporated by reference as part of this Report:

Enterprise Financial Services Corp and subsidiaries

		Page Number
1.	Financial Statements:
	Independent auditors’ report	42
	Consolidated Balance Sheets at December 31, 2004 and 2003	43
	Consolidated Statements of Income for the years ended December 31, 2004, 2003, and 2002	44
	Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2004, 2003, and 2002	45
	Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003, and 2002	46
	Consolidated Statements of Comprehensive Income for the years ended December 31, 2004, 2003 and 2002	48
	Notes to Consolidated Financial Statements	49
2.	Financial Statement Schedules
	None other than those included in the Notes to Consolidated Financial Statements.
3.	Exhibits
	See Exhibit Index

41

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Enterprise Financial Services Corp:

We have audited the accompanying consolidated balance sheets of Enterprise Financial Services Corp and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity, cash flows, and comprehensive income for each of the years in the three-year period ended December 31, 2004. These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Enterprise Financial Services Corp and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Enterprise Financial Services Corp’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 4, 2005 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

St. Louis, Missouri
March 4, 2005

42

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Consolidated Balance Sheets

	December 31,
	2004			2003
Assets
Cash and due from banks	$	28,323,601		$	26,271,251
Interest-bearing deposits		156,499			216,926
Investments in debt and equity securities:
Available for sale, at estimated fair value		121,630,434			83,938,696
Held to maturity, at amortized cost (estimated fair value of $8,138 at December 31, 2004 and $9,923 at December 31, 2003)		8,000			9,848
Total investments in debt and equity securities		121,638,434			83,948,544
Loans held for sale		2,375,917			2,848,214
Loans, less unearned loan fees		898,504,506			783,877,820
Less: allowance for loan losses		11,664,788			10,590,001
Loans, net		886,839,718			773,287,819
Other real estate owned		123,236			—
Fixed assets, net		8,044,349			7,317,664
Accrued interest receivable		4,238,008			3,278,904
Goodwill		1,937,537			1,937,537
Prepaid expenses and other assets		6,272,800			8,619,345
Total assets	$	1,059,950,099		$	907,726,204
Liabilities and Shareholders’ Equity
Deposits:
Demand	$	197,283,268		$	164,952,091
Interest-bearing transaction accounts		85,523,094			58,925,540
Money market accounts		432,339,748			371,582,696
Savings		3,919,481			4,123,387
Certificates of deposit:
$100,000 and over		178,851,178			154,142,327
Other		41,711,553			42,674,146
Total deposits		939,628,322			796,400,187
Subordinated debentures		20,620,000			15,464,208
Federal Home Loan Bank advances		10,298,629			14,500,056
Other borrowings		9,615,618			9,647,094
Notes payable		250,000			—
Accrued interest payable		1,664,692			1,150,539
Accounts payable and accrued expenses		5,147,188			5,176,416
Total liabilities		987,224,449			842,338,500
Shareholders’ equity:
Common stock, $.01 par value; authorized 20,000,000 shares; issued and outstanding 9,778,357 shares at December 31, 2004 and 9,618,482 shares at December 31, 2003		97,784			96,185
Additional paid in capital		41,325,621			39,841,177
Retained earnings		32,075,225			24,832,021
Accumulated other comprehensive (loss) income		(772,980	)		618,321
Total shareholders’ equity		72,725,650			65,387,704
Total liabilities and shareholders’ equity	$	1,059,950,099		$	907,726,204

See accompanying notes to consolidated financial statements.

43

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES
Consolidated Statements of Income

	Years ended December 31,
	2004		2003		2002
Interest income:
Interest and fees on loans	$	45,955,884	$	41,221,259	$	43,013,955
Interest on debt and equity securities:
Taxable		2,274,228		1,690,554		1,495,968
Nontaxable		40,872		23,239		917
Interest on federal funds sold		520,012		196,094		574,094
Interest on interest-bearing deposits		2,539		2,409		28,406
Dividends on equity securities		99,765		111,278		93,728
Total interest income		48,893,300		43,244,833		45,207,068
Interest expense:
Interest-bearing transaction accounts		320,063		169,455		269,189
Money market accounts		4,613,515		3,475,014		5,000,759
Savings		14,394		24,209		84,093
Certificates of deposit:
$100,000 and over		3,993,333		2,972,276		3,144,962
Other		1,057,133		1,559,600		3,687,543
Subordinated debentures		1,405,159		1,270,086		1,152,399
Federal Home Loan Bank borrowings		725,207		1,033,296		918,496
Notes payable and other borrowings		40,022		39,596		85,902
Total interest expense		12,168,826		10,543,532		14,343,343
Net interest income		36,724,474		32,701,301		30,863,725
Provision for loan losses		2,212,000		3,627,082		2,250,578
Net interest income after provision for loan losses		34,512,474		29,074,219		28,613,147
Noninterest income:
Service charges on deposit accounts		2,031,915		1,781,621		1,771,417
Wealth Management income		4,306,349		3,621,927		2,353,927
Other service charges and fee income		394,852		369,352		380,433
Gain on sale of mortgage loans		262,258		927,395		771,298
Gain on sale of securities		126,480		77,884		—
Gain on sale of branches		—		2,937,976		—
Recovery from Merchant Banc Investments		—		—		88,889
Miscellaneous income		—		375,000		—
Total noninterest income		7,121,854		10,091,155		5,365,964
Noninterest expense:
Compensation		15,781,951		15,371,302		13,496,376
Payroll taxes and employee benefits		2,771,300		2,326,974		2,431,353
Occupancy		2,090,012		1,973,874		1,900,812
Furniture and equipment		719,546		841,280		1,001,671
Data processing		796,928		932,426		1,011,860
Losses and settlement		62,548		80,585		1,371,361
Other		7,108,764		6,688,953		6,150,461
Total noninterest expense		29,331,049		28,215,394		27,363,894
Income before income tax expense		12,303,279		10,949,980		6,615,217
Income tax expense		4,088,752		4,024,761		1,613,737
Net income	$	8,214,527	$	6,925,219	$	5,001,480
Per share amounts:
Basic earnings per share	$	0.85	$	0.72	$	0.53
Basic weighted average common shares outstanding		9,695,500		9,566,059		9,399,374
Diluted earnings per share	$	0.82	$	0.70	$	0.52
Diluted weighted average common shares outstanding		10,054,691		9,875,141		9,611,108

See accompanying notes to consolidated financial statements.

44

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity

Years ended December 31, 2004, 2003, and 2002

	Common Stock				Additional Paid in Capital		Retained earnings			Accumulated other comprehensive income (loss)			Total share- holders’ equity
	Shares		Amount
Balance December 31, 2001		9,270,667	$	92,707	$	37,288,725	$	14,330,784		$	184,387		$	51,896,603
Net income		—		—		—		5,001,480			—			5,001,480
Dividends declared ($.07 per share)		—		—		—		(658,645	)		—			(658,645	)
Stock options exercised, including related tax benefit		227,127		2,271		911,636		—			—			913,907
Noncash compensation attributed to stock option grants		—		—		201,453		—			—			201,453
Other comprehensive income		—		—		—		—			1,455,152			1,455,152
Balance December 31, 2002		9,497,794	$	94,978	$	38,401,814	$	18,673,619		$	1,639,539		$	58,809,950
Net income		—		—		—		6,925,219			—			6,925,219
Dividends declared ($.08 per share)		—		—		—		(766,817	)		—			(766,817	)
Stock options exercised, including related tax benefit		120,688		1,207		1,150,651		—			—			1,151,858
Noncash compensation attributed to stock option grants		—		—		288,712		—			—			288,712
Other comprehensive loss		—		—		—		—			(1,021,218	)		(1,021,218	)
Balance December 31, 2003		9,618,482	$	96,185	$	39,841,177	$	24,832,021		$	618,321		$	65,387,704
Net income		—		—		—		8,214,527			—			8,214,527
Dividends declared ($.10 per share)		—		—		—		(971,323	)		—			(971,323	)
Stock options exercised, including related tax benefit		159,875		1,599		1,250,876		—			—			1,252,475
Noncash compensation attributed to stock option grants		—		—		233,568		—			—			233,568
Other comprehensive loss		—		—		—		—			(1,391,301	)		(1,391,301	)
Balance December 31, 2004		9,778,357	$	97,784	$	41,325,621	$	32,075,225		$	(772,980	)	$	72,725,650

See accompanying notes to consolidated financial statements.

45

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	Years ended December 31,
	2004			2003			2002
Cash flows from operating activities:
Net income	$	8,214,527		$	6,925,219		$	5,001,480
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		996,139			1,231,036			1,717,891
Provision for loan losses		2,212,000			3,627,082			2,250,578
Net amortization of debt and equity securities		1,816,903			907,378			706,771
Gain on sale of available for sale investment securities		(126,480	)		(77,884	)		—
Recoveries from Merchant Banc investments		—			—			(88,889	)
Mortgage loans originated		(60,263,270	)		(115,307,794	)		(93,219,738	)
Proceeds from mortgage loans sold		60,997,824			120,378,396			95,935,657
Gain on sale of mortgage loans		(262,258	)		(927,395	)		(771,298	)
(Decrease) increase in settlement accrual of disputed note		(575,000	)		(725,000	)		1,300,000
Noncash compensation expense attributed to stock option grants		233,568			288,712			201,453
(Increase) decrease in accrued interest receivable		(959,104	)		179,692			(317,684	)
Increase (decrease) in accrued interest payable		514,153			(114,061	)		56,051
Gain on sale of branches		—			(2,937,976	)		—
Deferred income tax expense (benefit)		210,397			(258,063	)		(325,816	)
Increase (decrease) in accrued salaries payable		75,596			2,310,412			(198,850	)
Other, net		1,996,662			479,940			(823,403	)
Net cash provided by operating activities		15,081,657			15,979,694			11,424,203
Cash flows from investing activities:
Cash paid in sale of branches		—			(16,740,983	)		—
Purchases of available for sale debt and equity securities		(351,695,916	)		(81,786,416	)		(65,686,572	)
Proceeds from sales of available for sale debt securities		62,766,412			11,193,355			—
Proceeds from redemption of equity securities		2,534,400			605,400			1,600
Proceeds from maturities and principal paydowns on available for sale debt and equity securities		246,242,254			51,936,463			44,501,177
Proceeds from maturities and principal paydowns on held to maturity debt securities		1,848			2,752			100,000
Proceeds from sale of other real estate		—			451,305			2,298,266
Net increase in loans		(116,045,804	)		(98,196,818	)		(80,498,510	)
Recoveries of loans previously charged off		158,671			266,515			299,417
Net decrease in assets held for sale		—			—			4,173,847
Net decrease in liabilities held for sale		—			—			(8,747,233	)
Proceeds from sale of fixed assets		—			—			21,382
Purchases of fixed assets		(1,722,824	)		(953,330	)		(532,329	)
Net cash used in investing activities		(157,760,959	)		(133,221,757	)		(104,068,955	)

46

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (continued)

	Years ended December 31,
	2004			2003			2002
Cash flows from financing activities:
Net increase in non-interest bearing deposit accounts		32,331,177			8,671,377			35,836,212
Net increase in interest bearing deposit accounts		110,896,958			69,900,543			24,387,153
Proceeds from issuance of subordinated debentures		16,496,000			—			4,000,000
Paydown of subordinated debentures		(11,340,208	)		—			—
Proceeds from borrowings of Federal Home Loan Bank advances		55,000,000			130,000,000			18,675,000
Maturities and paydowns of Federal Home Loan Bank advances		(59,201,427	)		(144,963,988	)		(3,243,341	)
(Decrease) increase in federal funds purchased		(2,047,062	)		8,380,532			—
Increase in customer repurchase agreements		3,085,846			—			—
Proceeds from notes payable		350,000			100,000			1,750,000
Paydowns of notes payable		(100,000	)		(100,000	)		(3,116,667	)
(Decrease) increase in other borrowings		(1,070,262	)		(1,092,191	)		2,358,753
Cash dividends paid		(971,323	)		(766,817	)		(658,645	)
Proceeds from the exercise of common stock options		1,241,526			1,115,301			905,584
Net cash provided by financing activities		144,671,225			71,244,757			80,894,049
Net increase (decrease) in cash and cash equivalents		1,991,923			(45,997,306	)		(11,750,703	)
Cash and cash equivalents, beginning of period		26,488,177			72,485,483			84,236,186
Cash and cash equivalents, end of period	$	28,480,100		$	26,488,177		$	72,485,483
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	11,654,673		$	10,657,593		$	14,251,701
Income taxes		3,279,500			4,517,062			2,062,744
Noncash transactions:
Transfer to other real estate owned in settlement of loans		273,236			344,985			2,235,000
Loans made to facilitate sale of other real estate owned		—			—			1,980,000
Writeoff of goodwill associated with sale of branches		—			150,000			—

See accompanying notes to consolidated financial statements.

47

ENTERPRISE FINANCIAL SERVICES CORP AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

	Years ended December 31,
	2004			2003			2002
Net income	$	8,214,527		$	6,925,219		$	5,001,480
Other comprehensive (loss) income:
Unrealized (loss) gain on investment securities arising during the period, net of tax		(417,484	)		(180,615	)		122,612
Less reclassification adjustment for realized gain on sale of securities included in net income, net of tax		(83,477	)		(51,903	)		—
Unrealized (loss) gain on cash flow type derivative instruments arising during the period, net of tax		(890,340	)		(788,700	)		1,332,540
Total other comprehensive (loss) income		(1,391,301	)		(1,021,218	)		1,455,152
Total comprehensive income	$	6,823,226		$	5,904,001		$	6,456,632

See accompanying notes to consolidated financial statements.

48

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The more significant accounting policies used by the Company in the preparation of the consolidated financial statements are summarized below:

Business

Enterprise Financial Services Corp (the “Company”) is a financial holding company that provides a full range of banking and wealth management services to individual and corporate customers located in the St. Louis and Kansas City metropolitan markets through its subsidiary, Enterprise Bank & Trust (the “Bank”). The Company is subject to competition from other financial and nonfinancial institutions providing financial services in the markets served by the Company’s subsidiary.  Additionally, the Company and the Bank are subject to the regulations of certain federal and state agencies and undergo periodic examinations by those regulatory agencies.  Enterprise Trust (“Trust”) is a division of the Bank which provides fee-based trust, personal financial planning, estate planning, and corporate planning services to the Company’s target market. 

Basis of Financial Statement Presentation

The consolidated financial statements of the Company and its subsidiaries have been prepared in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and conform to predominant practices within the banking industry.  In preparing the consolidated financial statements, management is required to make estimates and assumptions which significantly affect the reported amounts in the consolidated financial statements.  Estimates which are particularly susceptible to significant change in a short period of time include the determination of the allowance for loan losses, derivative financial instruments, deferred tax assets and goodwill.  Actual amounts could differ from those estimates.

Consolidation

The consolidated financial statements include the accounts of the Company and the Bank (100% owned).  All significant intercompany accounts and transactions have been eliminated.

Investments in Debt and Equity Securities

The Company currently classifies investments in debt and equity securities as follows:

Trading - includes securities which the Company has bought and held principally for the purpose of selling them in the near term.

Held to maturity - includes debt securities which the Company has the positive intent and ability to hold until maturity.

Available for sale - includes debt and marketable equity securities not classified as held to maturity or trading (i.e., investments which the Company has no present plans to sell but may be sold in the future under different circumstances).

Debt securities classified as held to maturity are carried at amortized cost, adjusted for the amortization or accretion of premiums or discounts.  Unrealized holding gains and losses for held to maturity securities are excluded from earnings and shareholders’ equity.  Debt and equity securities classified as available for sale are carried at estimated fair value.  Unrealized holding gains and losses for available for sale securities are excluded from earnings and reported as a net amount in a separate component of shareholders’ equity until realized.  All previous fair value adjustments included in the separate component of shareholders’ equity are reversed upon sale.  Debt and equity securities classified as trading are carried at estimated fair value.  The realized and unrealized gains and losses on trading securities are included in noninterest income.

A decline in the market value of any available for sale or held to maturity security below cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security.  The impairment is charged to earnings and a new cost basis for the security is established.  To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating cost of the investment is recoverable outweighs evidence to the contrary.  Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to year-end, and forecasted performance of the investee.

49

For securities in the held to maturity and available for sale categories, premiums and discounts are amortized or accreted over the lives of the respective securities as an adjustment to yield using the interest method.  Dividend and interest income is recognized when earned.  Realized gains and losses for securities classified as trading, available for sale and held to maturity are included in earnings and are derived using the specific identification method for determining the cost of securities sold.

Loans Held for Sale

The Company provides long-term financing of one to four-family residential real estate by originating fixed and variable rate loans. Long-term, fixed and variable rate loans are sold into the secondary market without recourse.  Upon receipt of an application for a real estate loan, the Company determines whether the loan will be sold into the secondary market or retained in the Company’s loan portfolio.  The interest rates on the loans sold are locked with the buyer and the Company bears no interest rate risk related to these loans.  Mortgage loans that are sold in the secondary market are sold principally under programs with the Government National Mortgage Association (“GNMA”) or the Federal National Mortgage Association (“FNMA”).  Mortgage loans held for sale are carried at the lower of cost or fair value, which is determined on a specific identification method.  The Company does not retain servicing on any loans sold, nor did the Company have any capitalized mortgage servicing rights at December 31, 2004 and 2003.  Gains on the sale of loans held for sale are reported net of direct origination fees and costs in the Company’s consolidated statements of income.

Interest and Fees on Loans

Interest income on loans is accrued to income based on the principal amount outstanding.  The recognition of interest income is discontinued when a loan becomes 90 days past due or a significant deterioration in the borrower’s credit has occurred which, in management’s opinion, negatively impacts the collectibility of the loan.  Subsequent interest payments received on such loans are applied to principal if any doubt exists as to the collectibility of such principal; otherwise, such receipts are recorded as interest income.  Loans are returned to accrual status when management believes full collectibility of principal and interest is expected.

Loan origination fees greater than $10,000 per loan are deferred and recognized over the lives of the related loans as a yield adjustment using a method which approximates the interest method.  Direct origination costs are expensed as incurred and reported in noninterest expenses.  The effect of this accounting policy was determined to be immaterial to net income.

Allowance For Loan Losses

The allowance for loan losses is increased by provisions charged to expense and is available to absorb charge offs, net of recoveries.  Management utilizes a systematic, documented approach in determining the appropriate level of the allowance for loan losses.  Management’s approach, which provides for general and specific allowances, is based on current economic conditions, past losses, collection experience, risk characteristics of the portfolio, assessments of collateral values by obtaining independent appraisals for significant properties, and such other factors which, in management’s judgment, deserve current recognition in estimating loan losses.

Management believes the allowance for loan losses is adequate to absorb probable losses in the loan portfolio.  While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions and other factors.  In addition, various regulatory agencies, as an integral part of the examination process, periodically review the Bank’s loan portfolio.  Such agencies may require the Bank to add to the allowance for loan losses based on their judgments and interpretations of information available to them at the time of their examinations.

Accounting for Impaired Loans

A loan is considered impaired when it is probable the Bank will be unable to collect all amounts due, both principal and interest, according to the contractual terms of the loan agreement.  The Bank’s non-accrual loans, loans past due greater than 90 days and still accruing, and restructured loans qualify as “impaired loans.”  When measuring impairment, the expected future cash flows of an impaired loan are discounted at the loan’s effective interest rate.  Alternatively, impairment is measured by reference to an observable market price, if one exists, or the fair value of the collateral for a collateral-dependent loan.  Regardless of the measurement method used, historically, the Bank measures impairment based on the fair value of the collateral when foreclosure is probable.  Interest income on impaired loans is recorded when cash is received and only if principal is considered to be fully collectible.

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Other Real Estate Owned

Other real estate owned represents property acquired through foreclosure or deeded to the Bank in lieu of foreclosure on loans on which the borrowers have defaulted as to the payment of principal and interest.  Other real estate owned is recorded on an individual asset basis at the lower of cost or fair value less estimated costs to sell.  Subsequent reductions in fair value are expensed or recorded in a valuation reserve account through a provision against income.  Subsequent increases in the fair value are recorded through a reversal of the valuation reserve.

Gains and losses resulting from the sale of other real estate owned are credited or charged to current period earnings.  Costs of maintaining and operating other real estate owned are expensed as incurred, and expenditures to complete or improve other real estate owned properties are capitalized if the expenditures are expected to be recovered upon ultimate sale of the property.

Fixed Assets

Buildings, leasehold improvements, and furniture, fixtures, and equipment are stated at cost less accumulated depreciation and amortization is computed using the straight-line method over their respective estimated useful lives. Furniture, fixtures and equipment is depreciated over three to ten years and buildings and leasehold improvements over ten to forty years based upon lease obligation periods.

Goodwill and Other Intangible Assets

Goodwill represents the excess of costs over fair value of assets of businesses acquired.  The Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets, as of January 1, 2002. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142.  SFAS No.142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and review for impairment in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

In connection with SFAS No. 142’s transitional goodwill impairment evaluation, the Statement required the Company to perform an assessment of whether there was an indication that goodwill is impaired as of the date of adoption.  To accomplish this, the Company was required to identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets to those reporting units as of January 1, 2002.  Goodwill was assigned to the Banking segment.  The Company was required to determine the fair value of the reporting unit and compare it to the carrying amount of the reporting unit within six months of January 1, 2002.  Given the size of the goodwill amount and the increasing profitability and growth of the Company, we determined the fair value of the Banking segment by applying appropriate multiples to the segments’ net book value.  To the extent the carrying amount of a reporting unit exceeded the fair value of the reporting unit, the Company would be required to perform the second step of the transitional impairment test, as this is an indication that the reporting unit goodwill may be impaired.  The second step was not required because the fair value exceeded the carrying amount for the reporting units. 

Impairment of Long-Lived Assets

SFAS No. 144 provides a single accounting model for long-lived assets to be disposed of.  SFAS No. 144 also changes the criteria for classifying an asset as held for sale; and broadens the scope of businesses to be disposed of that qualify for reporting as discontinued operations and changes the timing of recognizing losses on such operations.  The Company adopted SFAS No. 144 on January 1, 2002.  The adoption of SFAS No. 144 was considered in the accounting and disclosure of the Company’s sale of the Southeast Kansas branches.

In accordance with SFAS No. 144, long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.  Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated.  The assets and liabilities of a disposed group classified as held for sale are presented separately in the appropriate asset and liability sections of the balance sheet.

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Goodwill and intangible assets not subject to amortization are tested annually for impairment, and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired.  An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value.

Derivative Instruments and Hedging Activities

The Company began utilizing derivative instruments to assist in the management of interest rate sensitivity and to modify the repricing, maturity and option characteristics of certain assets and liabilities in 2002.  The Company uses such derivative instruments solely to reduce its interest rate exposure.  The following is a summary of the Company’s accounting policies for derivative instruments and hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended.

Interest Rate Swap Agreements – Cash Flow Hedges.  Interest rate swap agreements designated as cash flow hedges are accounted for at fair value.  The effective portion of the change in the cash flow hedge’s gain or loss is initially reported as a component of other comprehensive income net of taxes and subsequently reclassified into noninterest income when the underlying transaction affects earnings.  The ineffective portion of the change in the cash flow hedge’s gain or loss is recorded in earnings on each quarterly measurement date.  The swap agreements are accounted for on an accrual basis with the net interest differential being recognized as an adjustment to interest income or interest expense of the related asset or liability.

Interest Rate Swap Agreements – Fair Value Hedges.  Interest rate swap agreements designated as fair value hedges are accounted for at fair value.  Changes in the fair value of the swap agreements are recognized currently in noninterest income.  The change in the fair value on the underlying hedged item attributable to the hedged risk adjusts the carrying amount of the underlying hedged item and is also recognized currently in noninterest income.  All changes in fair value are measured on a quarterly basis.  The swap agreement is accounted for on an accrual basis with the net interest differential being recognized as an adjustment to interest income or interest expense of the related asset or liability.  

Income Taxes

The Company and its subsidiaries file consolidated federal income tax returns.  Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.  A valuation allowance is recognized if the Company determines it is more likely than not that all or some portion of the deferred tax asset will not be recognized.

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Stock Options

The Company applies the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including Financial Accounting Standards Board (“FASB”) Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25,  issued in March 2000, to account for its fixed-plan stock options.  Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price.  SFAS No. 123, Accounting for Stock-Based Compensation, established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans.  As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, an Amendment of FASB Statement No. 123.  The following table illustrates the effect on net income if the fair-value-based method had been applied to all outstanding and unvested awards in each period.

	2004			2003			2002
Net income, as reported	$	8,214,527		$	6,925,219		$	5,001,480
Add total stock-based employee compensation expense included in reported net income, net of tax		92,710			—			—
Deduct total stock-based employee compensation expense determined under fair-value-based method for all rewards, net of tax		(3,390,467	)		(958,745	)		(809,289	)
Pro forma net income	$	4,916,770	*	$	5,966,474		$	4,192,191
Earnings per share:
Basic:
As reported	$	0.85		$	0.72		$	0.53
Pro forma		0.51	*		0.62			0.45
Diluted:
As reported	$	0.82		$	0.70		$	0.52
Pro forma	$	0.49	*		0.60			0.44

* Based on the valuation and accounting uncertainties that outstanding options presented under proposed accounting treatment at the time, and the transition issues associated with the Company’s new Long Term Incentive Plan (“LTIP”), the Board of Directors accelerated the vesting on the Company’s outstanding stock options during the fourth quarter of 2004.  This action resulted in two financial reporting implications.  First, the remaining fair value of all outstanding stock options was recognized in 2004 as part of the pro-forma footnote disclosures above.  Secondly, the Company recognized $146,000 of compensation expense in the fourth quarter of 2004 based on the product of the number of outstanding unvested options times the spread between their weighted average stock price and the Company stock price on October 1, 2004 times the estimated option forfeiture rate of 9.5%.  The forfeiture rate is based on the Company’s history over the past several years, but actual forfeiture effects in the future will be measured and recognized in expense for any differences versus the estimate.

Cash Flow Information

For purposes of reporting cash flows, the Company considers cash and due from banks, interest-bearing deposits and any federal funds sold to be cash and cash equivalents.

Reclassification

Certain reclassifications have been made to the 2003 and 2002 amounts to conform to the present year presentation.

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New Accounting Standards

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), Share-Based Payment (“SFAS No. 123(R)”).  SFAS No. 123(R) replaces SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.  SFAS No. 123(R) requires compensation costs related to share-based payment transactions to be recognized in the financial statements over the period that an employee provides service in exchange for the award.  The accounting provisions of SFAS 123(R) are effective for reporting periods beginning after June 15, 2005.

We are required to adopt SFAS 123R in the third quarter of fiscal 2005. The pro forma disclosures previously permitted under SFAS 123 will no longer be an alternative to financial statement recognition. See Note 1 in our Notes to Consolidated Financial Statements for the pro forma net income and net income per share amounts, for fiscal 2002 through fiscal 2004, as if we had used a fair-value-based method similar to the methods required under SFAS 123R to measure compensation expense for employee stock incentive awards.  The Company is evaluating the effect SFAS 123R will have on its consolidated financial position, results of operations and cash flows.

In July 2004, the Derivatives Implementation Group of the FASB issued guidance on FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, Implementation Issue No. G25 (“DIG Issue G25”).  DIG Issue G25 clarifies the FASB’s position on the ability of entities to hedge the variability in interest receipts or overall changes in cash flows on a group of prime-rate based loans.  Under the new guidance these hedge relationships are allowed the use of the first payments received technique if all other conditions of FASB Statement No. 133 are met.  The effective date of DIG Issue G25 was October 1, 2004 and was applied to all hedging relationships as of that date.  If a pre-existing cash flow hedging relationship has identified the hedged transactions in a manner inconsistent with the guidance in DIG Issue G25, the hedging relationship must be de-designated at the effective date.  Any derivative gains or losses in other comprehensive income related to the de-designated hedging relationships should be accounted for under paragraphs 31 and 32 of Statement 133.  The Company had pre-existing cash flow hedging relationships in a manner inconsistent with the guidance in DIG Issue G25 which had a $32,000 loss, net of tax, in other comprehensive income as of September 30, 2004.  The Company implemented DIG Issue G25 on October 1, 2004 and de-designated its cash flow hedges which were inconsistent with the guidance.  These cash flow hedges were then re-designated as new cash flow hedging relationships under the new guidance of DIG Issue G25.  The implementation of DIG Issue G25 did not have a material effect on the Company’s consolidated financial position or results of operations.

In March 2004, the Emerging Issues Task Force (“EITF”) reached a consensus on criteria to evaluate whether to record a loss and disclose additional information about unrealized losses relating to debt and equity securities under EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. The consensus applies to investments in debt and marketable equity securities that are accounted under SFAS 115, Accounting for Certain Investments in Debt and Equity Securities, and SFAS 124, Accounting for Certain Investments Held by Not-for-Profit Organizations. The Consensus divides the procedures into three sequential steps. The Company first determines whether the investment is impaired. If so, the next step is to determine whether the impairment is other-than-temporary. If it is other-than-temporary, the third step is to recognize the impairment loss in earnings. An investment is impaired if its fair value is less than its carrying value, and an impairment is other-than-temporary if the investor does not have the “ability and intent” to hold the investment until a forecasted recovery of its carrying amount. The loss recognized from an other-than-temporary impairment should equal the difference between the investment’s carrying value and its quoted market price. This establishes a new cost basis for the investment. The EITF has proposed a delay in the effective date of the requirement to record impairment losses caused by the effect of increases in interest rates on investments. The EITF is also determining how to assess the severity of the impairment as well as the effect of selling investments on the Company’s ability and intent to hold other securities until a forecasted recovery of fair value. Consequently, we are currently awaiting additional guidance from the EITF on EITF Issue No. 03-1 and are presently unable to determine its overall impact on our consolidated financial statements or results of operations.

In December 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, a revision to FASB Interpretation No. 46, Consolidation of Variable Interest Entities issued in January 2003. This Interpretation is intended to achieve more consistent application of consolidation policies to variable interest entities and, thus to improve comparability between enterprises engaged in similar activities even if some of those activities are conducted through variable interest entities.  The provisions of this Interpretation are effective for financial statements issued for fiscal years ending after December 15, 2003.  We have two statutory and business trusts that were formed for the sole purpose of issuing trust preferred securities.  As further described in Note 9 to our Consolidated Financial Statements appearing elsewhere in this report, on December 31, 2003, we implemented FASB Interpretation No. 46, as amended, which resulted in the deconsolidation of our two statutory and business trusts.  The implementation of this Interpretation had no material effect on our consolidated financial position or results of operations.

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Also in December 2003, the Accounting Standards Executive Committee, (“AcSEC”) issued SOP 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer, effective for loans acquired in fiscal years beginning after December 15, 2004.  The scope of SOP 03-3 applies to “problem” loans that have been acquired, either individually in a portfolio, or in an acquisition.  These loans must have evidence of credit deterioration and the purchaser must not expect to collect contractual cash flows. SOP 03-3 updates Practice Bulletin (PB) No. 6, Amortization of Discounts on Certain Acquired Loans, for more recently issued literature, including FASB Statements No. 114, Accounting by Creditors for Impairment of a Loan; No. 115, Accounting for Certain Investments in Debt and Equity Securities; and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinquishments of Liabilities.  Additionally, it addresses FASB Statement No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases, which requires that discounts be recognized as an adjustment of yield over a loan’s life.

SOP 03-3 states that an institution may no longer display discounts on purchased loans within the scope of SOP 03-3 on the balance sheet and may not carry over the allowance for loan losses.  For those loans within the scope of SOP 03-3, this statement clarifies that a buyer cannot carry over the seller’s allowance for loan losses for the acquisition of loans with credit deterioration.  Loans acquired with evidence of deterioration in credit quality since origination will need to be accounted for under a new method using an income recognition model. This prohibition also applies to purchases of problem loans not included in a purchase business combination, which would include syndicated loans purchased in the secondary market and loans acquired in portfolio sales.  This guidance did not have a material effect on the Company’s consolidated financial position or results of operations.

In July 2003, the Board of Governors of the Federal Reserve System issued a supervisory letter instructing bank holding companies to continue to include the trust preferred securities in their Tier I capital for regulatory capital purposes, subject to applicable limits, until notice is given to the contrary.  The Federal Reserve reviewed the regulatory implications of the accounting treatment changes, and on May 6, 2004, released a proposal allowing the continued inclusion of outstanding and prospective issuances of trust preferred securities in the Tier I capital of bank holding companies, subject to stricter quantitative limits and qualitative standards.  The proposed changes are effective March 31, 2007.  Currently these proposed guidelines would not have a material impact on the Company’s regulatory capital.

FASB Statement No. 150, Accounting for Certain Financial Instruments with Character of both Liabilities and Equity, was issued in May 2003.  This Statement establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity.  The Statement also includes required disclosures for financial instruments within its scope.  For the Company, the Statement was effective for instruments entered into or modified after May 31, 2003 and otherwise is effective as of January 1, 2004, except for mandatorily redeemable financial instruments.  For certain mandatorily redeemable financial instruments, the Statement will be effective for the Company on January 1, 2005.  The effective date has been deferred indefinitely for certain other types of mandatorily redeemable financial instruments.  The Company currently does not have any financial instruments that are within the scope of this Statement.

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NOTE 2--EARNINGS PER SHARE

Basic earnings per share data is calculated by dividing net income by the weighted average number of common shares outstanding during the period.  Diluted earnings per share gives effect to the increase in the average shares outstanding which would have resulted from the exercise of dilutive stock options and warrants.  The components of basic earnings per share for the years ended December 31, 2004, 2003, and 2002 are as follows:

	2004		2003		2002
Basic
Net income attributable to common shareholders’ equity	$	8,214,527	$	6,925,219	$	5,001,480
Weighted average common shares outstanding		9,695,500		9,566,059		9,399,374
Basic earnings per share	$	0.85	$	0.72	$	0.53

The components of diluted earnings per share for the years ended December 31, 2004, 2003, and 2002 are as follows:

	2004		2003		2002
Diluted
Net income attributable to common shareholders’ equity	$	8,214,527	$	6,925,219	$	5,001,480
Weighted average common shares outstanding		9,695,500		9,566,059		9,399,374
Effect of dilutive stock options		359,191		309,082		211,734
Diluted weighted average common shares outstanding		10,054,691		9,875,141		9,611,108
Diluted earnings per share	$	0.82	$	0.70	$	0.52

For the year ended December 31, 2004, 194,994 options at an average strike price of $12.48 were outstanding but were not included in the calculation for diluted earnings per share due to the anti-dilutive impact of adjusting net income for the expenses associated with the options.  The Company recognizes expense for options granted to non-employees in the Moneta Plan and Stock Appreciation Rights granted to Directors of the Company.

For the year ended December 31, 2003, 257,867 options at an average strike price of $12.33 were outstanding but were not included in the calculation for diluted earnings per share due to the anti-dilutive impact of adjusting net income for the expenses associated with the options.  The Company recognizes expense for options granted to non-employees in the Moneta Plan and Stock Appreciation Rights granted to Directors of the Company.

For the year ended December 31, 2002, 722,589 options at an average strike price of $12.51 were outstanding but were not included in the calculation for diluted earnings per share because the exercise price was higher than the average market price of the Company’s common shares.

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NOTE 3--REGULATORY RESTRICTIONS

The Bank is subject to regulations by regulatory authorities, which require the maintenance of minimum capital standards, which may affect the amount of dividends the Bank can pay.

At December 31, 2004 and 2003, approximately $7.1 million and $3.2 million, respectively, of cash and due from banks represented required reserves on deposits maintained by the Bank in accordance with Federal Reserve Bank requirements. 

NOTE 4--INVESTMENTS IN DEBT AND EQUITY SECURITIES

A summary of the amortized cost and estimated fair value of debt and equity securities classified as available for sale at December 31, 2004 and 2003 is as follows:

	2004
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	99,504,359	$	3,553	$	(563,935	)	$	98,943,977
Mortgage-backed securities		18,610,200		62,622		(167,141	)		18,505,681
Municipal bonds		1,618,188		7,114		(8,826	)		1,616,476
Other securities		895,000		—		—			895,000
Federal Home Loan Bank stock		1,669,300		—		—			1,669,300
	$	122,297,047	$	73,289	$	(739,902	)	$	121,630,434

	2003
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	51,771,839	$	157,886	$	(60,497	)	$	51,869,228
Mortgage-backed securities		27,798,019		155,693		(150,096	)		27,803,616
Municipal bonds		1,657,153		11,751		(10,660	)		1,658,244
Other securities		739,208		—		—			739,208
Federal Home Loan Bank stock		1,868,400		—		—			1,868,400
	$	83,834,619	$	325,330	$	(221,253	)	$	83,938,696

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The amortized cost and estimated fair value of debt and equity securities classified as available for sale at December 31, 2004, by contractual maturity, are shown below.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Estimated Fair Value
Due in one year or less	$	31,581,595	$	31,574,925
Due after one year through five years		69,072,658		68,515,653
Due after 5 years through ten years		468,294		469,875
Due after ten years		—		—
Mortgage-backed securities		18,610,200		18,505,681
Securities with no stated maturity		2,564,300		2,564,300
	$	122,297,047	$	121,630,434

A summary of the amortized cost and estimated fair value of debt and equity securities classified as held to maturity at December 31, 2004 and 2003 is as follows:

	2004
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Mortgage-backed securities	$	8,000	$	138	$	—	$	8,138

	2003
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Mortgage-backed securities	$	9,848	$	75	$	—	$	9,923

The amortized cost and estimated fair value of debt and equity securities classified as held to maturity at December 31, 2004, by contractual maturity, are shown below.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Estimated Fair Value
Due after 5 years through ten years	$	8,000	$	8,138

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Provided below is a summary of securities available for-sale which were in an unrealized loss position at December 31, 2004.  Approximately 72.4% of the total unrealized loss was comprised of securities in a continuous loss position for less than twelve months that consisted of U.S. government and agency securities with estimated maturities or repricings of less than five years.  Approximately 9.2% of the total unrealized loss was comprised of securities in a continuous loss position for less than twelve months that consisted of mortgage backed securities with estimated maturities or repricings of less than five years.  Fannie Mae or Freddie Mac guarantees the contractual cash flows of these securities.  The Company has the ability and intent to hold these securities until such time as the value recovers or the securities mature.  Further, the Company believes the deterioration in value is attributable to changes in market interest rates and not credit quality of the issuer.

	Securities Available for Sale
	Less than 12 months				12 months or more				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	96,212,390	$	535,390	$	1,471,455	$	28,545	$	97,683,845	$	563,935
Mortgage-backed securities		5,217,291		68,056		7,148,748		99,085		12,366,039		167,141
Municipal bonds		1,125,772		8,826		—		—		1,125,772		8,826
	$	102,555,453	$	612,272	$	8,620,203	$	127,630	$	111,175,656	$	739,902

During 2004, proceeds from sales of investments in debt and equity securities were $62,766,412, which resulted in gross gains of $130,855 and gross losses of $4,375.  During 2003, the Company sold investment securities with proceeds of $11,193,355, which resulted in gross gains of $77,884.  There were no sales of investments in debt and equity securities in 2002.  Debt and equity securities having a carrying value of $13,852,414 and $12,359,882 at December 31, 2004 and 2003, respectively, were pledged as collateral to secure public deposits and for other purposes as required by law or contract provisions.

As a member of the Federal Home Loan Bank system administered by the Federal Housing Finance Board, the Bank is required to maintain an investment in the capital stock of its respective Federal Home Loan Bank (FHLB) in an amount equal to the greater of 1% of the aggregate outstanding balance of loans secured by dwelling units at the beginning of each year or 0.3% of its total assets.  The FHLB stock is recorded at cost which represents redemption value.  The Bank is a member of the Federal Home Loan Bank of Des Moines.

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NOTE 5--LOANS

A summary of loans by category at December 31, 2004 and 2003 is as follows:

	2004			2003
Commercial and industrial	$	253,594,252		$	209,927,567
Loans secured by real estate		605,458,913			537,647,475
Other		39,662,485			36,390,357
		898,715,650			783,965,399
Less unearned loan fees, net		(211,144	)		(87,579	)
	$	898,504,506		$	783,877,820

The breakdown of loans secured by real estate at December 31, 2004 and 2003 is as follows:

	2004		2003
Business and personal loans	$	153,896,310	$	141,188,619
Income-producing properties		220,908,878		203,667,722
Owner-occupied properties		68,421,514		67,003,746
Real estate development properties		162,232,210		125,787,388
	$	605,458,913	$	537,647,475

The Bank grants commercial, residential, and consumer loans throughout its service areas, which consists of the immediate area in which the Bank is located.  The Company has a diversified loan portfolio, with no particular concentration of credit in any one economic sector; however, a substantial portion of the portfolio is concentrated in and secured by real estate.  The ability of the Company’s borrowers to honor their contractual obligations is dependent upon the local economy and its effect on the real estate market.

Following is a summary of activity for the year ended December 31, 2004 of loans to executive officers and directors or to entities in which such individuals had beneficial interests as a shareholder, officer, or director.  Such loans were made in the normal course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other customers and did not involve more than the normal risk of collectibility. 

Balance January 1, 2004	$	24,574,452
New loans		3,881,231
Payments		(11,920,363	)
Balance December 31, 2004	$	16,535,320

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A summary of activity in the allowance for loan losses for the years ended December 31, 2004, 2003, and 2002 is as follows:

	2004			2003			2002
Balance at beginning of year	$	10,590,001		$	8,600,001		$	7,295,916
Provision for loan losses		2,212,000			3,627,082			2,250,578
Loans charged off		(1,295,884	)		(1,903,597	)		(1,245,910	)
Recoveries of loan previously charged off		158,671			266,515			299,417
Balance at end of year	$	11,664,788		$	10,590,001		$	8,600,001

A summary of impaired loans at December 31, 2004, 2003, and 2002 is as follows:

	2004		2003		2002
Nonaccrual loans	$	1,826,562	$	1,547,656	$	2,212,479
Restructured loans continuing to accrue interest		—		—		1,675,466
Total impaired loans	$	1,826,562	$	1,547,656	$	3,887,945
Allowance for losses on impaired loans	$	441,190	$	872,291	$	690,493
Impaired loans with no related allowance for loan losses		872,439		—		—
Average balance of impaired loans during the year	$	1,845,634	$	3,076,322	$	4,185,486

The Bank had no loans over 90 days past due and still accruing interest at December 2004, 2003 and 2002. If interest on nonaccrual loans had been accrued, such income would have been $102,573, $210,463, and $327,334, for the years ended December 31, 2004, 2003, and 2002, respectively.  The cash amount recognized as interest income on nonaccrual loans was $63,761, $119,364, and $135,077, for the years ended December 31, 2004, 2003, and 2002, respectively.  The amount recognized as interest income on impaired loans continuing to accrue interest was $0, $38,179, and $127,048, for the years ended December 31, 2004, 2003, and 2002, respectively.

NOTE 6--DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

In 2002, the Bank began using interest rate swap derivatives as one method to manage some of its interest rate risks from recorded financial assets and liabilities. These derivatives are utilized when they can be demonstrated to effectively hedge a designated asset or liability and such asset or liability exposes the Bank to interest rate risk. 

The Bank accounts for its derivatives under SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities and SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.  These Standards require recognition of all derivatives as either assets or liabilities in the balance sheet and require measurement of those instruments at fair value through adjustments to either other comprehensive income, current earnings, or both, as appropriate.

In July 2004, the Derivatives Implementation Group of the FASB issued guidance on FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, Implementation Issue No. G25 (“DIG Issue G25”).  DIG Issue G25 clarifies the FASB’s position on the ability of entities to hedge the variability in interest receipts or overall changes in cash flows on a group of prime-rate based loans.  Under the new guidance these hedge relationships are allowed the use of the first payments received technique if all other conditions of FASB Statement No. 133 are met.  The effective date of DIG Issue G25 was October 1, 2004 and was applied to all hedging relationships as of that date.  If a pre-existing cash flow hedging relationship has identified the hedged transactions in a manner inconsistent with the guidance in DIG Issue G25, the hedging relationship must be de-designated at the effective date.  Any derivative gains or losses in other comprehensive income related to the de-designated hedging relationships should be accounted for under paragraphs 31 and 32 of Statement 133.  The Company had pre-

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existing cash flow hedging relationships in a manner inconsistent with the guidance in DIG Issue G25 which had a $32,000 loss, net of tax, in other comprehensive income as of September 30, 2004.  The Company implemented DIG Issue G25 on October 1, 2004 and de-designated its cash flow hedges which were inconsistent with the guidance.  These cash flow hedges were then re-designated as new cash flow hedging relationships under the new guidance of DIG Issue G25.  The implementation of DIG Issue G25 did not have a material effect on the Company’s consolidated financial position or results of operations.

The decision to enter into an interest rate swap is made after considering the asset/liability mix of the Bank, the desired asset/liability sensitivity and by interest rate levels.  Prior to entering into a hedge transaction, the Bank formally documents the relationship between hedging instruments and hedged items, as well as the risk management objective for undertaking the various hedge transactions.

The following is a summary of the Company’s accounting policies for derivative instruments and its activities under SFAS No. 149, SFAS No. 133 and DIG Issue G25.

Cash Flow Hedges – The Bank entered into interest rate swaps to convert floating-rate loan assets to fixed rates.   The swap agreements provide for the Bank to pay a variable rate of interest equivalent to the prime rate and to receive a fixed rate of interest.  Under the swap agreements the Bank is to pay or receive interest quarterly.  Amounts to be paid or received under these swap agreements are accounted for on an accrual basis and recognized as interest income of the related asset.  The net cash flows related to cash flow hedges increased interest income on loans by $1,163,000, $1,796,000 and $968,000 during 2004, 2003 and 2002, respectively.  

Cash flow hedges are accounted for at fair value.   The effective portion of the change in the cash flow hedge’s gain or loss is reported as a component of other comprehensive income net of taxes.  The ineffective portion of the change in the cash flow hedge’s gain or loss is recorded in earnings on each quarterly measurement date.  At December 31, 2004 and 2003, $(347,000) and $544,000, respectively, in deferred (losses)/gains, net of tax, related to cash flow hedges were recorded in accumulated other comprehensive income.  All cash flow hedges were effective, therefore, no gain or loss was recorded in earnings.  The maximum term over which the Bank is hedging its exposure to the variability of future cash flows is approximately 2 years. 

Fair Value Hedges - The Bank has entered into interest rate swap agreements with the objective of converting the fixed interest rate on brokered CDs to a variable interest rate.  The swap agreements provide for the Bank to pay a variable rate of interest based on a spread to the three-month London Interbank Offer Rate (LIBOR) and to receive a fixed rate of interest equal to that of the brokered CD (hedged instrument.) Under the swap agreements the Bank is to pay or receive interest semiannually.  Amounts to be paid or received under these swap agreements are accounted for on an accrual basis and recognized as interest expense of the related liability.   The net cash flows related to fair value hedges decreased interest expense on certificates of deposit by $346,000, $513,000, and $198,000 during 2004, 2003 and 2002, respectively.

Fair value hedges are accounted for at fair value.   The swaps qualify for the “shortcut method” under SFAS No. 133.   Based on this shortcut method, no ineffectiveness is assumed.  As a result, changes in the fair value of the swaps directly offset changes in the fair value of the underlying hedged item (i.e., brokered CDs).  All changes in fair value are measured on a quarterly basis.  

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The following table summarizes the Bank’s derivative instrument activity at December 31, 2004 and 2003.

Cash Flow Hedges

	December 31,
	2004			2003
	(dollars in thousands)
Notional amount	$	90,000		$	90,000
Weighted average pay rate		5.25	%		4.00	%
Weighted average receive rate		5.74	%		6.11	%
Weighted average maturity in months		12			12
Unrealized (loss) gain related to interest rate swaps	$	(511	)	$	823

Fair Value Hedges

	December 31,
	2004			2003
	(dollars in thousands)
Notional amount	$	40,000		$	30,000
Weighted average pay rate		2.60	%		1.33	%
Weighted average receive rate		2.34	%		3.18	%
Weighted average maturity in months		14			12
Unrealized (loss) gain related to interest rate swaps	$	(415	)	$	162

The notional amounts of derivative financial instruments do not represent amounts exchanged by the parties, and therefore, are not a measure of the Bank’s credit exposure through its use of these instruments.  The credit exposure represents the accounting loss the Bank would incur in the event the counterparties failed completely to perform according to the terms of the derivative financial instruments and the collateral held to support the credit exposure was of no value.  Given the fair value loss associated with the derivatives at December 31, 2004, the Bank had no credit exposure to counterparties.  At December 31, 2004 and 2003, in connection with our interest rate swap agreements we had pledged investment securities available for sale with a fair value of $3.5 million and $2.1 million, respectively.  At December 31, 2004 and 2003, we had accepted, as collateral in connection with our interest rate swap agreements, cash of $196,300 and $1.3 million, respectively.

NOTE 7--FIXED ASSETS

A summary of fixed assets at December 31, 2004 and 2003 is as follows:

	December 31,
	2004		2003
Land	$	1,542,909	$	660,000
Buildings and leasehold improvements		6,562,994		6,217,475
Furniture, fixtures and equipment		5,574,058		5,097,476
		13,679,961		11,974,951
Less accumulated depreciation and amortization		5,635,612		4,657,287
	$	8,044,349	$	7,317,664

Depreciation and amortization of building, leasehold improvements, and furniture, fixtures and equipment included in noninterest expense amounted to $996,139, $1,231,036, and $1,717,891 in 2004, 2003, and 2002, respectively. 

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All of the Company’s Missouri banking facilities are leased under agreements that expire in various years through 2016.  The Company’s aggregate rent expense totaled $1,504,404, $1,417,367, and $1,311,148 in 2004, 2003, and 2002, respectively, and sublease rental income totaled $0, $0, and $7,250 in 2004, 2003, and 2002, respectively.  The future aggregate minimum rental commitments required under the leases are as follows:

Year	Amount
2005	$	1,331,521
2006	$	1,354,654
2007	$	1,401,507
2008	$	1,430,538
2009	$	1,342,767
Thereafter	$	3,160,813
Total	$	10,021,800

For leases which renew or are subject to periodic rental adjustments, the monthly rental payments will be adjusted based on then current market conditions and rates of inflation.

NOTE 8--MATURITY OF CERTIFICATES OF DEPOSIT

Following is a summary of certificates of deposit maturities at December 31, 2004:

Maturity Period	$100,000 and Over		Other		Total
Less than 1 year	$	111,071,237	$	25,102,481	$	136,173,718
Greater than 1 year and less than 2 years		43,802,576		10,666,906		54,469,482
Greater than 2 years and less than 3 years		18,219,172		2,996,896		21,216,068
Greater than 3 years and less than 4 years		5,658,193		2,772,687		8,430,880
Greater than 4 years and less than 5 years		100,000		171,878		271,878
Over 5 years		—		705		705
	$	178,851,178	$	41,711,553	$	220,562,731

NOTE 9--SUBORDINATED DEBENTURES

On December 13, 2004, EFSC Capital Trust III (“EFSC Trust III”), a newly-formed Delaware business trust and subsidiary of the Company, issued 11,000 floating rate Trust Preferred Securities III (“Preferred Securities III”) at $1,000 per share to a Trust Preferred Securities Pool.  The floating rate is equal to the three month LIBOR rate plus 1.97%, and reprices quarterly. The Preferred Securities III are fully, irrevocably and unconditionally guaranteed on a subordinated basis by the Company.  The proceeds of the Preferred Securities III were invested in junior subordinated debentures of the Company.  The net proceeds to the Company from the sale of the junior subordinated debentures, were approximately $11 million.  Distributions on the Preferred Securities II will be payable quarterly on March 15, June 15, September 15 and December 15 of each year that the Preferred Securities III are outstanding, commencing March 15, 2005.  The Preferred Securities III mature on December 15, 2034.  The mandatory date may be shortened to a date not earlier than December 15, 2009 if certain conditions are met.  The Preferred Securities III are classified as subordinated debentures and the distributions are recorded as interest expense in the Company’s consolidated financial statements.  The proceeds from the offering were used to redeem the Preferred Securities issued by EBH Capital Trust I (“EBH Trust”), as discussed below.

On May 11, 2004, EFSC Capital Trust II (“EFSC Trust II”), a newly-formed Delaware business trust and subsidiary of the Company, issued 5,000 floating rate Trust Preferred Securities II (“Preferred Securities II”) at $1,000 per share to a Trust Preferred Securities Pool.  The floating rate is equal to the three month LIBOR rate plus 2.65%, and reprices quarterly. The Preferred Securities II are fully, irrevocably and unconditionally guaranteed on a subordinated basis by the Company.  The proceeds of the Preferred Securities II were invested in junior

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subordinated debentures of the Company.  The net proceeds to the Company from the sale of the junior subordinated debentures, after deducting underwriting commissions and estimated offering expenses, were approximately $4.97 million.  Distributions on the Preferred Securities II will be payable quarterly on March 17, June 17, September 17 and December 17 of each year that the Preferred Securities are outstanding, commencing September 17, 2004.  The Preferred Securities II mature on June 17, 2034.  The mandatory date may be shortened to a date not earlier than June 17, 2009 if certain conditions are met.  The Preferred Securities II are classified as subordinated debentures and the distributions are recorded as interest expense in the Company’s consolidated financial statements.  A portion of the proceeds from the offering were used to invest $3 million in the form of additional capital in the Bank with the remaining funds available for operating expenses at the holding company level.

On June 28, 2002, EFSC Capital Trust I (“EFSC Trust I”), a newly-formed Delaware business trust and subsidiary of the Company issued 4,000 floating rate Trust Preferred Securities (“Preferred Securities I”) at $1,000 per share to a Trust Preferred Securities Pool.  The floating rate is equal to the three month LIBOR rate plus 3.65%, and reprices quarterly. Preferred Securities I are fully, irrevocably and unconditionally guaranteed on a subordinated basis by the Company.  The proceeds of the Preferred Securities I were invested in junior subordinated debentures of the Company.  The net proceeds to the Company from the sale of the junior subordinated debentures, after deducting underwriting commissions and estimated offering expenses, were approximately $3.92 million.  Distributions on the Preferred Securities I are payable quarterly on March 30, June 30, September 30 and December 30 of each year that the Preferred Securities I are outstanding.  The Preferred Securities I mature on June 30, 2032.  The maturity date may be shortened to a date not earlier than June 30, 2007 if certain conditions are met.  The Preferred Securities I are classified as subordinated debentures and the distributions are recorded as interest expense in the Company’s consolidated financial statements.  A portion of the proceeds from the offering were used to repay the $2.3 million of outstanding indebtedness with the remaining available for cash operating expenses at the holding company level.

On October 25, 1999, EBH Capital Trust I (“EBH Trust”), a Delaware business trust subsidiary of Enterprise Financial Services Corp issued 1,375,000 shares of 9.40% Cumulative Trust Preferred Securities (“Preferred Securities”) at $8 per share in an underwritten public offering. The Preferred Securities mature on December 15, 2029.  The maturity date may be shortened to a date not earlier than December 15, 2004 if certain conditions are met.  The proceeds of the Preferred Securities were invested in subordinated debentures of the Company.  In connection with the issuance of the Preferred Securities, the Company made certain guarantees and commitments that, in the aggregate, constitute a full and unconditional guarantee by the Company of the obligations of EBH Trust under the Preferred Securities. The Company’s proceeds from the issuance of the subordinated debentures to EBH Trust, net of underwriting fees and offering expenses, were $10.28 million.  The Preferred Securities are classified as debt for reporting purposes and capital for regulatory reporting purposes.  On December 15, 2004 all 1,375,000 shares of EBH Trust were redeemed by the Company.

Prior to 2003, EFSC Trust I and EBH Trust were consolidated in the Company’s financial statements, with the trust preferred securities issued by the Trust’s reported in liabilities as “Guaranteed Preferred Beneficial Interest in Subordinated Debentures” and the subordinated debentures eliminated in consolidation.  Under new accounting guidance, FASB Interpretation No. 46, as revised in December 2003, the Trusts are no longer consolidated.  Accordingly, the Company does not report the securities issued by the Trust’s as liabilities, and instead reports as liabilities the subordinated debentures issued by the Company and held by the Trust, as these are no longer eliminated in consolidation.  The amount of the subordinated debentures as of December 31, 2004 and 2003 was $20,620,000 and $15,464,208.  In applying this FASB Interpretation, the Company recorded the investment in the common securities issued by the Trust and a corresponding obligation of the Trusts’ subordinated debentures as well as interest income and interest expense on this investment and obligation.  The application of the FASB Interpretation has been reflected in all applicable prior periods. 

NOTE 10--FEDERAL HOME LOAN BANK ADVANCES

As a member of the Federal Home Loan Bank, the Bank has access to Federal Home Loan Bank advances. The Federal Home Loan Bank advances at December 31, 2004 and 2003 are collateralized by 1-4 family residential real estate loans, business loans and certain commercial real estate loans with a carrying value of $258 million and $229 million, respectively, and all stock held in the Federal Home Loan Bank of Des Moines.

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The following table summarizes the type, maturity and rate of the Company’s Federal Home Loan Bank advances at December 31, 2004 and 2003:

			2004					2003
Type of Advance	Term		Outstanding Balance		Weighted Rate			Outstanding Balance		Weighted Rate
Long term non-amortized & mortgage matched advance		less than 1 year	$	3,655,000		4.45	%	$	3,400,000		4.73	%
Long term non-amortized advance		1 - 2 years		1,525,000		4.51	%		3,665,000		4.46	%
Long term non-amortized advance		2 - 3 years		1,250,000		4.74	%		1,525,000		4.51	%
Long term non-amortized advance		3 - 4 years		650,000		4.91	%		1,250,000		4.74	%
Long term non-amortized advance		4 - 5 years		1,050,000		5.40	%		650,000		4.91	%
Long term non-amortized advance		5 - 10 years		1,100,000		5.44	%		2,150,000		5.42	%
Mortgage matched advance		10 - 15 years		1,068,629		5.69	%		1,860,056		5.78	%
Total Federal Home Loan Bank Advances			$	10,298,629		4.85	%	$	14,500,056		4.88	%

The majority of these advances were used to match certain fixed rate loans to lock in an interest rate spread.  All of the Federal Home Loan Bank advances have fixed interest rates, and $9,230,000 and $12,640,000 at December 31, 2004 and 2003, respectively, are callable by the Company anytime, subject to prepayment penalties.  The remaining $1,068,629 and $1,860,056 of these borrowings are not callable by the Company at December 31, 2004 and 2003, respectively.  The Bank, which has an investment in the capital stock of the Federal Home Loan Bank, maintains a line of credit with the Federal Home Loan Bank and had availability of approximately $100 million at December 31, 2004.

NOTE 11--OTHER BORROWINGS  AND NOTES PAYABLE

A summary of other borrowings at December 31, 2004 and 2003 is as follows:

	At December 31,
	2004		2003
Federal funds purchased	$	6,333,470	$	8,380,532
Other borrowings		3,282,148		1,266,562
Total	$	9,615,618	$	9,647,094

At December 31, 2004, the weighted average interest rate for federal funds purchased and other borrowings were 2.75% and 1.32%, respectively.  At December 31, 2003, the weighted average interest rate for federal funds purchased and other borrowings were 1.44% and 1.09%, respectively.  The total maximum other borrowings outstanding at any month-end during 2004 and 2003, were $3.3 million and $9.6 million, respectively.

The average balances and average interest rate of other borrowings were as follows:

	Years Ended December 31,
	2004					2003
	Average Balance		Average Rate			Average Balance		Average Rate
Federal funds purchased	$	1,810,704		1.42	%	$	835,621		1.70	%
Other borrowings		1,085,072		1.09	%		2,122,203		1.19	%
Total	$	2,895,776		1.30	%	$	2,957,824		1.34	%

At December 31, 2004 the Company had a $10 million unsecured bank line of credit that matured on January 10, 2005 with an outstanding balance of $250,000.  The line has debt covenants, accrues interest based on the Prime rate or LIBOR at the Company’s discretion, and is payable quarterly.  For the year ended December 31, 2004, the average balance and maximum month-end balance of the note payable were $66,000 and $250,000, respectively.

The Company also has a line with the Federal Reserve Bank of St. Louis for back-up liquidity purposes but has not drawn on the line.  As of December 31, 2004 approximately $27 million was available under this line.  This line is secured by a pledge of certain eligible loans.

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NOTE 12--INCOME TAXES

The components of income tax expense for the years ended December 31, 2004, 2003, and 2002 are as follows:

	2004		2003			2002
Current:
Federal	$	3,611,605	$	4,048,923		$	1,832,879
State and local		266,750		233,901			106,674
Deferred		210,397		(258,063	)		(325,816	)
	$	4,088,752	$	4,024,761		$	1,613,737

A reconciliation of expected income tax expense, computed by applying the statutory federal income tax rate of 34% in 2004, 2003, and 2002 to income before income taxes and the amounts reflected in the consolidated statements of income is as follows:

	2004			2003			2002
Income tax expense at statutory rate	$	4,183,115		$	3,722,993		$	2,249,174
Increase (reduction) in income tax resulting from:
Reversal of valuation allowance		(241,080	)		—			(800,000	)
Tax-exempt income		(297,573	)		(258,203	)		(165,798	)
State and local income tax expense		176,055			154,375			70,405
Goodwill amortization		—			51,000			—
Non-deductible expenses		159,389			100,756			113,494
Other, net		108,846			253,840			146,462
Total income tax expense	$	4,088,752		$	4,024,761		$	1,613,737

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A net deferred income tax asset of $4,779,154 and $4,273,101 is included in prepaid expenses and other assets in the consolidated balance sheets at December 31, 2004 and 2003, respectively.  The tax effect of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2004 and 2003 is as follows:

Deferred tax assets:
Allowance for loan losses	$	3,966,028	$	3,600,600
Deferred compensation		624,890		536,817
Merchant banking investments		209,183		370,006
Unrealized losses on securities available for sale		240,133		—
Unrealized losses on cash flow type derivative instruments		178,500		—
Other		191,362		474,751
Gross deferred tax assets		5,410,096		4,982,174
Valuation allowance		—		(241,080	)
Deferred tax assets net of valuation allowance		5,410,096		4,741,094
Deferred tax liabilities:
Office equipment and leasehold improvements		630,942		158,237
Unrealized gains on securities available for sale		—		29,596
Unrealized gains on cash flow type derivative instruments		—		280,160
Total deferred tax liabilities		630,942		467,993
Net deferred tax asset	$	4,779,154	$	4,273,101

A valuation allowance is provided on deferred tax assets when it is more likely than not that some portion of the assets will not be realized.  The Company had established a valuation allowance as of December 31, 2001.  During 2004, the Company had a $241,080 reversal of the remaining deferred tax valuation allowance related to Merchant Banking losses in 2001.  The nature and deductibility of these losses were finally determined when the Company filed its 2003 income tax returns during 2004.  Also, during 2004, the Company recognized state income tax refunds of $163,000 related to amendments of prior state income tax returns.

NOTE 13--REGULATORY MATTERS

The Company and Bank are subject to various regulatory capital requirements administered by the Federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.  The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets.  Management believes, as of December 31, 2004 and 2003, that the Company and Bank meet all capital adequacy requirements to which they are subject.

As of December 31, 2004 and 2003, the Bank was categorized as “well capitalized” under the regulatory framework for prompt corrective action.  To be categorized as “well capitalized” the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table.

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The Company’s and Bank’s actual capital amounts and ratios are also presented in the table.

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2004:
Total Capital (to Risk Weighted Assets)
Enterprise Financial Services Corp	$	103,673,055		11.19	%	$	74,085,532		8.00	%	$	—		—	%
Enterprise Bank & Trust		99,544,796		10.76			74,035,758		8.00			92,544,697		10.00
Tier I Capital (to Risk Weighted Assets)
Enterprise Financial Services Corp		92,096,093		9.94			37,042,766		4.00			—		—
Enterprise Bank & Trust		87,975,515		9.51			37,017,879		4.00			55,526,818		6.00
Tier I Capital (to Average Assets)
Enterprise Financial Services Corp		92,096,093		8.44			32,725,474		3.00			—		—
Enterprise Bank & Trust		87,975,515		8.08			32,658,891		3.00			54,431,486		5.00
As of December 31, 2003:
Total Capital (to Risk Weighted Assets)
Enterprise Financial Services Corp		87,969,991		11.02			63,881,112		8.00			—		—
Enterprise Bank & Trust		83,669,404		10.52			63,650,480		8.00			79,563,100		10.00
Tier I Capital (to Risk Weighted Assets)
Enterprise Financial Services Corp		77,981,054		9.77			31,940,556		4.00			—		—
Enterprise Bank & Trust		73,716,054		9.27			31,825,240		4.00			47,737,860		6.00
Tier I Capital (to Average Assets)
Enterprise Financial Services Corp		77,981,054		8.67			26,974,358		3.00			—		—
Enterprise Bank & Trust		73,716,054		8.22			26,902,290		3.00			44,837,150		5.00

NOTE 14--COMPENSATION PLANS

Stock Option Plans

At December 31, 2004, the Company has five qualified incentive, one nonqualified and one omnibus stock plan for the benefit of employees and directors.  A summary of the plans is as follows:

							December 31, 2004
Plan	Type		Adopted		Total Options		Outstanding		Available to grant
I		Qualified		1988		432,000		—		—
II		Qualified		1990		225,000		13,200		—
III		Qualified		1996		600,000		276,100		6,300
IV		Qualified		1999		600,000		499,500		33,800
V		Omnibus		2002		750,000		432,771		311,297
CGB		Qualified		N/A		171,441		—		20,335
General		Nonqualified		1998		105,000		77,750		14,650
								1,299,321		386,382

All of the plans above have five year vesting terms except for the CGB Qualified Plan (which is ten years) and the Omnibus Plan V (which is subject to Board discretion).  The options outstanding under the Omnibus Plan have three year vesting terms.  Subject to Board discretion, the Omnibus Plan V can issue Stock Appreciation Rights or restricted stock, instead of options, up to the 750,000 share limit.  As of December 31, 2004 there were no Stock Appreciation Rights or restricted stock grants issued from Omnibus Plan V.

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Following is a summary of the various stock option plan transactions:

	Number of Shares		Price per share		Weighted Avg. Price per Share		Total
December 31, 2001		1,255,044	$	2.33 - 18.00	$	9.04	$	11,342,776
Granted		373,905		9.25 - 11.50		9.93		3,714,079
Exercised		227,127		2.33 - 11.75		3.99		905,584
Forfeited		117,179		5.33 - 18.00		12.24		1,433,821
December 31, 2002		1,284,643	$	5.33 - 18.00	$	9.90	$	12,717,450
Granted		415,962		12.50 - 13.85		13.28		5,524,291
Exercised		120,688		5.33 - 11.75		9.24		1,115,301
Forfeited		69,514		10.00 - 18.00		12.93		897,028
December 31, 2003		1,510,403	$	5.33 - 18.00	$	10.75	$	16,229,412
Granted		30,500		13.25 - 14.00		13.70		417,700
Exercised		159,875		5.33 - 15.00		7.77		1,241,526
Forfeited		81,707		10.00 - 18.00		12.54		1,024,741
December 31, 2004		1,299,321	$	5.33 - 18.00	$	11.07	$	14,380,845

The exercise price range of outstanding options at December 31, 2004 was $5.33 to $18.00 and the weighted average contractual life was 6.49 years.  The exercise price range of outstanding options at December 31, 2003 was $5.33 to $18.00 and the weighted average contractual life was 7.00 years.  The exercise price range of outstanding options at December 31, 2002 was $5.33 to $18.00 and the weighted average contractual life was 7.06 years. 

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Following is a summary of the options outstanding at December 31, 2004:

Option Price	Number of Options		Total		Number of Exercisable Options		Total
$             5.33		197,600	$	1,053,208		197,600	$	1,053,208
5.58		3,000		16,740		3,000		16,740
8.33		3,000		24,990		3,000		24,990
9.25		250		2,313		250		2,313
9.30		82,905		771,017		82,905		771,017
9.92		3,900		38,688		3,900		38,688
10.00		205,100		2,051,000		205,100		2,051,000
10.25		75,600		774,900		75,600		774,900
10.30		5,200		53,560		5,200		53,560
10.33		1,500		15,495		1,500		15,495
10.67		1,500		16,005		1,500		16,005
11.50		6,500		74,750		6,500		74,750
11.75		163,400		1,919,950		163,400		1,919,950
12.50		15,750		196,875		15,750		196,875
12.90		8,000		103,200		8,000		103,200
13.05		35,000		456,750		35,000		456,750
13.10		76,333		999,962		76,333		999,962
13.20		1,000		13,200		1,000		13,200
13.25		5,000		66,250		5,000		66,250
13.40		218,533		2,928,342		218,533		2,928,342
13.45		10,000		134,500		10,000		134,500
13.50		32,500		438,750		32,500		438,750
13.80		2,000		27,600		2,000		27,600
13.85		1,000		13,850		1,000		13,850
13.90		8,000		111,200		8,000		111,200
14.00		10,500		147,000		10,500		147,000
15.00		108,250		1,623,750		108,250		1,623,750
15.50		6,000		93,000		6,000		93,000
16.00		1,000		16,000		1,000		16,000
18.00		11,000		198,000		11,000		198,000
		1,299,321	$	14,380,845		1,299,321	$	14,380,845

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The fair value of each option granted in 2004 was estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions:

Grant Date	Risk-free Interest Rate			Dividend Yield			Vesting Period		Expected Life		Volatility
January 1		4.27	%		0.60	%		5 years		10 years		47.95	%
January 5		4.41			0.60			5 years		10 years		47.68
March 1		4.00			0.60			5 years		10 years		42.40
April 1		3.91			0.60			5 years		10 years		41.60

The weighted average fair value of the options granted in 2004 was $7.80.

The fair value of each option granted in 2003 was estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions:

Grant Date	Risk-free Interest Rate			Dividend Yield			Vesting Period		Expected Life		Volatility
January 1		4.07	%		0.60	%		5 years		10 years		63.61	%
January 16		4.10			0.60			5 years		10 years		63.47
April 1		3.84			0.60			5 years		10 years		58.08
April 7		4.03			0.60			5 years		10 years		57.76
April 16		3.96			0.60			5 years		10 years		57.55
May 13		3.63			0.60			3 years		10 years		52.76
May 28		3.44			0.60			5 years		10 years		51.56
July 28		4.31			0.60			5 years		10 years		50.59
August 1		4.44			0.60			3 years		10 years		50.44
August 25		4.53			0.60			5 years		10 years		48.68
September 8		4.41			0.60			5 years		10 years		48.56
November 10		4.49			0.60			5 years		10 years		48.59
December 29		4.24			0.60			5 years		10 years		47.87

The weighted average fair value of the options granted in 2003 was $8.37.

The fair value of each option granted in 2002 was estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions:

Grant Date	Risk-free Interest Rate			Dividend Yield			Vesting Period		Expected Life		Volatility
January 1		5.20	%		0.60	%		5 years		10 years		60.02	%
April 1		5.44			0.60			5 years		10 years		65.80
July 1		4.85			0.60			3 years		10 years		68.88
July 1		4.85			0.60			5 years		10 years		68.88
August 28		4.22			0.60			5 years		10 years		66.93
September 24		3.69			0.60			5 years		10 years		65.50
October 1		3.72			0.60			3 years		10 years		65.35

The weighted average fair value of the options granted in 2002 was $7.41.

On April 1, 1999, the Company adopted a Stock Appreciation Rights (“SAR”) Plan.  This Plan replaced the previous form of cash compensation for directors of the Company and its subsidiaries and awards vest based upon attendance and unit performance.  Under the plan, the Company has the option to pay vested SARs either in the form of cash or Company common stock.  The Company recognized $88,829 in expense to record the market value of the SARs for the year ended December 31, 2003.  At December 31, 2004, there were 7,800 SARs outstanding versus 64,000 SARS outstanding at December 31, 2003.  The Company recognized a reduction to expense of $6,114 to record the market value of the SARs for the year ended December 31, 2004.

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In 1997, the Company entered into a solicitation and referral agreement with Moneta Group, Inc. (“Moneta”), a nationally recognized firm in the financial planning industry.  The Company renegotiated the original agreement on December 24, 2003.  Moneta had received options for banking business referrals and still receives a portion of the gross margin earned by Trust in the form of cash.  The Company recognizes the fair value of the options over the vesting period as expense. The Company recognized $87,568, $288,712 and $201,453 in Moneta option-related expenses during 2004, 2003 and 2002, respectively. The fair value of each option grant to Moneta was estimated on the date of grant using the Black-Scholes option pricing model.

The Company granted 10,882 options that vested immediately to Moneta on December 24, 2003 upon the closing of the new agreement.  The options were granted at $13.65 price per share, a fair value of $8.02, assuming a risk-free interest rate of 4.24%, a dividend yield of 0.60%, immediate vesting, expected life of 10 years and volatility of 47.87%.  The Company recognized $87,274 in expense for the fair value of the options granted on December 24, 2003.  The Company granted 11,769 options on January 1, 2002 at $11.50 price per share, a fair value of $7.34, assuming a risk free interest rate of 5.20%, a dividend yield of 0.60%, vesting period for 5 years, expected life of 8 years and volatility of 59.47%.  The Company granted 11,081 options on January 1, 2001 at $10.33 price per share, a fair value of $7.77 per share, assuming a risk free interest rate of 5.20%, a dividend yield of 0.67%, vesting period for 5 years, expected life of 8 years and volatility of 39.79%.   The weighted average fair value of the options granted to Moneta was $5.51.  There have been no exercises of Moneta options since grant date.  There were 4,363 and 2,036 Moneta options forfeited in 2004 and 2003, respectively.

Effective January 1, 1993, the Company adopted a 401(k) thrift plan which covers substantially all full-time employees over the age of 21.  The amount charged to expense for the Company’s contributions to the plan was $475,692, $427,994, and $433,798 for 2004, 2003, and 2002, respectively.

NOTE 15--LITIGATION AND OTHER CLAIMS

Except as noted below, various legal claims have arisen during the normal course of business which, in the opinion of management, after discussion with legal counsel, will not result in any material liability.

In accordance with SFAS No. 5, Accounting for Contingencies, the Company recognized $1.3 million in expense at December 31, 2002 related to settlement of a dispute with another financial institution pursuant to an agreement signed in February of 2003.  During 2003 the Company paid $725,000 of this settlement and the remaining $575,000 was paid in 2004.

NOTE 16--DISCLOSURES ABOUT FINANCIAL INSTRUMENTS

The Bank issues financial instruments with off balance sheet risk in the normal course of the business of meeting the financing needs of its customers.  These financial instruments include commitments to extend credit and standby letters of credit.  These instruments may involve, to varying degrees, elements of credit and interest-rate risk in excess of the amounts recognized in the consolidated balance sheets.

The Company’s extent of involvement and maximum potential exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments.  The Bank uses the same credit policies in making commitments and conditional obligations as it does for financial instruments included on its consolidated balance sheets.  At December 31, 2004, no amounts have been accrued for any estimated losses for these financial instruments.

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The contractual amount of off-balance-sheet financial instruments as of December 31, 2004 and 2003 is as follows:

	2004		2003
Commitments to extend credit	$	296,560,848	$	265,962,785
Standby letters of credit		20,263,053		10,933,894

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments usually have fixed expiration dates or other termination clauses and may require payment of a fee.  Of the total commitments to extend credit at December 31, 2004 and 2003, approximately $6.4 million and $5.2 million, respectively, represents fixed rate loan commitments.  Since certain of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Bank evaluates each customer’s credit worthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the borrower.  Collateral held varies, but may include accounts receivable, inventory, premises and equipment, and real estate.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.  These standby letters of credit are issued to support contractual obligations of the Bank’s customers.  The credit risk involved in issuing letters of credit is essentially the same as the risk involved in extending loans to customers.  The approximate remaining term of standby letters of credit range from 1 month to 4 years at December 31, 2004.

SFAS 107, Disclosures about Fair Value of Financial Instruments, extends existing fair value disclosure for some financial instruments by requiring disclosure of the fair value of such financial instruments, both assets and liabilities recognized and not recognized in the consolidated balance sheets.

Following is a summary of the carrying amounts and fair values of the Company’s financial instruments on the consolidated balance sheets at December 31, 2004 and 2003:

	2004						2003
	Carrying Amount			Estimated fair value			Carrying Amount		Estimated fair value
Balance sheet assets
Cash and due from banks		28,323,601			28,323,601			26,271,251		26,271,251
Interest-bearing deposits		156,499			156,499			216,926		216,926
Investments in debt and equity securities		121,638,434			121,638,572			83,948,544		83,948,619
Loans held for sale		2,375,917			2,375,917			2,848,214		2,848,214
Derivative financial instruments		(927,000	)		(927,000	)		985,000		985,000
Loans, net		886,839,718			886,249,864			773,287,820		771,420,279
Accrued interest receivable		4,238,008			4,238,008			3,278,904		3,278,904
Balance sheet liabilities
Deposits		939,628,322			939,929,848			796,400,187		798,148,753
Other borrowed funds		20,164,245			21,694,023			24,147,150		24,372,398
Subordinated debentures		20,620,000			20,620,000			15,464,208		15,588,884
Accrued interest payable		1,664,692			1,664,692			1,150,539		1,150,539

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practical to estimate such value:

Cash and Other Short-term Instruments

For cash and due from banks, federal funds purchased, interest-bearing deposits, and accrued interest receivable (payable), the carrying amount is a reasonable estimate of fair value, as such instruments reprice in a short time period.

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Investments in Debt and Equity Securities

Fair values are based on quoted market prices or dealer quotes.

Loans, net

The fair value of adjustable-rate loans approximates cost.  The fair value of fixed-rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers for the same remaining maturities.

Derivative Financial Instruments

The fair value of derivative financial instruments is based on quoted market prices by the counterparty and verified by the Company using public pricing information.

Deposits

The fair value of demand deposits, interest-bearing transaction accounts, money market accounts and savings deposits is the amount payable on demand at the reporting date.  The fair value of fixed-maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.

Subordinated Debentures

Fair value of floating interest rate subordinated debentures is assumed to equal carrying value.

Other Borrowed Funds

Other borrowed funds include Federal Home Loan Bank advances, federal funds purchased, and notes payable.  The fair value of Federal Home Loan Bank advances is based on the discounted value of contractual cash flows.  The discount rate is estimated using current rates on borrowed money with similar remaining maturities. The fair value of federal funds purchased and notes payable are assumed to be equal to their carrying amount since they have an adjustable interest rate.

Commitments to Extend Credit and Standby Letters of Credit

The fair value of commitments to extend credit and standby letters of credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the likelihood of the counterparties drawing on such financial instruments, and the present creditworthiness of such counterparties.  The Company believes such commitments have been made on terms which are competitive in the markets in which it operates; however, no premium or discount is offered thereon and accordingly, the Company has not assigned a value to such instruments for purposes of this disclosure.

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment, and therefore, cannot be determined with precision.  Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on-balance and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.  In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in many of the estimates.

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NOTE 17--SEGMENT REPORTING

Management segregates the Company into three distinct businesses for evaluation purposes.  The three segments are Banking, Wealth Management, and Corporate and Intercompany.  The segments are evaluated separately on their individual performance, as well as, their contribution to the Company as a whole.

The majority of the Company’s assets and income result from the Banking segment.  The Bank consists of three banking branches and an operations center in the St. Louis region and two banking branches in the Kansas City region.  The products and services offered by the banking branches include a broad range of commercial and personal banking services, including certificates of deposit, individual retirement accounts, checking and other demand deposit accounts, interest checking accounts, savings accounts and money market accounts.  Loans include commercial, financial, real estate construction and development, commercial and residential real estate, consumer and installment loans.  Other financial services include mortgage banking, debit and credit cards, automatic teller machines, internet account access, safe deposit boxes, and treasury management services.

Wealth Management provides fee-based personal and corporate financial consulting and trust services.  Personal financial consulting includes estate planning, investment management, and retirement planning.  Corporate consulting services are focused in the areas of retirement plans, management compensation, strategic planning and management succession issues.  The Wealth Management segment also provides life, annuity, disability income, and long-term care products and mutual funds.

The Corporate and Intercompany segment includes the holding company and subordinated debentures.  The Company incurs general corporate expenses and owns Enterprise Bank & Trust. 

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Following are the financial results for the Company’s operating segments.

	Years ended December 31, 2004
	Banking		Wealth Management		Corporate, Intercompany, and Reclassifications			Total
Net interest income	$	38,010,670	$	79,758	$	(1,365,954	)	$	36,724,474
Provision for loan losses		2,212,000		—		—			2,212,000
Noninterest income		2,811,717		4,306,349		3,788			7,121,854
Noninterest expense		22,061,491		3,683,860		3,585,698			29,331,049
Income (loss) before income tax expense		16,548,896		702,247		(4,947,864	)		12,303,279
Income tax expense (benefit)		5,862,125		259,831		(2,033,204	)		4,088,752
Net income (loss)	$	10,686,771	$	442,416	$	(2,914,660	)	$	8,214,527
Loans, less unearned loan fees	$	898,504,506	$	—	$	—		$	898,504,506
Goodwill		1,937,537		—		—			1,937,537
Deposits		939,784,003		—		(155,681	)		939,628,322
Borrowings		19,914,247		—		20,870,000			40,784,247
Total assets	$	1,058,538,597	$	—	$	1,411,502		$	1,059,950,099

	2003
	Banking		Wealth Management			Corporate, Intercompany, and Reclassifications			Total
Net interest income	$	33,837,082	$	95,257		$	(1,231,038	)	$	32,701,301
Provision for loan losses		3,627,082		—			—			3,627,082
Noninterest income		6,483,282		3,621,927			(14,054	)		10,091,155
Noninterest expense		21,864,337		3,756,998			2,594,059			28,215,394
Income (loss) before income tax expense		14,828,945		(39,814	)		(3,839,151	)		10,949,980
Income tax expense (benefit)		5,455,044		(14,731	)		(1,415,552	)		4,024,761
Net income (loss)	$	9,373,901	$	(25,083	)	$	(2,423,599	)	$	6,925,219
Loans, less unearned loan fees	$	783,877,820	$	—		$	—		$	783,877,820
Goodwill		1,937,537		—			—			1,937,537
Deposits		797,721,766		—			(1,321,579	)		796,400,187
Borrowings		24,147,150		—			15,464,208			39,611,358
Total assets	$	905,434,357	$	—		$	2,291,847		$	907,726,204

	2002
	Banking		Wealth Management			Corporate, Intercompany, and Reclassifications			Total
Net interest income	$	32,026,044	$	—		$	(1,162,319	)	$	30,863,725
Provision for loan losses		2,250,578		—			—			2,250,578
Noninterest income		2,931,725		2,353,927			80,312			5,365,964
Noninterest expense		20,494,906		3,090,242			3,778,746			27,363,894
Income (loss) before income tax expense		12,212,285		(736,315	)		(4,860,753	)		6,615,217
Income tax expense (benefit)		4,453,445		(272,437	)		(2,567,271	)		1,613,737
Net income (loss)	$	7,758,840	$	(463,878	)	$	(2,293,482	)	$	5,001,480
Loans, less unearned loan fees	$	679,799,399	$	—		$	—		$	679,799,399
Assets held for sale		36,401,416		—			—			36,401,416
Goodwill		2,087,537		—			—			2,087,537
Deposits		717,135,113		—			(820,839	)		716,314,274
Borrowings		31,822,797		—			15,464,208			47,287,005
Liabilities held for sale		50,053,023		—			—			50,053,023
Total assets	$	873,035,220	$	—		$	4,215,489		$	877,250,709

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NOTE 18 – PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS

Condensed Balance Sheets

	December 31,
	2004		2003
Assets
Cash	$	143,021	$	1,308,920
Investment in Enterprise Bank & Trust		89,355,071		76,659,412
Other assets		4,432,577		3,274,822
Total assets	$	93,930,669	$	81,243,154
Liabilities and Shareholders’ Equity
Subordinated debentures	$	20,620,000	$	15,464,208
Accounts payable and other liabilities		585,019		391,242
Shareholders’ equity		72,725,650		65,387,704
Total liabilities and shareholders’ equity	$	93,930,669	$	81,243,154

Condensed Statements of Income

	Year ended December 31
	2004			2003			2002
Income:
Dividends from subsidiaries	$	41,644		$	2,038,862		$	1,095,591
Recoveries from Merchant Banc activities		—			—			88,889
Other		46,013			(13,825	)		(8,577	)
Total income		87,657			2,025,037			1,175,903
Expenses:
Interest expense-subordinated debentures		1,405,159			1,270,086			1,152,399
Interest expense-notes payable		2,437			—			45,510
Other expenses		3,585,699			2,593,424			3,773,547
Total expenses		4,993,295			3,863,510			4,971,456
Loss before tax benefit and equity in undistributed earnings of subsidiaries		(4,905,638	)		(1,838,473	)		(3,795,554	)
Income tax benefit		2,033,204			1,414,874			2,566,996
Loss before equity in undistributed earnings of subsidiaries		(2,872,434	)		(423,599	)		(1,228,558	)
Equity in undistributed earnings of subsidiaries		11,086,961			7,348,818			6,230,038
Net income	$	8,214,527		$	6,925,219		$	5,001,480

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Condensed Statements of Cash Flow

	Year Ended December 31,
	2004			2003			2002
Cash flows from operating activities:
Net income	$	8,214,527		$	6,925,219		$	5,001,480
Adjustments to reconcile net income to net cash provided by operating activities:
Recoveries from Merchant Banc activities		—			—			(88,889	)
(Decrease) increase in settlement accrual of disputed note		(575,000	)		(725,000	)		1,300,000
Noncash compensation expense attributed to stock option grants		233,568			288,712			201,453
Net income of subsidiaries		(11,128,605	)		(9,387,680	)		(7,325,629	)
Dividends from subsidiaries		41,644			2,038,862			1,095,591
Other, net		(628,028	)		1,006,126			(2,407,872	)
Net cash (used in) provided by operating activities		(3,841,894	)		146,239			(2,223,866	)
Cash flows from investing activities:
Capital contributions to subsidiaries		(3,000,000	)		—			—
Net cash used in investing activities		(3,000,000	)		—			—
Cash flows from financing activities:
Proceeds from notes payable		350,000			100,000			1,750,000
Paydowns of notes payable		(100,000	)		(100,000	)		(3,116,667	)
Proceeds from issuance of subordinated debentures		16,496,000			—			4,000,000
Paydown of subordinated debentures		(11,340,208	)		—			—
Cash dividends paid		(971,323	)		(766,817	)		(658,645	)
Proceeds from the exercise of common stock options		1,241,526			1,115,301			905,584
Net cash provided by financing activities		5,675,995			348,484			2,880,272
Net (decrease) increase in cash and cash equivalents		(1,165,899	)		494,723			656,406
Cash and cash equivalents, beginning of year		1,308,920			814,197			157,791
Cash and cash equivalents, end of year	$	143,021		$	1,308,920		$	814,197

79

NOTE 19--QUARTERLY CONDENSED FINANCIAL INFORMATION (Unaudited)

The following table presents the unaudited quarterly financial information for the years ended December 31, 2004 and 2003.

	2004
	4th Quarter		3rd Quarter		2nd Quarter		1st Quarter
	(dollars in thousands, except per share data)
Interest income	$	13,697	$	12,550	$	11,701	$	10,945
Interest expense		3,680		3,156		2,778		2,555
Net interest income		10,017		9,394		8,923		8,390
Provision for loan losses		775		100		740		597
Net interest income after provision for loan losses		9,242		9,294		8,183		7,793
Noninterest income		1,947		1,878		1,817		1,480
Noninterest expense		8,275		7,057		7,127		6,872
Income before income tax expense		2,914		4,115		2,873		2,401
Income tax expense		1,067		1,261		886		874
Net income	$	1,847	$	2,854	$	1,987	$	1,527
Earnings per common share
Basic	$	0.19	$	0.29	$	0.21	$	0.16
Diluted		0.18		0.28		0.20		0.15

	2003
	4th Quarter		3rd Quarter		2nd Quarter		1st Quarter
	(dollars in thousands, except per share data)
Interest income	$	10,841	$	10,717	$	10,798	$	10,889
Interest expense		2,552		2,462		2,695		2,835
Net interest income		8,289		8,255		8,103		8,054
Provision for loan losses		899		635		1,094		999
Net interest income after provision for loan losses		7,390		7,620		7,009		7,055
Noninterest income		2,144		2,063		4,383		1,501
Noninterest expense		7,270		6,921		7,269		6,755
Income before income tax expense		2,264		2,762		4,123		1,801
Income tax expense		829		1,005		1,525		666
Net income	$	1,435	$	1,757	$	2,598	$	1,135
Earnings per common share
Basic	$	0.15	$	0.18	$	0.27	$	0.12
Diluted		0.14		0.18		0.26		0.12

80

The Company earned $1.8 million in net income for the fourth quarter ended December 31, 2004, a $412,000 increase over net income of $1.4 million the same period in 2003.  This increase was due to several factors.

The net interest rate margin was 3.85% for the fourth quarter of 2004 as compared to 3.89% for the same period in 2003.  Net interest income in the fourth quarter of 2004 increased $1.7 million from the fourth quarter of 2003.  This increase in net interest income was the result of a $1.1 million increase in interest expense offset by a $2.8 million increase in interest income.  The cost of interest-bearing liabilities increased to 1.82% for the fourth quarter of 2004 from 1.50% for the same period in 2003.  This increase is attributed mainly to an increase in money market interest rates.  The yield on average interest-earning assets increased to 5.25% during the fourth quarter of 2004 as compared to 5.05% during the same period in 2003.  The increase in asset yield was due to several prime rate increases during 2004.

The provision for loan losses was $775,000 in the fourth quarter of 2004 versus $899,000 in 2003.  The decrease of $124,000 was due to stable and low non-performing loan levels, strengthening local economies and favorable delinquency trends.

Noninterest income was $1.9 million during the fourth quarter of 2004, a $197,000 decrease over $2.1 million in noninterest income during the same period in 2003.  This decrease was the result of increased wealth management income being offset by the recognition of a $375,000 legal settlement in the 4^th quarter of 2003.

Noninterest expense was $8.3 million during the fourth quarter of 2004 versus $7.3 million during the same period in 2003.  This represents a $1.0 million or 14% increase.  This increase was due to the following items recognized in the fourth quarter of 2004: 1) $554,000 charge for unamortized debt issuance costs related to $11 million of subordinated debentures that were refinanced; 2) a $150,000 valuation write-down on the Bank’s only foreclosed real estate asset; and 3) $146,000 of compensation expense related to the acceleration of employee stock options and the Company’s new LTIP.

Income tax expense was $1.1 million during the fourth quarter of 2004 versus $829,000 in the same period in 2003.  The effective tax rates were 37% for both periods in 2004 and 2003.

81

SIGNATURES

Pursuant to the requirements of Section 13 or 15d of the Securities Act of 1934, the undersigned Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Clayton, State of Missouri, on the 11^th of March, 2005.

ENTERPRISE FINANCIAL SERVICES CORP
/s/ KEVIN C. EICHNER	/s/ FRANK H. SANFILIPPO
Kevin C. Eichner	Frank H. Sanfilippo
Chief Executive Officer	Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1934, this Report on Form 10-K has been signed by the following persons in the capacities indicated on the 11^th day of March, 2005.

Signatures	Title
/s/ PAUL J. MCKEE, JR.*	Chairman of the Board of Directors
Paul J. McKee, Jr.
/s/ KEVIN C. EICHNER*	Chief Executive Officer and and Director
Kevin C. Eichner
/s/ PETER F. BENOIST*	Executive Vice President and Director
Peter F. Benoist
/s/ PAUL R. CAHN*	Director
Paul R. Cahn
/s/ WILLIAM H. DOWNEY*	Director
William H. Downey
/s/ ROBERT E. GUEST, JR.*	Director
Robert E. Guest, Jr.
/s/ RICHARD S. MASINTON*	Director
Richard S. Masinton
/s/ BIRCH M. MULLINS*	Director
Birch M. Mullins
/s/ JAMES J. MURPHY*	Director
James Murphy
/s/ ROBERT E. SAUR*	Director
Robert E. Saur
/s/ SANDRA VAN TREASE*	Director
Sandra Van Trease
/s/ HENRY D. WARSHAW*	Director
Henry D. Warshaw

*Signed by Power of Attorney.

82

EXHIBIT INDEX

Exhibit No.	Exhibit
3.1	Certificate of Incorporation of the Registrant, as amended (incorporated herein by reference to Exhibit 3.1 of the Registrant’s Registration Statement on Form S-1 dated December 19, 1996 (File No. 333-14737)).
3.2	Amendment to the Certificates of Incorporation of the Registrant (incorporated herein by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-8 dated July 1, 1999 (File No. 333-82087)).
3.3	Amendment to the Certificate of Incorporation of the Registrant (incorporated herein by reference to Exhibit 3.1 of the Registrant’s Quarterly Report on Form 10-Q for the period ending September 30, 1999).
3.4	Amendment to the Certificate of Incorporation of the Registrant (incorporated herein by reference to Exhibit 99.2 to the Registrant’s Current Report on Form 8-K filed on April 30, 2002).
3.5	Bylaws of the Registrant, as amended (incorporated herein by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed on October 29, 2004).
4.1	Enterprise Bank Second Incentive Stock Option Plan (incorporated herein by reference to Exhibit 44.4 of the Registrant’s Registration Statement on Form S-8 dated December 29, 1997 (File No. 333-43365)).
4.2	Enterprise Financial Services Corp Third Incentive Stock Option Plan (incorporated herein by reference to Exhibit 4.5 of the Registrant’s Registration Statement on Form S-8 dated December 29, 1997 (File No. 333-43365)).
4.3	Enterprise Financial Services Corp, Fourth Incentive Stock Option Plan (incorporated herein by reference to the Registrant’s 1998 Proxy Statement on Form 14-A).
4.4	Enterprise Financial Services Corp (formerly Commercial Guaranty Bancshares, Inc.) Employee Incentive Stock Option Plan (incorporated herein by reference to the Registrant’s Form S-8 dated July 25, 2000 (File No. 333-42204)).
4.5	Enterprise Financial Services Corp (formerly Commercial Guaranty Bancshares, Inc.) Non-Employee Organizer and Director Incentive Stock Option Plan (incorporated herein by reference to the Registrant’s Form S-8 dated July 25, 2000 (File No. 333-42204)).
4.6	Enterprise Financial Services Corp Stock Appreciation Rights (SAR) Plan and Agreement (incorporated herein by reference to Exhibit 4.5 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 1999).
4.7.1	Indenture dated June 27, 2002 between Registrant and Wells Fargo, National Association, relating to Floating Rate Junior Subordinated Deferrable Interest Debentures due June 30, 2032, (incorporated by reference to exhibit 4.9.1 to Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2002).
4.7.2	Form of Floating Rate Junior Subordinated Deferrable Interest Debenture due June 30, 2032, (incorporated by reference to exhibit 4.9.2 to Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2002).
4.7.3	Amended and Restated Trust Agreement of EFSC Capital Trust I dated June 27, 2002, (incorporated by reference to exhibit 4.9.3 to Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2002).

83

4.7.4	Trust Preferred Securities Guarantee Agreement between Registrant and Wells Fargo, National Association, dated June 27, 2002, (incorporated by reference to exhibit 4.9.4 to Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2002.)
4.8.1	Indenture dated May 11, 2004 between Registrant and Wilmington Trust Company relating to Floating Rate Junior Deferrable Interest due June 17, 2034, (incorporated  by reference to exhibit 4.1 to Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2004).
4.8.2	Floating Rate Junior Subordinated Deferrable Interest Debenture due June 17, 2034, (incorporated by reference to exhibit 4.2 to Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2004).
4.8.3	Amended and Restated Declaration of Trust of EFSC Capital Trust II dated May 11, 2004, (incorporated by reference to exhibit 4.3 to Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2004).
4.8.4	Guarantee Agreement between Registrant and Wilmington Trust Company dated May 11, 2004, (incorporated by reference to exhibit 4.4 to Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2004).
4.9.1(1)	Indenture dated December 13, 2004 between Registrant and Wilmington Trust Company relating to Floating Rate Junior Deferrable Interest due December 15, 2034.
4.9.2(1)	Floating Rate Junior Subordinated Deferrable Interest Debenture due December 15, 2034
4.9.3(1)	Amended and Restated Declaration of Trust of EFSC Capital Trust III dated December 13, 2004.
4.9.4(1)	Guarantee Agreement between Registrant and Wilmington Trust Company dated December 13, 2004.
4.10	Enterprise Financial Services Corp 2002 Stock Incentive Plan (incorporated herein by reference to Appendix B of the Company’s Definitive Proxy Statement dated April 4, 2003).
4.11	Enterprise Financial Services Corp, Incentive Stock Purchase Plan (incorporated herein by reference to the Registrant’s Registration Statement on Form S-8 dated October 30, 2002 (File No. 333-100928)).
10.1	Amended and Restated Customer Referral and Support Agreement between Enterprise Bank and Moneta Group Investment Advisors, Inc. dated December 24, 2003, filed on Exhibit to Registrant’s Report on Form 10-K for the year ended December 31, 2003.
10.2	Enterprise Financial Services Corp Deferred Compensation Plan I (incorporated herein by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2000).
10.3	Consulting contract dated October 3, 2001 between Enterprise Financial Services Corp and Paul J. McKee, Jr. (incorporated herein by reference to Exhibit 10.12 of the Registrant’s Annual Report on Form 10-K for the period ending December 31, 2001).
10.4	Key Executive Employment Agreement dated July 1, 2002 between Enterprise Financial Services Corp and Kevin C. Eichner (incorporated herein by reference to Exhibit 10.7 of to Registrant’s Report on Form 10-K for the year ended December 31, 2002.)

84

10.5	Form of Key Executive Employment Agreement dated October 15, 2002 between Enterprise Financial Services Corp and James C. Wagner and Jack L. Sutherland filed on Exhibit to Registrant’s Report on Form 10-K for the year ended December 31, 2002.
10.7	Key Executive Employment Agreement dated October 1, 2002 between Enterprise Financial Services Corp and Peter F. Benoist filed on Exhibit to Registrant’s Report on Form 10-K for the year ended December 31, 2002.
10.8	First Amendment to Credit Agreement dated January 26, 2004 between Enterprise Financial Services Corp. and Wells Fargo Bank, National Association file on Exhibit to Registrant’s Form 10-K for the year ended December 31, 2003.
10.9	Key Executive Employment Agreement dated September 8, 2004 between Enterprise Financial Services Corp and Stephen P. Marsh filed on Exhibit to Registrant’s Quarterly Report on Form 10-Q for the period ended September 20, 2004.
10.10	Key Executive Employment Agreement dated December 1, 2004 between Enterprise Financial Services Corp and Frank H. Sanfilippo.  Filed on Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated December 1, 2004.
10.11	$15,000,000 Credit Agreement dated January 14, 2005 between Enterprise Financial Services Corp and U.S. Bank National Association filed on Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated January 14, 2005.
11.1(1)	Statement regarding computation of per share earnings.
14.1	Code of Ethics for the Principal Executive Officer and Senior Financial Officers filed on Exhibit to Registrant’s Report on Form 10-K for the year ended December 31, 2003.
21.1(1)	Subsidiaries of the Registrant.
23.1(1)	Consent of KPMG LLP.
24.1(1)	Power of Attorney
31.1(1)	Chief Executive Officer’s Certification required by Rule 13(a)-14(a).
31.2(1)	Chief Financial Officer’s Certification required by Rule 13(a)-14(a).
32.1(1)	Chief Executive Officer Certification pursuant to 18 U.S.C. § 1350, as adopted pursuant to section § 906 of the Sarbanes-Oxley Act of 2002
32.2(1)	Chief Financial Officer Certification pursuant to 18 U.S.C. § 1350, as adopted pursuant to section § 906  of the Sarbanes-Oxley Act of 2002
99.1(1)	Report of KPMG LLP regarding management’s assessment of the Company’s internal control over financial reporting.

⁽¹⁾ Filed herewith

85

EX-4.9

Exhibit 4.9

ENTERPRISE FINANCIAL SERVICES CORP.,
as Issuer

INDENTURE

Dated as of December 13, 2004

WILMINGTON TRUST COMPANY,
as Trustee

FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES

DUE 2034

TABLE OF CONTENTS

		Page
ARTICLE I.      DEFINITIONS		1
Section 1.1.	Definitions.	1
ARTICLE II.     DEBENTURES		8
Section 2.1.	Authentication and Dating.
Section 2.2.	Form of Trustee’s Certificate of Authentication.	8
Section 2.3.	Form and Denomination of Debentures	9
Section 2.4.	Execution of Debentures	9
Section 2.5.	Exchange and Registration of Transfer of Debentures.	9
Section 2.6.	Mutilated, Destroyed, Lost or Stolen Debentures	11
Section 2.7.	Temporary Debentures.	12
Section 2.8.	Payment of Interest and Additional Interest.	12
Section 2.9.	Cancellation of Debentures Paid, etc.	13
Section 2.10.	Computation of Interest.	14
Section 2.11.	Extension of Interest Payment Period	15
Section 2.12.	CUSIP Numbers.	16
ARTICLE III.      PARTICULAR COVENANTS OF THE COMPANY		16
Section 3.1.	Payment of Principal, Premium and Interest; Agreed Treatment of the Debentures.	16
Section 3.2.	Offices for Notices and Payments, etc.	17
Section 3.3.	Appointments to Fill Vacancies in Trustee’s Office.	17
Section 3.4.	Provision as to Paying Agent	17
Section 3.5.	Certificate to Trustee.	18
Section 3.6.	Additional Sums.	18
Section 3.7.	Compliance with Consolidation Provisions.	19
Section 3.8.	Limitation on Dividends.	19
Section 3.9.	Covenants as to the Trust.	19
Section 3.10.	Additional Junior Indebtedness.	20
ARTICLE IV.     SECURITYHOLDERS’ LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE		20
Section 4.1.	Security holders’ Lists.	20
Section 4.2.	Preservation and Disclosure of Lists .	20
ARTICLE V.     REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT		21
Section 5.1.	Events of Default.	21
Section 5.2.	Payment of Debentures on Default; Suit Therefor.	23
Section 5.3.	Application of Moneys Collected by Trustee.	24
Section 5.4.	Proceedings by Securityholders.	24
Section 5.5.	Proceedings by Trustee.	25
Section 5.6.	Remedies Cumulative and Continuing; Delay or Omission Not a Waiver	25

i

Section 5.7.	Direction of Proceedings and Waiver of Defaults by Majority of Securityholders.	25
Section 5.8.	Notice of Defaults.	26
Section 5.9.	Undertaking to Pay Costs.	26
ARTICLE VI.     CONCERNING THE TRUSTEE .		26
Section 6.1.	Duties and Responsibilities of Trustee.	26
Section 6.2.	Reliance on Documents, Opinions, etc.	27
Section 6.3.	No Responsibility for Recitals, etc.	28
Section 6.4.	Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own Debentures.	28
Section 6.5.	Moneys to be Held in Trust.	28
Section 6.6.	Compensation and Expenses of Trustee.	29
Section 6.7.	Officers’ Certificate as Evidence.	29
Section 6.8.	Eligibility of Trustee.	29
Section 6.9.	Resignation or Removal of Trustee	30
Section 6.10.	Acceptance by Successor Trustee.	31
Section 6.11.	Succession by Merger, etc.	32
Section 6.12.	Authenticating Agents.	32
ARTICLE VII.     CONCERNING THE SECURITYHOLDERS		33
Section 7.1.	Action by Securityholders.	33
Section 7.2.	Proof of Execution by Securityholders.	33
Section 7.3.	Who Are Deemed Absolute Owners .	34
Section 7.4.	Debentures Owned by Company Deemed Not Outstanding.	34
Section 7.5.	Revocation of Consents; Future Holders Bound.	34
ARTICLE VIII.     SECURITYHOLDERS’ MEETINGS		34
Section 8.1.	Purposes of Meetings	34
Section 8.2.	Call of Meetings by Trustee	35
Section 8.3.	Call of Meetings by Company or Securityholders .	35
Section 8.4.	Qualifications for Voting.	35
Section 8.5.	Regulations.	35
Section 8.6.	Voting.	36
Section 8.7.	Quorum; Actions	36
ARTICLE IX.     SUPPLEMENTAL INDENTURES		37
Section 9.1.	Supplemental Indentures without Consent of Securityholders.	37
Section 9.2.	Supplemental Indentures with Consent of Securityholders.	38
Section 9.3.	Effect of Supplemental Indentures .	39
Section 9.4.	Notation on Debentures.	39
Section 9.5.	Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee.	39
ARTICLE X.     REDEMPTION OF SECURITIES		39
Section 10.1.	Optional Redemption.	39
Section 10.2.	Special Event Redemption	39
Section 10.3.	Notice of Redemption; Selection of Debentures.	39
Section 10.4.	Payment of Debentures Called for Redemption.	40

ii

ARTICLE XI.      CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE		40
Section 11.1.	Company May Consolidate, etc., on Certain Terms	40
Section 11.2.	Successor Entity to be Substituted.	41
Section 11.3.	Opinion of Counsel to be Given to Trustee.	41
ARTICLE XII.     SATISFACTION AND DISCHARGE OF INDENTURE		41
Section 12.1.	Discharge of Indenture.	41
Section 12.2.	Deposited Moneys to be Held in Trust by Trustee	42
Section 12.3.	Paying Agent to Repay Moneys Held.	42
Section 12.4.	Return of Unclaimed Moneys.	42
ARTICLE XIII.      IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS		42
Section 13.1.	Indenture and Debentures Solely Corporate Obligations.	42
ARTICLE XIV.     MISCELLANEOUS PROVISIONS		43
Section 14.1.	Successors.	43
Section 14.2.	Official Acts by Successor Entity.	43
Section 14.3.	Surrender of Company Powers	43
Section 14.4.	Addresses for Notices, etc	43
Section 14.5.	Governing Law	43
Section 14.6.	Evidence of Compliance with Conditions Precedent.	43
Section 14.7.	Table of Contents, Headings, etc.	44
Section 14.8.	Execution in Counterparts	44
Section 14.9.	Separability.	44
Section 14.10.	Assignment.	44
Section 14.11.	Acknowledgment of Rights	44
ARTICLE XV.     SUBORDINATION OF DEBENTURES		44
Section 15.1.	Agreement to Subordinate	44
Section 15.2.	Default on Senior Indebtedness.	45
Section 15.3.	Liquidation, Dissolution, Bankruptcy.	45
Section 15.4.	Subrogation.	46
Section 15.5.	Trustee to Effectuate Subordination.	47
Section 15.6.	Notice by the Company.	47
Section 15.7.	Rights of the Trustee; Holders of Senior Indebtedness.	47
Section 15.8.	Subordination May Not Be Impaired	48
Exhibit A            Form of Floating Rate Junior Subordinated Deferrable Interest Debenture

iii

          THIS INDENTURE, dated as of December 13, 2004, between Enterprise Financial Services Corp., a Delaware corporation (the “Company”), and Wilmington Trust Company, a Delaware banking corporation, as debenture trustee (the “Trustee”).

WITNESSETH:

          WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its Floating Rate Junior Subordinated Deferrable Interest Debentures due 2034 (the “Debentures”) under this Indenture to provide, among other things, for the execution and authentication, delivery and administration thereof, and the Company has duly authorized the execution of this Indenture; and

          WHEREAS, all acts and things necessary to make this Indenture a valid agreement according to its terms, have been done and performed;

          NOW, THEREFORE, This Indenture Witnesseth:

          In consideration of the premises, and the purchase of the Debentures by the holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective holders from time to time of the Debentures as follows:

ARTICLE I.
DEFINITIONS

          Section 1.1.     Definitions. The terms defined in this Section 1.1 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.1.  All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles and the term “generally accepted accounting principles” means such accounting principles as are generally accepted in the United States at the time of any computation.  The words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.

          “Additional Interest” has the meaning set forth in Section 2.11.

          “Additional Junior Indebtedness” means, without duplication and other than the Debentures, any indebtedness, liabilities or obligations of the Company, or any Subsidiary of the Company, under debt securities (or guarantees in respect of debt securities) initially issued after the date of this Indenture to any trust, or a trustee of a trust, partnership or other entity affiliated with the Company that is, directly or indirectly, a finance subsidiary (as such term is defined in Rule 3a-5 under the Investment Company Act of 1940) or other financing vehicle of the Company or any Subsidiary of the Company in connection with the issuance by that entity of preferred securities or other securities that are eligible to qualify for Tier 1 capital treatment (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Company (or, if the Company is not a bank holding company, such guidelines applied to the Company as if the Company were subject to such guidelines); provided, however, that the inability of the Company to treat all or any portion of the Additional Junior Indebtedness as Tier 1 capital shall not disqualify it as Additional Junior Indebtedness if such inability results from the Company having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve now or may hereafter accord Tier 1 capital treatment (including the Debentures) in excess of the amount which may qualify for treatment as Tier 1 capital under applicable capital adequacy guidelines.

          “Additional Sums” has the meaning set forth in Section 3.6.

1

          “Affiliate” has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder.

          “Authenticating Agent” means any agent or agents of the Trustee which at the time shall be appointed and acting pursuant to Section 6.12.

          “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.

          “Board of Directors” means the board of directors or the executive committee or any other duly authorized designated officers of the Company.

          “Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee.

          “Business Day” means any day other than a Saturday, Sunday or any other day on which banking institutions in New York City or Wilmington, Delaware are permitted or required by any applicable law or executive order to close.

          “Capital Securities” means undivided beneficial interests in the assets of the Trust which rank pari passu with Common Securities issued by the Trust; provided, however, that upon the occurrence and continuance of an Event of Default (as defined in the Declaration), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities.

          “Capital Securities Guarantee” means the guarantee agreement that the Company enters into with Wilmington Trust Company, as guarantee trustee, or other Persons that operates directly or indirectly for the benefit of holders of Capital Securities of the Trust.

          “Capital Treatment Event” means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of any amendment to, or change (including any announced prospective change) in, the laws, rules or regulations of the United States or any political subdivision thereof or therein, or as the result of any official or administrative pronouncement or action or decision interpreting or applying such laws, rules or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that the Company will not, within 90 days of the date of such opinion, be entitled to treat an amount equal to the aggregate liquidation amount of the Capital Securities as “Tier 1 Capital” (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Company (or if the Company is not a bank holding company, such guidelines applied to the Company as if the Company were subject to such guidelines); provided, however, that the inability of the Company to treat all or any portion of the liquidation amount of the Capital Securities as Tier l Capital shall not constitute the basis for a Capital Treatment Event, if such inability results from the Company having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve or OTS, as applicable, may now or hereafter accord Tier 1 Capital treatment in excess of the amount which may now or hereafter qualify for treatment as Tier 1 Capital under applicable capital adequacy guidelines; provided further, however, that the distribution of Debentures in connection with the liquidation of the Trust shall not in and of itself constitute a Capital Treatment Event unless such liquidation shall have occurred in connection with a Tax Event or an Investment Company Event.

2

          “Certificate” means a certificate signed by any one of the principal executive officer, the principal financial officer or the principal accounting officer of the Company.

          “Common Securities” means undivided beneficial interests in the assets of the Trust which rank pari passu with Capital Securities issued by the Trust; provided, however, that upon the occurrence and continuance of an Event of Default (as defined in the Declaration), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities.

          “Company” means Enterprise Financial Services Corp., a Delaware corporation, and, subject to the provisions of Article XI, shall include its successors and assigns.

          “Coupon Rate” has the meaning set forth in Section 2.8.

          “Debenture” or “Debentures” has the meaning stated in the first recital of this Indenture.

          “Debenture Register” has the meaning specified in Section 2.5.

          “Declaration” means the Amended and Restated Declaration of Trust of the Trust, as amended or supplemented from time to time.

          “Default” means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.

          “Defaulted Interest” has the meaning set forth in Section 2.8.

          “Distribution Period” means (i) with respect to interest paid on the first Interest Payment Date, the period beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in March 2005 and (ii) thereafter, with respect to interest paid on each successive Interest Payment Date, the period beginning on (and including) the preceding Interest Payment Date and ending on (but excluding) such current Interest Payment Date.

          “Determination Date” has the meaning set forth in Section 2.10.

          “Event of Default” means any event specified in Section 5.1, continued for the period of time, if any, and after the giving of the notice, if any, therein designated.

          “Extension Event of Default” means an Event of Default under Section 5.1(a), (d) or (e), whatever the reason for such Extension Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.

          “Extension Period” has the meaning set forth in Section 2.11.

          “Federal Reserve” means the Board of Governors of the Federal Reserve System, or its designated district bank, as applicable, and any successor federal agency that is primarily responsible for regulating the activities of bank holding companies.

          “Indenture” means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented, or both.

          “Institutional Trustee” has the meaning set forth in the Declaration.

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          “Interest Payment Date” means March 15, June 15, September 15 and December 15 of each year during the term of this Indenture, or if such day is not a Business Day, then the next succeeding Business Day, commencing in March 2005.

          “Interest Rate” means for the Distribution Period beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in March 2005 the rate per annum of 4.42%, and for each Distribution Period beginning on or after the Interest Payment Date in March 2005, the Coupon Rate for such Distribution Period.

          “Investment Company Event” means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or written change (including any announced prospective change) in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within 90 days of the date of such opinion will be considered an “investment company” that is required to be registered under the Investment Company Act of 1940, as amended which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Debentures.

          “Liquidation Amount” means the stated amount of $1,000.00 per Trust Security.

          “Maturity Date” means December 15, 2034.

          “Officers’ Certificate” means a certificate signed by the Chairman of the Board, the Chief Executive Officer, the Vice Chairman, the President, any Managing Director or any Vice President, and by the Treasurer, an Assistant Treasurer, the Comptroller, an Assistant Comptroller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee.  Each such certificate shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section.

          “Opinion of Counsel” means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company, or may be other counsel reasonably satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section.

          “OTS” means the Office of Thrift Supervision and any successor federal agency that is primarily responsible for regulating the activities of savings and loan holding companies.

          The term “outstanding,” when used with reference to Debentures, means, subject to the provisions of Section 7.4, as of any particular time, all Debentures authenticated and delivered by the Trustee or the Authenticating Agent under this Indenture, except:

          (a)          Debentures theretofore canceled by the Trustee or the Authenticating Agent or delivered to the Trustee for cancellation;

          (b)          Debentures, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own paying agent); provided, however, that, if such Debentures, or portions thereof, are to be redeemed prior to maturity thereof, notice of such redemption shall have been given as provided in Section 10.3 or provision satisfactory to the Trustee shall have been made for giving such notice; and

          (c)          Debentures paid pursuant to Section 2.6 or in lieu of or in substitution for which other Debentures shall have been authenticated and delivered pursuant to the terms of Section 2.6 unless proof satisfactory to the Company and the Trustee is presented that any such Debentures are held by bona fide holders in due course.

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          “Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

          “Predecessor Security” of any particular Debenture means every previous Debenture evidencing all or a portion of the same debt as that evidenced by such particular Debenture; and, for purposes of this definition, any Debenture authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the same debt as the lost, destroyed or stolen Debenture.

          “Principal Office of the Trustee,” or other similar term, means the office of the Trustee, at which at any particular time its corporate trust business shall be principally administered, which at the time of the execution of this Indenture shall be Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-1600, Attention: Corporate Trust Administration.

          “Redemption Date” has the meaning set forth in Section 10.1.

          “Redemption Price” means 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid interest (including any Additional Interest) on such Debentures to the Redemption Date.

          “Responsible Officer” means, with respect to the Trustee, any officer within the Principal Office of the Trustee, including any vice-president, any assistant vice-president, any secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or other officer of the Principal Trust Office of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer’s knowledge of and familiarity with the particular subject.

          “Securities Act” means the Securities Act of 1933, as amended from time to time or any successor legislation.

          “Securityholder,” “holder of Debentures,” or other similar terms, means any Person in whose name at the time a particular Debenture is registered on the register kept by the Company or the Trustee for that purpose in accordance with the terms hereof.

          “Senior Indebtedness” means, with respect to the Company, (i) the principal, premium, if any, and interest in respect of (A) indebtedness of the Company for all borrowed and purchased money and (B) indebtedness evidenced by securities, debentures, notes, bonds or other similar instruments issued by the Company; (ii) all capital lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement; (iv) all obligations of the Company for the reimbursement of any letter of credit, any banker’s acceptance, any security purchase facility, any repurchase agreement or similar arrangement, any interest rate swap, any other hedging arrangement, any obligation under options or any similar credit or other transaction; (v) all obligations of the Company associated with derivative products such as interest and foreign exchange rate contracts, commodity contracts, and similar arrangements; (vi) all obligations of the type referred to in clauses (i) through (v) above of other Persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise including, without limitation, similar obligations arising from off-balance sheet guarantees and direct credit substitutes; and (vii) all obligations of the type referred to in clauses (i)

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through (vi) above of other Persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), whether incurred on or prior to the date of this Indenture or thereafter incurred.  Notwithstanding the foregoing, “Senior Indebtedness” shall not include (1) any Additional Junior Indebtedness, (2) Debentures issued pursuant to this Indenture and guarantees in respect of such Debentures, (3) trade accounts payable of the Company arising in the ordinary course of business (such trade accounts payable being pari passu in right of payment to the Debentures), or (4) obligations with respect to which (a) in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are pari passu, junior or otherwise not superior in right of payment to the Debentures and (b) the Company, prior to the issuance thereof, has notified (and, if then required under the applicable guidelines of the regulating entity, has received approval from) the Federal Reserve (if the Company is a bank holding company) or the OTS (if the Company is a savings and loan holding company). Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness.

          “Special Event” means any of a Capital Treatment Event, an Investment Company Event or a Tax Event.

          “Special Redemption Date” has the meaning set forth in Section 10.2.

          “Special Redemption Price” means the price set forth in the following table for any Special Redemption Date that occurs on the date indicated below (or if such day is not a Business Day, then the next succeeding Business Day), expressed as the percentage of the principal amount of the Debentures being redeemed:

Month in which Special Redemption Date Occurs	Special Redemption Price
March 2005	104.625%
June 2005	104.300%
September 2005	104.000%
December 2005	103.650%
March 2006	103.350%
June 2006	103.000%
September 2006	102.700%
December 2006	102.350%
March 2007	102.050%
June 2007	101.700%
September 2007	101.400%
December 2007	101.050%
March 2008	100.750%
June 2008	100.450%
September 2008	100.200%
December 2008 and thereafter	100.000%

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          plus, in each case, accrued and unpaid interest (including any Additional Interest) on such Debentures to the Special Redemption Date.

          “Subsidiary” means with respect to any Person, (i) any corporation at least a majority of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture or similar entity, at least a majority of the outstanding partnership or similar interests of which shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. For the purposes of this definition, “voting stock” means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.

          “Tax Event” means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement (including any private letter ruling, technical advice memorandum, field service advice, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt such procedures or regulations) (an “Administrative Action”) or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Company or the Trust and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that:  (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debentures; (ii) interest payable by the Company on the Debentures is not, or within 90 days of the date of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges.

          “3-Month LIBOR” has the meaning set forth in Section 2.10.

          “Telerate Page 3750” has the meaning set forth in Section 2.10.

          “Trust” shall mean EFSC Statutory Trust III, a Delaware statutory trust, or any other similar trust created for the purpose of issuing Capital Securities in connection with the issuance of Debentures under this Indenture, of which the Company is the sponsor.

          “Trust Securities” means Common Securities and Capital Securities of the Trust.

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          “Trustee” means Wilmington Trust Company, and, subject to the provisions of Article VI hereof, shall also include its successors and assigns as Trustee hereunder.

ARTICLE II.
DEBENTURES

          Section 2.1.     Authentication and Dating. Upon the execution and delivery of this Indenture, or from time to time thereafter, Debentures in an aggregate principal amount not in excess of $11,341,000.00 may be executed and delivered by the Company to the Trustee for authentication, and the Trustee, upon receipt of a written authentication order from the Company, shall thereupon authenticate and make available for delivery said Debentures to or upon the written order of the Company, signed by its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman, the President, one of its Managing Directors or one of its Vice Presidents without any further action by the Company hereunder. Notwithstanding anything to the contrary contained herein, the Trustee shall be fully protected in relying upon the aforementioned authentication order and written order in authenticating and delivering said Debentures. In authenticating such Debentures, and accepting the additional responsibilities under this Indenture in relation to such Debentures, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon:

          (a)       a copy of any Board Resolution or Board Resolutions relating thereto and, if applicable, an appropriate record of any action taken pursuant to such resolution, in each case certified by the Secretary or an Assistant Secretary of the Company, as the case may be; and

          (b)       an Opinion of Counsel prepared in accordance with Section 14.6 which shall also state:

          (1)          that such Debentures, when authenticated and delivered by the Trustee and issued by the Company in each case in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, subject to or limited by applicable bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium and other statutory or decisional laws relating to or affecting creditors’ rights or the reorganization of financial institutions (including, without limitation, preference and fraudulent conveyance or transfer laws), heretofore or hereafter enacted or in effect, affecting the rights of creditors generally; and

          (2)           that all laws and requirements in respect of the execution and delivery by the Company of the Debentures have been complied with and that authentication and delivery of the Debentures by the Trustee will not violate the terms of this Indenture.

          The Trustee shall have the right to decline to authenticate and deliver any Debentures under this Section if the Trustee, being advised in writing by counsel, determines that such action may not lawfully be taken or if a Responsible Officer of the Trustee in good faith shall determine that such action would expose the Trustee to personal liability to existing holders.

          The definitive Debentures shall be typed, printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Debentures, as evidenced by their execution of such Debentures.

          Section 2.2.     Form of Trustee’s Certificate of Authentication. The Trustee’s certificate of authentication on all Debentures shall be in substantially the following form:

          This is one of the Debentures referred to in the within-mentioned Indenture.

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WILMINGTON TRUST COMPANY, as Trustee

By

Authorized Signer

          Section 2.3.      Form and Denomination of Debentures. The Debentures shall be substantially in the form of Exhibit A attached hereto.  The Debentures shall be in registered, certificated form without coupons and in minimum denominations of $100,000.00 and any multiple of $1,000.00 in excess thereof. Any attempted transfer of the Debentures in a block having an aggregate principal amount of less than $100,000.00 shall be deemed to be void and of no legal effect whatsoever.  Any such purported transferee shall be deemed not to be a holder of such Debentures for any purpose, including, but not limited to the receipt of payments on such Debentures, and such purported transferee shall be deemed to have no interest whatsoever in such Debentures.  The Debentures shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the officers executing the same may determine with the approval of the Trustee as evidenced by the execution and authentication thereof.

          Section 2.4.     Execution of Debentures. The Debentures shall be signed in the name and on behalf of the Company by the manual or facsimile signature of its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman, President, one of its Managing Directors or one of its Executive Vice Presidents, Senior Vice Presidents or Vice Presidents.  Only such Debentures as shall bear thereon a certificate of authentication substantially in the form herein before recited, executed by the Trustee or the Authenticating Agent by the manual signature of an authorized signer, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose.  Such certificate by the Trustee or the Authenticating Agent upon any Debenture executed by the Company shall be conclusive evidence that the Debenture so authenticated has been duly authenticated and delivered hereunder and that the holder is entitled to the benefits of this Indenture.

          In case any officer of the Company who shall have signed any of the Debentures shall cease to be such officer before the Debentures so signed shall have been authenticated and delivered by the Trustee or the Authenticating Agent, or disposed of by the Company, such Debentures nevertheless may be authenticated and delivered or disposed of as though the Person who signed such Debentures had not ceased to be such officer of the Company; and any Debenture may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Debenture, shall be the proper officers of the Company, although at the date of the execution of this Indenture any such person was not such an officer.

          Every Debenture shall be dated the date of its authentication.

          Section 2.5.      Exchange and Registration of Transfer of Debentures. The Company shall cause to be kept, at the office or agency maintained for the purpose of registration of transfer and for exchange as provided in Section 3.2, a register (the “Debenture Register”) for the Debentures issued hereunder in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration and transfer of all Debentures as in this Article II provided.  The Debenture Register shall be in written form or in any other form capable of being converted into written form within a reasonable time.

          Debentures to be exchanged may be surrendered at the Principal Office of the Trustee or at any office or agency to be maintained by the Company for such purpose as provided in Section 3.2, and the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange therefor the Debenture or Debentures which the Securityholder making the exchange shall be entitled to receive.  Upon due presentment for registration of transfer of any Debenture at the Principal Office of the Trustee or at any

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office or agency of the Company maintained for such purpose as provided in Section 3.2, the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in the name of the transferee or transferees a new Debenture for a like aggregate principal amount.  Registration or registration of transfer of any Debenture by the Trustee or by any agent of the Company appointed pursuant to Section 3.2, and delivery of such Debenture, shall be deemed to complete the registration or registration of transfer of such Debenture.

          All Debentures presented for registration of transfer or for exchange or payment shall (if so required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee or the Authenticating Agent duly executed by the holder or his attorney duly authorized in writing.

          No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith.

          The Company or the Trustee shall not be required to exchange or register a transfer of any Debenture for a period of 15 days next preceding the date of selection of Debentures for redemption.

          Notwithstanding anything herein to the contrary, Debentures may not be transferred except in compliance with the restricted securities legend set forth below, unless otherwise determined by the Company, upon the advice of counsel expert in securities law, in accordance with applicable law:

          THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION.

          THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW.  NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.  THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF

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AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.

          THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING.  ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

          THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF.  ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

          THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

          Section 2.6.      Mutilated, Destroyed, Lost or Stolen Debentures. In case any Debenture shall become mutilated or be destroyed, lost or stolen, the Company shall execute, and upon its written request the Trustee shall authenticate and deliver, a new Debenture bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Debenture, or in lieu of and in substitution for the Debenture so destroyed, lost or stolen.  In every case the applicant for a substituted Debenture shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee evidence to their satisfaction of the destruction, loss or theft of such Debenture and of the ownership thereof.

          The Trustee may authenticate any such substituted Debenture and deliver the same upon the written request or authorization of any officer of the Company.  Upon the issuance of any substituted Debenture, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Debenture which has matured or is about to mature or has been called for redemption in full

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shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Debenture, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Debenture) if the applicant for such payment shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless and, in case of destruction, loss or theft, evidence satisfactory to the Company and to the Trustee of the destruction, loss or theft of such Debenture and of the ownership thereof.

          Every substituted Debenture issued pursuant to the provisions of this Section 2.6 by virtue of the fact that any such Debenture is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debenture shall be found at any time, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debentures duly issued hereunder.  All Debentures shall be held and owned upon the express condition that, to the extent permitted by applicable law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.

          Section 2.7.     Temporary Debentures. Pending the preparation of definitive Debentures, the Company may execute and the Trustee shall authenticate and make available for delivery temporary Debentures that are typed, printed or lithographed. Temporary Debentures shall be issuable in any authorized denomination, and substantially in the form of the definitive Debentures in lieu of which they are issued but with such omissions, insertions and variations as may be appropriate for temporary Debentures, all as may be determined by the Company.  Every such temporary Debenture shall be executed by the Company and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Debentures.  Without unreasonable delay the Company will execute and deliver to the Trustee or the Authenticating Agent definitive Debentures and thereupon any or all temporary Debentures may be surrendered in exchange therefor, at the principal corporate trust office of the Trustee or at any office or agency maintained by the Company for such purpose as provided in Section 3.2, and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange for such temporary Debentures a like aggregate principal amount of such definitive Debentures.  Such exchange shall be made by the Company at its own expense and without any charge therefor except that in case of any such exchange involving a registration of transfer the Company may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto.  Until so exchanged, the temporary Debentures shall in all respects be entitled to the same benefits under this Indenture as definitive Debentures authenticated and delivered hereunder.

          Section 2.8.     Payment of Interest and Additional Interest. Interest at the Interest Rate and any Additional Interest on any Debenture that is payable, and is punctually paid or duly provided for, on any Interest Payment Date for Debentures shall be paid to the Person in whose name said Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment except that interest and any Additional Interest payable on the Maturity Date shall be paid to the Person to whom principal is paid.

          Each Debenture shall bear interest for the period beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in March 2005 at a rate per annum of 4.42%, and shall bear interest for each successive Distribution Period beginning on or after the Interest Payment Date in March 2005 at a rate per annum equal to the 3-Month LIBOR, determined as described in Section 2.10, plus 1.97% (the “Coupon Rate”), applied to the principal amount thereof, until the principal thereof becomes due and payable, and on any overdue principal and to the extent that payment of such interest is enforceable under applicable law (without duplication) on any overdue installment of

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interest (including Additional Interest) at the Interest Rate in effect for each applicable period compounded quarterly.  Interest shall be payable (subject to any relevant Extension Period) quarterly in arrears on each Interest Payment Date with the first installment of interest to be paid on the Interest Payment Date in March 2005.

          Any interest on any Debenture, including Additional Interest, that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”) shall forthwith cease to be payable to the registered holder on the relevant regular record date by virtue of having been such holder; and such Defaulted Interest shall be paid by the Company to the Persons in whose names such Debentures (or their respective Predecessor Securities) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner: the Company shall notify the Trustee in writing at least 25 days prior to the date of the proposed payment of the amount of Defaulted Interest proposed to be paid on each such Debenture and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment.  The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Securityholder at its address as it appears in the Debenture Register, not less than 10 days prior to such special record date.  Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names such Debentures (or their respective Predecessor Securities) are registered on such special record date and shall be no longer payable.

          The Company may make payment of any Defaulted Interest on any Debentures in any other lawful manner after notice given by the Company to the Trustee of the proposed payment method; provided, however, the Trustee in its sole discretion deems such payment method to be practical.

          Any interest (including Additional Interest) scheduled to become payable on an Interest Payment Date occurring during an Extension Period shall not be Defaulted Interest and shall be payable on such other date as may be specified in the terms of such Debentures.

          The term “regular record date” as used in this Section shall mean the close of business on the 5th Business Day preceding the applicable Interest Payment Date.

          Subject to the foregoing provisions of this Section, each Debenture delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Debenture shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Debenture.

          Section 2.9.      Cancellation of Debentures Paid, etc. All Debentures surrendered for the purpose of payment, redemption, exchange or registration of transfer, shall, if surrendered to the Company or any paying agent, be surrendered to the Trustee and promptly canceled by it, or, if surrendered to the Trustee or any Authenticating Agent, shall be promptly canceled by it, and no Debentures shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. All Debentures canceled by any Authenticating Agent shall be delivered to the Trustee.  The Trustee shall destroy all canceled Debentures unless the Company otherwise directs the Trustee in writing. If the Company shall acquire any of the Debentures, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debentures unless and until the same are surrendered to the Trustee for cancellation.

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          Section 2.10.      Computation of Interest. The amount of interest payable for each Distribution Period will be calculated by applying the Interest Rate to the principal amount outstanding at the commencement of the Distribution Period on the basis of the actual number of days in the Distribution Period concerned divided by 360.  All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).

          (a)          “3-Month LIBOR” means the London interbank offered interest rate for three-month, U.S. dollar deposits determined by the Trustee in the following order of priority:

          (1)           the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (as defined below).  “Telerate Page 3750” means the display designated as “Page 3750” on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits;

          (2)          if such rate cannot be identified on the related Determination Date, the Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks’ offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date.  If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations;

          (3)           if fewer than two such quotations are provided as requested in clause (2) above, the Trustee will request four major New York City banks to provide such banks’ offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.  If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and

          (4)          if fewer than two such quotations are provided as requested in clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period.

                    If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date.

          (b)          The Interest Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.

          (c)          “Determination Date” means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the particular Distribution Period for which a Coupon Rate is being determined.

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          (d)           Trustee shall notify the Company, the Institutional Trustee and any securities exchange or interdealer quotation system on which the Capital Securities are listed, of the Coupon Rate and the Determination Date for each Distribution Period, in each case as soon as practicable after the determination thereof but in no event later than the thirtieth (30th) day of the relevant Distribution Period. Failure to notify the Company, the Institutional Trustee or any securities exchange or interdealer quotation system, or any defect in said notice, shall not affect the obligation of the Company to make payment on the Debentures at the applicable Coupon Rate.  Any error in the calculation of the Coupon Rate by the Trustee may be corrected at any time by notice delivered as above provided.  Upon the request of a holder of a Debenture, the Trustee shall provide the Coupon Rate then in effect and, if determined, the Coupon Rate for the next Distribution Period.

          (e)          Subject to the corrective rights set forth above, all certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions relating to the payment and calculation of interest on the Debentures and distributions on the Capital Securities by the Trustee or the Institutional Trustee will (in the absence of willful default, bad faith and manifest error) be final, conclusive and binding on the Trust, the Company and all of the holders of the Debentures and the Capital Securities, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Trustee or the Institutional Trustee in connection with the exercise or non-exercise by either of them or their respective powers, duties and discretion.

          Section 2.11.      Extension of Interest Payment Period. So long as no Extension Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an “Extension Period”), during which Extension Period no interest (including Additional Interest) shall be due and payable (except any Additional Sums that may be due and payable).  No Extension Period may end on a date other than an Interest Payment Date.  During an Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Interest Rate in effect for such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as “Additional Interest”). At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date; provided further, however, that during any such Extension Period, the Company shall not and shall not permit any Affiliate to (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s or such Affiliate’s capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (i) or (ii) above, (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any exchange or conversion of any class or series of the Company’s capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company’s capital stock or of any class or series of the Company’s indebtedness for any class or series of the Company’s capital stock, (c) the purchase of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or

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the security being converted or exchanged, (d) any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (f) payments under the Capital Securities Guarantee).  Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements.  No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest to the extent permitted by applicable law.  The Company must give the Trustee notice of its election to begin or extend an Extension Period by the close of business at least 5 Business Days prior to the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend such Extension Period.  The Trustee shall give notice of the Company’s election to begin a new Extension Period to the Securityholders.

          Section 2.12.      CUSIP Numbers. The Company in issuing the Debentures may use “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Securityholders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Debentures or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Debentures, and any such redemption shall not be affected by any defect in or omission of such numbers.  The Company will promptly notify the Trustee in writing of any change in the CUSIP numbers.

ARTICLE III.
PARTICULAR COVENANTS OF THE COMPANY

          Section 3.1.      Payment of Principal, Premium and Interest; Agreed Treatment of the Debentures.

          (a)           The Company covenants and agrees that it will duly and punctually pay or cause to be paid the principal of and premium, if any, and interest and any Additional Interest and other payments on the Debentures at the place, at the respective times and in the manner provided in this Indenture and the Debentures. Each installment of interest on the Debentures may be paid (i) by mailing checks for such interest payable to the order of the holders of Debentures entitled thereto as they appear on the registry books of the Company if a request for a wire transfer has not been received by the Company or (ii) by wire transfer to any account with a banking institution located in the United States designated in writing by such Person to the paying agent no later than the related record date. Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Institutional Trustee.

          (b)          The Company will treat the Debentures as indebtedness, and the amounts payable in respect of the principal amount of such Debentures as interest, for all United States federal income tax purposes. All payments in respect of such Debentures will be made free and clear of United States withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form W8 BEN (or any substitute or successor form) establishing its non-United States status for United States federal income tax purposes.

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          (c)          As of the date of this Indenture, the Company has no present intention to exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension Period.

          (d)          As of the date of this Indenture, the Company believes that the likelihood that it would exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension Period at any time during which the Debentures are outstanding is remote because of the restrictions that would be imposed on the Company’s ability to declare or pay dividends or distributions on, or to redeem, purchase or make a liquidation payment with respect to, any of its outstanding equity and on the Company’s ability to make any payments of principal of or interest on, or repurchase or redeem, any of its debt securities that rank pari passu in all respects with (or junior in interest to) the Debentures.

          Section 3.2.      Offices for Notices and Payments, etc. So long as any of the Debentures remain outstanding, the Company will maintain in Wilmington, Delaware, an office or agency where the Debentures may be presented for payment, an office or agency where the Debentures may be presented for registration of transfer and for exchange as in this Indenture provided and an office or agency where notices and demands to or upon the Company in respect of the Debentures or of this Indenture may be served. The Company will give to the Trustee written notice of the location of any such office or agency and of any change of location thereof.  Until otherwise designated from time to time by the Company in a notice to the Trustee, or specified as contemplated by Section 2.5, such office or agency for all of the above purposes shall be the office or agency of the Trustee.  In case the Company shall fail to maintain any such office or agency in Wilmington, Delaware, or shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Principal Office of the Trustee.

          In addition to any such office or agency, the Company may from time to time designate one or more offices or agencies outside Wilmington, Delaware, where the Debentures may be presented for registration of transfer and for exchange in the manner provided in this Indenture, and the Company may from time to time rescind such designation, as the Company may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain any such office or agency in Wilmington, Delaware, for the purposes above mentioned. The Company will give to the Trustee prompt written notice of any such designation or rescission thereof.

          Section 3.3.      Appointments to Fill Vacancies in Trustee’s Office. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 6.9, a Trustee, so that there shall at all times be a Trustee hereunder.

          Section 3.4.      Provision as to Paying Agent.

          (a)          If the Company shall appoint a paying agent other than the Trustee, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provision of this Section 3.4,

          (1)           that it will hold all sums held by it as such agent for the payment of the principal of and premium, if any, or interest, if any, on the Debentures (whether such sums have been paid to it by the Company or by any other obligor on the Debentures) in trust for the benefit of the holders of the Debentures;

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          (2)           that it will give the Trustee prompt written notice of any failure by the Company (or by any other obligor on the Debentures) to make any payment of the principal of and premium, if any, or interest, if any, on the Debentures when the same shall be due and payable; and

          (3)           that it will, at any time during the continuance of any Event of Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent.

          (b)           If the Company shall act as its own paying agent, it will, on or before each due date of the principal of and premium, if any, or interest or other payments, if any, on the Debentures, set aside, segregate and hold in trust for the benefit of the holders of the Debentures a sum sufficient to pay such principal, premium, interest or other payments so becoming due and will notify the Trustee in writing of any failure to take such action and of any failure by the Company (or by any other obligor under the Debentures) to make any payment of the principal of and premium, if any, or interest or other payments, if any, on the Debentures when the same shall become due and payable.

          Whenever the Company shall have one or more paying agents for the Debentures, it will, on or prior to each due date of the principal of and premium, if any, or interest, if any, on the Debentures, deposit with a paying agent a sum sufficient to pay the principal, premium, interest or other payments so becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless such paying agent is the Trustee) the Company shall promptly notify the Trustee in writing of its action or failure to act.

          (c)           Anything in this Section 3.4 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge with respect to the Debentures, or for any other reason, pay, or direct any paying agent to pay to the Trustee all sums held in trust by the Company or any such paying agent, such sums to be held by the Trustee upon the trusts herein contained.

          (d)           Anything in this Section 3.4 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 3.4 is subject to Sections 12.3 and 12.4.

          Section 3.5.      Certificate to Trustee. The Company will deliver to the Trustee on or before 120 days after the end of each fiscal year, so long as Debentures are outstanding hereunder, a Certificate stating that in the course of the performance by the signers of their duties as officers of the Company they would normally have knowledge of any default during such fiscal year by the Company in the performance of any covenants contained herein, stating whether or not they have knowledge of any such default and, if so, specifying each such default of which the signers have knowledge and the nature and status thereof.

          Section 3.6.      Additional Sums. If and for so long as the Trust is the holder of all Debentures and the Trust is required to pay any additional taxes (including withholding taxes), duties, assessments or other governmental charges as a result of a Tax Event, the Company will pay such additional amounts (“Additional Sums”) on the Debentures as shall be required so that the net amounts received and retained by the Trust after paying taxes (including withholding taxes), duties, assessments or other governmental charges will be equal to the amounts the Trust would have received if no such taxes, duties, assessments or other governmental charges had been imposed.  Whenever in this Indenture or the Debentures there is a reference in any context to the payment of principal of or interest on the Debentures, such mention shall be deemed to include mention of payments of the Additional Sums provided for in this paragraph to the extent that, in such context, Additional Sums are, were or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Sums in those provisions hereof

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where such express mention is not made; provided, however, that the deferral of the payment of interest during an Extension Period pursuant to Section 2.11 shall not defer the payment of any Additional Sums that may be due and payable.

          Section 3.7.      Compliance with Consolidation Provisions. The Company will not, while any of the Debentures remain outstanding, consolidate with, or merge into, or merge into itself, or sell or convey all or substantially all of its property to any other Person unless the provisions of Article XI hereof are complied with.

          Section 3.8.      Limitation on Dividends. If Debentures are initially issued to the Trust or a trustee of such Trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debentures continue to be held by such Trust) and (i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on the Debentures by extending the interest payment period as provided herein and such period, or any extension thereof, shall be continuing, then the Company shall not, and shall not allow any Affiliate of the Company to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s capital stock or its Affiliates’ capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above,  (1) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, if any, (2) as a result of any exchange or conversion of any class or series of the Company’s capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company’s capital stock or of any class or series of the Company’s indebtedness for any class or series of the Company’s capital stock, (3) the purchase of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (4) any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant thereto, (5) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (6) payments under the Capital Securities Guarantee).

          Section 3.9.      Covenants as to the Trust. For so long as the Trust Securities remain outstanding, the Company shall maintain 100% ownership of the Common Securities; provided, however, that any permitted successor of the Company under this Indenture may succeed to the Company’s ownership of such Common Securities.  The Company, as owner of the Common Securities, shall, except in connection with a distribution of Debentures to the holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, cause the Trust  (a) to remain a statutory trust, (b) to otherwise continue to be classified as a grantor trust for United States federal income tax purposes, and (c) to cause each holder of Trust Securities to be treated as owning an undivided beneficial interest in the Debentures.

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          Section 3.10.      Additional Junior Indebtedness. The Company shall not, and it shall not cause or permit any Subsidiary of the Company to, incur, issue or be obligated on any Additional Junior Indebtedness, either directly or indirectly, by way of guarantee, suretyship or otherwise, other than Additional Junior Indebtedness (i) that, by its terms, is expressly stated to be either junior and subordinate or pari passu in all respects to the Debentures, and (ii) of which the Company has notified (and, if then required under the applicable guidelines of the regulating entity, has received approval from) the Federal Reserve, if the Company is a bank holding company, or the OTS, if the Company is a savings and loan holding company.

ARTICLE IV.
SECURITYHOLDERS’ LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE

          Section 4.1.      Securityholders’ Lists. The Company covenants and agrees that it will furnish or caused to be furnished to the Trustee:

          (a)           on each regular record date for the Debentures, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Securityholders of the Debentures as of such record date; and

          (b)           at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished;

except that no such lists need be furnished under this Section 4.1 so long as the Trustee is in possession thereof by reason of its acting as Debenture registrar.

          Section 4.2.      Preservation and Disclosure of Lists.

          (a)           The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of Debentures (1) contained in the most recent list furnished to it as provided in Section 4.1 or (2) received by it in the capacity of Debentures registrar (if so acting) hereunder.  The Trustee may destroy any list furnished to it as provided in Section 4.1 upon receipt of a new list so furnished.

          (b)           In case three or more holders of Debentures (hereinafter referred to as “applicants”) apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Debenture for a period of at least 6 months preceding the date of such application, and such application states that the applicants desire to communicate with other holders of Debentures with respect to their rights under this Indenture or under such Debentures and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall within 5 Business Days after the receipt of such application, at its election, either:

(1)           afford such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, or

(2)           inform such applicants as to the approximate number of holders of Debentures whose names and addresses appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any, specified in such application.

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          If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Securityholder whose name and address appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2 a copy of the form of proxy or other communication which is specified in such request with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, the Trustee shall mail to such applicants and file with the Securities and Exchange Commission, if permitted or required by applicable law, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the holders of all Debentures, as the case may be, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion.  If said Commission, as permitted or required by applicable law, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, said Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Securityholders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application.

          (c)           Each and every holder of Debentures, by receiving and holding the same, agrees with Company and the Trustee that neither the Company nor the Trustee nor any paying agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the holders of Debentures in accordance with the provisions of subsection (b) of this Section 4.2, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under said subsection (b).

ARTICLE V.
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
UPON AN EVENT OF DEFAULT

          Section 5.1.      Events of Default. “Event of Default,” wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

          (a)           the Company defaults in the payment of any interest upon any Debenture, including any Additional Interest in respect thereof, following the nonpayment of any such interest for twenty or more consecutive Distribution Periods; or

          (b)           the Company defaults in the payment of all or any part of the principal of (or premium, if any, on) any Debentures as and when the same shall become due and payable either at maturity, upon redemption, by declaration of acceleration or otherwise; or

          (c)           the Company defaults in the performance of, or breaches, any of its covenants or agreements in this Indenture or in the terms of the Debentures established as contemplated in this Indenture (other than a covenant or agreement a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in aggregate principal amount of the outstanding Debentures, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder; or

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          (d)           a court of competent jurisdiction shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or

          (e)           the Company shall commence a voluntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or

          (f)           the Trust shall have voluntarily or involuntarily liquidated, dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of the Debentures to holders of such Trust Securities in liquidation of their interests in the Trust, (ii) the redemption of all of the outstanding Trust Securities or (iii) certain mergers, consolidations or amalgamations, each as permitted by the Declaration.

          If an Event of Default under Section 5.1(a), (d) or (e) occurs and is continuing with respect to the Debentures, then, and in each and every such case, unless the principal of the Debentures shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by Securityholders), may declare the entire principal of the Debentures and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable.  If an Event of Default under Section 5.1(b), (c) or (f) occurs and is continuing with respect to the Debentures, then, and in each and every such case, unless the principal of the Debentures shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by Securityholders), may proceed to remedy the default or breach thereunder by such appropriate judicial proceedings as the Trustee or such holders shall deem most effectual to remedy the defaulted covenant or enforce the provisions of this Indenture so breached, either by suit in equity or by action at law, for damages or otherwise.

          The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Debentures shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, (i) the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Debentures and the principal of and premium, if any, on the Debentures which shall have become due otherwise than by acceleration (with interest upon such principal and premium, if any, and Additional Interest) and such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and all other amounts due to the Trustee pursuant to Section 6.6, if any, and (ii) all Events of Default under this Indenture, other than the non-payment of the principal of or premium, if any, on Debentures which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein -- then and in every such case the holders of a majority in aggregate principal amount of the Debentures then outstanding, by written notice to the Company and to the Trustee, may waive all defaults and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon.

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          In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Trustee and the holders of the Debentures shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the holders of the Debentures shall continue as though no such proceeding had been taken.

          Section 5.2.      Payment of Debentures on Default; Suit Therefor. The Company covenants that upon the occurrence of an Event of Default pursuant to Section 5.1(a) or (b) then, upon demand of the Trustee, the Company will pay to the Trustee, for the benefit of the holders of the Debentures the whole amount that then shall have become due and payable on all Debentures for principal and premium, if any, or interest, or both, as the case may be, with Additional Interest accrued on the Debentures (to the extent that payment of such interest is enforceable under applicable law and, if the Debentures are held by the Trust or a trustee of such Trust, without duplication of any other amounts paid by the Trust or a trustee in respect thereof); and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Trustee, its agents, attorneys and counsel, and any other amounts due to the Trustee under Section 6.6.  In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or any other obligor on such Debentures and collect in the manner provided by law out of the property of the Company or any other obligor on such Debentures wherever situated the moneys adjudged or decreed to be payable.

          In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Debentures under Bankruptcy Law, or in case a receiver or trustee shall have been appointed for the property of the Company or such other obligor, or in the case of any other similar judicial proceedings relative to the Company or other obligor upon the Debentures, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Debentures shall then be due and payable as therein expressed or by declaration of acceleration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.2, shall be entitled and empowered, by intervention in such proceedings or otherwise,

(i)	to file and prove a claim or claims for the whole amount of principal and interest owing  and unpaid in respect of the Debentures,
(ii)	in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all other amounts due to the Trustee under Section 6.6), and of the Securityholders allowed in such judicial proceedings relative to the Company or any other obligor on the Debentures, or to the creditors or property of the Company or such other obligor, unless prohibited by applicable law and regulations, to vote on behalf of the holders of the Debentures in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or Person performing similar functions in comparable proceedings,
(iii)	to collect and receive any moneys or other property payable or deliverable on any such  claims, and
(iv)	to distribute the same after the deduction of its charges and expenses.

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          Any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the Securityholders to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other amounts due to the Trustee under Section 6.6.

          Nothing herein contained shall be construed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Debentures or the rights of any holder thereof or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding.

          All rights of action and of asserting claims under this Indenture, or under any of the Debentures, may be enforced by the Trustee without the possession of any of the Debentures, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the holders of the Debentures.

          In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the holders of the Debentures, and it shall not be necessary to make any holders of the Debentures parties to any such proceedings.

          Section 5.3.      Application of Moneys Collected by Trustee. Any moneys collected by the Trustee pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee for the distribution of such moneys, upon presentation of the several Debentures in respect of which moneys have been collected, and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid:

          First:     To the payment of costs and expenses incurred by, and reasonable fees of, the Trustee, its agents, attorneys and counsel, and of all other amounts due to the Trustee under Section 6.6;

          Second:     To the payment of all Senior Indebtedness of the Company if and to the extent required by Article XV;

          Third:     To the payment of the amounts then due and unpaid upon Debentures for principal (and premium, if any), and interest on the Debentures, in respect of which or for the benefit of which money has been collected, ratably, without preference or priority of any kind, according to the amounts due on such Debentures (including Additional Interest); and

          Fourth:     The balance, if any, to the Company.

          Section 5.4.      Proceedings by Securityholders. No holder of any Debenture shall have any right to institute any suit, action or proceeding for any remedy hereunder, unless such holder previously shall have given to the Trustee written notice of an Event of Default with respect to the Debentures and unless the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding shall have given the Trustee a written request to institute such action, suit or proceeding and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action, suit or proceeding.

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          Notwithstanding any other provisions in this Indenture, however, the right of any holder of any Debenture to receive payment of the principal of, premium, if any, and interest, on such Debenture when due, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such holder and by accepting a Debenture hereunder it is expressly understood, intended and covenanted by the taker and holder of every Debenture with every other such taker and holder and the Trustee, that no one or more holders of Debentures shall have any right in any manner whatsoever by virtue or by availing itself of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other Debentures, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Debentures.  For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.

          Section 5.5.      Proceedings by Trustee. In case of an Event of Default hereunder the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.

          Section 5.6.      Remedies Cumulative and Continuing; Delay or Omission Not a Waiver. Except as otherwise provided in Section 2.6, all powers and remedies given by this Article V to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Trustee or the holders of the Debentures, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to the Debentures, and no delay or omission of the Trustee or of any holder of any of the Debentures to exercise any right, remedy or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right, remedy or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 5.4, every power and remedy given by this Article V or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee (in accordance with its duties under Section 6.1) or by the Securityholders.

          Section 5.7.      Direction of Proceedings and Waiver of Defaults by Majority of Securityholders. The holders of a majority in aggregate principal amount of the Debentures affected (voting as one class) at the time outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to such Debentures; provided, however, that (subject to the provisions of Section 6.1) the Trustee shall have the right to decline to follow any such direction if the Trustee shall determine that the action so directed would be unjustly prejudicial to the holders not taking part in such direction or if the Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if a Responsible Officer of the Trustee shall determine that the action or proceedings so directed would involve the Trustee in personal liability.

          The holders of a majority in aggregate principal amount of the Debentures at the time outstanding may on behalf of the holders of all of the Debentures waive (or modify any previously granted waiver of) any past default or Event of Default, and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debentures, (b) in respect of covenants or provisions hereof which cannot be modified or amended without the consent of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section 3.9; provided, however, that if the Debentures are held

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by the Trust or a trustee of such trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver, provided, further, that if the consent of the holder of each outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver.  Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.  Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section, said default or Event of Default shall for all purposes of the Debentures and this Indenture be deemed to have been cured and to be not continuing.

          Section 5.8.      Notice of Defaults. The Trustee shall, within 90 days after the actual knowledge by a Responsible Officer of the Trustee of the occurrence of a default with respect to the Debentures, mail to all Securityholders, as the names and addresses of such holders appear upon the Debenture Register, notice of all defaults with respect to the Debentures known to the Trustee, unless such defaults shall have been cured before the giving of such notice (the term “defaults” for the purpose of this Section 5.8 being hereby defined to be the events specified in clauses (a), (b), (c), (d), (e) and (f) of Section 5.1, not including periods of grace, if any, provided for therein); provided, however, that, except in the case of default in the payment of the principal of, premium, if any, or interest on any of the Debentures, the Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Trustee in good faith determines that the withholding of such notice is in the interests of the Securityholders.

          Section 5.9.      Undertaking to Pay Costs. All parties to this Indenture agree, and each holder of any Debenture by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, that the provisions of this Section 5.9 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than 10% in principal amount of the Debentures outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Debenture against the Company on or after the same shall have become due and payable.

ARTICLE VI.
CONCERNING THE TRUSTEE

          Section 6.1.      Duties and Responsibilities of Trustee. With respect to the holders of Debentures issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Debentures and after the curing or waiving of all Events of Default which may have occurred, with respect to the Debentures, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants shall be read into this Indenture against the Trustee.  In case an Event of Default with respect to the Debentures has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

          No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

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          (a)           prior to the occurrence of an Event of Default with respect to Debentures and after the curing or waiving of all Events of Default which may have occurred

(1)           the duties and obligations of the Trustee with respect to Debentures shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations with respect to the Debentures as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee, and

(2)           in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture;

          (b)          the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and

          (c)          the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith, in accordance with the direction of the Securityholders pursuant to Section 5.7, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture.

          None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is ground for believing that the repayment of such funds or liability is not assured to it under the terms of this Indenture or indemnity satisfactory to the Trustee against such risk is not reasonably assured to it.

          Section 6.2.      Reliance on Documents, Opinions, etc. Except as otherwise provided in Section 6.1:

          (a)           the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, note, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

          (b)           any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers’ Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;

          (c)           the Trustee may consult with counsel of its selection and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;

          (d)           the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders, pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby;

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          (e)           the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default with respect to the Debentures (that has not been cured or waived) to exercise with respect to Debentures such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs;

          (f)           the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, coupon or other paper or document, unless requested in writing to do so by the holders of not less than a majority in aggregate principal amount of the outstanding Debentures affected thereby; provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expense or liability as a condition to so proceeding;

          (g)           the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents (including any Authenticating Agent) or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed by it with due care; and

          (h)           with the exceptions of defaults under Sections 5.1(a) or (b), the Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Debentures unless a written notice of such Default or Event of Default shall have been given to the Trustee by the Company or any other obligor on the Debentures or by any holder of the Debentures.

          Section 6.3.      No Responsibility for Recitals, etc. The recitals contained herein and in the Debentures (except in the certificate of authentication of the Trustee or the Authenticating Agent) shall be taken as the statements of the Company, and the Trustee and the Authenticating Agent assume no responsibility for the correctness of the same.  The Trustee and the Authenticating Agent make no representations as to the validity or sufficiency of this Indenture or of the Debentures.  The Trustee and the Authenticating Agent shall not be accountable for the use or application by the Company of any Debentures or the proceeds of any Debentures authenticated and delivered by the Trustee or the Authenticating Agent in conformity with the provisions of this Indenture.

          Section 6.4.      Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own Debentures. The Trustee or any Authenticating Agent or any paying agent or any transfer agent or any Debenture registrar, in its individual or any other capacity, may become the owner or pledgee of Debentures with the same rights it would have if it were not Trustee, Authenticating Agent, paying agent, transfer agent or Debenture registrar.

          Section 6.5.      Moneys to be Held in Trust. Subject to the provisions of Section 12.4, all moneys received by the Trustee or any paying agent shall, until used or applied as herein provided, be held in trust for the purpose for which they were received, but need not be segregated from other funds except to the extent required by law.  The Trustee and any paying agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such

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moneys shall be paid from time to time upon the written order of the Company, signed by the Chairman of the Board of Directors, the Chief Executive Officer, the President, a Managing Director, a Vice President, the Treasurer or an Assistant Treasurer of the Company.

          Section 6.6.      Compensation and Expenses of Trustee. The Company covenants and agrees to pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or willful misconduct.  For purposes of clarification, this Section 6.6 does not contemplate the payment by the Company of acceptance or annual administration fees owing to the Trustee pursuant to the services to be provided by the Trustee under this Indenture or the fees and expenses of the Trustee’s counsel in connection with the closing of the transactions contemplated by this Indenture.  The Company also covenants to indemnify each of the Trustee or any predecessor Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any and all loss, damage, claim, liability or expense including taxes (other than taxes based on the income of the Trustee) incurred without negligence or willful misconduct on the part of the Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of liability.  The obligations of the Company under this Section 6.6 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder.  Such additional indebtedness shall be secured by a lien prior to that of the Debentures upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Debentures.

          Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.1(d), (e) or (f), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law.

          The provisions of this Section shall survive the resignation or removal of the Trustee and the defeasance or other termination of this Indenture.

          Notwithstanding anything in this Indenture or any Debenture to the contrary, the Trustee shall have no obligation whatsoever to advance funds to pay any principal of or interest on or other amounts with respect to the Debentures or otherwise advance funds to or on behalf of the Company.

          Section 6.7.      Officers’ Certificate as Evidence. Except as otherwise provided in Sections 6.1 and 6.2, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the Trustee, be deemed to be conclusively proved and established by an Officers’ Certificate delivered to the Trustee, and such certificate, in the absence of negligence or willful misconduct on the part of the Trustee, shall be full warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof.

          Section 6.8.     Eligibility of Trustee. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia or a corporation or other Person authorized under such laws to exercise corporate trust powers, having (or whose obligations under this Indenture are guaranteed by an affiliate having) a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000.00) and subject to supervision or examination by federal, state, territorial, or District of Columbia authority. If

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such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.8 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent records of condition so published.

          The Company may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee.

          In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.8, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.9.

          If the Trustee has or shall acquire any “conflicting interest” within the meaning of § 310(b) of the Trust Indenture Act of 1939, the Trustee shall either eliminate such interest or resign, to the extent and in the manner described by this Indenture.

          Section 6.9.      Resignation or Removal of Trustee

          (a)           The Trustee, or any trustee or trustees hereafter appointed, may at any time resign by giving written notice of such resignation to the Company and by mailing notice thereof, at the Company’s expense, to the holders of the Debentures at their addresses as they shall appear on the Debenture Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee or trustees by written instrument, in duplicate, executed by order of its Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor Trustee. If no successor Trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation to the affected Securityholders, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, or any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least six months may, subject to the provisions of Section 5.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor Trustee.  Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Trustee.

          (b)           In case at any time any of the following shall occur --

(1)           the Trustee shall fail to comply with the provisions of Section 6.8 after written request therefor by the Company or by any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months, or

(2)           the Trustee shall cease to be eligible in accordance with the provisions of Section 6.8 and shall fail to resign after written request therefor by the Company or by any such Securityholder, or

(3)           the Trustee shall become incapable of acting, or shall be adjudged as bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case, the Company may remove the Trustee and appoint a successor Trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor Trustee, or, subject to the provisions of Section 5.9, any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint successor Trustee.

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          (c)           Upon prior written notice to the Company and the Trustee, the holders of a majority in aggregate principal amount of the Debentures at the time outstanding may at any time remove the Trustee and nominate a successor Trustee, which shall be deemed appointed as successor Trustee unless within 10 Business Days after such nomination the Company objects thereto, in which case, or in the case of a failure by such holders to nominate a successor Trustee, the Trustee so removed or any Securityholder, upon the terms and conditions and otherwise as in subsection (a) of this Section 6.9 provided, may petition any court of competent jurisdiction for an appointment of a successor.

          (d)           Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor Trustee as provided in Section 6.10.

          Section 6.10.    Acceptance by Successor Trustee. Any successor Trustee appointed as provided in Section 6.9 shall execute, acknowledge and deliver to the Company and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations with respect to the Debentures of its predecessor hereunder, with like effect as if originally named as Trustee herein; but, nevertheless, on the written request of the Company or of the successor Trustee, the Trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of Section 6.6, execute and deliver an instrument transferring to such successor Trustee all the rights and powers of the Trustee so ceasing to act and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee thereunder.  Upon request of any such successor Trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Trustee all such rights and powers.  Any Trustee ceasing to act shall, nevertheless, retain a lien upon all property or funds held or collected by such Trustee to secure any amounts then due it pursuant to the provisions of Section 6.6.

          If a successor Trustee is appointed, the Company, the retiring Trustee and the successor Trustee shall execute and deliver an indenture supplemental hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debentures as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the Trust hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be Trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee.

          No successor Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Trustee shall be eligible under the provisions of Section 6.8.

          In no event shall a retiring Trustee be liable for the acts or omissions of any successor Trustee hereunder.

          Upon acceptance of appointment by a successor Trustee as provided in this Section 6.10, the Company shall mail notice of the succession of such Trustee hereunder to the holders of Debentures at their addresses as they shall appear on the Debenture Register.  If the Company fails to mail such notice within 10 Business Days after the acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Company.

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          Section 6.11.      Succession by Merger, etc. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided such corporation shall be otherwise eligible and qualified under this Article.

          In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Debentures shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee, and deliver such Debentures so authenticated; and in case at that time any of the Debentures shall not have been authenticated, any successor to the Trustee may authenticate such Debentures either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Debentures or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Debentures in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.

          Section 6.12.      Authenticating Agents. There may be one or more Authenticating Agents appointed by the Trustee upon the request of the Company with power to act on its behalf and subject to its direction in the authentication and delivery of Debentures issued upon exchange or registration of transfer thereof as fully to all intents and purposes as though any such Authenticating Agent had been expressly authorized to authenticate and deliver Debentures; provided, however, that the Trustee shall have no liability to the Company for any acts or omissions of the Authenticating Agent with respect to the authentication and delivery of Debentures.  Any such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States or of any state or territory thereof or of the District of Columbia authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of at least $50,000,000.00 and being subject to supervision or examination by federal, state, territorial or District of Columbia authority.  If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section 6.12 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.  If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect herein specified in this Section.

          Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this Section 6.12 without the execution or filing of any paper or any further act on the part of the parties hereto or such Authenticating Agent.

          Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company.  The Trustee may at any time terminate the agency of any Authenticating Agent with respect to the Debentures by giving written notice of termination to such Authenticating Agent and to the Company.  Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section 6.12, the Trustee may, and upon the request of the Company shall, promptly appoint a successor Authenticating Agent

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eligible under this Section 6.12, shall give written notice of such appointment to the Company and shall mail notice of such appointment to all holders of Debentures as the names and addresses of such holders appear on the Debenture Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities with respect to the Debentures of its predecessor hereunder, with like effect as if originally named as Authenticating Agent herein.

          The Company agrees to pay to any Authenticating Agent from time to time reasonable compensation for its services.  Any Authenticating Agent shall have no responsibility or liability for any action taken by it as such in accordance with the directions of the Trustee.

ARTICLE VII.
CONCERNING THE SECURITYHOLDERS

          Section 7.1.      Action by Securityholders. Whenever in this Indenture it is provided that the holders of a specified percentage in aggregate principal amount of the Debentures may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action) the fact that at the time of taking any such action the holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by such Securityholders in person or by agent or proxy appointed in writing, or (b) by the record of such holders of Debentures voting in favor thereof at any meeting of such Securityholders duly called and held in accordance with the provisions of Article VIII, or (c) by a combination of such instrument or instruments and any such record of such a meeting of such Securityholders or (d) by any other method the Trustee deems satisfactory.

          If the Company shall solicit from the Securityholders any request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, the Company may, at its option, as evidenced by an Officers’ Certificate, fix in advance a record date for such Debentures for the determination of Securityholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same may be given before or after the record date, but only the Securityholders of record at the close of business on the record date shall be deemed to be Securityholders for the purposes of determining whether Securityholders of the requisite proportion of outstanding Debentures have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, and for that purpose the outstanding Debentures shall be computed as of the record date; provided, however, that no such authorization, agreement or consent by such Securityholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than 6 months after the record date.

          Section 7.2.      Proof of Execution by Securityholders. Subject to the provisions of Section 6.1, 6.2 and 8.5, proof of the execution of any instrument by a Securityholder or his agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee.  The ownership of Debentures shall be proved by the Debenture Register or by a certificate of the Debenture registrar.  The Trustee may require such additional proof of any matter referred to in this Section as it shall deem necessary.

          The record of any Securityholders’ meeting shall be proved in the manner provided in Section 8.6.

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          Section 7.3.      Who Are Deemed Absolute Owners. Prior to due presentment for registration of transfer of any Debenture, the Company, the Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Debenture registrar may deem the Person in whose name such Debenture shall be registered upon the Debenture Register to be, and may treat him as, the absolute owner of such Debenture (whether or not such Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture registrar shall be affected by any notice to the contrary.  All such payments so made to any holder for the time being or upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debenture.

          Section 7.4.      Debentures Owned by Company Deemed Not Outstanding. In determining whether the holders of the requisite aggregate principal amount of Debentures have concurred in any direction, consent or waiver under this Indenture, Debentures which are owned by the Company or any other obligor on the Debentures or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Debentures shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided, however, that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Debentures which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded.  Debentures so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this Section 7.4 if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s right to vote such Debentures and that the pledgee is not the Company or any such other obligor or Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee.

          Section 7.5.      Revocation of Consents; Future Holders Bound. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the holders of the percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action, any holder (in cases where no record date has been set pursuant to Section 7.1) or any holder as of an applicable record date (in cases where a record date has been set pursuant to Section 7.1) of a Debenture (or any Debenture issued in whole or in part in exchange or substitution therefor) the serial number of which is shown by the evidence to be included in the Debentures the holders of which have consented to such action may, by filing written notice with the Trustee at the Principal Office of the Trustee and upon proof of holding as provided in Section 7.2, revoke such action so far as concerns such Debenture (or so far as concerns the principal amount represented by any exchanged or substituted Debenture). Except as aforesaid any such action taken by the holder of any Debenture shall be conclusive and binding upon such holder and upon all future holders and owners of such Debenture, and of any Debenture issued in exchange or substitution therefor or on registration of transfer thereof, irrespective of whether or not any notation in regard thereto is made upon such Debenture or any Debenture issued in exchange or substitution therefor.

ARTICLE VIII.
SECURITYHOLDERS’ MEETINGS

          Section 8.1.      Purposes of Meetings. A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article VIII for any of the following purposes:

          (a)           to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article V;

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          (b)          to remove the Trustee and nominate a successor trustee to the provisions of Article VI;

          (c)          to consent to the execution of an indenture or indenture supplement hereto pursuant to the provisions of Section 9.2; or

          (d)           to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of such Debentures under any other provision of this Indenture or under applicable law.

          Section 8.2.      Call of Meetings by Trustee. The Trustee may at any time call a meeting of Securityholders to take any action specified in Section 8.1, to be held at such time and at such place as the Trustee shall determine. Notice of every meeting of the Securityholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to holders of Debentures affected at their addresses as they shall appear on the Debentures Register and, if the Company is not a holder of Debentures, to the Company.  Such notice shall be mailed not less than 20 nor more than 180 days prior to the date fixed for the meeting.

          Section 8.3.      Call of Meetings by Company or Securityholders. In case at any time the Company pursuant to a Board Resolution, or the holders of at least 10% in aggregate principal amount of the Debentures, as the case may be, then outstanding, shall have requested the Trustee to call a meeting of Securityholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Company or such Securityholders may determine the time and the place for such meeting and may call such meeting to take any action authorized in Section 8.1, by mailing notice thereof as provided in Section 8.2.

          Section 8.4.      Qualifications for Voting. To be entitled to vote at any meeting of Securityholders a Person shall (a) be a holder of one or more Debentures with respect to which the meeting is being held or (b) a Person appointed by an instrument in writing as proxy by a holder of one or more such Debentures.  The only Persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.

          Section 8.5.      Regulations. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in regard to proof of the holding of Debentures and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit.

          The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Securityholders as provided in Section 8.3, in which case the Company or the Securityholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman.  A permanent chairman and a permanent secretary of the meeting shall be elected by majority vote of the meeting.

          Subject to the provisions of Section 7.4, at any meeting each holder of Debentures with respect to which such meeting is being held or proxy therefor shall be entitled to one vote for each $1,000.00 principal amount of Debentures held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Debenture challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding.  The chairman of the meeting shall have no right to vote

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other than by virtue of Debentures held by him or instruments in writing as aforesaid duly designating him as the Person to vote on behalf of other Securityholders.  Any meeting of Securityholders duly called pursuant to the provisions of Section 8.2 or 8.3 may be adjourned from time to time by a majority of those present, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice.

          Section 8.6.      Voting. The vote upon any resolution submitted to any meeting of holders of Debentures with respect to which such meeting is being held shall be by written ballots on which shall be subscribed the signatures of such holders or of their representatives by proxy and the serial number or numbers of the Debentures held or represented by them.  The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting.  A record in duplicate of the proceedings of each meeting of Securityholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 8.2. The record shall show the serial numbers of the Debentures voting in favor of or against any resolution.  The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting.

          Any record so signed and verified shall be conclusive evidence of the matters therein stated.

          Section 8.7.      Quorum; Actions. The Persons entitled to vote a majority in principal amount of the Debentures then outstanding shall constitute a quorum for a meeting of Securityholders; provided, however, that if any action is to be taken at such meeting with respect to a consent, waiver, request, demand, notice, authorization, direction or other action which may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding, the Persons holding or representing such specified percentage in principal amount of the Debentures then outstanding will constitute a quorum.  In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Securityholders, be dissolved.  In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such meeting.  In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such adjourned meeting.  Notice of the reconvening of any adjourned meeting shall be given as provided in Section 8.2, except that such notice need be given only once not less than 5 days prior to the date on which the meeting is scheduled to be reconvened.  Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Debentures then outstanding which shall constitute a quorum.

          Except as limited by the provisos in the first paragraph of Section 9.2, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the holders of a majority in principal amount of the Debentures then outstanding; provided, however, that, except as limited by the provisos in the first paragraph of Section 9.2, any resolution with respect to any consent, waiver, request, demand, notice, authorization, direction or other action which this Indenture expressly provides may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid only by the affirmative vote of the holders of a not less than such specified percentage in principal amount of the Debentures then outstanding.

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          Any resolution passed or decision taken at any meeting of holders of Debentures duly held in accordance with this Section shall be binding on all the Securityholders, whether or not present or represented at the meeting.

ARTICLE IX.
SUPPLEMENTAL INDENTURES

          Section 9.1.      Supplemental Indentures without Consent of Securityholders. The Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto, without the consent of the Securityholders, for one or more of the following purposes:

          (a)           to evidence the succession of another Person to the Company, or successive successions, and the assumption by the successor Person of the covenants, agreements and obligations of the Company, pursuant to Article XI hereof;

          (b)           to add to the covenants of the Company such further covenants, restrictions or conditions for the protection of the holders of Debentures as the Board of Directors shall consider to be for the protection of the holders of such Debentures, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions a default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant restriction or condition such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default;

          (c)           to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Indenture; provided that any such action shall not materially adversely affect the interests of the holders of the Debentures;

          (d)           to add to, delete from, or revise the terms of Debentures, including, without limitation, any terms relating to the issuance, exchange, registration or transfer of Debentures, including to provide for transfer procedures and restrictions substantially similar to those applicable to the Capital Securities as required by Section 2.5 (for purposes of assuring that no registration of Debentures is required under the Securities Act); provided, however, that any such action shall not adversely affect the interests of the holders of the Debentures then outstanding (it being understood, for purposes of this proviso, that transfer restrictions on Debentures substantially similar to those that were applicable to Capital Securities shall not be deemed to materially adversely affect the holders of the Debentures);

          (e)           to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Debentures and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee;

          (f)           to make any change (other than as elsewhere provided in this paragraph) that does not adversely affect the rights of any Securityholder in any material respect; or

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          (g)           to provide for the issuance of and establish the form and terms and conditions of the Debentures, to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or the Debentures, or to add to the rights of the holders of Debentures.

          The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Trustee shall not be obligated to, but may in its discretion, enter into any such supplemental indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

          Any supplemental indenture authorized by the provisions of this Section 9.1 may be executed by the Company and the Trustee without the consent of the holders of any of the Debentures at the time outstanding, notwithstanding any of the provisions of Section 9.2.

          Section 9.2.     Supplemental Indentures with Consent of Securityholders. With the consent (evidenced as provided in Section 7.1) of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding affected by such supplemental indenture (voting as a class), the Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided, however, that no such supplemental indenture shall without the consent of the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debentures, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of which are required to consent to any such supplemental indenture; provided further, however, that if the Debentures are held by a trust or a trustee of such trust, such supplemental indenture shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities shall have consented to such supplemental indenture; provided further, however, that if the consent of the Securityholder of each outstanding Debenture is required, such supplemental indenture shall not be effective until each holder of the Trust Securities shall have consented to such supplemental indenture.

          Upon the request of the Company accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Securityholders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture.

          Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Trustee shall transmit by mail, first class postage prepaid, a notice, prepared by the Company, setting forth in general terms the substance of such supplemental indenture, to the Securityholders as their names and addresses appear upon the Debenture Register.  Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

          It shall not be necessary for the consent of the Securityholders under this Section 9.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.

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          Section 9.3.      Effect of Supplemental Indentures. Upon the execution of any supplemental indenture pursuant to the provisions of this Article IX, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the holders of Debentures shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

          Section 9.4.      Notation on Debentures. Debentures authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article IX may bear a notation as to any matter provided for in such supplemental indenture.  If the Company or the Trustee shall so determine, new Debentures so modified as to conform, in the opinion of the Board of Directors of the Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared and executed by the Company, authenticated by the Trustee or the Authenticating Agent and delivered in exchange for the Debentures then outstanding.

          Section 9.5.      Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall, in addition to the documents required by Section 14.6, receive an Officers’ Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article IX.  The Trustee shall receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article IX is authorized or permitted by, and conforms to, the terms of this Article IX and that it is proper for the Trustee under the provisions of this Article IX to join in the execution thereof.

ARTICLE X.
REDEMPTION OF SECURITIES

          Section 10.1.      Optional Redemption. The Company shall have the right (subject to the receipt by the Company of prior approval (i) if the Company is a bank holding company, from the Federal Reserve, if then required under applicable capital guidelines or policies of the Federal Reserve or (ii) if the Company is a savings and loan holding company, from the OTS, if then required under applicable capital guidelines or policies of the OTS) to redeem the Debentures, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000.00, on any Interest Payment Date on or after the Interest Payment Date in December 2009 (the “Redemption Date”), at the Redemption Price.

          Section 10.2.      Special Event Redemption. If a Special Event shall occur and be continuing, the Company shall have the right (subject to the receipt by the Company of prior approval (i) if the Company is a bank holding company, from the Federal Reserve, if then required under applicable capital guidelines or policies of the Federal Reserve or (ii) if the Company is a savings and loan holding company, from the OTS, if then required under applicable capital guidelines or policies of the OTS) to redeem the Debentures in whole, but not in part, at any Interest Payment Date, within 120 days following the occurrence of such Special Event (the “Special Redemption Date”) at the Special Redemption Price.

          Section 10.3.      Notice of Redemption; Selection of Debentures. In case the Company shall desire to exercise the right to redeem all, or, as the case may be, any part of the Debentures, it shall cause to be mailed a notice of such redemption at least 30 and not more than 60 days prior to the Redemption Date or the Special Redemption Date to the holders of Debentures so to be redeemed as a whole or in part at their last addresses as the same appear on the Debenture Register.  Such mailing shall be by first class mail. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives such notice.  In any case, failure to give such notice by mail or any defect in the notice to the holder of any Debenture designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Debenture.

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          Each such notice of redemption shall specify the CUSIP number, if any, of the Debentures to be redeemed, the Redemption Date or the Special Redemption Date, as applicable, the Redemption Price or the Special Redemption Price, as applicable, at which Debentures are to be redeemed, the place or places of payment, that payment will be made upon presentation and surrender of such Debentures, that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue.  If less than all the Debentures are to be redeemed the notice of redemption shall specify the numbers of the Debentures to be redeemed.  In case the Debentures are to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Debenture, a new Debenture or Debentures in principal amount equal to the unredeemed portion thereof will be issued.

          Prior to 10:00 a.m. New York City time on the Redemption Date or Special Redemption Date, as applicable, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the Redemption Date or the Special Redemption Date, as applicable, all the Debentures so called for redemption at the appropriate Redemption Price or Special Redemption Price.

          If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date or Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be redeemed.

          Section 10.4.     Payment of Debentures Called for Redemption. If notice of redemption has been given as provided in Section 10.3, the Debentures or portions of Debentures with respect to which such notice has been given shall become due and payable on the Redemption Date or Special Redemption Date, as applicable, and at the place or places stated in such notice at the applicable Redemption Price or Special Redemption Price and on and after said date (unless the Company shall default in the payment of such Debentures at the Redemption Price or Special Redemption Price, as applicable) interest on the Debentures or portions of Debentures so called for redemption shall cease to accrue. On presentation and surrender of such Debentures at a place of payment specified in said notice, such Debentures or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price or Special Redemption Price.

          Upon presentation of any Debenture redeemed in part only, the Company shall execute and the Trustee shall authenticate and make available for delivery to the holder thereof, at the expense of the Company, a new Debenture or Debentures of authorized denominations, in principal amount equal to the unredeemed portion of the Debenture so presented.

ARTICLE XI.
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

          Section 11.1.      Company May Consolidate, etc., on Certain Terms. Nothing contained in this Indenture or in the Debentures shall prevent any consolidation or merger of the Company with or into any other Person (whether or not affiliated with the Company) or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property of the Company or its successor or successors as an entirety, or substantially as an entirety, to any other Person (whether or not affiliated with the

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Company, or its successor or successors) authorized to acquire and operate the same; provided, however, that the Company hereby covenants and agrees that, upon any such consolidation, merger (where the Company is not the surviving corporation), sale, conveyance, transfer or other disposition, the due and punctual payment of the principal of (and premium, if any) and interest on all of the Debentures in accordance with their terms, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Company, shall be expressly assumed by supplemental indenture satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which the Company shall have been merged, or by the entity which shall have acquired such property.

          Section 11.2.      Successor Entity to be Substituted. In case of any such consolidation, merger, sale, conveyance, transfer or other disposition and upon the assumption by the successor entity, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and premium, if any, and interest on all of the Debentures and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company, such successor entity shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the Company, and thereupon the predecessor entity shall be relieved of any further liability or obligation hereunder or upon the Debentures. Such successor entity thereupon may cause to be signed, and may issue in its own name, any or all of the Debentures issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee or the Authenticating Agent; and, upon the order of such successor entity instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee or the Authenticating Agent shall authenticate and deliver any Debentures which previously shall have been signed and delivered by the officers of the Company, to the Trustee or the Authenticating Agent for authentication, and any Debentures which such successor entity thereafter shall cause to be signed and delivered to the Trustee or the Authenticating Agent for that purpose.  All the Debentures so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debentures theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Debentures had been issued at the date of the execution hereof.

          Section 11.3.      Opinion of Counsel to be Given to Trustee. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall receive, in addition to the Opinion of Counsel required by Section 9.5, an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale, conveyance, transfer or other disposition, and any assumption, permitted or required by the terms of this Article XI complies with the provisions of this Article XI.

ARTICLE XII.
SATISFACTION AND DISCHARGE OF INDENTURE

          Section 12.1.      Discharge of Indenture. When

(a)

the Company shall deliver to the Trustee for cancellation all Debentures theretofore authenticated (other than any Debentures which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.6) and not  theretofore canceled, or

(b)

all the Debentures not theretofore canceled or delivered to the Trustee for cancellation  shall have become due and payable, or are by their terms to become due and payable within 1 year or are to be called for redemption within 1 year under arrangements  satisfactory to the Trustee for the giving of notice of redemption, and the Company shall  deposit with the Trustee, in trust, funds, which shall be immediately due and payable,  sufficient to pay at maturity or upon redemption all of the Debentures (other than any

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Debentures which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.6) not theretofore canceled or delivered to the Trustee for cancellation, including principal and premium, if any, and interest due or to become due to such date of maturity or redemption date, as the case may be, but excluding, however, the amount of any moneys for the payment of principal of, and premium, if any, or interest on the Debentures (1) theretofore repaid to the Company in accordance with the provisions of Section 12.4, or (2) paid to any state or to the District of Columbia pursuant to its unclaimed property or similar laws,

and if in the case of either clause (a) or clause (b) the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect except for the provisions of Sections 2.5, 2.6, 2.8, 3.1, 3.2, 3.4, 6.6, 6.8, 6.9 and 12.4 hereof shall survive until such Debentures shall mature and be paid.  Thereafter, Sections 6.6 and 12.4 shall survive, and the Trustee, on demand of the Company accompanied by an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with, and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture.  The Company agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee in connection with this Indenture or the Debentures.

          Section 12.2.      Deposited Moneys to be Held in Trust by Trustee. Subject to the provisions of Section 12.4, all moneys deposited with the Trustee pursuant to Section 12.1 shall be held in trust in a non-interest bearing account and applied by it to the payment, either directly or through any paying agent (including the Company if acting as its own paying agent), to the holders of the particular Debentures for the payment of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal, and premium, if any, and interest.

          Section 12.3.      Paying Agent to Repay Moneys Held. Upon the satisfaction and discharge of this Indenture all moneys then held by any paying agent of the Debentures (other than the Trustee) shall, upon demand of the Company, be repaid to it or paid to the Trustee, and thereupon such paying agent shall be released from all further liability with respect to such moneys.

          Section 12.4.      Return of Unclaimed Moneys. Any moneys deposited with or paid to the Trustee or any paying agent for payment of the principal of, and premium, if any, or interest on Debentures and not applied but remaining unclaimed by the holders of Debentures for 2 years after the date upon which the principal of, and premium, if any, or interest on such Debentures, as the case may be, shall have become due and payable, shall, subject to applicable escheatment laws, be repaid to the Company by the Trustee or such paying agent on written demand; and the holder of any of the Debentures shall thereafter look only to the Company for any payment which such holder may be entitled to collect, and all liability of the Trustee or such paying agent with respect to such moneys shall thereupon cease.

ARTICLE XIII.
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS

          Section 13.1.      Indenture and Debentures Solely Corporate Obligations. No recourse for the payment of the principal of or premium, if any, or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture, or in any such Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Company or of any successor Person of the Company, either directly or through the Company or any successor Person of the

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Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Debentures.

ARTICLE XIV.
MISCELLANEOUS PROVISIONS

          Section 14.1.      Successors. All the covenants, stipulations, promises and agreements of the Company in this Indenture shall bind its successors and assigns whether so expressed or not.

          Section 14.2.      Official Acts by Successor Entity. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee, officer or other authorized Person of any entity that shall at the time be the lawful successor of the Company.

          Section 14.3.      Surrender of Company Powers. The Company by instrument in writing executed by authority of at least 2/3 (two-thirds) of its Board of Directors and delivered to the Trustee may surrender any of the powers reserved to the Company and thereupon such power so surrendered shall terminate both as to the Company, and as to any permitted successor.

          Section 14.4.      Addresses for Notices, etc. Any notice, consent, direction, request, authorization, waiver or demand which by any provision of this Indenture is required or permitted to be given, made, furnished or served by the Trustee or by the Securityholders on or to the Company may be given or served in writing by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until another address is filed by the Company, with the Trustee for the purpose) to the Company, 150 North Meramec Avenue, Suite 300, St. Louis, Missouri  63105, Attention: Frank Sanfilippo.  Any notice, consent, direction, request, authorization, waiver or demand by any Securityholder or the Company to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the office of the Trustee, addressed to the Trustee, Rodney Square North, 1100 North Market Street, Wilmington, Delaware  19890-1600, Attention: Corporate Trust Administration.  Any notice, consent, direction, request, authorization, waiver or demand on or to any Securityholder shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the address set forth in the Debenture Register.

          Section 14.5.      Governing Law. This Indenture and each Debenture shall be deemed to be a contract made under the law of the State of New York, and for all purposes shall be governed by and construed in accordance with the law of said State, without regard to conflict of laws principles thereof.

          Section 14.6.      Evidence of Compliance with Conditions Precedent. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers’ Certificate stating that in the opinion of the signers all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

          Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such

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person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not in the opinion of such person, such condition or covenant has been complied with.

          Section 14.7.      Table of Contents, Headings, etc. The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

          Section 14.8.      Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.

          Section 14.9.      Separability. In case any one or more of the provisions contained in this Indenture or in the Debentures shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of such Debentures, but this Indenture and such Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.

          Section 14.10.      Assignment. The Company will have the right at all times to assign any of its rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Company, provided that, in the event of any such assignment, the Company will remain liable for all such obligations.  Subject to the foregoing, this Indenture is binding upon and inures to the benefit of the parties hereto and their respective successors and assigns.  This Indenture may not otherwise be assigned by the parties hereto.

          Section 14.11.      Acknowledgment of Rights. The Company agrees that, with respect to any Debentures held by the Trust or the Institutional Trustee of the Trust, if the Institutional Trustee of the Trust fails to enforce its rights under this Indenture as the holder of Debentures held as the assets of such Trust after the holders of a majority in Liquidation Amount of the Capital Securities of such Trust have so directed such Institutional Trustee, a holder of record of such Capital Securities may, to the fullest extent permitted by law, institute legal proceedings directly against the Company to enforce such Institutional Trustee’s rights under this Indenture without first instituting any legal proceedings against such trustee or any other Person.  Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest (or premium, if any) or principal on the Debentures on the date such interest (or premium, if any) or principal is otherwise payable (or in the case of redemption, on the redemption date), the Company agrees that a holder of record of Capital Securities of the Trust may directly institute a proceeding against the Company for enforcement of payment to such holder directly of the principal of (or premium, if any) or interest on the Debentures having an aggregate principal amount equal to the aggregate Liquidation Amount of the Capital Securities of such holder on or after the respective due date specified in the Debentures.

ARTICLE XV.
SUBORDINATION OF DEBENTURES

          Section 15.1.      Agreement to Subordinate. The Company covenants and agrees, and each holder of Debentures by such Securityholder’s acceptance thereof likewise covenants and agrees, that all Debentures shall be issued subject to the provisions of this Article XV; and each holder of a Debenture, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions.

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          The payment by the Company of the principal of, and premium, if any, and interest on all Debentures shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company, whether outstanding at the date of this Indenture or thereafter incurred; provided, however, that the Debentures shall rank pari passu in right of payment with the Company’s Junior Subordinated Debentures due December 15, 2029 issued pursuant to an Indenture dated as of October 25, 1999 by and between the Company and Wilmington Trust Company; the Company’s Junior Subordinated Debentures due June 30, 2032 issued pursuant to an Indenture dated as of June 28, 2002 by and between the Company and Wells Fargo; and the Company’s Junior Subordinated Deferrable Interest Debentures due June 17, 2034 issued pursuant to an Indenture dated as of May 11, 2004 by and between the Company and Wilmington Trust Company.

          No provision of this Article XV shall prevent the occurrence of any default or Event of Default hereunder.

          Section 15.2.      Default on Senior Indebtedness. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company following any grace period, or in the event that the maturity of any Senior Indebtedness of the Company has been accelerated because of a default and such acceleration has not been rescinded or canceled and such Senior Indebtedness has not been paid in full, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption) of, or premium, if any, or interest on the Debentures.

          In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraph of this Section 15.2, such payment shall, subject to Section 15.7, be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee in writing within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness.

          Section 15.3.      Liquidation, Dissolution, Bankruptcy. Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company, on account of the principal (and premium, if any) or interest on the Debentures.  Upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Securityholders or the Trustee would be entitled to receive from the Company, except for the provisions of this Article XV, shall be paid by the Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Securityholders or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money’s worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Securityholders or to the Trustee.

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          In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Senior Indebtedness is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness.

          For purposes of this Article XV, the words “cash, property or securities” shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article XV with respect to the Debentures to the payment of all Senior Indebtedness, that may at the time be outstanding, provided that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment.  The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article XI of this Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article XI of this Indenture.  Nothing in Section 15.2 or in this Section shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6 of this Indenture.

          Section 15.4.      Subrogation. Subject to the payment in full of all Senior Indebtedness, the Securityholders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company, applicable to such Senior Indebtedness until the principal of (and premium, if any) and interest on the Debentures shall be paid in full. For the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Securityholders or the Trustee would be entitled except for the provisions of this Article XV, and no payment over pursuant to the provisions of this Article XV to or for the benefit of the holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness of the Company, and the holders of the Debentures be deemed to be a payment or distribution by the Company to or on account of such Senior Indebtedness.  It is understood that the provisions of this Article XV are and are intended solely for the purposes of defining the relative rights of the holders of the Securities, on the one hand, and the holders of such Senior Indebtedness, on the other hand.

          Nothing contained in this Article XV or elsewhere in this Indenture or in the Debentures is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the holders of the Debentures, the obligation of the Company, which is absolute and unconditional, to pay to the holders of the Debentures the principal of (and premium, if any) and interest on the Debentures as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Debentures and creditors of the Company, other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XV of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company, received upon the exercise of any such remedy.

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          Upon any payment or distribution of assets of the Company referred to in this Article XV, the Trustee, subject to the provisions of Article VI of this Indenture, and the Securityholders shall be entitled to conclusively rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Securityholders, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XV.

          Section 15.5.      Trustee to Effectuate Subordination. Each Securityholder by such Securityholder’s acceptance thereof authorizes and directs the Trustee on such Securityholder’s behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article XV and appoints the Trustee such Securityholder’s attorney-in-fact for any and all such purposes.

          Section 15.6.      Notice by the Company. The Company shall give prompt written notice to a Responsible Officer of the Trustee at the Principal Office of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV.  Notwithstanding the provisions of this Article XV or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV, unless and until a Responsible Officer of the Trustee at the Principal Office of the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least 2 Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Debenture), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within 2 Business Days prior to such date.

          The Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled to conclusively rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee or representative on behalf of such holder), to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee or representative on behalf of any such holder or holders.  In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article XV, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XV, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.

          Section 15.7.      Rights of the Trustee; Holders of Senior Indebtedness. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XV in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder.

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          With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XV, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Trustee.  The Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Article VI of this Indenture, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to Securityholders, the Company or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article XV or otherwise.

          Nothing in this Article XV shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6.

          Section 15.8.      Subordination May Not Be Impaired. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with.

          Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Securityholders, without incurring responsibility to the Securityholders and without impairing or releasing the subordination provided in this Article XV or the obligations hereunder of the holders of the Debentures to the holders of such Senior Indebtedness, do any one or more of the following:  (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company, and any other Person.

Signatures appear on the following page

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          IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written.

ENTERPRISE FINANCIAL SERVICES CORP.
By	Signatory name and title not clear
Name:
Title:	CFO
WILMINGTON TRUST COMPANY, as Trustee
By
Name:
Title:

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          IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written.

ENTERPRISE FINANCIAL SERVICES CORP.
By
Name:
Title:
WILMINGTON TRUST COMPANY, as Trustee
By	Signatory name and title not clear
Name:
Title:

49

EXHIBIT A

FORM OF FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE

[FORM OF FACE OF SECURITY]

          THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION.

          THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW.  NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.  THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.

          THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY

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SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING.  ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

          THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF.  ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

          THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

          IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

Floating Rate Junior Subordinated Deferrable Interest Debenture

of

Enterprise Financial Services Corp.

December 13, 2004

          Enterprise Financial Services Corp., a Delaware corporation (the “Company” which term includes any successor Person under the Indenture hereinafter referred to), for value received promises to pay to Wilmington Trust Company, not in its individual capacity but solely as Institutional Trustee for EFSC Statutory Trust III (the “Holder”) or registered assigns, the principal sum of eleven million three hundred forty-one thousand dollars ($11,341,000.00) on December 15, 2034, and to pay interest on said principal sum from December 13, 2004, or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 15, June 15, September 15 and December 15 of each year or if such day is not a Business Day, then the next succeeding Business Day (each such date, an “Interest Payment Date”) (it being understood that interest accrues for any such non-Business Day), commencing on the Interest Payment Date in March 2005, at an annual rate equal to 4.42% beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in March 2005 and at an annual rate for each successive period beginning on (and including) the Interest Payment Date in March 2005, and each succeeding Interest Payment Date, and ending on (but excluding) the next succeeding Interest Payment Date (each a “Distribution Period”), equal to 3-Month LIBOR, determined as described below, plus 1.97% (the “Coupon Rate”), applied to the principal amount hereof, until the principal hereof is paid or duly provided for or made available for payment, and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any

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overdue installment of interest (including Additional Interest) at the Interest Rate in effect for each applicable period, compounded quarterly, from the dates such amounts are due until they are paid or made available for payment.  The amount of interest payable for any period will be computed on the basis of the actual number of days in the Distribution Period concerned divided by 360. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment, which shall be five Business Days prior to the day on which the relevant Interest Payment Date occurs.  Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such regular record date and may be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on a special record date.

          “3-Month LIBOR” as used herein, means the London interbank offered interest rate for three-month U.S. dollar deposits determined by the Trustee in the following order of priority:  (i) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (“Telerate Page 3750” means the display designated as “Page 3750” on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits); (ii) if such rate cannot be identified on the related Determination Date, the Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks’ offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date.  If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are provided as requested in clause (ii) above, the Trustee will request four major New York City banks to provide such banks’ offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.  If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period.  If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date.  As used herein, “Determination Date” means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period.

          The Interest Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.

          All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).

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          The principal of and interest on this Debenture shall be payable at the office or agency of the Trustee (or other paying agent appointed by the Company) maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made by check mailed to the registered holder at such address as shall appear in the Debenture Register if a request for a wire transfer by such holder has not been received by the Company or by wire transfer to an account appropriately designated by the holder hereof.  Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Trustee.

          So long as no Extension Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an “Extension Period”), during which Extension Period no interest (including Additional Interest) shall be due and payable (except any Additional Sums that may be due and payable).  No Extension Period may end on a date other than an Interest Payment Date.  During an Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Interest Rate in effect for such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as “Additional Interest”).  At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date; provided further, however, that during any such Extension Period, the Company shall not and shall not permit any Affiliate to engage in any of the activities or transactions described on the reverse side hereof and in the Indenture.  Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date.  Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements.  No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest.  The Company must give the Trustee notice of its election to begin or extend an Extension Period by the close of business at least 5 Business Days prior to the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend such Extension Period.

          The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto.  Each holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes.  Each holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions.

          This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by or on behalf of the Trustee.

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The provisions of this Debenture are continued on the reverse side hereof and such provisions shall for all purposes have the same effect as though fully set forth at this place.

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IN WITNESS WHEREOF, the Company has duly executed this certificate.

ENTERPRISE FINANCIAL SERVICES CORP.

By

Name:

Title:

CERTIFICATE OF AUTHENTICATION

This is one of the Debentures referred to in the within-mentioned Indenture.

WILMINGTON TRUST COMPANY, as Trustee
By:
	Authorized Officer

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[FORM OF REVERSE OF DEBENTURE]

          This Debenture is one of the floating rate junior subordinated deferrable interest debentures of the Company, all issued or to be issued under and pursuant to the Indenture dated as of December 13, 2004 (the “Indenture”), duly executed and delivered between the Company and the Trustee, to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debentures.  The Debentures are limited in aggregate principal amount as specified in the Indenture.

          Upon the occurrence and continuation of a Special Event prior to the Interest Payment Date in December 2009, the Company shall have the right to redeem the Debentures in whole, but not in part, at any Interest Payment Date, within 120 days following the occurrence of such Special Event, at the Special Redemption Price.

          In addition, the Company shall have the right to redeem the Debentures, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000.00, on any Interest Payment Date on or after the Interest Payment Date in December 2009, at the Redemption Price.

          Prior to 10:00 a.m. New York City time on the Redemption Date or Special Redemption Date, as applicable, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the Redemption Date or the Special Redemption Date, as applicable, all the Debentures so called for redemption at the appropriate Redemption Price or Special Redemption Price.

          If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date or Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be redeemed.

          Notwithstanding the foregoing, any redemption of Debentures by the Company shall be subject to the receipt of any and all required regulatory approvals.

          In case an Event of Default described in Section 5.1(a), (d) or (e) of the Indenture shall have occurred and be continuing, upon demand of the Trustee, the principal of all of the Debentures shall become due and payable in the manner, with the effect and subject to the conditions provided in the Indenture.

          The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided, however, that no such supplemental indenture shall without the consent of the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debentures, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of which are required to consent to any such supplemental indenture.

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          The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Debentures at the time outstanding on behalf of the holders of all of the Debentures to waive (or modify any previously granted waiver of) any past default or Event of Default, and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debentures, (b) in respect of covenants or provisions hereof or of the Indenture which cannot be modified or amended without the consent of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section 3.9 of the Indenture; provided, however, that if the Debentures are held by the Trust or a trustee of such trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver, provided, further, that if the consent of the holder of each outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver.  Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of the Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.  Whenever any default or Event of Default hereunder shall have been waived as permitted by the Indenture, said default or Event of Default shall for all purposes of the Debentures and the Indenture be deemed to have been cured and to be not continuing.

          No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest, including Additional Interest, on this Debenture at the time and place and at the rate and in the money herein prescribed.

          The Company has agreed that if Debentures are initially issued to the Trust or a trustee of such Trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debentures continue to be held by such Trust) and (i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on the Debentures by extending the interest payment period as provided herein and such Extension Period, or any extension thereof, shall be continuing, then the Company shall not, and shall not allow any Affiliate of the Company to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s capital stock or its Affiliates’ capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above,  (1) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, if any, (2) as a result of any exchange or conversion of any class or series of the Company’s capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company’s capital stock or of any class or series of the Company’s indebtedness for any class or series of the Company’s capital stock, (3) the purchase of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (4) any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant thereto, (5) any dividend in the form of stock, warrants, options or other rights where the

A-8

dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (6) payments under the Capital Securities Guarantee).

          The Debentures are issuable only in registered, certificated form without coupons and in minimum denominations of $100,000.00 and any multiple of $1,000.00 in excess thereof.  As provided in the Indenture and subject to the transfer restrictions and limitations as may be contained herein and therein from time to time, this Debenture is transferable by the holder hereof on the Debenture Register of the Company.  Upon due presentment for registration of transfer of any Debenture at the Principal Office of the Trustee or at any office or agency of the Company maintained for such purpose as provided in Section 3.2 of the Indenture, the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in the name of the transferee or transferees a new Debenture for a like aggregate principal amount.  All Debentures presented for registration of transfer or for exchange or payment shall (if so required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to, the Company and the Trustee or the Authenticating Agent duly executed by the holder or his attorney duly authorized in writing.  No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith.

          Prior to due presentment for registration of transfer of any Debenture, the Company, the Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Debenture registrar may deem the Person in whose name such Debenture shall be registered upon the Debenture Register to be, and may treat him as, the absolute owner of such Debenture (whether or not such Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture registrar shall be affected by any notice to the contrary.  All such payments so made to any holder for the time being or upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debenture.

          No recourse for the payment of the principal of or premium, if any, or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or in any supplemental indenture, or in any such Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Company or of any successor Person of the Company, either directly or through the Company or any successor Person of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of the Indenture and the issue of the Debentures.

          Capitalized terms used and not defined in this Debenture shall have the meanings assigned in the Indenture dated as of the date of original issuance of this Debenture between the Trustee and the Company.

          THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF.

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FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE

          THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION.

          THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.

          THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE

IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WELL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

          THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

          THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

          IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

Floating Rate Junior Subordinated Deferrable Interest Debenture

of

Enterprise Financial Services Corp.

December 13, 2004

          Enterprise Financial Services Corp., a Delaware corporation (the “Company” which term includes any successor Person under the Indenture hereinafter referred to), for value received promises to pay to Wilmington Trust Company, not in its individual capacity but solely as Institutional Trustee for EFSC Statutory Trust III (the “Holder”) or registered assigns, the principal sum of eleven million three hundred forty-one thousand dollars ($11,341,000.00) on December 15, 2034, and to pay interest on said principal sum from December 13, 2004, or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 15, June 15, September 15 and December 15 of each year or if such day is not a Business Day, then the next succeeding Business Day (each such date, an “Interest Payment Date”) (it being understood that interest accrues for any such non-Business Day), commencing on the Interest Payment Date in March 2005, at an annual rate equal to 4.42% beginning on (and including) the date of original issuance and ending on (but excluding) the Interest Payment Date in March 2005 and at an annual rate for each successive period beginning on (and including) the Interest Payment Date in March 2005, and each succeeding Interest Payment Date, and ending on (but excluding) the next succeeding Interest Payment Date (each a “Distribution Period”), equal to 3-Month LIBOR, determined as described below, plus 1.97% (the “Coupon Rate”), applied to the principal amount hereof, until the principal hereof is paid or duly provided for or made available for payment, and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest (including Additional Interest) at the Interest Rate in effect for each applicable period, compounded quarterly, from the dates such amounts are due until they are paid or made available for payment. The amount of interest payable for any period will be computed on the basis of the actual number of days in the Distribution Period concerned divided by 360. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the

Indenture, be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment, which shall be five Business Days prior to the day on which the relevant Interest Payment Date occurs. Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such regular record date and may be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on a special record date.

          “3-Month LIBOR” as used herein, means the London interbank offered interest rate for three-month U.S. dollar deposits determined by the Trustee in the following order of priority: (i) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (“Telerate Page 3750” means the display designated as “Page 3750” on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits); (ii) if such rate cannot be identified on the related Determination Date, the Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks’ offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are provided as requested in clause (ii) above, the Trustee will request four major New York City banks to provide such banks’ offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period. If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date. As used herein, “Determination Date” means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period.

          The Interest Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.

          All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).

          The principal of and interest on this Debenture shall be payable at the office or agency of the Trustee (or other paying agent appointed by the Company) maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made by check mailed to the registered holder at such address as shall appear in the Debenture Register if a request for a wire transfer by such holder has not been received by the Company or by wire transfer to an account appropriately designated by the holder hereof. Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Trustee.

          So long as no Extension Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an “Extension Period”), during which Extension Period no interest (including Additional Interest) shall be due and payable (except any Additional Sums that may be due and payable). No Extension Period may end on a date other than an Interest Payment Date. During an Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Interest Rate in effect for such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as “Additional Interest”). At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date; provided further, however, that during any such Extension Period, the Company shall not and shall not permit any Affiliate to engage in any of the activities or transactions described on the reverse side hereof and in the Indenture. Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. The Company must give the Trustee notice of its election to begin or extend an Extension Period by the close of business at least 5 Business Days prior to the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend such Extension Period.

          The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions.

          This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by or on behalf of the Trustee.

          The provisions of this Debenture are continued on the reverse side hereof and such provisions shall for all purposes have the same effect as though fully set forth at this place.

          IN WITNESS WHEREOF, the Company has duly executed this certificate.

ENTERPRISE FINANCIAL SERVICES CORP.
By:	Signatory name and title not clear
Name:
Title:

CERTIFICATE OF AUTHENTICATION

This is one of the Debentures referred to in the within-mentioned Indenture.

WILMINGTON TRUST COMPANY, as Trustee
By:	Signatory name and title not clear
	Authorized Officer

REVERSE OF DEBENTURE

          This Debenture is one of the floating rate junior subordinated deferrable interest debentures of the Company, all issued or to be issued under and pursuant to the Indenture dated as of December 13, 2004 (the “Indenture”), duly executed and delivered between the Company and the Trustee, to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debentures. The Debentures are limited in aggregate principal amount as specified in the Indenture.

          Upon the occurrence and continuation of a Special Event prior to the Interest Payment Date in December 2009, the Company shall have the right to redeem the Debentures in whole, but not in part, at any Interest Payment Date, within 120 days following the occurrence of such Special Event, at the Special Redemption Price.

          In addition, the Company shall have the right to redeem the Debentures, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000.00, on any Interest Payment Date on or after the Interest Payment Date in December 2009, at the Redemption Price.

          Prior to 10:00 a.m. New York City time on the Redemption Date or Special Redemption Date, as applicable, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the Redemption Date or the Special Redemption Date, as applicable, all the Debentures so called for redemption at the appropriate Redemption Price or Special Redemption Price.

          If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date or Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debentures or portions thereof (in integral multiples of $1 ,000.00) to be redeemed.

          Notwithstanding the foregoing, any redemption of Debentures by the Company shall be subject to the receipt of any and all required regulatory approvals.

          In case an Event of Default described in Section 5.1(a), (d) or (e) of the Indenture shall have occurred and be continuing, upon demand of the Trustee, the principal of all of the Debentures shall become due and payable in the manner, with the effect and subject to the conditions provided in the Indenture.

          The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided, however, that no such supplemental indenture shall without the consent of the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debentures, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of which are required to consent to any such supplemental indenture.

          The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Debentures at the time outstanding on behalf of the holders of all of the Debentures to waive (or modify any previously granted waiver of) any past default or Event of Default, and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debentures, (b) in respect of covenants or provisions hereof or of the Indenture which cannot be modified or amended without the consent of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section 3.9 of the Indenture; provided, however, that if the Debentures are held by the Trust or a trustee of such trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver, provided, further, that if the consent of the holder of each outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of the Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by the Indenture, said default or Event of Default shall for all purposes of the Debentures and the Indenture be deemed to have been cured and to be not continuing.

          No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest, including Additional Interest, on this Debenture at the time and place and at the rate and in the money herein prescribed.

          The Company has agreed that if Debentures are initially issued to the Trust or a trustee of such Trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debentures continue to be held by such Trust) and (i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on the Debentures by extending the interest payment period as provided herein and such Extension Period, or any extension thereof, shall be continuing, then the Company shall not, and shall not allow any Affiliate of the Company to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s capital stock or its Affiliates’ capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest

or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (1) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, if any, (2) as a result of any exchange or conversion of any class or series of the Company’s capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company’s capital stock or of any class or series of the Company’s indebtedness for any class or series of the Company’s capital stock, (3) the purchase of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (4) any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant thereto, (5) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (6) payments under the Capital Securities Guarantee).

          The Debentures are issuable only in registered, certificated form without coupons and in minimum denominations of $100,000.00 and any multiple of $1,000.00 in excess thereof. As provided in the Indenture and subject to the transfer restrictions and limitations as may be contained herein and therein from time to time, this Debenture is transferable by the holder hereof on the Debenture Register of the Company. Upon due presentment for registration of transfer of any Debenture at the Principal Office of the Trustee or at any office or agency of the Company maintained for such purpose as provided in Section 3.2 of the Indenture, the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in the name of the transferee or transferees a new Debenture for a like aggregate principal amount. All Debentures presented for registration of transfer or for exchange or payment shall (if so required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to, the Company and the Trustee or the Authenticating Agent duly executed by the holder or his attorney duly authorized in writing. No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith.

          Prior to due presentment for registration of transfer of any Debenture, the Company, the Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Debenture registrar may deem the Person in whose name such Debenture shall be registered upon the Debenture Register to be, and may treat him as, the absolute owner of such Debenture (whether or not such Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debenture.

          No recourse for the payment of the principal of or premium, if any, or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or in any supplemental indenture, or in any such Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Company or of any successor Person of the Company, either directly or through the Company or any successor Person of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of the Indenture and the issue of the Debentures.

          Capitalized terms used and not defined in this Debenture shall have the meanings assigned in the Indenture dated as of the date of original issuance of this Debenture between the Trustee and the Company.

          THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF.

EX-4.9.3

AMENDED AND RESTATED DECLARATION
OF TRUST

by and among

WILMINGTON TRUST COMPANY,
as Delaware Trustee,

WILMINGTON TRUST COMPANY,
as Institutional Trustee,

ENTERPRISE FINANCIAL SERVICES CORP.,
as Sponsor,

and

FRANK SANFILIPPO and DEBORAH BARSTOW,
as Administrators,

Dated as of December 13, 2004

TABLE OF CONTENTS

			Page
ARTICLE I INTERPRETATION AND DEFINITIONS			1
	Section 1.1.	Definitions	1
ARTICLE II ORGANIZATION			7
	Section 2.1.	Name	7
	Section 2.2.	Office	7
	Section 2.3.	Purpose	8
	Section 2.4.	Authority	8
	Section 2.5.	Title to Property of the Trust	8
	Section 2.6.	Powers and Duties of the Trustees and the Administrators	8
	Section 2.7.	Prohibition of Actions by the Trust and the Institutional Trustee	11
	Section 2.8.	Powers and Duties of the Institutional Trustee	12
	Section 2.9.	Certain Duties and Responsibilities of the Trustees and Administrators	13
	Section 2.10.	Certain Rights of Institutional Trustee	15
	Section 2.11.	Delaware Trustee	17
	Section 2.12.	Execution of Documents	17
	Section 2.13.	Not Responsible for Recitals or Issuance of Securities	17
	Section 2.14.	Duration of Trust	17
	Section 2.15.	Mergers	17
ARTICLE III SPONSOR			18
	Section 3.1.	Sponsor’s Purchase of Common Securities	18
	Section 3.2.	Responsibilities of the Sponsor	19
	Section 3.3.	Expenses	19
	Section 3.4.	Right to Proceed	19
ARTICLE IV INSTITUTIONAL TRUSTEE AND ADMINISTRATORS			20
	Section 4.1.	Number of Trustees	20
	Section 4.2.	Delaware Trustee; Eligibility	20
	Section 4.3.	Institutional Trustee; Eligibility	20
	Section 4.4.	Administrators	21
	Section 4.5.	Appointment, Removal and Resignation of Trustees and Administrators	21
	Section 4.6.	Vacancies Among Trustees	22
	Section 4.7.	Effect of Vacancies	22
	Section 4.8.	Meetings of the Trustees and the Administrators	23
	Section 4.9.	Delegation of Power	23
	Section 4.10.	Conversion, Consolidation or Succession to Business	23
ARTICLE V DISTRIBUTIONS			24
	Section 5.1.	Distributions	24
ARTICLE VI ISSUANCE OF SECURITIES			24
	Section 6.1.	General Provisions Regarding Securities	24
	Section 6.2.	Paying Agent, Transfer Agent and Registrar	25
	Section 6.3.	Form and Dating	25
	Section 6.4.	Mutilated, Destroyed, Lost or Stolen Certificates	25
	Section 6.5.	Temporary Securities	26

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	Section 6.6.	Cancellation	26
	Section 6.7.	Rights of Holders; Waivers of Past Defaults	26
ARTICLE VII DISSOLUTION AND TERMINATION OF TRUST			28
	Section 7.1.	Dissolution and Termination of Trust	28
ARTICLE VIII TRANSFER OF INTERESTS			28
	Section 8.1.	General	28
	Section 8.2.	Transfer Procedures and Restrictions	29
	Section 8.3.	Deemed Security Holders	31
ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS			31
	Section 9.1.	Liability	31
	Section 9.2.	Exculpation	32
	Section 9.3.	Fiduciary Duty	32
	Section 9.4.	Indemnification	33
	Section 9.5.	Outside Businesses	35
	Section 9.6.	Compensation; Fee	35
ARTICLE X ACCOUNTING			35
	Section 10.1.	Fiscal Year	35
	Section 10.2.	Certain Accounting Matters	35
	Section 10.3.	Banking	36
	Section 10.4.	Withholding	36
ARTICLE XI AMENDMENTS AND MEETINGS			36
	Section 11.1.	Amendments	36
	Section 11.2.	Meetings of the Holders of Securities; Action by Written Consent	38
ARTICLE XII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND THE DELAWARE TRUSTEE			39
	Section 12.1.	Representations and Warranties of Institutional Trustee	39
	Section 12.2.	Representations of the Delaware Trustee	39
ARTICLE XIII MISCELLANEOUS			40
	Section 13.1.	Notices	40
	Section 13.2.	Governing Law	41
	Section 13.3.	Intention of the Parties	41
	Section 13.4.	Headings	42
	Section 13.5.	Successors and Assigns	42
	Section 13.6.	Partial Enforceability	42
	Section 13.7.	Counterparts	42

Annex I	Terms of Securities
Exhibit A-1	Form of Capital Security Certificate
Exhibit A-2	Form of Common Security Certificate
Exhibit B	Specimen of Initial Debenture
Exhibit C	Placement Agreement

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AMENDED AND RESTATED

DECLARATION OF TRUST

OF

EFSC STATUTORY TRUST III

December 13, 2004

          AMENDED AND RESTATED DECLARATION OF TRUST (“Declaration”) dated and effective as of December 13, 2004, by the Trustees (as defined herein), the Administrators (as defined herein), the Sponsor (as defined herein) and by the holders, from time to time, of undivided beneficial interests in the Trust (as defined herein) to be issued pursuant to this Declaration;

          WHEREAS, the Trustees, the Administrators and the Sponsor established EFSC Statutory Trust III (the “Trust”), a statutory trust under the Statutory Trust Act (as defined herein) pursuant to a Declaration of Trust dated as of November 16, 2004 (the “Original Declaration”), and a Certificate of Trust filed with the Secretary of State of the State of Delaware on November 16, 2004, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain debentures of the Debenture Issuer (as defined herein);

          WHEREAS, as of the date hereof, no interests in the Trust have been issued; and

          WHEREAS, the Trustees, the Administrators and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration;

          NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a statutory trust under the Statutory Trust Act and that this Declaration constitutes the governing instrument of such statutory trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration.  The parties hereto hereby agree as follows:

ARTICLE I

INTERPRETATION AND DEFINITIONS

          Section 1.1.          Definitions.

          Unless the context otherwise requires:

          (a)          Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1;

          (b)          a term defined anywhere in this Declaration has the same meaning throughout;

          (c)          all references to “the Declaration” or “this Declaration” are to this Declaration as modified, supplemented or amended from time to time;

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          (d)          all references in this Declaration to Articles and Sections and Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to this Declaration unless otherwise specified; and

          (e)          a reference to the singular includes the plural and vice versa.

          “Additional Interest” has the meaning set forth in the Indenture.

          “Administrative Action” has the meaning set forth in paragraph 4(a) of Annex I.

          “Administrators” means each of Frank Sanfilippo and Deborah Barstow, solely in such Person’s capacity as Administrator of the Trust created and continued hereunder and not in such Person’s individual capacity, or such Administrator’s successor in interest in such capacity, or any successor appointed as herein provided.

          “Affiliate” has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder.

          “Authorized Officer” of a Person means any Person that is authorized to bind such Person.

          “Bankruptcy Event” means, with respect to any Person:

          (a)          a court having jurisdiction in the premises shall enter a decree or order for relief in respect of such Person in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or

          (b)          such Person shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of such Person of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due.

          “Business Day” means any day other than Saturday, Sunday or any other day on which banking institutions in New York City or Wilmington, Delaware are permitted or required by any applicable law or executive order to close.

          “Capital Securities” has the meaning set forth in paragraph 1(a) of Annex I.

          “Capital Security Certificate” means a definitive Certificate in fully registered form representing a Capital Security substantially in the form of Exhibit A-1.

          “Capital Treatment Event” has the meaning set forth in paragraph 4(a) of Annex I.

          “Certificate” means any certificate evidencing Securities.

          “Closing Date” has the meaning set forth in the Placement Agreement.

          “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation.

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          “Common Securities” has the meaning set forth in paragraph 1(b) of Annex I.

          “Common Security Certificate” means a definitive Certificate in fully registered form representing a Common Security substantially in the form of Exhibit A-2.

          “Company Indemnified Person” means (a) any Administrator; (b) any Affiliate of any Administrator; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Administrator; or (d) any officer, employee or agent of the Trust or its Affiliates.

          “Corporate Trust Office” means the office of the Institutional Trustee at which the corporate trust business of the Institutional Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Declaration is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware  19890-1600, Attn: Corporate Trust Administration.

          “Coupon Rate” has the meaning set forth in paragraph 2(a) of Annex I.

           “Covered Person” means: (a) any Administrator, officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) any of the Trust’s Affiliates; and (b) any Holder of Securities.

           “Creditor” has the meaning set forth in Section 3.3.

           “Debenture Issuer” means Enterprise Financial Services Corp., a Delaware corporation, in its capacity as issuer of the Debentures under the Indenture.

           “Debenture Trustee” means Wilmington Trust Company, as trustee under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee.

           “Debentures” means the Floating Rate Junior Subordinated Deferrable Interest Debentures due 2034 to be issued by the Debenture Issuer under the Indenture.

           “Defaulted Interest” has the meaning set forth in the Indenture.

           “Delaware Trustee” has the meaning set forth in Section 4.2.

           “Determination Date” has the meaning set forth in paragraph 4(a) of Annex I.

           “Direct Action” has the meaning set forth in Section 2.8(d).

           “Distribution” means a distribution payable to Holders of Securities in accordance with Section 5.1.

           “Distribution Payment Date” has the meaning set forth in paragraph 2(b) of Annex I.

           “Distribution Period” means (i) with respect to the Distribution paid on the first Distribution Payment Date, the period beginning on (and including) the date of original issuance and ending on (but excluding) the Distribution Payment Date in March 2005 and (ii) thereafter, with respect to a Distribution paid on each successive Distribution Payment Date, the period beginning on (and including) the preceding Distribution Payment Date and ending on (but excluding) such current Distribution Payment Date.

           “Distribution Rate” means, for the Distribution Period beginning on (and including) the date of original issuance and ending on (but excluding) the Distribution Payment Date in March 2005, the rate

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per annum of 4.42%, and for each Distribution Period beginning on or after the Distribution Payment Date in March 2005, the Coupon Rate for such Distribution Period.

          “Event of Default” means any one of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

          (a)          the occurrence of an Indenture Event of Default; or

          (b)          default by the Trust in the payment of any Redemption Price or Special Redemption Price of any Security when it becomes due and payable; or

          (c)          default in the performance, or breach, in any material respect, of any covenant or warranty of the Institutional Trustee in this Declaration (other than those specified in clause (a) or (b) above) and continuation of such default or breach for a period of 60 days after there has been given, by registered or certified mail to the Institutional Trustee and to the Sponsor by the Holders of at least 25% in aggregate liquidation amount of the outstanding Capital Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder; or

          (d)          the occurrence of a Bankruptcy Event with respect to the Institutional Trustee if a successor Institutional Trustee has not been appointed within 90 days thereof.

          “Extension Event of Default” has the meaning set forth in the Indenture.

          “Extension Period” has the meaning set forth in paragraph 2(b) of Annex I.

           “Federal Reserve” has the meaning set forth in paragraph 3 of Annex I.

           “Fiduciary Indemnified Person” shall mean each of the Institutional Trustee (including in its individual capacity), the Delaware Trustee (including in its individual capacity), any Affiliate of the Institutional Trustee or Delaware Trustee and any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Institutional Trustee or Delaware Trustee.

           “Fiscal Year” has the meaning set forth in Section 10.1.

           “Guarantee” means the guarantee agreement to be dated as of the Closing Date, of the Sponsor in respect of the Capital Securities.

           “Holder” means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Statutory Trust Act.

           “Indemnified Person” means a Company Indemnified Person or a Fiduciary Indemnified Person.

           “Indenture” means the Indenture dated as of the Closing Date, between the Debenture Issuer and the Debenture Trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued, as such Indenture and any supplemental indenture may be amended, supplemented or otherwise modified from time to time.

           “Indenture Event of Default” means an “Event of Default” as defined in the Indenture.

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           “Institutional Trustee” means the Trustee meeting the eligibility requirements set forth in Section 4.3.

           “Interest” means any interest due on the Debentures including any Additional Interest and Defaulted Interest.

           “Investment Company” means an investment company as defined in the Investment Company Act.

           “Investment Company Act” means the Investment Company Act of 1940, as amended from time to time, or any successor legislation.

           “Investment Company Event” has the meaning set forth in paragraph 4(a) of Annex I.

           “Liquidation” has the meaning set forth in paragraph 3 of Annex I.

           “Liquidation Distribution” has the meaning set forth in paragraph 3 of Annex I.

           “Majority in liquidation amount of the Securities” means Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class.

           “Maturity Date” has the meaning set forth in paragraph 4(a) of Annex I.

           “Officers’ Certificates” means, with respect to any Person, a certificate signed by two Authorized Officers of such Person.  Any Officers’ Certificate delivered with respect to compliance with a condition or covenant providing for it in this Declaration shall include:

           (a)          a statement that each officer signing the Certificate has read the covenant or condition and the definitions relating thereto;

           (b)          a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate;

           (c)          a statement that each such officer has made such examination or investigation as, in such officer’s opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and

           (d)          a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with.

           “OTS” has the meaning set forth in paragraph 3 of Annex I.

           “Paying Agent” has the meaning specified in Section 6.2.

          “Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature.

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           “Placement Agreement” means the Placement Agreement relating to the offering and sale of Capital Securities in the form of Exhibit C.

           “Property Account” has the meaning set forth in Section 2.8(c).

           “Pro Rata” has the meaning set forth in paragraph 8 of Annex I.

           “Quorum” means a majority of the Administrators or, if there are only two Administrators, both of them.

           “Redemption Date” has the meaning set forth in paragraph 4(a) of Annex I.

           “Redemption/Distribution Notice” has the meaning set forth in paragraph 4(e) of Annex I.

           “Redemption Price” has the meaning set forth in paragraph 4(a) of Annex I.

           “Registrar” has the meaning set forth in Section 6.2.

           “Relevant Trustee” has the meaning set forth in Section 4.5(a).

           “Responsible Officer” means, with respect to the Institutional Trustee, any officer within the Corporate Trust Office of the Institutional Trustee, including any vice-president, any assistant vice-president, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or other officer of the Corporate Trust Office of the Institutional Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer’s knowledge of and familiarity with the particular subject.

           “Restricted Securities Legend” has the meaning set forth in Section 8.2(b).

           “Rule 3a-5” means Rule 3a-5 under the Investment Company Act.

           “Rule 3a-7” means Rule 3a-7 under the Investment Company Act.

           “Securities” means the Common Securities and the Capital Securities.

           “Securities Act” means the Securities Act of 1933, as amended from time to time, or any successor legislation.

           “Special Event” has the meaning set forth in paragraph 4(a) of Annex I.

           “Special Redemption Date” has the meaning set forth in paragraph 4(a) of Annex I.

           “Special Redemption Price” has the meaning set forth in paragraph 4(a) of Annex I.

           “Sponsor” means Enterprise Financial Services Corp., a Delaware corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust.

           “Statutory Trust Act” means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. §§ 3801, et seq. as may be amended from time to time.

           “Successor Entity” has the meaning set forth in Section 2.15(b).

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           “Successor Delaware Trustee” has the meaning set forth in Section 4.5(e).

           “Successor Institutional Trustee” has the meaning set forth in Section 4.5(b).

           “Successor Securities” has the meaning set forth in Section 2.15(b).

           “Super Majority” has the meaning set forth in paragraph 5(b) of Annex I.

           “Tax Event” has the meaning set forth in paragraph 4(a) of Annex I.

           “10% in liquidation amount of the Securities” means Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of 10% or more of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class.

           “3-Month LIBOR” has the meaning set forth in paragraph 4(a) of Annex I.

           “Transfer Agent” has the meaning set forth in Section 6.2.

           “Treasury Regulations” means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

          “Trust Property” means (a) the Debentures, (b) any cash on deposit in, or owing to, the Property Account and (c) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Institutional Trustee pursuant to the trusts of this Declaration.

          “Trustee” or “Trustees” means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder.

          “U.S. Person” means a United States Person as defined in Section 7701(a)(30) of the Code.

ARTICLE II

ORGANIZATION

          Section 2.1.          Name. The Trust is named “EFSC Statutory Trust III,” as such name may be modified from time to time by the Administrators following written notice to the Holders of the Securities. The Trust’s activities may be conducted under the name of the Trust or any other name deemed advisable by the Administrators.

          Section 2.2.          Office. The address of the principal office of the Trust is c/o Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware  19890-1600.  On at least 10 Business Days written notice to the Holders of the Securities, the Administrators may designate another principal office, which shall be in a state of the United States or in the District of Columbia.

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          Section 2.3.          Purpose. The exclusive purposes and functions of the Trust are (a) to issue and sell the Securities representing undivided beneficial interests in the assets of the Trust, (b) to invest the gross proceeds from such sale to acquire the Debentures, (c) to facilitate direct investment in the assets of the Trust through issuance of the Common Securities and the Capital Securities and (d) except as otherwise limited herein, to engage in only those other activities necessary or incidental thereto.  The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States federal income tax purposes as a grantor trust.

          Section 2.4.          Authority. Except as specifically provided in this Declaration, the Institutional Trustee shall have exclusive and complete authority to carry out the purposes of the Trust.  An action taken by a Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust.  In dealing with the Trustees acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustees to bind the Trust.  Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration.  The Administrators shall have only those ministerial duties set forth herein with respect to accomplishing the purposes of the Trust and are not intended to be trustees or fiduciaries with respect to the Trust or the Holders.  The Institutional Trustee shall have the right, but shall not be obligated except as provided in Section 2.6, to perform those duties assigned to the Administrators.

          Section 2.5.          Title to Property of the Trust. Except as provided in Section 2.8 with respect to the Debentures and the Property Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust.  The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust.

          Section 2.6.          Powers and Duties of the Trustees and the Administrators.

          (a)          The Trustees and the Administrators shall conduct the affairs of the Trust in accordance with the terms of this Declaration.  Subject to the limitations set forth in paragraph (b) of this Section, and in accordance with the following provisions (i) and (ii), the Trustees and the Administrators shall have the authority to enter into all transactions and agreements determined by the Institutional Trustee to be appropriate in exercising the authority, express or implied, otherwise granted to the Trustees or the Administrators, as the case may be, under this Declaration, and to perform all acts in furtherance thereof, including without limitation, the following:

(i)        Each Administrator shall have the power and authority to act on behalf of the Trust with respect to the following matters:
		(A)  the issuance and sale of the Securities;
	(B)  to cause the Trust to enter into, and to execute and deliver on behalf of the Trust, such agreements as may be necessary or desirable in connection with the purposes and function of the Trust, including agreements with the Paying Agent;
	(C)  ensuring compliance with the Securities Act, applicable state securities or blue sky laws;
	(D)  the sending of notices (other than notices of default), and other information regarding the Securities and the Debentures to the Holders in accordance with this Declaration;

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	(E)  the consent to the appointment of a Paying Agent, Transfer Agent and Registrar in accordance with this Declaration, which consent shall not be unreasonably withheld or delayed;
	(F)  execution and delivery of the Securities in accordance with this Declaration;
	(G)  execution and delivery of closing certificates pursuant to the Placement Agreement and the application for a taxpayer identification number;
	(H)  unless otherwise determined by the Holders of a Majority in liquidation amount of the Securities or as otherwise required by the Statutory Trust Act, to execute on behalf of the Trust (either acting alone or together with any or all of the Administrators) any documents that the Administrators have the power to execute pursuant to this Declaration;
	(I)  the taking of any action incidental to the foregoing as the Institutional Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Declaration for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder);
	(J)  to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Capital Securities and Holders of Common Securities as to such actions and applicable record dates; and
	(K)  to duly prepare and file all applicable tax returns and tax information reports that are required to be filed with respect to the Trust on behalf of the Trust.
(ii)       As among the Trustees and the Administrators, the Institutional Trustee shall have the power, duty and authority to act on behalf of the Trust with respect to the following matters:
		(A)  the establishment of the Property Account;
		(B)  the receipt of the Debentures;
	(C)  the collection of interest, principal and any other payments made in respect of the Debentures in the Property Account;
	(D)  the distribution through the Paying Agent of amounts owed to the Holders in respect of the Securities;
	(E)  the exercise of all of the rights, powers and privileges of a holder of the Debentures;
	(F)  the sending of notices of default and other information regarding the Securities and the Debentures to the Holders in accordance with this Declaration;
	(G)  the distribution of the Trust Property in accordance with the terms of this Declaration;

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	(H)  to the extent provided in this Declaration, the winding up of the affairs of and liquidation of the Trust and the preparation, execution and filing of the certificate of cancellation with the Secretary of State of the State of Delaware;
	(I)  after any Event of Default (provided that such Event of Default is not by or with respect to the Institutional Trustee) the taking of any action incidental to the foregoing as the Institutional Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Declaration and protect and conserve the Trust Property for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder); and
	(J)  to take all action that may be necessary for the preservation and the continuation of the Trust’s valid existence, rights, franchises and privileges as a statutory trust under the laws of the State of Delaware.
(iii)     The Institutional Trustee shall have the power and authority to act on behalf of the Trust with respect to any of the duties, liabilities, powers or the authority of the Administrators set forth in Section 2.6(a)(i)(D), (E) and (F) herein but shall not have a duty to do any such act unless specifically requested to do so in writing by the Sponsor, and shall then be fully protected in acting pursuant to such written request; and in the event of a conflict between the action of the Administrators and the action of the Institutional Trustee, the action of the Institutional Trustee shall prevail.

          (b)       So long as this Declaration remains in effect, the Trust (or the Trustees or Administrators acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, neither the Trustees nor the Administrators may cause the Trust to (i) acquire any investments or engage in any activities not authorized by this Declaration, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Holders, except as expressly provided herein, (iii) take any action that would reasonably be expected (x) to cause the Trust to fail or cease to qualify as a “grantor trust” for United States federal income tax purposes or (y) to require the trust to register as an Investment Company under the Investment Company Act, (iv) incur any indebtedness for borrowed money or issue any other debt or (v) take or consent to any action that would result in the placement of a lien on any of the Trust Property. The Institutional Trustee shall, at the sole cost and expense of the Trust, defend all claims and demands of all Persons at any time claiming any lien on any of the Trust Property adverse to the interest of the Trust or the Holders in their capacity as Holders.

          (c)       In connection with the issuance and sale of the Capital Securities, the Sponsor shall have the right and responsibility to assist the Trust with respect to, or effect on behalf of the Trust, the following (and any actions taken by the Sponsor in furtherance of the following prior to the date of this Declaration are hereby ratified and confirmed in all respects):

          (i)          the taking of any action necessary to obtain an exemption from the Securities Act;

          (ii)          the determination of the States in which to take appropriate action to qualify or register for sale all or part of the Capital Securities and the determination of any and all such acts, other than actions which must be taken by or on behalf of the Trust, and the advice to the Administrators of actions they must take on behalf of the Trust, and the preparation for execution and filing of any documents to be executed and filed by the Trust or on behalf of the Trust, as the

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Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States in connection with the sale of the Capital Securities;

          (iii)          the negotiation of the terms of, and the execution and delivery of, the Placement Agreement providing for the sale of the Capital Securities; and

          (iv)          the taking of any other actions necessary or desirable to carry out any of the foregoing activities.

          (d)      Notwithstanding anything herein to the contrary, the Administrators and the Holders of a Majority in liquidation amount of the Common Securities are authorized and directed to conduct the affairs of the Trust and to operate the Trust so that the Trust will not (i) be deemed to be an Investment Company required to be registered under the Investment Company Act, and (ii) fail to be classified as a “grantor trust” for United States federal income tax purposes.  The Administrators and the Holders of a Majority in liquidation amount of the Common Securities shall not take any action inconsistent with the treatment of the Debentures as indebtedness of the Debenture Issuer for United States federal income tax purposes. In this connection, the Administrators and the Holders of a Majority in liquidation amount of the Common Securities are authorized to take any action, not inconsistent with applicable laws, the Certificate of Trust or this Declaration, as amended from time to time, that each of the Administrators and the Holders of a Majority in liquidation amount of the Common Securities determines in their discretion to be necessary or desirable for such purposes.

          (e)      All expenses incurred by the Administrators or the Trustees pursuant to this Section 2.6 shall be reimbursed by the Sponsor, and the Trustees and the Administrators shall have no obligations with respect to such expenses (for purposes of clarification, this Section 2.6(e) does not contemplate the payment by the Sponsor of acceptance or annual administration fees owing to the Trustees under this Declaration or the fees and expenses of the Trustees’ counsel in connection with the closing of the transactions contemplated by this Declaration).

          (f)      The assets of the Trust shall consist of the Trust Property.

          (g)      Legal title to all Trust Property shall be vested at all times in the Institutional Trustee (in its capacity as such) and shall be held and administered by the Institutional Trustee and the Administrators for the benefit of the Trust in accordance with this Declaration.

          (h)      If the Institutional Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Declaration and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Institutional Trustee or to such Holder, then and in every such case the Sponsor, the Institutional Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Institutional Trustee and the Holders shall continue as though no such proceeding had been instituted.

          Section 2.7.          Prohibition of Actions by the Trust and the Institutional Trustee.

          (a)      The Trust shall not, and the Institutional Trustee shall cause the Trust not to, engage in any activity other than as required or authorized by this Declaration.  In particular, the Trust shall not and the Institutional Trustee shall cause the Trust not to:

          (i)          invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders of the Securities pursuant to the terms of this Declaration and of the Securities;

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          (ii)          acquire any assets other than as expressly provided herein;

          (iii)         possess Trust Property for other than a Trust purpose;

          (iv)          make any loans or incur any indebtedness other than loans represented by the Debentures;

          (v)         possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever other than as expressly provided herein;

          (vi)         issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities;

          (vii)        carry on any “trade or business” as that phrase is used in the Code; or

          (viii)       other than as provided in this Declaration (including Annex I), (A) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable, or (D) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless the Trust shall have received a written opinion of counsel to the effect that such modification will not cause the Trust to cease to be classified as a “grantor trust” for United States federal income tax purposes.

          Section 2.8.          Powers and Duties of the Institutional Trustee.

          (a)      The legal title to the Debentures shall be owned by and held of record in the name of the Institutional Trustee in trust for the benefit of the Trust and the Holders of the Securities.  The right, title and interest of the Institutional Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Institutional Trustee in accordance with Section 4.5. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered.

          (b)      The Institutional Trustee shall not transfer its right, title and interest in the Debentures to the Administrators or to the Delaware Trustee.

          (c)      The Institutional Trustee shall:

          (i)          establish and maintain a segregated non-interest bearing trust account (the “Property Account”) in the name of and under the exclusive control of the Institutional Trustee, and maintained in the Institutional Trustee’s trust department, on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures held by the Institutional Trustee, deposit such funds into the Property Account and make payments, or cause the Paying Agent to make payments, to the Holders of the Capital Securities and Holders of the Common Securities from the Property Account in accordance with Section 5.1.  Funds in the Property Account shall be held uninvested until disbursed in accordance with this Declaration;

          (ii)         engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Capital Securities and the Common Securities to the extent the Debentures are redeemed or mature; and

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          (iii)        upon written notice of distribution issued by the Administrators in accordance with the terms of the Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Debentures to Holders of Securities upon the occurrence of certain circumstances pursuant to the terms of the Securities.

          (d)      The Institutional Trustee may bring or defend, pay, collect, compromise, arbitrate, resort to legal action with respect to, or otherwise adjust claims or demands of or against, the Trust which arises out of or in connection with an Event of Default of which a Responsible Officer of the Institutional Trustee has actual knowledge or arises out of the Institutional Trustee’s duties and obligations under this Declaration; provided, however, that if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of the Capital Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Capital Securities of such Holder (a “Direct Action”) on or after the respective due date specified in the Debentures.  In connection with such Direct Action, the rights of the Holders of the Common Securities will be subrogated to the rights of such Holder of the Capital Securities to the extent of any payment made by the Debenture Issuer to such Holder of the Capital Securities in such Direct Action; provided, however, that no Holder of the Common Securities may exercise such right of subrogation so long as an Event of Default with respect to the Capital Securities has occurred and is continuing.

          (e)      The Institutional Trustee shall continue to serve as a Trustee until either:

          (i)          the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of the Securities pursuant to the terms of the Securities and this Declaration; or

          (ii)         a Successor Institutional Trustee has been appointed and has accepted that appointment in accordance with Section 4.5.

          (f)       The Institutional Trustee shall have the legal power to exercise all of the rights, powers and privileges of a Holder of the Debentures under the Indenture and, if an Event of Default occurs and is continuing, the Institutional Trustee may, for the benefit of Holders of the Securities, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to this Declaration (including Annex I) and the terms of the Securities.

          The Institutional Trustee must exercise the powers set forth in this Section 2.8 in a manner that is consistent with the purposes and functions of the Trust set out in Section 2.3, and the Institutional Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 2.3.

          Section 2.9. Certain Duties and Responsibilities of the Trustees and Administrators.

          (a)       The Institutional Trustee, before the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants shall be read into this Declaration against the Institutional Trustee.  In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 6.7), the Institutional Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

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          (b)       The duties and responsibilities of the Trustees and the Administrators shall be as provided by this Declaration.  Notwithstanding the foregoing, no provision of this Declaration shall require any Trustee or Administrator to expend or risk their own funds or otherwise incur any financial liability in the performance of any of their duties hereunder, or in the exercise of any of their rights or powers if it shall have reasonable grounds to believe that repayment of such funds or adequate protection against such risk of liability is not reasonably assured to it.  Whether or not therein expressly so provided, every provision of this Declaration relating to the conduct or affecting the liability of or affording protection to the Trustees or Administrators shall be subject to the provisions of this Article.  Nothing in this Declaration shall be construed to relieve an Administrator or a Trustee from liability for its own negligent act, its own negligent failure to act, or its own willful misconduct.  To the extent that, at law or in equity, a Trustee or an Administrator has duties and liabilities relating to the Trust or to the Holders, such Trustee or such Administrator shall not be liable to the Trust or to any Holder for such Trustee’s or such Administrator’s good faith reliance on the provisions of this Declaration.  The provisions of this Declaration, to the extent that they restrict the duties and liabilities of the Administrators or the Trustee otherwise existing at law or in equity, are agreed by the Sponsor and the Holders to replace such other duties and liabilities of the Administrators or the Trustees.

          (c)       All payments made by the Institutional Trustee or a Paying Agent in respect of the Securities shall be made only from the revenue and proceeds from the Trust Property and only to the extent that there shall be sufficient revenue or proceeds from the Trust Property to enable the Institutional Trustee or a Paying Agent to make payments in accordance with the terms hereof.  Each Holder, by its acceptance of a Security, agrees that it will look solely to the revenue and proceeds from the Trust Property to the extent legally available for distribution to it as herein provided and that the Trustees and the Administrators are not personally liable to it for any amount distributable in respect of any Security or for any other liability in respect of any Security.  This Section 2.9(c) does not limit the liability of the Trustees expressly set forth elsewhere in this Declaration.

          (d)      The Institutional Trustee shall not be liable for its own acts or omissions hereunder except as a result of its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

          (i)          the Institutional Trustee shall not be liable for any error of judgment made in good faith by an Authorized Officer of the Institutional Trustee, unless it shall be proved that the Institutional Trustee was negligent in ascertaining the pertinent facts;

          (ii)        the Institutional Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Capital Securities or the Common Securities, as applicable, relating to the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under this Declaration;

          (iii)       the Institutional Trustee’s sole duty with respect to the custody, safekeeping and physical preservation of the Debentures and the Property Account shall be to deal with such property in a similar manner as the Institutional Trustee deals with similar property for its fiduciary accounts generally, subject to the protections and limitations on liability afforded to the Institutional Trustee under this Declaration;

          (iv)       the Institutional Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree in writing with the Sponsor; and money held by the Institutional Trustee need not be segregated from other funds held by it except in relation to

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the Property Account maintained by the Institutional Trustee pursuant to Section 2.8(c)(i) and except to the extent otherwise required by law; and

          (v)        the Institutional Trustee shall not be responsible for monitoring the compliance by the Administrators or the Sponsor with their respective duties under this Declaration, nor shall the Institutional Trustee be liable for any default or misconduct of the Administrators or the Sponsor.

          Section 2.10. Certain Rights of Institutional Trustee. Subject to the provisions of Section 2.9:

          (a)      the Institutional Trustee may conclusively rely and shall fully be protected in acting or refraining from acting in good faith upon any resolution, opinion of counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties;

          (b)      if (i) in performing its duties under this Declaration, the Institutional Trustee is required to decide between alternative courses of action, (ii) in construing any of the provisions of this Declaration, the Institutional Trustee finds the same ambiguous or inconsistent with any other provisions contained herein, or (iii) the Institutional Trustee is unsure of the application of any provision of this Declaration, then, except as to any matter as to which the Holders of Capital Securities are entitled to vote under the terms of this Declaration, the Institutional Trustee may deliver a notice to the Sponsor requesting the Sponsor’s written instructions as to the course of action to be taken and the Institutional Trustee shall take such action, or refrain from taking such action, as the Institutional Trustee shall be instructed in writing, in which event the Institutional Trustee shall have no liability except for its own negligence or willful misconduct;

          (c)      any direction or act of the Sponsor or the Administrators contemplated by this Declaration shall be sufficiently evidenced by an Officers’ Certificate;

          (d)      whenever in the administration of this Declaration, the Institutional Trustee shall deem it desirable that a matter be proved or established before undertaking, suffering or omitting any action hereunder, the Institutional Trustee (unless other evidence is herein specifically prescribed) may request and conclusively rely upon an Officers’ Certificate as to factual matters which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Administrators;

          (e)      the Institutional Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or reregistration thereof;

          (f)       the Institutional Trustee may consult with counsel of its selection (which counsel may be counsel to the Sponsor or any of its Affiliates) and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice; the Institutional Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction;

          (g)      the Institutional Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any of the Holders pursuant to this Declaration, unless such Holders shall have offered to the Institutional Trustee security or indemnity

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reasonably satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; provided, that nothing contained in this Section 2.10(g) shall be taken to relieve the Institutional Trustee, subject to Section 2.9(b), upon the occurrence of an Event of Default (that has not been cured or waived pursuant to Section 6.7), to exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs;

          (h)      the Institutional Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, unless requested in writing to do so by one or more Holders, but the Institutional Trustee may make such further inquiry or investigation into such facts or matters as it may see fit;

          (i)       the Institutional Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys and the Institutional Trustee shall not be responsible for any misconduct or negligence on the part of or for the supervision of, any such agent or attorney appointed with due care by it hereunder;

          (j)       whenever in the administration of this Declaration the Institutional Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Institutional Trustee (i) may request instructions from the Holders of the Capital Securities which instructions may only be given by the Holders of the same proportion in liquidation amount of the Capital Securities as would be entitled to direct the Institutional Trustee under the terms of the Capital Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be fully protected in acting in accordance with such instructions;

          (k)      except as otherwise expressly provided in this Declaration, the Institutional Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration;

          (l)       when the Institutional Trustee incurs expenses or renders services in connection with a Bankruptcy Event, such expenses (including the fees and expenses of its counsel) and the compensation for such services are intended to constitute expenses of administration under any bankruptcy law or law relating to creditors rights generally;

          (m)     the Institutional Trustee shall not be charged with knowledge of an Event of Default unless a Responsible Officer of the Institutional Trustee obtains actual knowledge of such event or the Institutional Trustee receives written notice of such event from any Holder, the Sponsor or the Debenture Trustee;

          (n)      any action taken by the Institutional Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities, and the signature of the Institutional Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Institutional Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Institutional Trustee’s or its agent’s taking such action; and

          (o)      no provision of this Declaration shall be deemed to impose any duty or obligation on the Institutional Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Institutional Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to

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exercise any such right, power, duty or obligation. No permissive power or authority available to the Institutional Trustee shall be construed to be a duty.

          Section 2.11.          Delaware Trustee. Notwithstanding any other provision of this Declaration other than Section 4.1, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of any of the Trustees or the Administrators described in this Declaration (except as may be required under the Statutory Trust Act).  Except as set forth in Section 4.1, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of § 3807 of the Statutory Trust Act.

          Section 2.12.          Execution of Documents. Unless otherwise determined in writing by the Institutional Trustee, and except as otherwise required by the Statutory Trust Act, the Institutional Trustee, or any one or more of the Administrators, as the case may be, is authorized to execute on behalf of the Trust any documents that the Trustees or the Administrators, as the case may be, have the power and authority to execute pursuant to Section 2.6.

          Section 2.13.          Not Responsible for Recitals or Issuance of Securities. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness.  The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof.  The Trustees make no representations as to the validity or sufficiency of this Declaration, the Debentures or the Securities.

          Section 2.14.          Duration of Trust. The Trust, unless earlier dissolved pursuant to the provisions of Article VII hereof, shall be in existence for 35 years from the Closing Date.

          Section 2.15.          Mergers.

          (a)       The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except as described in Section 2.15(b) and (c) and except in connection with the liquidation of the Trust and the distribution of the Debentures to Holders of Securities pursuant to Section 7.1(a)(iv) of the Declaration or Section 4 of Annex I.

          (b)       The Trust may, with the consent of the Institutional Trustee and without the consent of the Holders of the Capital Securities, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any state; provided that:

(i)          if the Trust is not the surviving entity, such successor entity (the “Successor Entity”) either:
	(A)  expressly assumes all of the obligations of the Trust under the Securities; or
	(B)  substitutes for the Securities other securities having substantially the same terms as the Securities (the “Successor Securities”) so that the Successor Securities rank the same as the Securities rank with respect to Distributions and payments upon Liquidation, redemption and otherwise;
(ii)         the Sponsor expressly appoints a trustee of the Successor Entity that possesses substantially the same powers and duties as the Institutional Trustee as the Holder of the Debentures;

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(iii)        such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect;
(iv)        the Institutional Trustee receives written confirmation from Moody’s Investor Services, Inc. and any other nationally recognized statistical rating organization that rates securities issued by the initial purchaser of the Capital Securities that it will not reduce or withdraw the rating of any such securities because of such merger, conversion, consolidation, amalgamation or replacement;
(v)         such Successor Entity has a purpose substantially identical to that of the Trust;
(vi)        prior to such merger, consolidation, amalgamation or replacement, the Trust has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that:
	(A)  such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect;
	(B)  following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and
	(C)  following such merger, consolidation, amalgamation or replacement, the Trust (or the Successor Entity) will continue to be classified as a “grantor trust” for United States federal income tax purposes;
(vii)        the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Guarantee;
(viii)        the Sponsor owns 100% of the common securities of any Successor Entity; and
(ix)          prior to such merger, consolidation, amalgamation or replacement, the Institutional Trustee shall have received an Officers’ Certificate of the Administrators and an opinion of counsel, each to the effect that all conditions precedent under this Section 2.15(b) to such transaction have been satisfied.

          (c)          Notwithstanding Section 2.15(b), the Trust shall not, except with the consent of Holders of 100% in aggregate liquidation amount of the Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity to be classified as other than a grantor trust for United States federal income tax purposes.

ARTICLE III

SPONSOR

          Section 3.1.          Sponsor’s Purchase of Common Securities. On the Closing Date, the Sponsor will purchase all of the Common Securities issued by the Trust in an amount at least equal to 3% of the capital of the Trust, at the same time as the Capital Securities are sold.

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          Section 3.2.          Responsibilities of the Sponsor. In connection with the issue and sale of the Capital Securities, the Sponsor shall have the exclusive right and responsibility to engage in, or direct the Administrators to engage in, the following activities:

          (a)          to determine the States in which to take appropriate action to qualify the Trust or to qualify or register for sale all or part of the Capital Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States, to protect the limited liability of the Holders of the Capital Securities or to enable the Trust to effect the purposes for which it was created; and

          (b)           to negotiate the terms of and/or execute on behalf of the Trust, the Placement Agreement and other related agreements providing for the sale of the Capital Securities.

          Section 3.3.           Expenses. In connection with the offering, sale and issuance of the Debentures to the Trust and in connection with the sale of the Securities by the Trust, the Sponsor, in its capacity as Debenture Issuer, shall:

           (a)           pay all reasonable costs and expenses owing to the Debenture Trustee pursuant to Section 6.6 of the Indenture;

           (b)           be responsible for and shall pay all debts and obligations (other than with respect to the Securities) and all costs and expenses of the Trust, the offering, sale and issuance of the Securities (including fees to the placement agents in connection therewith), the costs and expenses (including reasonable counsel fees and expenses) of the Institutional Trustee and the Administrators, the costs and expenses relating to the operation of the Trust, including, without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, Paying Agents, Registrars, Transfer Agents, duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets and the enforcement by the Institutional Trustee of the rights of the Holders (for purposes of clarification, this Section 3.3(b) does not contemplate the payment by the Sponsor of acceptance or annual administration fees owing to the Trustees pursuant to the services to be provided by the Trustees under this Declaration or the fees and expenses of the Trustees’ counsel in connection with the closing of the transactions contemplated by this Declaration); and

           (c)           pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust.

          The Sponsor’s obligations under this Section 3.3 shall be for the benefit of, and shall be enforceable by, any Person to whom such debts, obligations, costs, expenses and taxes are owed (a “Creditor”) whether or not such Creditor has received notice hereof.  Any such Creditor may enforce the Sponsor’s obligations under this Section 3.3 directly against the Sponsor and the Sponsor irrevocably waives any right or remedy to require that any such Creditor take any action against the Trust or any other Person before proceeding against the Sponsor.  The Sponsor agrees to execute such additional agreements as may be necessary or desirable in order to give full effect to the provisions of this Section 3.3.

          Section 3.4.           Right to Proceed. The Sponsor acknowledges the rights of Holders to institute a Direct Action as set forth in Section 2.8(d) hereto.

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ARTICLE IV

INSTITUTIONAL TRUSTEE AND ADMINISTRATORS

          Section 4.1.           Number of Trustees. The number of Trustees shall initially be two, and;

           (a)           at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and

           (b)           after the issuance of any Securities, the number of Trustees may be increased or decreased by vote of the Holder of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holder of the Common Securities; provided, however, that there shall be a Delaware Trustee if required by Section 4.2; and there shall always be one Trustee who shall be the Institutional Trustee, and such Trustee may also serve as Delaware Trustee if it meets the applicable requirements, in which case Section 2.11 shall have no application to such entity in its capacity as Institutional Trustee.

          Section 4.2.           Delaware Trustee; Eligibility.

           (a)          If required by the Statutory Trust Act, one Trustee (the “Delaware Trustee”) shall be:

               (i)          a natural person at least 21 years of age who is a resident of the State of Delaware; or

                (ii)         if not a natural person, an entity which is organized under the laws of the United States or any state thereof or the District of Columbia, has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law, including § 3807 of the Statutory Trust Act.

(b)          the initial Delaware Trustee shall be Wilmington Trust Company.

          Section 4.3.          Institutional Trustee; Eligibility.

          (a)          There shall at all times be one Trustee which shall:

             (i)          not be an Affiliate of the Sponsor;

              (ii)        not offer or provide credit or credit enhancement to the Trust; and

              (iii)       be a banking corporation or trust company organized and doing business under the laws of the United States of America or any state thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000.00), and subject to supervision or examination by Federal, state, or District of Columbia authority.  If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 4.3(a)(iii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

          (b)          If at any time the Institutional Trustee shall cease to be eligible to so act under Section 4.3(a), the Institutional Trustee shall immediately resign in the manner and with the effect set forth in Section 4.5.

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          (c)          If the Institutional Trustee has or shall acquire any “conflicting interest” within the meaning of Section 310(b) of the Trust Indenture Act of 1939, as amended, the Institutional Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to this Declaration.

          (d)          The initial Institutional Trustee shall be Wilmington Trust Company.

          Section 4.4.          Administrators. Each Administrator shall be a U.S. Person, 21 years of age or older and authorized to bind the Sponsor.  The initial Administrators shall be Frank Sanfilippo and Deborah Barstow.  There shall at all times be at least one Administrator.  Except where a requirement for action by a specific number of Administrators is expressly set forth in this Declaration and except with respect to any action the taking of which is the subject of a meeting of the Administrators, any action required or permitted to be taken by the Administrators may be taken by, and any power of the Administrators may be exercised by, or with the consent of, any one such Administrator.

          Section 4.5.          Appointment, Removal and Resignation of Trustees and Administrators.

          (a)          No resignation or removal of any Trustee (the “Relevant Trustee”) and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of this Section 4.5.

          (b)          Subject to Section 4.5(a), a Relevant Trustee may resign at any time by giving written notice thereof to the Holders of the Securities and by appointing a successor Relevant Trustee.  Upon the resignation of the Institutional Trustee, the Institutional Trustee shall appoint a successor by requesting from at least three Persons meeting the eligibility requirements their expenses and charges to serve as the successor Institutional Trustee on a form provided by the Administrators, and selecting the Person who agrees to the lowest expense and charges (the “Successor Institutional Trustee”).  If the instrument of acceptance by the successor Relevant Trustee required by this Section 4.5 shall not have been delivered to the Relevant Trustee within 60 days after the giving of such notice of resignation or delivery of the instrument of removal, the Relevant Trustee may petition, at the expense of the Trust, any federal, state or District of Columbia court of competent jurisdiction for the appointment of a successor Relevant Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Relevant Trustee. The Institutional Trustee shall have no liability for the selection of such successor pursuant to this Section 4.5.

          (c)          Unless an Event of Default shall have occurred and be continuing, any Trustee may be removed at any time by an act of the Holders of a Majority in liquidation amount of the Common Securities. If any Trustee shall be so removed, the Holders of the Common Securities, by act of the Holders of a Majority in liquidation amount of the Common Securities delivered to the Relevant Trustee, shall promptly appoint a successor Relevant Trustee, and such successor Trustee shall comply with the applicable requirements of this Section 4.5.  If an Event of Default shall have occurred and be continuing, the Institutional Trustee or the Delaware Trustee, or both of them, may be removed by the act of the Holders of a Majority in liquidation amount of the Capital Securities, delivered to the Relevant Trustee (in its individual capacity and on behalf of the Trust).  If any Trustee shall be so removed, the Holders of Capital Securities, by act of the Holders of a Majority in liquidation amount of the Capital Securities then outstanding delivered to the Relevant Trustee, shall promptly appoint a successor Relevant Trustee or Trustees, and such successor Trustee shall comply with the applicable requirements of this Section 4.5.  If no successor Relevant Trustee shall have been so appointed by the Holders of a Majority in liquidation amount of the Capital Securities and accepted appointment in the manner required by this Section 4.5 within 30 days after delivery of an instrument of removal, the Relevant Trustee or any Holder who has been a Holder of the Securities for at least six months may, on behalf of himself and all others similarly situated, petition any federal, state or District of Columbia court of competent jurisdiction for the

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appointment of a successor Relevant Trustee.  Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a successor Relevant Trustee or Trustees.

          (d)          The Institutional Trustee shall give notice of each resignation and each removal of a Trustee and each appointment of a successor Trustee to all Holders and to the Sponsor.  Each notice shall include the name of the successor Relevant Trustee and the address of its Corporate Trust Office if it is the Institutional Trustee.

          (e)          Notwithstanding the foregoing or any other provision of this Declaration, in the event a Delaware Trustee who is a natural person dies or is adjudged by a court to have become incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by the Institutional Trustee following the procedures in this Section 4.5 (with the successor being a Person who satisfies the eligibility requirement for a Delaware Trustee set forth in this Declaration) (the “Successor Delaware Trustee”).

          (f)          In case of the appointment hereunder of a successor Relevant Trustee, the retiring Relevant Trustee and each successor Relevant Trustee with respect to the Securities shall execute and deliver an amendment hereto wherein each successor Relevant Trustee shall accept such appointment and which (a) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Securities and the Trust and (b) shall add to or change any of the provisions of this Declaration as shall be necessary to provide for or facilitate the administration of the Trust by more than one Relevant Trustee, it being understood that nothing herein or in such amendment shall constitute such Relevant Trustees co-trustees and upon the execution and delivery of such amendment the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Relevant Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee; but, on request of the Trust or any successor Relevant Trustee, such retiring Relevant Trustee shall duly assign, transfer and deliver to such successor Relevant Trustee all Trust Property, all proceeds thereof and money held by such retiring Relevant Trustee hereunder with respect to the Securities and the Trust subject to the payment of all unpaid fees, expenses and indemnities of such retiring Relevant Trustee.

          (g)          No Institutional Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any Successor Institutional Trustee or Successor Delaware Trustee, as the case may be.

          (h)          The Holders of the Capital Securities will have no right to vote to appoint, remove or replace the Administrators, which voting rights are vested exclusively in the Holders of the Common Securities.

          (i)          Any successor Delaware Trustee shall file an amendment to the Certificate of Trust with the Secretary of State of the State of Delaware identifying the name and principal place of business of such Delaware Trustee in the State of Delaware.

          Section 4.6.          Vacancies Among Trustees. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 4.1, a vacancy shall occur.  A resolution certifying the existence of such vacancy by the Trustees or, if there are more than two, a majority of the Trustees, shall be conclusive evidence of the existence of such vacancy.  The vacancy shall be filled with a Trustee appointed in accordance with Section 4.5.

          Section 4.7.          Effect of Vacancies. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to dissolve, terminate or annul the Trust or terminate this Declaration.  Whenever a vacancy in the number

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of Trustees shall occur, until such vacancy is filled by the appointment of a Trustee in accordance with Section 4.5, the Institutional Trustee shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by this Declaration.

          Section 4.8.          Meetings of the Trustees and the Administrators. Meetings of the Administrators shall be held from time to time upon the call of an Administrator. Regular meetings of the Administrators may be held in person in the United States or by telephone, at a place (if applicable) and time fixed by resolution of the Administrators.  Notice of any in-person meetings of the Trustees with the Administrators or meetings of the Administrators shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Trustees with the Administrators or meetings of the Administrators or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting.  The presence (whether in person or by telephone) of a Trustee or an Administrator, as the case may be, at a meeting shall constitute a waiver of notice of such meeting except where the Trustee or an Administrator, as the case may be, attends a meeting for the express purpose of objecting to the transaction of any activity on the grounds that the meeting has not been lawfully called or convened.  Unless provided otherwise in this Declaration, any action of the Trustees or the Administrators, as the case may be, may be taken at a meeting by vote of a majority of the Trustees or the Administrators present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by the unanimous written consent of the Trustees or the Administrators.  Meetings of the Trustees and the Administrators together shall be held from time to time upon the call of any Trustee or an Administrator.

          Section 4.9.          Delegation of Power.

          (a)          Any Administrator may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 that is a U.S. Person his or her power for the purpose of executing any documents contemplated in Section 2.6; and

          (b)          the Administrators shall have power to delegate from time to time to such of their number the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrators or otherwise as the Administrators may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein.

          Section 4.10.        Conversion, Consolidation or Succession to Business. Any Person into which the Institutional Trustee or the Delaware Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Institutional Trustee or the Delaware Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of the Institutional Trustee or the Delaware Trustee shall be the successor of the Institutional Trustee or the Delaware Trustee hereunder, provided such Person shall be otherwise qualified and eligible under this Article and, provided, further, that such Person shall file an amendment to the Certificate of Trust with the Secretary of State of the State of Delaware as contemplated in Section 4.5(i).

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ARTICLE V

DISTRIBUTIONS

          Section 5.1.          Distributions. Holders shall receive Distributions in accordance with the applicable terms of the relevant Holder’s Securities. Distributions shall be made on the Capital Securities and the Common Securities in accordance with the preferences set forth in their respective terms. If and to the extent that the Debenture Issuer makes a payment of Interest or any principal on the Debentures held by the Institutional Trustee, the Institutional Trustee shall and is directed, to the extent funds are available for that purpose, to make a distribution (a “Distribution”) of such amounts to Holders.

ARTICLE VI

ISSUANCE OF SECURITIES

          Section 6.1.          General Provisions Regarding Securities.

          (a)          The Administrators shall, on behalf of the Trust, issue one series of capital securities substantially in the form of Exhibit A-1 representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I and one series of common securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I.  The Trust shall issue no securities or other interests in the assets of the Trust other than the Capital Securities and the Common Securities.  The Capital Securities rank pari passu to, and payment thereon shall be made Pro Rata with, the Common Securities except that, where an Event of Default has occurred and is continuing, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights to payment of the Holders of the Capital Securities as set forth in Annex I.

          (b)          The Certificates shall be signed on behalf of the Trust by one or more Administrators. Such signature shall be the facsimile or manual signature of any Administrator.  In case any Administrator of the Trust who shall have signed any of the Securities shall cease to be such Administrator before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the person who signed such Certificates had not ceased to be such Administrator, and any Certificate may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Security, shall be an Administrator of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such an Administrator.  A Capital Security shall not be valid until authenticated by the facsimile or manual signature of an Authorized Officer of the Institutional Trustee.  Such signature shall be conclusive evidence that the Capital Security has been authenticated under this Declaration.  Upon written order of the Trust signed by one Administrator, the Institutional Trustee shall authenticate the Capital Securities for original issue. The Institutional Trustee may appoint an authenticating agent that is a U.S. Person acceptable to the Trust to authenticate the Capital Securities.  A Common Security need not be so authenticated.

          (c)          The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust.

          (d)          Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and, except as provided in Section 9.1(b) with respect to the Common Securities, non-assessable.

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          (e)          Every Person, by virtue of having become a Holder in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration and the Guarantee.

          Section 6.2.          Paying Agent, Transfer Agent and Registrar. The Trust shall maintain in Wilmington, Delaware, an office or agency where the Capital Securities may be presented for payment (“Paying Agent”), and an office or agency where Securities may be presented for registration of transfer or exchange (the “Transfer Agent”). The Trust shall keep or cause to be kept at such office or agency a register for the purpose of registering Securities, transfers and exchanges of Securities, such register to be held by a registrar (the “Registrar”).  The Administrators may appoint the Paying Agent, the Registrar and the Transfer Agent and may appoint one or more additional Paying Agents or one or more co-Registrars, or one or more co-Transfer Agents in such other locations as it shall determine.  The term “Paying Agent” includes any additional paying agent, the term “Registrar” includes any additional registrar or co-Registrar and the term “Transfer Agent” includes any additional transfer agent.  The Administrators may change any Paying Agent, Transfer Agent or Registrar at any time without prior notice to any Holder. The Administrators shall notify the Institutional Trustee of the name and address of any Paying Agent, Transfer Agent and Registrar not a party to this Declaration.  The Administrators hereby initially appoint the Institutional Trustee to act as Paying Agent, Transfer Agent and Registrar for the Capital Securities and the Common Securities.  The Institutional Trustee or any of its Affiliates in the United States may act as Paying Agent, Transfer Agent or Registrar.

          Section 6.3.          Form and Dating. The Capital Securities and the Institutional Trustee’s certificate of authentication thereon shall be substantially in the form of Exhibit A-1, and the Common Securities shall be substantially in the form of Exhibit A-2, each of which is hereby incorporated in and expressly made a part of this Declaration.  Certificates may be typed, printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrators, as conclusively evidenced by their execution thereof.  The Securities may have letters, numbers, notations or other marks of identification or designation and such legends or endorsements required by law, stock exchange rule, agreements to which the Trust is subject if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Sponsor).  The Trust at the direction of the Sponsor shall furnish any such legend not contained in Exhibit A-1 to the Institutional Trustee in writing.  Each Capital Security shall be dated on or before the date of its authentication.  The terms and provisions of the Securities set forth in Annex I and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the terms of this Declaration and to the extent applicable, the Institutional Trustee, the Delaware Trustee, the Administrators and the Sponsor, by their execution and delivery of this Declaration, expressly agree to such terms and provisions and to be bound thereby.  Capital Securities will be issued only in blocks having a stated liquidation amount of not less than $100,000.00 and any multiple of $1,000.00 in excess thereof.

          The Capital Securities are being offered and sold by the Trust pursuant to the Placement Agreement in definitive, registered form without coupons and with the Restricted Securities Legend.

          Section 6.4.          Mutilated, Destroyed, Lost or Stolen Certificates.

          If:

          (a)          any mutilated Certificates should be surrendered to the Registrar, or if the Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Certificate; and

          (b)          there shall be delivered to the Registrar, the Administrators and the Institutional Trustee such security or indemnity as may be required by them to keep each of them harmless;

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then, in the absence of notice that such Certificate shall have been acquired by a protected purchaser, an Administrator on behalf of the Trust shall execute (and in the case of a Capital Security Certificate, the Institutional Trustee shall authenticate) and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination.  In connection with the issuance of any new Certificate under this Section 6.4, the Registrar or the Administrators may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time.

          Section 6.5.          Temporary Securities. Until definitive Securities are ready for delivery, the Administrators may prepare and, in the case of the Capital Securities, the Institutional Trustee shall authenticate, temporary Securities.  Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Administrators consider appropriate for temporary Securities. Without unreasonable delay, the Administrators shall prepare and, in the case of the Capital Securities, the Institutional Trustee shall authenticate, definitive Securities in exchange for temporary Securities.

          Section 6.6.          Cancellation. The Administrators at any time may deliver Securities to the Institutional Trustee for cancellation.  The Registrar shall forward to the Institutional Trustee any Securities surrendered to it for registration of transfer, redemption or payment.  The Institutional Trustee shall promptly cancel all Securities surrendered for registration of transfer, payment, replacement or cancellation and shall dispose of such canceled Securities as the Administrators direct.  The Administrators may not issue new Securities to replace Securities that have been paid or that have been delivered to the Institutional Trustee for cancellation.

          Section 6.7.          Rights of Holders; Waivers of Past Defaults.

          (a)          The legal title to the Trust Property is vested exclusively in the Institutional Trustee (in its capacity as such) in accordance with Section 2.5, and the Holders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Trust conferred by their Securities and they shall have no right to call for any partition or division of property, profits or rights of the Trust except as described below.  The Securities shall be personal property giving only the rights specifically set forth therein and in this Declaration.  The Securities shall have no preemptive or similar rights.

          (b)          For so long as any Capital Securities remain outstanding, if upon an Indenture Event of Default, the Debenture Trustee fails or the holders of not less than 25% in principal amount of the outstanding Debentures fail to declare the principal of all of the Debentures to be immediately due and payable, the Holders of a Majority in liquidation amount of the Capital Securities then outstanding shall have the right to make such declaration by a notice in writing to the Institutional Trustee, the Sponsor and the Debenture Trustee.

          At any time after a declaration of acceleration with respect to the Debentures has been made and before a judgment or decree for payment of the money due has been obtained by the Debenture Trustee as provided in the Indenture, if the Institutional Trustee, subject to the provisions hereof, fails to annul any such declaration and waive such default, the Holders of a Majority in liquidation amount of the Capital Securities, by written notice to the Institutional Trustee, the Sponsor and the Debenture Trustee, may rescind and annul such declaration and its consequences if:

(i)          the Debenture Issuer has paid or deposited with the Debenture Trustee a sum sufficient to pay
	(A)  all overdue installments of interest on all of the Debentures,

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	(B) any accrued Additional Interest on all of the Debentures,
	(C) the principal of (and premium, if any, on) any Debentures that have become due otherwise than by such declaration of acceleration and interest and Additional Interest thereon at the rate borne by the Debentures, and
	(D) all sums paid or advanced by the Debenture Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Debenture Trustee and the Institutional Trustee, their agents and counsel; and
(ii)         all Events of Default with respect to the Debentures, other than the nonpayment of the principal of the Debentures that has become due solely by such acceleration, have been cured or waived as provided in Section 5.7 of the Indenture.

          The Holders of at least a Majority in liquidation amount of the Capital Securities may, on behalf of the Holders of all the Capital Securities, waive any past default under the Indenture or any Indenture Event of Default, except a default or Indenture Event of Default in the payment of principal or interest on the Debentures (unless such default or Indenture Event of Default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Debenture Trustee) or a default under the Indenture or an Indenture Event of Default in respect of a covenant or provision that under the Indenture cannot be modified or amended without the consent of the holder of each outstanding Debenture.  No such rescission shall affect any subsequent default or impair any right consequent thereon.

          Upon receipt by the Institutional Trustee of written notice declaring such an acceleration, or rescission and annulment thereof, by Holders of any part of the Capital Securities, a record date shall be established for determining Holders of outstanding Capital Securities entitled to join in such notice, which record date shall be at the close of business on the day the Institutional Trustee receives such notice.  The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date; provided, that unless such declaration of acceleration, or rescission and annulment, as the case may be, shall have become effective by virtue of the requisite percentage having joined in such notice prior to the day that is 90 days after such record date, such notice of declaration of acceleration, or rescission and annulment, as the case may be, shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new written notice of declaration of acceleration, or rescission and annulment thereof, as the case may be, that is identical to a written notice that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 6.7.

          (c)          Except as otherwise provided in paragraphs (a) and (b) of this Section 6.7, the Holders of at least a Majority in liquidation amount of the Capital Securities may, on behalf of the Holders of all the Capital Securities, waive any past default or Event of Default and its consequences. Upon such waiver, any such default or Event of Default shall cease to exist, and any default or Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.

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ARTICLE VII

DISSOLUTION AND TERMINATION OF TRUST

          Section 7.1.          Dissolution and Termination of Trust.

          (a)          The Trust shall dissolve on the first to occur of:

              (i)          unless earlier dissolved, on December 15, 2039, the expiration of the term of the Trust;

               (ii)        upon a Bankruptcy Event with respect to the Sponsor, the Trust or the Debenture Issuer;

               (iii)        upon the filing of a certificate of dissolution or its equivalent with respect to the Sponsor (other than in connection with a merger, consolidation or similar transaction not prohibited by the Indenture, this Declaration or the Guarantee, as the case may be) or upon the revocation of the charter of the Sponsor and the expiration of 90 days after the date of revocation without a reinstatement thereof;

               (iv)        upon the distribution of the Debentures to the Holders of the Securities, upon exercise of the right of the Holder of all of the outstanding Common Securities to dissolve the Trust as provided in Annex I hereto;

               (v)         upon the entry of a decree of judicial dissolution of the Holder of the Common Securities, the Sponsor, the Trust or the Debenture Issuer;

               (vi)         when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; or

               (vii)         before the issuance of any Securities, with the consent of all of the Trustees and the Sponsor.

          (b)          As soon as is practicable after the occurrence of an event referred to in Section 7.1(a), and after satisfaction of liabilities to creditors of the Trust as required by applicable law, including of the Statutory Trust Act, and subject to the terms set forth in Annex I, the Institutional Trustee shall terminate the Trust by filing a certificate of cancellation with the Secretary of State of the State of Delaware.

          (c)          The provisions of Section 2.9 and Article IX shall survive the termination of the Trust.

ARTICLE VIII

TRANSFER OF INTERESTS

          Section 8.1.          General.

          (a)          Subject to Section 8.1(c), where Capital Securities are presented to the Registrar or a co-registrar with a request to register a transfer or to exchange them for an equal number of Capital Securities represented by different certificates, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met.  To permit registrations of transfer and exchanges, the Trust shall issue and the Institutional Trustee shall authenticate Capital Securities at the Registrar’s request.

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          (b)          Upon issuance of the Common Securities, the Sponsor shall acquire and retain beneficial and record ownership of the Common Securities and for so long as the Securities remain outstanding, and to the fullest extent permitted by applicable law, the Sponsor shall maintain 100% ownership of the Common Securities; provided, however, that any permitted successor of the Sponsor, in its capacity as Debenture Issuer, under the Indenture that is a U.S. Person may succeed to the Sponsor’s ownership of the Common Securities.

          (c)          Capital Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities.  To the fullest extent permitted by applicable law, any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void and will be deemed to be of no legal effect whatsoever and any such transferee shall be deemed not to be the holder of such Capital Securities for any purpose, including but not limited to the receipt of Distributions on such Capital Securities, and such transferee shall be deemed to have no interest whatsoever in such Capital Securities.

          (d)          The Registrar shall provide for the registration of Securities and of transfers of Securities, which will be effected without charge but only upon payment (with such indemnity as the Registrar may require) in respect of any tax or other governmental charges that may be imposed in relation to it.  Upon surrender for registration of transfer of any Securities, the Registrar shall cause one or more new Securities of the same tenor to be issued in the name of the designated transferee or transferees. Every Security surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by the Holder or such Holder’s attorney duly authorized in writing.  Each Security surrendered for registration of transfer shall be canceled by the Institutional Trustee pursuant to Section 6.6.  A transferee of a Security shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Security.  By acceptance of a Security, each transferee shall be deemed to have agreed to be bound by this Declaration.

          (e)          The Trust shall not be required (i) to issue, register the transfer of, or exchange any Securities during a period beginning at the opening of business five days before the day of any selection of Securities for redemption and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all Holders of the Securities to be redeemed, or (ii) to register the transfer or exchange of any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.

          Section 8.2.          Transfer Procedures and Restrictions.

          (a)          The Capital Securities shall bear the Restricted Securities Legend, which shall not be removed unless there is delivered to the Trust such satisfactory evidence, which may include an opinion of counsel satisfactory to the Institutional Trustee, as may be reasonably required by the Trust, that neither the legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of the Securities Act.  Upon provision of such satisfactory evidence, the Institutional Trustee, at the written direction of the Trust, shall authenticate and deliver Capital Securities that do not bear the legend.

          (b)          Except as permitted by Section 8.2(a), each Capital Security shall bear a legend (the “Restricted Securities Legend”) in substantially the following form and a Capital Security shall not be transferred except in compliance with such legend, unless otherwise determined by the Sponsor, upon the advice of counsel expert in securities law, in accordance with applicable law:

             THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW.

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NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.  THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR’S AND THE TRUST’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

             THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING.  ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT

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EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

             THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

             THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

          (c)          To permit registrations of transfers and exchanges, the Trust shall execute and the Institutional Trustee shall authenticate Capital Securities at the Registrar’s request.

          (d)          Registrations of transfers or exchanges will be effected without charge, but only upon payment (with such indemnity as the Registrar or the Sponsor may require) in respect of any tax or other governmental charge that may be imposed in relation to it.

          (e)          All Capital Securities issued upon any registration of transfer or exchange pursuant to the terms of this Declaration shall evidence the same security and shall be entitled to the same benefits under this Declaration as the Capital Securities surrendered upon such registration of transfer or exchange.

          Section 8.3.          Deemed Security Holders. The Trust, the Administrators, the Trustees, the Paying Agent, the Transfer Agent or the Registrar may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust, the Administrators, the Trustees, the Paying Agent, the Transfer Agent or the Registrar shall have actual or other notice thereof.

ARTICLE IX

LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS

          Section 9.1.          Liability.

          (a)          Except as expressly set forth in this Declaration, the Guarantee and the terms of the Securities, the Sponsor shall not be:

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          (i)          personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; or

          (ii)         required to pay to the Trust or to any Holder of the Securities any deficit upon dissolution of the Trust or otherwise.

          (b)         The Holder of the Common Securities shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities) to the extent not satisfied out of the Trust’s assets.

          (c)          Pursuant to the Statutory Trust Act, the Holders of the Capital Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware.

          Section 9.2.          Exculpation.

          (a)          No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person’s negligence or willful misconduct with respect to such acts or omissions.

          (b)          An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person’s professional or expert competence and, if selected by such Indemnified Person, has been selected by such Indemnified Person with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid.

          Section 9.3.          Fiduciary Duty.

          (a)          To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration.  The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of the Indemnified Person.

          (b)          Whenever in this Declaration an Indemnified Person is permitted or required to make a decision:

              (i)          in its “discretion” or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or

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              (ii)         in its “good faith” or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law.

          Section 9.4.          Indemnification.

          (a)          The Sponsor shall indemnify, to the full extent permitted by law, any Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) arising out of or in connection with the acceptance or administration of this Declaration by reason of the fact that he is or was an Indemnified Person against expenses (including reasonable attorneys’ fees and expenses), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

          (b)          The Sponsor shall indemnify, to the full extent permitted by law, any Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Trust to procure a judgment in its favor arising out of or in connection with the acceptance or administration of this Declaration by reason of the fact that he is or was an Indemnified Person against expenses (including reasonable attorneys’ fees and expenses) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust; provided, however, that no such indemnification shall be made in respect of any claim, issue or matter as to which such Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.

          (c)          To the extent that an Indemnified Person shall be successful on the merits or otherwise (including dismissal of an action without prejudice or the settlement of an action without admission of liability) in defense of any action, suit or proceeding referred to in paragraphs (a) and (b) of this Section 9.4, or in defense of any claim, issue or matter therein, he shall be indemnified, to the full extent permitted by law, against expenses (including attorneys’ fees and expenses) actually and reasonably incurred by him in connection therewith.

          (d)          Any indemnification of an Administrator under paragraphs (a) and (b) of this Section 9.4 (unless ordered by a court) shall be made by the Sponsor only as authorized in the specific case upon a determination that indemnification of the Indemnified Person is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (a) and (b). Such determination shall be made (i) by the Administrators by a majority vote of a Quorum consisting of such Administrators who were not parties to such action, suit or proceeding, (ii) if such a Quorum is not obtainable, or, even if obtainable, if a Quorum of disinterested Administrators so directs, by independent legal counsel in a written opinion, or (iii) by the Common Security Holder of the Trust.

          (e)          To the fullest extent permitted by law, expenses (including reasonable attorneys’ fees and expenses) incurred by an Indemnified Person in defending a civil, criminal, administrative or

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investigative action, suit or proceeding referred to in paragraphs (a) and (b) of this Section 9.4 shall be paid by the Sponsor in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Indemnified Person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Sponsor as authorized in this Section 9.4. Notwithstanding the foregoing, no advance shall be made by the Sponsor if a determination is reasonably and promptly made (i) by the Administrators by a majority vote of a Quorum of disinterested Administrators, (ii) if such a Quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Administrators so directs, by independent legal counsel in a written opinion or (iii) by the Common Security Holder of the Trust, that, based upon the facts known to the Administrators, counsel or the Common Security Holder at the time such determination is made, such Indemnified Person acted in bad faith or in a manner that such Indemnified Person did not believe to be in the best interests of the Trust, or, with respect to any criminal proceeding, that such Indemnified Person believed or had reasonable cause to believe his conduct was unlawful. In no event shall any advance be made in instances where the Administrators, independent legal counsel or the Common Security Holder reasonably determine that such Indemnified Person deliberately breached his duty to the Trust or its Common or Capital Security Holders.

          (f)          The Trustees, at the sole cost and expense of the Sponsor, retain the right to representation by counsel of their own choosing in any action, suit or any other proceeding for which they are indemnified under paragraphs (a) and (b) of this Section 9.4, without affecting their right to indemnification hereunder or waiving any rights afforded to it under this Declaration or applicable law.

          (g)          The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 9.4 shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors of the Sponsor or Capital Security Holders of the Trust or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. All rights to indemnification under this Section 9.4 shall be deemed to be provided by a contract between the Sponsor and each Indemnified Person who serves in such capacity at any time while this Section 9.4 is in effect.  Any repeal or modification of this Section 9.4 shall not affect any rights or obligations then existing.

          (h)          The Sponsor or the Trust may purchase and maintain insurance on behalf of any Person who is or was an Indemnified Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Sponsor would have the power to indemnify him against such liability under the provisions of this Section 9.4.

          (i)           For purposes of this Section 9.4, references to “the Trust” shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any Person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 9.4 with respect to the resulting or surviving entity as he would have with respect to such constituent entity if its separate existence had continued.

          (j)          The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 9.4 shall, unless otherwise provided when authorized or ratified, (i) continue as to a Person who has ceased to be an Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a Person; and (ii) survive the termination or expiration of this Declaration or the earlier removal or resignation of an Indemnified Person.

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          Section 9.5.          Outside Businesses. Any Covered Person, the Sponsor, the Delaware Trustee and the Institutional Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper.  None of any Covered Person, the Sponsor, the Delaware Trustee or the Institutional Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee and the Institutional Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity.  Any Covered Person, the Delaware Trustee and the Institutional Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates.

          Section 9.6.          Compensation; Fee. The Sponsor agrees:

          (a)          to pay to the Trustees from time to time such compensation for all services rendered by them hereunder as the parties shall agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and

          (b)          except as otherwise expressly provided herein, to reimburse the Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustees in accordance with any provision of this Declaration (including the reasonable compensation and the expenses and disbursements of their respective agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, bad faith or willful misconduct.

          For purposes of clarification, this Section 9.6 does not contemplate the payment by the Sponsor of acceptance or annual administration fees owing to the Trustees under this Declaration or the fees and expenses of the Trustees’ counsel in connection with the closing of the transactions contemplated by this Declaration.

          The provisions of this Section 9.6 shall survive the dissolution of the Trust and the termination of this Declaration and the removal or resignation of any Trustee.

          No Trustee may claim any lien or charge on any property of the Trust as a result of any amount due pursuant to this Section 9.6.

ARTICLE X

ACCOUNTING

          Section 10.1.          Fiscal Year. The fiscal year (“Fiscal Year”) of the Trust shall be the calendar year, or such other year as is required by the Code.

          Section 10.2.         Certain Accounting Matters.

          (a)          At all times during the existence of the Trust, the Administrators shall keep, or cause to be kept at the principal office of the Trust in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, full books of account, records and supporting documents, which shall reflect in reasonable detail each transaction of the Trust.  The books of account shall be maintained, at the

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Sponsor’s expense, in accordance with generally accepted accounting principles, consistently applied. The books of account and the records of the Trust shall be examined by and reported upon (either separately or as part of the Sponsor’s regularly prepared consolidated financial report) as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Administrators.

          (b)          The Administrators shall cause to be duly prepared and delivered to each of the Holders of Securities Form 1099 or such other annual United States federal income tax information statement required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations.  Notwithstanding any right under the Code to deliver any such statement at a later date, the Administrators shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust.

          (c)          The Administrators, at the Sponsor’s expense, shall cause to be duly prepared at the principal office of the Sponsor in the United States, as ‘United States’ is defined in Section 7701(a)(9) of the Code (or at the principal office of the Trust if the Sponsor has no such principal office in the United States), and filed an annual United States federal income tax return on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Administrators on behalf of the Trust with any state or local taxing authority.

          Section 10.3          Banking. The Trust shall maintain in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Institutional Trustee shall be made directly to the Property Account and no other funds of the Trust shall be deposited in the Property Account.  The sole signatories for such accounts (including the Property Account) shall be designated by the Institutional Trustee.

          Section 10.4.         Withholding. The Institutional Trustee or any Paying Agent and the Administrators shall comply with all withholding requirements under United States federal, state and local law.  The Institutional Trustee or any Paying Agent shall request, and each Holder shall provide to the Institutional Trustee or any Paying Agent, such forms or certificates as are necessary to establish an exemption from withholding with respect to the Holder, and any representations and forms as shall reasonably be requested by the Institutional Trustee or any Paying Agent to assist it in determining the extent of, and in fulfilling, its withholding obligations.  The Administrators shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions.  To the extent that the Institutional Trustee or any Paying Agent is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a Distribution in the amount of the withholding to the Holder.  In the event of any claimed overwithholding, Holders shall be limited to an action against the applicable jurisdiction.  If the amount required to be withheld was not withheld from actual Distributions made, the Institutional Trustee or any Paying Agent may reduce subsequent Distributions by the amount of such withholding.

ARTICLE XI

AMENDMENTS AND MEETINGS

          Section 11.1.         Amendments.

          (a)          Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may only be amended by a written instrument approved and executed (i) by

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the Institutional Trustee, or (ii) if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee, by the Delaware Trustee.

          (b)         Notwithstanding any other provision of this Article XI, an amendment may be made, and any such purported amendment shall be valid and effective only if:

(i)          the Institutional Trustee shall have first received

          (A) an Officers’ Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and

          (B) an opinion of counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and

(ii)          the result of such amendment would not be to

          (A) cause the Trust to cease to be classified for purposes of United States federal income taxation as a grantor trust; or

          (B) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act.

          (c)       Except as provided in Section 11.1(d), (e) or (h), no amendment shall be made, and any such purported amendment shall be void and ineffective, unless the Holders of a Majority in liquidation amount of the Capital Securities shall have consented to such amendment.

          (d)       In addition to and notwithstanding any other provision in this Declaration, without the consent of each affected Holder, this Declaration may not be amended to (i) change the amount or timing of any Distribution on the Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Securities as of a specified date or change any conversion or exchange provisions or (ii) restrict the right of a Holder to institute suit for the enforcement of any such payment on or after such date.

          (e)       Sections 9.1(b) and 9.1(c) and this Section 11.1 shall not be amended without the consent of all of the Holders of the Securities.

          (f)       Article III shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities.

          (g)       The rights of the Holders of the Capital Securities under Article IV to appoint and remove Trustees shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Capital Securities.

          (h)       This Declaration may be amended by the Institutional Trustee and the Holders of a Majority in liquidation amount of the Common Securities without the consent of the Holders of the Capital Securities to:

           (i)          cure any ambiguity;

           (ii)          correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration;

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           (iii)          add to the covenants, restrictions or obligations of the Sponsor; or

           (iv)          modify, eliminate or add to any provision of this Declaration to such extent as may be necessary to ensure that the Trust will be classified for United States federal income tax purposes at all times as a grantor trust and will not be required to register as an Investment Company (including without limitation to conform to any change in Rule 3a-5, Rule 3a-7 or any other applicable rule under the Investment Company Act or written change in interpretation or application thereof by any legislative body, court, government agency or regulatory authority) which amendment does not have a material adverse effect on the rights, preferences or privileges of the Holders of Securities;

          provided, however, that no such modification, elimination or addition referred to in clauses (i), (ii), (iii) or (iv) shall adversely affect in any material respect the powers, preferences or special rights of Holders of Capital Securities.

          Section 11.2.          Meetings of the Holders of Securities; Action by Written Consent.

          (a)          Meetings of the Holders of any class of Securities may be called at any time by the Administrators (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration or the terms of the Securities. The Administrators shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities.  Such direction shall be given by delivering to the Administrators one or more calls in a writing stating that the signing Holders of the Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of the Securities calling a meeting shall specify in writing the Certificates held by the Holders of the Securities exercising the right to call a meeting and only those Securities represented by such Certificates shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met.

          (b)          Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of the Securities:

           (i)          notice of any such meeting shall be given to all the Holders of the Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of the Securities is permitted or required under this Declaration, such vote, consent or approval may be given at a meeting of the Holders of the Securities.  Any action that may be taken at a meeting of the Holders of the Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of the Securities owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of the Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of the Securities entitled to vote who have not consented in writing.  The Administrators may specify that any written ballot submitted to the Holders of the Securities for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Administrators;

           (ii)          each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy.  Every proxy shall be revocable at the pleasure of the Holder of the Securities executing it.  Except as otherwise

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provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation; each meeting of the Holders of the Securities shall be conducted by the Administrators or by such other Person that the Administrators may designate; and

           (iii)          unless the Statutory Trust Act, this Declaration, or the terms of the Securities otherwise provides, the Administrators, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of the Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote; provided, however, that each meeting shall be conducted in the United States (as that term is defined in Treasury Regulations section 301.7701-7).

ARTICLE XII

REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND THE DELAWARE TRUSTEE

          Section 12.1.          Representations and Warranties of Institutional Trustee. The initial Institutional Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Institutional Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Institutional Trustee’s acceptance of its appointment as Institutional Trustee, that:

          (a)          the Institutional Trustee is a Delaware banking corporation with trust powers, duly organized and validly existing under the laws of the State of Delaware with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration;

          (b)          the execution, delivery and performance by the Institutional Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Institutional Trustee.  This Declaration has been duly executed and delivered by the Institutional Trustee, and it constitutes a legal, valid and binding obligation of the Institutional Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors’ rights generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law);

          (c)          the execution, delivery and performance of this Declaration by the Institutional Trustee does not conflict with or constitute a breach of the charter or by-laws of the Institutional Trustee; and

          (d)          no consent, approval or authorization of, or registration with or notice to, any state or federal banking authority is required for the execution, delivery or performance by the Institutional Trustee of this Declaration.

          Section 12.2.          Representations of the Delaware Trustee. The Trustee that acts as initial Delaware Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Delaware Trustee’s acceptance of its appointment as Delaware Trustee that:

          (a)          if it is not a natural person, the Delaware Trustee is duly organized, validly existing and in good standing under the laws of the State of Delaware;

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          (b)          if it is not a natural person, the execution, delivery and performance by the Delaware Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Delaware Trustee.  This Declaration has been duly executed and delivered by the Delaware Trustee, and under Delaware law (excluding any securities laws) constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency and other similar laws affecting creditors’ rights generally and to general principles of equity and the discretion of the court (regardless of whether considered in a proceeding in equity or at law);

          (c)          if it is not a natural person, the execution, delivery and performance of this Declaration by the Delaware Trustee does not conflict with or constitute a breach of the charter or by-laws of the Delaware Trustee;

          (d)          it has trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration;

          (e)          no consent, approval or authorization of, or registration with or notice to, any state or federal banking authority governing the trust powers of the Delaware Trustee is required for the execution, delivery or performance by the Delaware Trustee of this Declaration; and

          (f)          the Delaware Trustee is a natural person who is a resident of the State of Delaware or, if not a natural person, it is an entity which has its principal place of business in the State of Delaware and, in either case, a Person that satisfies for the Trust the requirements of Section 3807 of the Statutory Trust Act.

ARTICLE XIII

MISCELLANEOUS

          Section 13.1.          Notices. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied (which telecopy shall be followed by notice delivered or mailed by first class mail) or mailed by first class mail, as follows:

          (a)          if given to the Trust, in care of the Administrators at the Trust’s mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities):

EFSC Statutory Trust III

c/o Enterprise Financial Services Corp.

150 North Meramec Avenue, Suite 300

St. Louis, Missouri  63105

Attention: Frank Sanfilippo

Telecopy:  314-812-1576

          (b)          if given to the Delaware Trustee, at the Delaware Trustee’s mailing address set forth below (or such other address as the Delaware Trustee may give notice of to the Holders of the Securities):

Wilmington Trust Company

Rodney Square North

1100 North Market Street

Wilmington, Delaware  19890-1600

Attention: Corporate Trust Administration

Telecopy:  302-636-4140

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          (c)          if given to the Institutional Trustee, at the Institutional Trustee’s mailing address set forth below (or such other address as the Institutional Trustee may give notice of to the Holders of the Securities):

Wilmington Trust Company

Rodney Square North

1100 North Market Street

Wilmington, Delaware  19890-1600

Attention: Corporate Trust Administration

Telecopy:  302-636-4140

          (d)          if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice of to the Trust):

Enterprise Financial Services Corp.

150 North Meramec Avenue, Suite 300

St. Louis, Missouri  63105

Attention: Frank Sanfilippo

Telecopy:  314-812-1576

          (e)          if given to any other Holder, at the address set forth on the books and records of the Trust.

          All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.

          Section 13.2.          Governing Law. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the law of the State of Delaware and all rights and remedies shall be governed by such laws without regard to the principles of conflict of laws of the State of Delaware or any other jurisdiction that would call for the application of the law of any jurisdiction other than the State of Delaware; provided, however, that there shall not be applicable to the Trust, the Trustees or this Declaration any provision of the laws (statutory or common) of the State of Delaware pertaining to trusts that relate to or regulate, in a manner inconsistent with the terms hereof (a) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee fees and charges, (b) affirmative requirements to post bonds for trustees, officers, agents or employees of a trust, (c) the necessity for obtaining court or other governmental approval concerning the acquisition, holding or disposition of real or personal property, (d) fees or other sums payable to trustees, officers, agents or employees of a trust, (e) the allocation of receipts and expenditures to income or principal, or (f) restrictions or limitations on the permissible nature, amount or concentration of trust investments or requirements relating to the titling, storage or other manner of holding or investing trust assets.

          Section 13.3.          Intention of the Parties. It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted to further this intention of the parties.

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          Section 13.4.          Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof.

          Section 13.5.          Successors and Assigns. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether or not so expressed.

          Section 13.6.          Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby.

          Section 13.7.          Counterparts. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees and Administrators to any of such counterpart signature pages.  All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page.

Signatures appear on the following page

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          IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written.

WILMINGTON TRUST COMPANY, as Delaware Trustee
By:	Signatory name and title not clear
Name:
Title:
WILMINGTON TRUST COMPANY, as Institutional Trustee
By:	Signatory name and title not clear
Name:
Title:
ENTERPRISE FINANCIAL SERVICES CORP., as Sponsor
By:
Name:
Title:
ADMINISTRATORS OF EFSC STATUTORY TRUST III
By:
	Administrator
By:
	Administrator

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          IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written.

WILMINGTON TRUST COMPANY, as Delaware Trustee
By:
Name:
Title:
WILMINGTON TRUST COMPANY, as Institutional Trustee
By:
Name:
Title:
ENTERPRISE FINANCIAL SERVICES CORP., as Sponsor
By:	Signatory name and title not clear
Name:
Title:
ADMINISTRATORS OF EFSC STATUTORY TRUST III
By:	Signatory name and title not clear
	Administrator
By:	Signatory name and title not clear
	Administrator

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ANNEX I

TERMS OF SECURITIES

                    Pursuant to Section 6.1 of the Amended and Restated Declaration of Trust, dated as of December 13, 2004 (as amended from time to time, the “Declaration”), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities and the Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration):

          1.       Designation and Number.

                    (a)          11,000 Floating Rate Capital Securities of EFSC Statutory Trust III (the “Trust”), with an aggregate stated liquidation amount with respect to the assets of the Trust of eleven million dollars ($11,000,000.00) and a stated liquidation amount with respect to the assets of the Trust of $1,000.00 per Capital Security, are hereby designated for the purposes of identification only as the “Capital Securities”. The Capital Security Certificates evidencing the Capital Securities shall be substantially in the form of Exhibit A-1 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice.

                    (b)          341 Floating Rate Common Securities of the Trust (the “Common Securities”) will be evidenced by Common Security Certificates substantially in the form of Exhibit A-2 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice.

          2.       Distributions.

                    (a)          Distributions will be payable on each Security for the Distribution Period beginning on (and including) the date of original issuance and ending on (but excluding) the Distribution Payment Date in March 2005 at a rate per annum of 4.42% and shall bear interest for each successive Distribution Period beginning on (and including) the Distribution Payment Date in March 2005, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date at a rate per annum equal to the 3-Month LIBOR, determined as described below, plus 1.97% (the “Coupon Rate”), applied to the stated liquidation amount thereof, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee.  Distributions in arrears will bear interest thereon compounded quarterly at the applicable Distribution Rate (to the extent permitted by law). Distributions, as used herein, include cash distributions and any such compounded distributions unless otherwise noted. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. The amount of the Distribution payable for any Distribution Period will be calculated by applying the Distribution Rate to the stated liquidation amount outstanding at the commencement of the Distribution Period on the basis of the actual number of days in the Distribution Period concerned divided by 360.  All percentages resulting from any calculations on the Capital Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).

                    (b)          Distributions on the Securities will be cumulative, will accrue from the date of original issuance, and will be payable, subject to extension of distribution payment periods as described herein, quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, or if such day is not a Business Day, then the next succeeding Business Day (each a “Distribution Payment Date”),

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commencing on the Distribution Payment Date in March 2005 when, as and if available for payment. The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures, so long as no Extension Event of Default has occurred and is continuing, by deferring the payment of interest on the Debentures for up to 20 consecutive quarterly periods (each an “Extension Period”) at any time and from time to time, subject to the conditions described below, during which Extension Period no interest shall be due and payable.  During any Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Distribution Rate in effect for each such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as “Additional Interest”).  No Extension Period may end on a date other than a Distribution Payment Date.  At the end of any such Extension Period, the Debenture Issuer shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date and provided further, however, that during any such Extension Period, the Debenture Issuer and its Affiliates shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Debenture Issuer’s or its Affiliates’ capital stock (other than payments of dividends or distributions to the Debenture Issuer) or make any guarantee payments with respect to the foregoing, or (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Debenture Issuer or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (i) and (ii) above, (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Debenture Issuer in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Debenture Issuer (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any exchange or conversion of any class or series of the Debenture Issuer’s capital stock (or any capital stock of a subsidiary of the Debenture Issuer) for any class or series of the Debenture Issuer’s capital stock or of any class or series of the Debenture Issuer’s indebtedness for any class or series of the Debenture Issuer’s capital stock, (c) the purchase of fractional interests in shares of the Debenture Issuer’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (f) payments under the Capital Securities Guarantee).  Prior to the termination of any Extension Period, the Debenture Issuer may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date.  Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements.  No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. During any Extension Period, Distributions on the Securities shall be deferred for a period equal to the Extension Period. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates to Holders of the Securities as they appear on the books and records of the Trust on the record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust.  The Trust’s

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funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer. The payment of Distributions out of moneys held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.

                    (c)          Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates.  The relevant record dates shall be five days before the relevant Distribution Payment Date.  Distributions payable on any Securities that are not punctually paid on any Distribution Payment Date, as a result of the Debenture Issuer having failed to make a payment under the Debentures, as the case may be, when due (taking into account any Extension Period), will cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture.

                    (d)          In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders of the Securities.

          3.       Liquidation Distribution Upon Dissolution. In the event of the voluntary or involuntary liquidation, dissolution, winding-up or termination of the Trust (each a “Liquidation”) other than in connection with a redemption of the Debentures, the Holders of the Securities will be entitled to receive out of the assets of the Trust available for distribution to Holders of the Securities, after satisfaction of liabilities to creditors of the Trust (to the extent not satisfied by the Debenture Issuer), distributions equal to the aggregate of the stated liquidation amount of $1,000.00 per Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the “Liquidation Distribution”), unless in connection with such Liquidation, the Debentures in an aggregate stated principal amount equal to the aggregate stated liquidation amount of such Securities, with an interest rate equal to the Distribution Rate of, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on, and having the same record date as, such Securities, after paying or making reasonable provision to pay all claims and obligations of the Trust in accordance with the Statutory Trust Act, shall be distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities.

          The Sponsor, as the Holder of all of the Common Securities, has the right at any time to dissolve the Trust (including, without limitation, upon the occurrence of a Special Event), subject to the receipt by the Debenture Issuer of prior approval from the Board of Governors of the Federal Reserve System, or its designated district bank, as applicable, and any successor federal agency that is primarily responsible for regulating the activities of the Sponsor (the “Federal Reserve”), if the Sponsor is a bank holding company, or from the Office of Thrift Supervision and any successor federal agency that is primarily responsible for regulating the activities of Sponsor, (the “OTS”) if the Sponsor is a savings and loan holding company, in either case if then required under applicable capital guidelines or policies of the Federal Reserve or OTS, as applicable, and, after satisfaction of liabilities to creditors of the Trust, cause the Debentures to be distributed to the Holders of the Securities on a Pro Rata basis in accordance with the aggregate stated liquidation amount thereof.

          If a Liquidation of the Trust occurs as described in clause (i), (ii), (iii) or (v) in Section 7.1(a) of the Declaration, the Trust shall be liquidated by the Institutional Trustee as expeditiously as it determines to be possible by distributing, after satisfaction of liabilities to creditors of the Trust, to the Holders of the Securities, the Debentures on a Pro Rata basis to the extent not satisfied by the Debenture Issuer, unless such distribution is determined by the Institutional Trustee not to be practical, in which event such Holders will be entitled to receive out of the assets of the Trust available for distribution to the Holders, after satisfaction of liabilities of creditors of the Trust to the extent not satisfied by the Debenture Issuer,

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an amount equal to the Liquidation Distribution.  An early Liquidation of the Trust pursuant to clause (iv) of Section 7.1(a) of the Declaration shall occur if the Institutional Trustee determines that such Liquidation is possible by distributing, after satisfaction of liabilities to creditors of the Trust, to the Holders of the Securities on a Pro Rata basis, the Debentures, and such distribution occurs.

          If, upon any such Liquidation the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on such Capital Securities shall be paid to the Holders of the Trust Securities on a Pro Rata basis, except that if an Event of Default has occurred and is continuing, the Capital Securities shall have a preference over the Common Securities with regard to such distributions.

          After the date for any distribution of the Debentures upon dissolution of the Trust (i) the Securities of the Trust will be deemed to be no longer outstanding, (ii) upon surrender of a Holder’s Securities certificate, such Holder of the Securities will receive a certificate representing the Debentures to be delivered upon such distribution, (iii) any certificates representing the Securities still outstanding will be deemed to represent undivided beneficial interests in such of the Debentures as have an aggregate principal amount equal to the aggregate stated liquidation amount with an interest rate identical to the Distribution Rate of, and bearing accrued and unpaid interest equal to accrued and unpaid distributions on, the Securities until such certificates are presented to the Debenture Issuer or its agent for transfer or reissuance (and until such certificates are so surrendered, no payments of interest or principal shall be made to Holders of Securities in respect of any payments due and payable under the Debentures; provided, however that such failure to pay shall not be deemed to be an Event of Default and shall not entitle the Holder to the benefits of the Guarantee), and (iv) all rights of Holders of Securities under the Declaration shall cease, except the right of such Holders to receive Debentures upon surrender of certificates representing such Securities.

          4.       Redemption and Distribution.

                    (a)          The Debentures will mature on December 15, 2034.  The Debentures may be redeemed by the Debenture Issuer, in whole or in part, at any Distribution Payment Date on or after the Distribution Payment Date in December 2009, at the Redemption Price. In addition, the Debentures may be redeemed by the Debenture Issuer at the Special Redemption Price, in whole but not in part, at any Distribution Payment Date, upon the occurrence and continuation of a Special Event within 120 days following the occurrence of such Special Event at the Special Redemption Price, upon not less than 30 nor more than 60 days’ notice to holders of such Debentures so long as such Special Event is continuing. In each case, the right of the Debenture Issuer to redeem the Debentures is subject to the Debenture Issuer having received prior approval from the Federal Reserve (if the Debenture Issuer is a bank holding company) or prior approval from the OTS (if the Debenture Issuer is a savings and loan holding company), in each case if then required under applicable capital guidelines or policies of the applicable federal agency.

          “3-Month LIBOR” means the London interbank offered interest rate for three-month, U.S. dollar deposits determined by the Debenture Trustee in the following order of priority:

          (1)          the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (as defined below).  “Telerate Page 3750” means the display designated as “Page 3750” on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits;

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          (2)          if such rate cannot be identified on the related Determination Date, the Debenture Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks’ offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date.  If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations;

          (3)          if fewer than two such quotations are provided as requested in clause (2) above, the Debenture Trustee will request four major New York City banks to provide such banks’ offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.  If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and

          (4)          if fewer than two such quotations are provided as requested in clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period.

          If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date.

          The Distribution Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.

          “Capital Treatment Event” means the receipt by the Debenture Issuer and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of any amendment to, or change (including any announced prospective change) in, the laws, rules or regulations of the United States or any political subdivision thereof or therein, or as the result of any official or administrative pronouncement or action or decision interpreting or applying such laws, rules or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that the Sponsor will not, within 90 days of the date of such opinion, be entitled to treat an amount equal to the aggregate liquidation amount of the Capital Securities as “Tier 1 Capital” (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Sponsor (or if the Sponsor is not a bank holding company, such guidelines applied to the Sponsor as if the Sponsor were subject to such guidelines); provided, however, that the inability of the Sponsor to treat all or any portion of the liquidation amount of the Capital Securities as Tier l Capital shall not constitute the basis for a Capital Treatment Event, if such inability results from the Sponsor having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve or OTS, as applicable, may now or hereafter accord Tier 1 Capital treatment in excess of the amount which may now or hereafter qualify for treatment as Tier 1 Capital under applicable capital adequacy guidelines; provided further, however, that the distribution of Debentures in connection with the Liquidation of the Trust shall not in and of itself constitute a Capital Treatment Event unless such Liquidation shall have occurred in connection with a Tax Event or an Investment Company Event.

          “Determination Date” means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the particular Distribution Period for which a Coupon Rate is being determined.

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          “Investment Company Event” means the receipt by the Debenture Issuer and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or written change (including any announced prospective change) in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within 90 days of the date of such opinion, will be considered an Investment Company that is required to be registered under the Investment Company Act which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Debentures.

          “Maturity Date” means December 15, 2034.

          “Redemption Date” shall mean the date fixed for the redemption of Capital Securities, which shall be any Distribution Payment Date on or after the Distribution Payment Date in December 2009.

          “Redemption Price” means 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid Interest on such Debentures to the Redemption Date.

          “Special Event” means a Tax Event, an Investment Company Event or a Capital Treatment Event.

          “Special Redemption Date” means a date on which a Special Event redemption occurs, which shall be a Distribution Payment Date.

          “Special Redemption Price” means the price set forth in the following table for any Special Redemption Date that occurs on the date indicated below (or if such day is not a Business Day, then the next succeeding Business Day), expressed as the percentage of the principal amount of the Debentures being redeemed:

Month in which Special Redemption Date Occurs	Special Redemption Price
March 2005		104.625	%
June 2005		104.300	%
September 2005		104.000	%
December 2005		103.650	%
March 2006		103.350	%
June 2006		103.000	%
September 2006		102.700	%
December 2006		102.350	%
March 2007		102.050	%
June 2007		101.700	%
September 2007		101.400	%
December 2007		101.050	%
March 2008		100.750	%
June 2008		100.450	%
September 2008		100.200	%
December 2008 and thereafter		100.000	%

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          plus, in each case, accrued and unpaid Interest on such Debentures to the Special Redemption Date.

          “Tax Event” means the receipt by the Debenture Issuer and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement (including any private letter ruling, technical advice memorandum, field service advice, regulatory procedure, notice or announcement including any notice or announcement of intent to adopt such procedures or regulations) (an “Administrative Action”) or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Debenture Issuer or the Trust and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that: (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debentures; (ii) interest payable by the Debenture Issuer on the Debentures is not, or within 90 days of the date of such opinion, will not be, deductible by the Debenture Issuer, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges.

                    (b)          Upon the repayment in full at maturity or redemption in whole or in part of the Debentures (other than following the distribution of the Debentures to the Holders of the Securities), the proceeds from such repayment or payment shall concurrently be applied to redeem Pro Rata at the applicable Redemption Price or Special Redemption Price, as applicable, Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so repaid or redeemed; provided, however, that holders of such Securities shall be given not less than 30 nor more than 60 days’ notice of such redemption (other than at the scheduled maturity of the Debentures).

                    (c)          If fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Capital Securities will be redeemed Pro Rata and the Capital Securities to be redeemed will be redeemed Pro Rata from each Holder of Capital Securities.

                    (d)          The Trust may not redeem fewer than all the outstanding Capital Securities unless all accrued and unpaid Distributions have been paid on all Capital Securities for all quarterly Distribution periods terminating on or before the date of redemption.

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          (e)          Redemption or Distribution Procedures.

                        (i)          Notice of any redemption of, or notice of distribution of the Debentures in exchange for, the Securities (a “Redemption/Distribution Notice”) will be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Debentures. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this paragraph 4(e)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of such Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of such Securities at the address of each such Holder appearing on the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder.

                        (ii)          If the Securities are to be redeemed and the Trust gives a Redemption/ Distribution Notice, which notice may only be issued if the Debentures are redeemed as set out in this paragraph 4 (which notice will be irrevocable), then, provided that the Institutional Trustee has a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Institutional Trustee will pay the relevant Redemption Price or Special Redemption Price, as applicable, to the Holders of such Securities by check mailed to the address of each such Holder appearing on the books and records of the Trust on the Redemption Date.  If a Redemption/Distribution Notice shall have been given and funds deposited as required then immediately prior to the close of business on the date of such deposit Distributions will cease to accrue on the Securities so called for redemption and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the applicable Redemption Price or Special Redemption Price specified in paragraph 4(a), but without interest on such Redemption Price or Special Redemption Price.  If payment of the Redemption Price or Special Redemption Price in respect of any Securities is improperly withheld or refused and not paid either by the Trust or by the Debenture Issuer as guarantor pursuant to the Guarantee, Distributions on such Securities will continue to accrue at the Distribution Rate from the original Redemption Date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price or Special Redemption Price.  In the event of any redemption of the Capital Securities issued by the Trust in part, the Trust shall not be required to (i) issue, register the transfer of or exchange any Security during a period beginning at the opening of business five days before any selection for redemption of the Capital Securities and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all Holders of the Capital Securities to be so redeemed or (ii) register the transfer of or exchange any Capital Securities so selected for redemption, in whole or in part, except for the unredeemed portion of any Capital Securities being redeemed in part.

                        (iii)          Redemption/Distribution Notices shall be sent by the Administrators on behalf of the Trust to (A) in respect of the Capital Securities, the Holders thereof and (B) in respect of the Common Securities, the Holder thereof.

                        (iv)          Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), and provided that the acquiror is not the Holder of the Common Securities or the obligor under the Indenture, the Sponsor or any of its

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subsidiaries may at any time and from time to time purchase outstanding Capital Securities by tender, in the open market or by private agreement.

          5.       Voting Rights - Capital Securities.

                    (a)          Except as provided under paragraphs 5(b) and 7 and as otherwise required by law and the Declaration, the Holders of the Capital Securities will have no voting rights. The Administrators are required to call a meeting of the Holders of the Capital Securities if directed to do so by Holders of at least 10% in liquidation amount of the Capital Securities.

                    (b)          Subject to the requirements of obtaining a tax opinion by the Institutional Trustee in certain circumstances set forth in the last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Capital Securities, voting separately as a class, have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under the Declaration, including the right to direct the Institutional Trustee, as holder of the Debentures, to (i) exercise the remedies available under the Indenture as the holder of the Debentures, (ii) waive any past default that is waivable under the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable or (iv) consent on behalf of all the Holders of the Capital Securities to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required; provided, however, that, where a consent or action under the Indenture would require the consent or act of the holders of greater than a simple majority in aggregate principal amount of Debentures (a “Super Majority”) affected thereby, the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Capital Securities outstanding which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. If the Institutional Trustee fails to enforce its rights under the Debentures after the Holders of a Majority in liquidation amount of such Capital Securities have so directed the Institutional Trustee, to the fullest extent permitted by law, a Holder of the Capital Securities may institute a legal proceeding directly against the Debenture Issuer to enforce the Institutional Trustee’s rights under the Debentures without first instituting any legal proceeding against the Institutional Trustee or any other person or entity. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date the interest or principal is payable (or in the case of redemption, the Redemption Date or the Special Redemption Date, as applicable), then a Holder of record of the Capital Securities may directly institute a proceeding for enforcement of payment, on or after the respective due dates specified in the Debentures, to such Holder directly of the principal of or interest on the Debentures having an aggregate principal amount equal to the aggregate liquidation amount of the Capital Securities of such Holder. The Institutional Trustee shall notify all Holders of the Capital Securities of any default actually known to the Institutional Trustee with respect to the Debentures unless (x) such default has been cured prior to the giving of such notice or (y) the Institutional Trustee determines in good faith that the withholding of such notice is in the interest of the Holders of such Capital Securities, except where the default relates to the payment of principal of or interest on any of the Debentures. Such notice shall state that such Indenture Event of Default also constitutes an Event of Default hereunder. Except with respect to directing the time, method and place of conducting a proceeding for a remedy, the Institutional Trustee shall not take any of the actions described in clauses (i), (ii) or (iii) above unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for United States federal income tax purposes.

          In the event the consent of the Institutional Trustee, as the holder of the Debentures, is required under the Indenture with respect to any amendment, modification or termination of the Indenture, the Institutional Trustee shall request the direction of the Holders of the Securities with respect to such

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amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require the consent of a Super-Majority, the Institutional Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities outstanding which the relevant Super-Majority represents of the aggregate principal amount of the Debentures outstanding. The Institutional Trustee shall not take any such action in accordance with the directions of the Holders of the Securities unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for United States federal income tax purposes.

          A waiver of an Indenture Event of Default will constitute a waiver of the corresponding Event of Default hereunder. Any required approval or direction of Holders of the Capital Securities may be given at a separate meeting of Holders of the Capital Securities convened for such purpose, at a meeting of all of the Holders of the Securities in the Trust or pursuant to written consent. The Institutional Trustee will cause a notice of any meeting at which Holders of the Capital Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of the Capital Securities. Each such notice will include a statement setting forth the following information (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Capital Securities will be required for the Trust to redeem and cancel Capital Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities.

          Notwithstanding that Holders of the Capital Securities are entitled to vote or consent under any of the circumstances described above, any of the Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not entitle the Holder thereof to vote or consent and shall, for purposes of such vote or consent, be treated as if such Capital Securities were not outstanding.

          In no event will Holders of the Capital Securities have the right to vote to appoint, remove or replace the Administrators, which voting rights are vested exclusively in the Sponsor as the Holder of all of the Common Securities of the Trust.  Under certain circumstances as more fully described in the Declaration, Holders of Capital Securities have the right to vote to appoint, remove or replace the Institutional Trustee and the Delaware Trustee.

          6.       Voting Rights - Common Securities.

                    (a)          Except as provided under paragraphs 6(b), 6(c) and 7 and as otherwise required by law and the Declaration, the Common Securities will have no voting rights.

                    (b)          The Holders of the Common Securities are entitled, in accordance with Article IV of the Declaration, to vote to appoint, remove or replace any Administrators.

                    (c)          Subject to Section 6.7 of the Declaration and only after each Event of Default (if any) with respect to the Capital Securities has been cured, waived, or otherwise eliminated and subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Common Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under the Declaration, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee with respect to the Debentures, (ii) waiving any past default and its consequences that is waivable under the Indenture, or (iii) exercising

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any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; provided, however, that, where a consent or action under the Indenture would require a Super Majority, the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Common Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. Notwithstanding this paragraph 6(c), the Institutional Trustee shall not revoke any action previously authorized or approved by a vote or consent of the Holders of the Capital Securities. Other than with respect to directing the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee or the Debenture Trustee as set forth above, the Institutional Trustee shall not take any action described in (i), (ii) or (iii) above, unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust on account of such action. If the Institutional Trustee fails to enforce its rights, to the fullest extent permitted by law, under the Declaration, any Holder of the Common Securities may institute a legal proceeding directly against any Person to enforce the Institutional Trustee’s rights under the Declaration, without first instituting a legal proceeding against the Institutional Trustee or any other Person.

          Any approval or direction of Holders of the Common Securities may be given at a separate meeting of Holders of the Common Securities convened for such purpose, at a meeting of all of the Holders of the Securities in the Trust or pursuant to written consent.  The Administrators will cause a notice of any meeting at which Holders of the Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of the Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents.

          No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities.

          7.       Amendments to Declaration and Indenture.

                    (a)          In addition to any requirements under Section 11.1 of the Declaration, if any proposed amendment to the Declaration provides for, or the Trustees, Sponsor or Administrators otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the Liquidation of the Trust, other than as described in Section 7.1 of the Declaration, then the Holders of outstanding Securities, voting together as a single class, will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of at least a Majority in liquidation amount of the Securities, affected thereby; provided, however, if any amendment or proposal referred to in clause (i) above would adversely affect only the Capital Securities or only the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a Majority in liquidation amount of such class of Securities.

                    (b)          In the event the consent of the Institutional Trustee as the holder of the Debentures is required under the Indenture with respect to any amendment, modification or termination of the Indenture or the Debentures, the Institutional Trustee shall request the written direction of the Holders of the Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification, or termination as directed by a Majority in liquidation amount of the

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Securities voting together as a single class; provided, however, that where a consent under the Indenture would require a Super Majority, the Institutional Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding.

                    (c)          Notwithstanding the foregoing, no amendment or modification may be made to the Declaration if such amendment or modification would (i) cause the Trust to be classified for purposes of United States federal income taxation as other than a grantor trust, (ii) reduce or otherwise adversely affect the powers of the Institutional Trustee or (iii) cause the Trust to be deemed an Investment Company which is required to be registered under the Investment Company Act.

                    (d)          Notwithstanding any provision of the Declaration, the right of any Holder of the Capital Securities to receive payment of distributions and other payments upon redemption or otherwise, on or after their respective due dates, or to institute a suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. For the protection and enforcement of the foregoing provision, each and every Holder of the Capital Securities shall be entitled to such relief as can be given either at law or equity.

          8.          Pro Rata.  A reference in these terms of the Securities to any payment, distribution or treatment as being “Pro Rata” shall mean pro rata to each Holder of the Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities then outstanding unless, in relation to a payment, an Event of Default has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Capital Securities Pro Rata according to the aggregate liquidation amount of the Capital Securities held by the relevant Holder relative to the aggregate liquidation amount of all Capital Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Capital Securities, to each Holder of the Common Securities Pro Rata according to the aggregate liquidation amount of the Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding.

          9.          Ranking. The Capital Securities rank pari passu with and payment thereon shall be made Pro Rata with the Common Securities except that, where an Event of Default has occurred and is continuing, the rights of Holders of the Common Securities to receive payment of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of the Holders of the Capital Securities with the result that no payment of any Distribution on, or Redemption Price (or Special Redemption Price) of, any Common Security, and no other payment on account of redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions on all outstanding Capital Securities for all distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price (or Special Redemption Price) the full amount of such Redemption Price (or Special Redemption Price) on all outstanding Capital Securities then called for redemption, shall have been made or provided for, and all funds immediately available to the Institutional Trustee shall first be applied to the payment in full in cash of all Distributions on, or the Redemption Price (or Special Redemption Price) of, the Capital Securities then due and payable.

          10.         Acceptance of Guarantee and Indenture. Each Holder of the Capital Securities and the Common Securities, by the acceptance of such Securities, agrees to the provisions of the Guarantee, including the subordination provisions therein and to the provisions of the Indenture.

          11.         No Preemptive Rights. The Holders of the Securities shall have no preemptive or similar rights to subscribe for any additional securities.

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          12.         Miscellaneous. These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration, the Guarantee, and the Indenture to a Holder without charge on written request to the Sponsor at its principal place of business.

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EXHIBIT A-1

FORM OF CAPITAL SECURITY CERTIFICATE

[FORM OF FACE OF SECURITY]

          THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW.  NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.  THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR’S AND THE TRUST’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST.  HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

          THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING.  ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE

A-1-1

MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

          THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

          THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

          IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

Certificate Number P-1	11,000 Capital Securities
[CUSIP NO. [_______] **To be inserted at the request of a subsequent transferee]

December 13, 2004

Certificate Evidencing Floating Rate Capital Securities

of

EFSC Statutory Trust III

(liquidation amount $1,000.00 per Capital Security)

          EFSC Statutory Trust III, a statutory trust created under the laws of the State of Delaware (the “Trust”), hereby certifies that First Tennessee Bank National Association is the registered owner of capital securities of the Trust representing undivided beneficial interests in the assets of the Trust, (liquidation amount $1,000.00 per capital security) (the “Capital Securities”). Subject to the Declaration (as defined below), the Capital Securities are transferable on the books and records of the Trust in person or by a duly authorized attorney, upon surrender of this Certificate duly endorsed and in proper form for transfer. The Capital Securities represented hereby are issued pursuant to, and the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities shall in all respects be subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of December 13, 2004, among Frank Sanfilippo and Deborah Barstow, as Administrators, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust Company, as Institutional Trustee, Enterprise Financial Services Corp., as Sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Trust, including the designation of the terms of the Capital Securities as set forth in Annex I to such amended and restated declaration as the same may be amended from time to time (the “Declaration”).  Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Guarantee, and the Indenture to the Holder without charge upon written request to the Sponsor at its principal place of business.

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          Upon receipt of this Security, the Holder is bound by the Declaration and is entitled to the benefits thereunder.

          By acceptance of this Security, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Capital Securities as evidence of beneficial ownership in the Debentures.

          This Capital Security is governed by, and construed in accordance with, the laws of the State of Delaware, without regard to principles of conflict of laws.

Signatures appear on following page

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          IN WITNESS WHEREOF, the Trust has duly executed this certificate.

EFSC STATUTORY TRUST III
By:
Name:
Title:	Administrator

CERTIFICATE OF AUTHENTICATION

          This is one of the Capital Securities referred to in the within-mentioned Declaration.

WILMINGTON TRUST COMPANY, as the Institutional Trustee
By:
	Authorized Officer

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[FORM OF REVERSE OF CAPITAL SECURITY]

          Distributions payable on each Capital Security will be payable at an annual rate equal to 4.42% beginning on (and including) the date of original issuance and ending on (but excluding) the Distribution Payment Date in March 2005 and at an annual rate for each successive period beginning on (and including) the Distribution Payment Date in March 2005, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date (each a “Distribution Period”), equal to 3-Month LIBOR, determined as described below, plus 1.97% (the “Coupon Rate”), applied to the stated liquidation amount of $1,000.00 per Capital Security, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term “Distributions” as used herein includes cash distributions and any such compounded distributions unless otherwise noted.  A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor.  As used herein, “Determination Date” means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period.  The amount of the Distribution payable for any Distribution Period will be calculated by applying the Distribution Rate to the stated liquidation amount outstanding at the commencement of the Distribution Period on the basis of the actual number of days in the Distribution Period concerned divided by 360.

          “3-Month LIBOR” as used herein, means the London interbank offered interest rate for three-month U.S. dollar deposits determined by the Debenture Trustee in the following order of priority:  (i) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (“Telerate Page 3750” means the display designated as “Page 3750” on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits); (ii) if such rate cannot be identified on the related Determination Date, the Debenture Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks’ offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date.  If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are provided as requested in clause (ii) above, the Debenture Trustee will request four major New York City banks to provide such banks’ offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.  If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period.  If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date.

          The Distribution Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.

          All percentages resulting from any calculations on the Capital Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655),

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and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).

          Except as otherwise described below, Distributions on the Capital Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year or if any such day is not a Business Day, then the next succeeding Business Day (each such day, a “Distribution Payment Date”), commencing on the Distribution Payment Date in March 2005.  The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures, so long as no Extension Event of Default has occurred and is continuing, by extending the interest payment period for up to 20 consecutive quarterly periods (each an “Extension Period”) at any time and from time to time on the Debentures, subject to the conditions described below, during which Extension Period no interest shall be due and payable.  During any Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Distribution Rate in effect for each such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as “Additional Interest”). No Extension Period may end on a date other than a Distribution Payment Date. At the end of any such Extension Period, the Debenture Issuer shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date.  Prior to the termination of any Extension Period, the Debenture Issuer may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements.  No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest.  During any Extension Period, Distributions on the Capital Securities shall be deferred for a period equal to the Extension Period. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates, to Holders of the Securities as they appear on the books and records of the Trust on the record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust.  The Trust’s funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer. The payment of Distributions out of moneys held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.

          The Capital Securities shall be redeemable as provided in the Declaration.

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ASSIGNMENT

          FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security Certificate to:

___________________________________________________________________

(Insert assignee’s social security or tax identification number) _________________

___________________________________________________________________

___________________________________________________________________

(Insert address and zip code of assignee) and irrevocably appoints

___________________________________________________________________

          agent to transfer this Capital Security Certificate on the books of the Trust.  The agent may substitute another to act for him or her.

Date: ______________________________________

Signature: __________________________________

                    (Sign exactly as your name appears on the other side of this Capital Security Certificate)

          Signature Guarantee:¹

¹ Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Security registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Security registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

A-1-7

EXHIBIT A-2

FORM OF COMMON SECURITY CERTIFICATE

          THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.

          THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH SECTION 8.1 OF THE DECLARATION.

          Certificate Number C-1 341 Common Securities

December 13, 2004

Certificate Evidencing Floating Rate Common Securities

of

EFSC Statutory Trust III

          EFSC Statutory Trust III, a statutory trust created under the laws of the State of Delaware (the “Trust”), hereby certifies that Enterprise Financial Services Corp. (the “Holder”) is the registered owner of common securities of the Trust representing undivided beneficial interests in the assets of the Trust (the “Common Securities”).  The Common Securities represented hereby are issued pursuant to, and the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities shall in all respects be subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of December 13, 2004, among Frank Sanfilippo and Deborah Barstow, as Administrators, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust Company, as Institutional Trustee, Enterprise Financial Services Corp., as Sponsor, and the holders from time to time of undivided beneficial interest in the assets of the Trust including the designation of the terms of the Common Securities as set forth in Annex I to such amended and restated declaration, as the same may be amended from time to time (the “Declaration”).  Capitalized terms used herein but not defined shall have the meaning given them in the Declaration.  The Holder is entitled to the benefits of the Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Guarantee and the Indenture to the Holder without charge upon written request to the Sponsor at its principal place of business.

          As set forth in the Declaration, when an Event of Default has occurred and is continuing, the rights of Holders of Common Securities to payment in respect of Distributions and payments upon Liquidation, redemption or otherwise are subordinated to the rights of payment of Holders of the Capital Securities.

          Upon receipt of this Certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder.

          By acceptance of this Certificate, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of undivided beneficial ownership in the Debentures.

          This Common Security is governed by, and construed in accordance with, the laws of the State of Delaware, without regard to principles of conflict of laws.

A-2-1

          IN WITNESS WHEREOF, the Trust has duly executed this certificate.

EFSC STATUTORY TRUST III
By:
Name:
Title:	Administrator

A-2-2

[FORM OF REVERSE OF COMMON SECURITY]

          Distributions payable on each Common Security will be payable at an annual rate equal to 4.42% beginning on (and including) the date of original issuance and ending on (but excluding) the Distribution Payment Date in March 2005 and at an annual rate for each successive period beginning on (and including) the Distribution Payment Date in March 2005, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date (each a “Distribution Period”), equal to 3-Month LIBOR, determined as described below, plus 1.97% (the “Coupon Rate”), applied to the stated liquidation amount of $1,000.00 per Common Security, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term “Distributions” as used herein includes cash distributions and any such compounded distributions unless otherwise noted.  A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor.  As used herein, “Determination Date” means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period.  The amount of the Distribution payable for any Distribution Period will be calculated by applying the Distribution Rate to the stated liquidation amount outstanding at the commencement of the Distribution Period on the basis of the actual number of days in the Distribution Period concerned divided by 360.

          “3-Month LIBOR” as used herein, means the London interbank offered interest rate for three-month U.S. dollar deposits determined by the Debenture Trustee in the following order of priority:  (i) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (“Telerate Page 3750” means the display designated as “Page 3750” on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits); (ii) if such rate cannot be identified on the related Determination Date, the Debenture Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks’ offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date.  If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are provided as requested in clause (ii) above, the Debenture Trustee will request four major New York City banks to provide such banks’ offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.  If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period.  If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date.

          The Distribution Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.

          All percentages resulting from any calculations on the Common Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655),

A-2-3

and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).

          Except as otherwise described below, Distributions on the Common Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year or if any such day is not a Business Day, then the next succeeding Business Day (each such day, a “Distribution Payment Date”), commencing on the Distribution Payment Date in March 2005. The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures, so long as no Extension Event of Default has occurred and is continuing, by extending the interest payment period for up to 20 consecutive quarterly periods (each an “Extension Period”) at any time and from time to time on the Debentures, subject to the conditions described below, during which Extension Period no interest shall be due and payable.  During any Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Distribution Rate in effect for each such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as “Additional Interest”). No Extension Period may end on a date other than a Distribution Payment Date.  At the end of any such Extension Period, the Debenture Issuer shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date.  Prior to the termination of any Extension Period, the Debenture Issuer may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest.  During any Extension Period, Distributions on the Common Securities shall be deferred for a period equal to the Extension Period. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates, to Holders of the Securities as they appear on the books and records of the Trust on the record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust. The Trust’s funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer.

          The Common Securities shall be redeemable as provided in the Declaration.

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ASSIGNMENT

          FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to:

___________________________________________________________________

(Insert assignee’s social security or tax identification number) _________________

___________________________________________________________________

___________________________________________________________________

(Insert address and zip code of assignee) and irrevocably appoints

___________________________________________________________________

______________________________________________________________________agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her.

Date:__________________________________

Signature:______________________________

(Sign exactly as your name appears on the other side of this Common Security Certificate)

Signature:______________________________

(Sign exactly as your name appears on the other side of this Common Security Certificate)

          Signature Guarantee²

² Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union, meeting the requirements of the Security registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Security registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

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EXHIBIT B

SPECIMEN OF INITIAL DEBENTURE

(See Document No. 17)

B-1

EXHIBIT C

PLACEMENT AGREEMENT

(See Document No. 1)

C-1

EX-4.9.4

GUARANTEE AGREEMENT

by and between

ENTERPRISE FINANCIAL SERVICES CORP.

and

WILMINGTON TRUST COMPANY

Dated as of December 13, 2004

GUARANTEE AGREEMENT

          This GUARANTEE AGREEMENT (this “Guarantee”), dated as of December 13, 2004, is executed and delivered by Enterprise Financial Services Corp., a Delaware corporation (the “Guarantor”), and Wilmington Trust Company, a Delaware banking corporation, as trustee (the “Guarantee Trustee”), for the benefit of the Holders (as defined herein) from time to time of the Capital Securities (as defined herein) of EFSC Statutory Trust III, a Delaware statutory trust (the “Issuer”).

          WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the “Declaration”), dated as of the date hereof among Wilmington Trust Company, not in its individual capacity but solely as institutional trustee, the administrators of the Issuer named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof those undivided beneficial interests, having an aggregate liquidation amount of $11,000,000.00 (the “Capital Securities”); and

          WHEREAS, as incentive for the Holders to purchase the Capital Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Guarantee, to pay to the Holders of Capital Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein; 

          NOW, THEREFORE, in consideration of the purchase by each Holder of the Capital Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of the Holders.

ARTICLE I

DEFINITIONS AND INTERPRETATION

          Section 1.1.      Definitions and Interpretation. In this Guarantee, unless the context otherwise requires:

          (a)           capitalized terms used in this Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1;

          (b)           a term defined anywhere in this Guarantee has the same meaning throughout;

          (c)           all references to “the Guarantee” or “this Guarantee” are to this Guarantee as modified, supplemented or amended from time to time;

          (d)           all references in this Guarantee to “Articles” or “Sections” are to Articles or Sections of this Guarantee, unless otherwise specified;

          (e)           terms defined in the Declaration as at the date of execution of this Guarantee have the same meanings when used in this Guarantee, unless otherwise defined in this Guarantee or unless the context otherwise requires; and

          (f)           a reference to the singular includes the plural and vice versa.

          “Affiliate” has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder.

          “Beneficiaries” means any Person to whom the Issuer is or hereafter becomes indebted or liable.

          “Capital Securities” has the meaning set forth in the recitals to this Guarantee.

          “Common Securities” means the common securities issued by the Issuer to the Guarantor pursuant to the Declaration.

          “Corporate Trust Office” means the office of the Guarantee Trustee at which the corporate trust business of the Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Guarantee is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware  19890-1600, Attention:  Corporate Trust Administration.

          “Covered Person” means any Holder of Capital Securities.

          “Debentures” means the debt securities of the Guarantor designated the Floating Rate Junior Subordinated Deferrable Interest Debentures due 2034 held by the Institutional Trustee (as defined in the Declaration) of the Issuer.

          “Declaration Event of Default” means an “Event of Default” as defined in the Declaration.

          “Event of Default” has the meaning set forth in Section 2.4(a).

          “Guarantee Payments” means the following payments or distributions, without duplication, with respect to the Capital Securities, to the extent not paid or made by the Issuer:  (i) any accrued and unpaid Distributions (as defined in the Declaration) which are required to be paid on such Capital Securities to the extent the Issuer shall have funds available therefor, (ii) the Redemption Price to the extent the Issuer has funds available therefor, with respect to any Capital Securities called for redemption by the Issuer, (iii) the Special Redemption Price to the extent the Issuer has funds available therefor, with respect to Capital Securities redeemed upon the occurrence of a Special Event, and (iv) upon a voluntary or involuntary liquidation, dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Debentures to the Holders of the Capital Securities in exchange therefor as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Capital Securities to the date of payment, to the extent the Issuer shall have funds available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the “Liquidation Distribution”).

          “Guarantee Trustee” means Wilmington Trust Company, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee and thereafter means each such Successor Guarantee Trustee.

          “Guarantor” means Enterprise Financial Services Corp. and each of its successors and assigns.

          “Holder” means any holder, as registered on the books and records of the Issuer, of any Capital Securities; provided, however, that, in determining whether the Holders of the requisite percentage of Capital Securities have given any request, notice, consent or waiver hereunder, “Holder” shall not include the Guarantor or any Affiliate of the Guarantor.

          “Indemnified Person” means the Guarantee Trustee, any Affiliate of the Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Guarantee Trustee.

          “Indenture” means the Indenture dated as of the date hereof between the Guarantor and Wilmington Trust Company, not in its individual capacity but solely as trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued to the institutional trustee of the Issuer.

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          “Issuer” has the meaning set forth in the opening paragraph to this Guarantee.

          “Liquidation Distribution” has the meaning set forth in the definition of “Guarantee Payments” herein.

          “Majority in liquidation amount of the Capital Securities” means Holder(s) of outstanding Capital Securities, voting together as a class, but separately from the holders of Common Securities, of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Capital Securities then outstanding.

          “Obligations” means any costs, expenses or liabilities (but not including liabilities related to taxes) of the Issuer other than obligations of the Issuer to pay to holders of any Trust Securities the amounts due such holders pursuant to the terms of the Trust Securities.

          “Officer’s Certificate” means, with respect to any Person, a certificate signed by one Authorized Officer of such Person. Any Officer’s Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee shall include:

          (a)           a statement that the officer signing the Officer’s Certificate has read the covenant or condition and the definitions relating thereto;

          (b)           a brief statement of the nature and scope of the examination or investigation undertaken by the officer in rendering the Officer’s Certificate;

          (c)           a statement that the officer has made such examination or investigation as, in such officer’s opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and

          (d)           a statement as to whether, in the opinion of the officer, such condition or covenant has been complied with.

          “Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature.

          “Redemption Price” has the meaning set forth in the Indenture.

          “Responsible Officer” means, with respect to the Guarantee Trustee, any officer within the Corporate Trust Office of the Guarantee Trustee including any Vice President, Assistant Vice President, Secretary, Assistant Secretary or any other officer of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer’s knowledge of and familiarity with the particular subject.

          “Special Event” has the meaning set forth in the Indenture.

          “Special Redemption Price” has the meaning set forth in the Indenture.

3

          “Successor Guarantee Trustee” means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 3.1.

          “Trust Securities” means the Common Securities and the Capital Securities.

ARTICLE II

POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE

          Section 2.1.      Powers and Duties of the Guarantee Trustee.

          (a)           This Guarantee shall be held by the Guarantee Trustee for the benefit of the Holders of the Capital Securities, and the Guarantee Trustee shall not transfer this Guarantee to any Person except a Holder of Capital Securities exercising his or her rights pursuant to Section 4.4(b) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee.  The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee.

          (b)           If an Event of Default actually known to a Responsible Officer of the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee for the benefit of the Holders of the Capital Securities.

          (c)           The Guarantee Trustee, before the occurrence of any Event of Default and after curing all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee, and no implied covenants shall be read into this Guarantee against the Guarantee Trustee.  In case an Event of Default has occurred (that has not been waived pursuant to Section 2.4) and is actually known to a Responsible Officer of the Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

          (d)           No provision of this Guarantee shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(i)           prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred:
	(A)           the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee, and no implied covenants or obligations shall be read into this Guarantee against the Guarantee Trustee; and
	(B)          in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee; but in the

4

	case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee;
(ii)           the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that such Responsible Officer of the Guarantee Trustee or the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made;
(iii)           the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the written direction of the Holders of not less than a Majority in liquidation amount of the Capital Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or relating to the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee; and
(iv)           no provision of this Guarantee shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds is not reasonably assured to it under the terms of this Guarantee or security and indemnity, reasonably satisfactory to the Guarantee Trustee, against such risk or liability is not reasonably assured to it.
Section 2.2.      Certain Rights of Guarantee Trustee.
(a)          Subject to the provisions of Section 2.1:
(i)           The Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties.
(ii)           Any direction or act of the Guarantor contemplated by this Guarantee shall be sufficiently evidenced by an Officer’s Certificate.
(iii)           Whenever, in the administration of this Guarantee, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officer’s Certificate of the Guarantor which, upon receipt of such request, shall be promptly delivered by the Guarantor.
(iv)           The Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any re-recording, refiling or re-registration thereof).
(v)           The Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any

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of its Affiliates and may include any of its employees.  The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee from any court of competent jurisdiction.

               (vi)           The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee such security and indemnity, reasonably satisfactory to the Guarantee Trustee, against the costs, expenses (including attorneys’ fees and expenses and the expenses of the Guarantee Trustee’s agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided, however, that nothing contained in this Section 2.2(a)(vi) shall relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee.

               (vii)           The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit.

               (viii)          The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.

               (ix)           Any action taken by the Guarantee Trustee or its agents hereunder shall bind the Holders of the Capital Securities, and the signature of the Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action.  No third party shall be required to inquire as to the authority of the Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Guarantee, both of which shall be conclusively evidenced by the Guarantee Trustee’s or its agent’s taking such action.

               (x)           Whenever in the administration of this Guarantee the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (i) may request instructions from the Holders of a Majority in liquidation amount of the Capital Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions.

               (xi)           The Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith, without negligence, and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Guarantee.

          (b)           No provision of this Guarantee shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty.

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          Section 2.3.      Not Responsible for Recitals or Issuance of Guarantee. The recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness.  The Guarantee Trustee makes no representation as to the validity or sufficiency of this Guarantee.

          Section 2.4.      Events of Default; Waiver.

          (a)           An Event of Default under this Guarantee will occur upon the failure of the Guarantor to perform any of its payment or other obligations hereunder.

          (b)           The Holders of a Majority in liquidation amount of the Capital Securities may, voting or consenting as a class, on behalf of the Holders of all of the Capital Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and shall be deemed to have been cured, for every purpose of this Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.

          Section 2.5.      Events of Default; Notice.

          (a)          The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Capital Securities and the Guarantor, notices of all Events of Default actually known to a Responsible Officer of the Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided, however, that the Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Capital Securities.

          (b)          The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice from the Guarantor or a Holder of the Capital Securities (except in the case of a payment default), or a Responsible Officer of the Guarantee Trustee charged with the administration of this Guarantee shall have obtained actual knowledge thereof.

ARTICLE III

GUARANTEE TRUSTEE

          Section 3.1.      Guarantee Trustee; Eligibility.

(a)      There shall at all times be a Guarantee Trustee which shall:

          (i)           not be an Affiliate of the Guarantor, and

          (ii)          be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or Person authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 3.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

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          (b)           If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 3.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 3.2(c).

          (c)          If the Guarantee Trustee has or shall acquire any “conflicting interest” within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee shall either eliminate such interest or resign to the extent and in the manner provided by, and subject to this Guarantee.

          Section 3.2.      Appointment, Removal and Resignation of Guarantee Trustee.

          (a)          Subject to Section 3.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor except during an Event of Default.

          (b)          The Guarantee Trustee shall not be removed in accordance with Section 3.2(a) until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor.

          (c)          The Guarantee Trustee appointed to office shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation.  The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by an instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee.

          (d)          If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 3.2 within 60 days after delivery of an instrument of removal or resignation, the Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee.  Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee.

          (e)          No Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Guarantee Trustee.

          (f)          Upon termination of this Guarantee or removal or resignation of the Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall pay to the Guarantee Trustee all amounts owing to the Guarantee Trustee under Sections 7.2 and 7.3 accrued to the date of such termination, removal or resignation.

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ARTICLE IV

GUARANTEE

          Section 4.1.      Guarantee.

          (a)           The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense (except the defense of payment by the Issuer), right of set-off or counterclaim that the Issuer may have or assert.  The Guarantor’s obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders.

          (b)           The Guarantor hereby also agrees to assume any and all Obligations of the Issuer and in the event any such Obligation is not so assumed, subject to the terms and conditions hereof, the Guarantor hereby irrevocably and unconditionally guarantees to each Beneficiary the full payment, when and as due, of any and all Obligations to such Beneficiaries.  This Guarantee is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof.

          Section 4.2.      Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of this Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands.

          Section 4.3.      Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following:

          (a)          the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Capital Securities to be performed or observed by the Issuer;

          (b)           the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Special Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Capital Securities or the extension of time for the performance of any other obligation under, arising out of or in connection with, the Capital Securities (other than an extension of time for payment of Distributions, Redemption Price, Special Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures or any extension of the maturity date of the Debentures permitted by the Indenture);

          (c)           any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Capital Securities, or any action on the part of the Issuer granting indulgence or extension of any kind;

          (d)           the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer;

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          (e)          any invalidity of, or defect or deficiency in, the Capital Securities;

          (f)          the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or

          (g)          any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 4.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances.

          There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing.

          Section 4.4.      Rights of Holders.

          (a)           The Holders of a Majority in liquidation amount of the Capital Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee; provided, however, that (subject to Section 2.1) the Guarantee Trustee shall have the right to decline to follow any such direction if the Guarantee Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if the Guarantee Trustee in good faith by its board of directors or trustees, executive committees or a trust committee of directors or trustees and/or Responsible Officers shall determine that the action or proceedings so directed would involve the Guarantee Trustee in personal liability.

          (b)           Any Holder of Capital Securities may institute a legal proceeding directly against the Guarantor to enforce the Guarantee Trustee’s rights under this Guarantee, without first instituting a legal proceeding against the Issuer, the Guarantee Trustee or any other Person.  The Guarantor waives any right or remedy to require that any such action be brought first against the Issuer, the Guarantee Trustee or any other Person before so proceeding directly against the Guarantor.

          Section 4.5.      Guarantee of Payment. This Guarantee creates a guarantee of payment and not of collection.

          Section 4.6.      Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders of Capital Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if, after giving effect to any such payment, any amounts are due and unpaid under this Guarantee.  If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders.

          Section 4.7.      Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Capital Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 4.3 hereof.

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ARTICLE V

LIMITATION OF TRANSACTIONS; SUBORDINATION

          Section 5.1.      Limitation of Transactions. So long as any Capital Securities remain outstanding, if (a) there shall have occurred and be continuing an Event of Default or a Declaration Event of Default or (b) the Guarantor shall have selected an Extension Period as provided in the Declaration and such period, or any extension thereof, shall have commenced and be continuing, then the Guarantor shall not and shall not permit any Affiliate to (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Guarantor’s or such Affiliate’s capital stock (other than payments of dividends or distributions to the Guarantor) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Guarantor or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (i) repurchases, redemptions or other acquisitions of shares of capital stock of the Guarantor in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Guarantor (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the occurrence of the Event of Default, Declaration Event of Default or Extension Period, as applicable, (ii) as a result of any exchange or conversion of any class or series of the Guarantor’s capital stock (or any capital stock of a subsidiary of the Guarantor) for any class or series of the Guarantor’s capital stock or of any class or series of the Guarantor’s indebtedness for any class or series of the Guarantor’s capital stock, (iii) the purchase of fractional interests in shares of the Guarantor’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (iv) any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant thereto, (v) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (vi) payments under this Guarantee).

          Section 5.2.      Ranking. This Guarantee will constitute an unsecured obligation of the Guarantor and will rank subordinate and junior in right of payment to all present and future Senior Indebtedness (as defined in the Indenture) of the Guarantor.  By their acceptance thereof, each Holder of Capital Securities agrees to the foregoing provisions of this Guarantee and the other terms set forth herein.

          The right of the Guarantor to participate in any distribution of assets of any of its subsidiaries upon any such subsidiary’s liquidation or reorganization or otherwise is subject to the prior claims of creditors of that subsidiary, except to the extent the Guarantor may itself be recognized as a creditor of that subsidiary.  Accordingly, the Guarantor’s obligations under this Guarantee will be effectively subordinated to all existing and future liabilities of the Guarantor’s subsidiaries, and claimants should look only to the assets of the Guarantor for payments hereunder.  This Guarantee does not limit the incurrence or issuance of other secured or unsecured debt of the Guarantor, including Senior Indebtedness of the Guarantor, under any indenture that the Guarantor may enter into in the future or otherwise.

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ARTICLE VI

TERMINATION

          Section 6.1.      Termination. This Guarantee shall terminate as to the Capital Securities (i) upon full payment of the Redemption Price or Special Redemption Price of all Capital Securities then outstanding, (ii) upon the distribution of all of the Debentures to the Holders of all of the Capital Securities or (iii) upon full payment of the amounts payable in accordance with the Declaration upon dissolution of the Issuer. This Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Capital Securities must restore payment of any sums paid under the Capital Securities or under this Guarantee.

ARTICLE VII

INDEMNIFICATION

          Section 7.1.      Exculpation.

          (a)           No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person’s negligence or willful misconduct with respect to such acts or omissions.

          (b)           An Indemnified Person shall be fully protected in relying in good faith upon the records of the Issuer or the Guarantor and upon such information, opinions, reports or statements presented to the Issuer or the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person’s professional or expert competence and who, if selected by such Indemnified Person, has been selected with reasonable care by such Indemnified Person, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Capital Securities might properly be paid.

          Section 7.2.      Indemnification.

          (a)           The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any and all loss, liability, damage, claim or expense incurred without negligence or willful misconduct on the part of the Indemnified Person, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including, but not limited to, the costs and expenses (including reasonable legal fees and expenses) of the Indemnified Person defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of the Indemnified Person’s powers or duties hereunder.  The obligation to indemnify as set forth in this Section 7.2 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee.

          (b)           Promptly after receipt by an Indemnified Person under this Section 7.2 of notice of the commencement of any action, such Indemnified Person will, if a claim in respect thereof is to be made against the Guarantor under this Section 7.2, notify the Guarantor in writing of the commencement thereof; but the failure so to notify the Guarantor (i) will not relieve the Guarantor from liability under

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paragraph (a) above unless and to the extent that the Guarantor did not otherwise learn of such action and such failure results in the forfeiture by the Guarantor of substantial rights and defenses and (ii) will not, in any event, relieve the Guarantor from any obligations to any Indemnified Person other than the indemnification obligation provided in paragraph (a) above.  The Guarantor shall be entitled to appoint counsel of the Guarantor’s choice at the Guarantor’s expense to represent the Indemnified Person in any action for which indemnification is sought (in which case the Guarantor shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Person or Persons except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the Indemnified Person. Notwithstanding the Guarantor’s election to appoint counsel to represent the Guarantor in an action, the Indemnified Person shall have the right to employ separate counsel (including local counsel), and the Guarantor shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the Guarantor to represent the Indemnified Person would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the Indemnified Person and the Guarantor and the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it and/or other Indemnified Person(s) which are different from or additional to those available to the Guarantor, (iii) the Guarantor shall not have employed counsel satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of the institution of such action or (iv) the Guarantor shall authorize the Indemnified Person to employ separate counsel at the expense of the Guarantor.  The Guarantor will not, without the prior written consent of the Indemnified Persons, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Persons are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Person from all liability arising out of such claim, action, suit or proceeding.

          Section 7.3.      Compensation; Reimbursement of Expenses. The Guarantor agrees:

          (a)           to pay to the Guarantee Trustee from time to time such compensation for all services rendered by it hereunder as the parties shall agree to from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and

          (b)           except as otherwise expressly provided herein, to reimburse the Guarantee Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by it in accordance with any provision of this Guarantee (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or willful misconduct.

          For purposes of clarification, this Section 7.3 does not contemplate the payment by the Guarantor of acceptance or annual administration fees owing to the Guarantee Trustee for services to be provided by the Guarantee Trustee under this Guarantee or the fees and expenses of the Guarantee Trustee’s counsel in connection with the closing of the transactions contemplated by this Guarantee.  The provisions of this Section 7.3 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee.

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ARTICLE VIII

MISCELLANEOUS

          Section 8.1.      Successors and Assigns. All guarantees and agreements contained in this Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Capital Securities then outstanding.  Except in connection with any merger or consolidation of the Guarantor with or into another entity or any sale, transfer or lease of the Guarantor’s assets to another entity, in each case, to the extent permitted under the Indenture, the Guarantor may not assign its rights or delegate its obligations under this Guarantee without the prior approval of the Holders of at least a Majority in liquidation amount of the Capital Securities.

          Section 8.2.      Amendments. Except with respect to any changes that do not adversely affect the rights of Holders of the Capital Securities in any material respect (in which case no consent of Holders will be required), this Guarantee may be amended only with the prior approval of the Holders of not less than a Majority in liquidation amount of the Capital Securities.  The provisions of the Declaration with respect to amendments thereof apply to the giving of such approval.

          Section 8.3.      Notices. All notices provided for in this Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows:

          (a)           If given to the Guarantee Trustee, at the Guarantee Trustee’s mailing address set forth below (or such other address as the Guarantee Trustee may give notice of to the Holders of the Capital Securities and the Guarantor):

          Wilmington Trust Company
          Rodney Square North
          1100 North Market Street
          Wilmington, Delaware  19890-1600
          Attention: Corporate Trust Administration
          Telecopy:  302-636-4140

          (b)           If given to the Guarantor, at the Guarantor’s mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Capital Securities and to the Guarantee Trustee):

          Enterprise Financial Services Corp.
          150 North Meramec Avenue, Suite 300
          St. Louis, Missouri  63105
          Attention: Frank Sanfilippo
          Telecopy:  314-812-1576

          (c)           If given to any Holder of the Capital Securities, at the address set forth on the books and records of the Issuer.

          All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.

          Section 8.4.     Benefit. This Guarantee is solely for the benefit of the Beneficiaries and, subject to Section 2.1(a), is not separately transferable from the Capital Securities.

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          Section 8.5.      Governing Law. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

          Section 8.6.      Counterparts. This Guarantee may be executed in one or more counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same instrument.

          Section 8.7      Separability. In case one or more of the provisions contained in this Guarantee shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Guarantee, but this Guarantee shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein.

Signatures appear on the following page

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          THIS GUARANTEE is executed as of the day and year first above written.

ENTERPRISE FINANCIAL SERVICES CORP, as Guarantor
By:	Signatory name and title not clear
Name:
Title:
WILMINGTON TRUST COMPANY, as Guarantee Trustee
By:
Name:
Title:

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          THIS GUARANTEE is executed as of the day and year first above written.

ENTERPRISE FINANCIAL SERVICES CORP, as Guarantor
By:
Name:
Title:
WILMINGTON TRUST COMPANY, as Guarantee Trustee
By:	Signatory name and title not clear
Name:
Title:

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EX-11.1

EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF PER EARNINGS SHARE

	Basic EPS number of shares		Diluted EPS number of shares		Net Income		Basic EPS		Diluted EPS
12 months ended December 31, 2002		9,399,374		9,611,108	$	5,001,480	$	0.53	$	0.52
12 months ended December 31, 2003		9,566,059		9,875,141	$	6,925,219	$	0.72	$	0.70
12 months ended December 31, 2004		9,695,500		10,054,691	$	8,214,527	$	0.85	$	0.82

12 months ended December 31, 2002	Basic				Diluted
Average Shares Outstanding		9,399,374				9,399,374
Options - Plan 1				0
Average Option Price			$	0.00
Total Exercise Cost			$	0.00
Shares Repurchased				0
Net Shares from Option - Plan 1						0
Options - Plan 2				57,455
Average Option Price			$	3.14
Total Exercise Cost			$	180,409
Shares Repurchased				16,876
Net Shares from Option - Plan 2						40,579
Options - Plan 3				452,541
Average Option Price			$	6.90
Total Exercise Cost			$	3,122,533
Shares Repurchased				292,098
Net Shares from Option - Plan 3						160,443
Options - Plan 4				464,960
Average Option Price			$	12.60
Total Exercise Cost			$	5,858,496
Shares Repurchased				548,035
Net Shares from Option - Plan 4						0
Options - Plan 5				54,032
Average Option Price			$	9.52
Total Exercise Cost			$	514,385
Shares Repurchased				48,118
Net Shares from Option - Plan 5						5,914
Options - EFA Non-qualified				85,500
Average Option Price			$	10.18
Total Exercise Cost			$	870,390
Shares Repurchased				81,421
Net Shares from Option - EFA Non-qualified						4,079
Options - CGB Qualified				40,495
Average Option Price			$	10.59
Total Exercise Cost			$	428,842
Shares Repurchased				40,116
Net Shares from Option - CGB Qualified						379
Options - CGB Non-qualified				45,552
Average Option Price			$	10.61
Total Exercise Cost			$	483,307
Shares Repurchased				45,211
Net Shares from Option - CGB Non-qualified						341
Options - Moneta				187,241
Average Option Price			$	12.44
Total Exercise Cost			$	2,329,278
Shares Repurchased				217,893
Net Shares from Option - Moneta						0
Stock Appreciation Rights				70,388
Average Stock Appreciation Rights Price			$	12.13
Total Exercise Cost			$	853,806
Shares Repurchased				79,870
Net Shares from Stock Appreciation Rights						0
Gross Shares		9,399,374				9,611,108
Price			$	10.69

Moneta options and Stock Appreciation Rights are anti-dilutive due to the impact of adjusting net income for the expense associated with each plan during the quarter.

12 months ended December 31, 2003	Basic				Diluted
Average Shares Outstanding		9,566,059				9,566,059
Options - Plan 1				0
Average Option Price			$	0.00
Total Exercise Cost			$	0.00
Shares Repurchased				0
Net Shares from Option - Plan 1						0
Options - Plan 2				13,200
Average Option Price			$	5.88
Total Exercise Cost			$	77,616
Shares Repurchased				5,836
Net Shares from Option - Plan 2						7,364
Options - Plan 3				401,144
Average Option Price			$	6.94
Total Exercise Cost			$	2,783,939
Shares Repurchased				209,319
Net Shares from Option - Plan 3						191,825
Options - Plan 4				542,500
Average Option Price			$	12.13
Total Exercise Cost			$	6,580,525
Shares Repurchased				494,776
Net Shares from Option - Plan 4						47,724
Options - Plan 5				327,057
Average Option Price			$	11.85
Total Exercise Cost			$	3,875,625
Shares Repurchased				291,400
Net Shares from Option - Plan 5						35,657
Options - EFA Non-qualified				90,236
Average Option Price			$	10.13
Total Exercise Cost			$	914,091
Shares Repurchased				68,729
Net Shares from Option - EFA Non-qualified						21,507
Options - CGB Qualified				17,568
Average Option Price			$	10.73
Total Exercise Cost			$	188,505
Shares Repurchased				14,173
Net Shares from Option - CGB Qualified						3,395
Options - CGB Non-qualified				10,816
Average Option Price			$	11.32
Total Exercise Cost			$	122,437
Shares Repurchased				9,206
Net Shares from Option - CGB Non-qualified						1,610
Options - Moneta				191,951
Average Option Price			$	12.46
Total Exercise Cost			$	2,391,709
Shares Repurchased				179,828
Net Shares from Option - Moneta						0
Stock Appreciation Rights				65,916
Average Stock Appreciation Rights Price			$	11.91
Total Exercise Cost			$	785,060
Shares Repurchased				59,027
Net Shares from Stock Appreciation Rights						0
Gross Shares		9,566,059				9,875,141
Price			$	13.30

Moneta options and Stock Appreciation Rights are anti-dilutive due to the impact of adjusting net income for the expense associated with each plan during the quarter.

12 months ended December 31, 2004	Basic				Diluted
Average Shares Outstanding		9,695,500				9,695,500
Options - Plan 1				0
Average Option Price			$	0.00
Total Exercise Cost			$	0.00
Shares Repurchased				0
Net Shares from Option - Plan 1						0
Options - Plan 2				13,200
Average Option Price			$	5.88
Total Exercise Cost			$	77,616
Shares Repurchased				5,287
Net Shares from Option - Plan 2						7,913
Options - Plan 3				316,913
Average Option Price			$	7.43
Total Exercise Cost			$	2,354,664
Shares Repurchased				160,399
Net Shares from Option - Plan 3						156,514
Options - Plan 4				546,413
Average Option Price			$	12.30
Total Exercise Cost			$	6,720,880
Shares Repurchased				457,826
Net Shares from Option - Plan 4						88,587
Options - Plan 5 - Omnibus				450,853
Average Option Price			$	12.25
Total Exercise Cost			$	5,522,949
Shares Repurchased				376,223
Net Shares from Option - Plan 5						74,630
Options - EFA Non-qualified				86,571
Average Option Price			$	10.10
Total Exercise Cost			$	874,367
Shares Repurchased				59,562
Net Shares from Option - EFA Non-qualified						27,009
Options - CGB Qualified				498
Average Option Price			$	11.67
Total Exercise Cost			$	5,812
Shares Repurchased				396
Net Shares from Option - CGB Qualified						102
Options - CGB Non-qualified				0
Average Option Price			$	0.00
Total Exercise Cost			$	0.00
Shares Repurchased				0
Net Shares from Option - CGB Non-qualified						0
Options - Moneta				194,994
Average Option Price			$	12.48
Total Exercise Cost			$	2,433,525
Shares Repurchased				165,771
Net Shares from Option - Moneta						0
Stock Appreciation Rights				22,930
Average Stock Appreciation Rights Price			$	11.84
Total Exercise Cost			$	271,491
Shares Repurchased				18,494
Net Shares from Stock Appreciation Rights						4,436
Gross Shares		9,695,500				10,054,691
Average Market Price			$	14.68

Moneta options are anti-dilutive due to the impact of adjusting net income for the expense associated with each plan during the quarter.

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

Company	State of Organization
Enterprise Financial Services Corp	Delaware
Enterprise Bank & Trust	Missouri
Charford, Inc.	Missouri
Enterprise Premium Finance Corp.	Missouri
EFSC Capital Trust I	Delaware
EFSC Capital Trust II	Delaware
EFSC Capital Trust III	Delaware
Enterprise Real Estate Mortgage Company, LLC	Missouri
Enterprise IHC, LLC	Missouri

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Enterprise Financial Services Corp:

We consent to the incorporation by reference in the registration statement (Nos. 333-42204, 333-43365, 333-82087, and 333-100928) on Form S-8 of Enterprise Financial Services Corp of our reports dated March 4, 2005, with respect to the consolidated balance sheets of Enterprise Financial Services Corp as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity, cash flows, and comprehensive income for each of the years in the three-year period ended December 31, 2004, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2004 and the effectiveness of internal control over financial reporting as of December 31, 2004, which reports appear in the December 31, 2004 annual report on Form 10-K of Enterprise Financial Services Corp.

/s/ KPMG LLP

St. Louis, Missouri
March 11, 2005

EX-24.1

EXHIBIT 24.1

POWER OF ATTORNEY

The undersigned members of the Board of Directors and Executive Officers of Enterprise Financial Services Corp, a Delaware corporation (the “Company”) hereby appoint Frank H. Sanfilippo or Kevin C. Eichner as their Attorney-in-Fact for the purpose of signing the Company’s Securities Exchange Commission Form 10-K (and any and all Amendments thereto) for the year ended December 31, 2004.

Dated: January 26, 2005

Signatures	Title
/s/ PAUL J. MCKEE, JR.	Chairman of the Board of Directors
Paul J. McKee, Jr.
/s/ KEVIN C. EICHNER	Chief Executive Officer and Director
Kevin C. Eichner
/s/ PETER F. BENOIST	Executive Vice President and Director
Peter F. Benoist
/s/ PAUL R. CAHN	Director
Paul R. Cahn
/s/ WILLIAM H. DOWNEY	Director
William H. Downey
/s/ ROBERT E. GUEST, JR.	Director
Robert E. Guest, Jr.
/s/ RICHARD S. MASINTON	Director
Richard S. Masinton
/s/ BIRCH M. MULLINS	Director
Birch M. Mullins
/s/ JAMES J. MURPHY	Director
James Murphy
/s/ ROBERT E. SAUR	Director
Robert E. Saur
/s/ SANDRA VAN TREASE	Director
Sandra Van Trease
/s/ HENRY D. WARSHAW	Director
Henry D. Warshaw

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Kevin C. Eichner, certify that:

1.      I have reviewed this annual report on Form 10-K of Enterprise Financial Services Corp;

2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.      Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)     Designed such disclosure controls and procedures, or caused such controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)      Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)      All significant deficiencies and retained weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control.

Date: March 11, 2005

/s/ KEVIN C. EICHNER

Kevin C. Eichner,
Chief Executive Officer

EX-31.2

EXHIBIT 31.2

I, Frank H. Sanfilippo, certify that:

1.      I have reviewed this annual report on Form 10-K of Enterprise Financial Services Corp;

2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)     Designed such disclosure controls and procedures, or caused such controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)     All significant deficiencies and retained weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control.

Date: March 11, 2005

/s/ FRANK H. SANFILIPPO

Frank H. Sanfilippo,
Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Enterprise Financial Services Corp (the “Company”) on Form 10-K for the period ending December 31, 2004 as filed with the Securities and Exchange Commission (the “Report”), I, Kevin C. Eichner, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as enacted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ KEVIN C. EICHNER

Kevin C. Eichner

Chief Executive Officer

March 11, 2005

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Enterprise Financial Services Corp (the “Company”) on Form 10-K for the period ending December 31, 2004 as filed with the Securities and Exchange Commission (the “Report”), I, Frank H. Sanfilippo, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as enacted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ FRANK H. SANFILIPPO

Frank H. Sanfilippo

Chief Financial Officer

March 11, 2005

EX-99.1

Exhibit 99.1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Enterprise Financial Services Corp:

We have audited management’s assessment, included in the accompanying Management Report on Internal Controls over Financial Reporting, that Enterprise Financial Services Corp and subsidiaries (the Company)maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.  

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Enterprise Financial Services Corp maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also, in our opinion, Enterprise Financial Services Corp maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Enterprise Financial Services Corp as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity, cash flows, and comprehensive income for each of the years in the three-year period ended December 31, 2004, and our report dated March 4, 2005 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

St. Louis, Missouri
March 4, 2005