DEF 14A 1 e300153_def14a-cass.txt DEFINITIVE PROXY MATERIAL UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant |X| Filed by a Party other than the Registrant |_| Check the appropriate box: |_| Preliminary Proxy Statement |_| Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |X| Definitive Proxy Statement |_| Definitive Additional Materials |_| Soliciting Material Pursuant to ss.240.14a-12 CASS INFORMATION SYSTEMS, INC. -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): |X| No fee required. |_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: ---------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ---------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ---------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: ---------------------------------------------------------------------- (5) Total fee paid: ---------------------------------------------------------------------- |_| Fee paid previously with preliminary materials. |_| Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ---------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: ---------------------------------------------------------------------- (3) Filing Party: ---------------------------------------------------------------------- (4) Date Filed: ---------------------------------------------------------------------- CASS INFORMATION SYSTEMS, INC. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To be held on April 21, 2003 TO THE SHAREHOLDERS: The Annual Meeting of Shareholders of Cass Information Systems, Inc. will be held at the offices of Cass Information Systems, Inc. located at 13001 Hollenberg Drive, Bridgeton, Missouri on Monday, April 21, 2003, at 11:00 a.m., for the following purposes: 1. To elect four Directors, each to serve for a three year term; 2. To act upon ratification of the selection of KPMG LLP as independent auditors for 2003; and 3. To act upon such other matters as may properly come before the meeting. The close of business on March 5, 2003 has been fixed as the record date for determining shareholders entitled to notice of and to vote at the Meeting. By Order of the Board of Directors, Eric H. Brunngraber Secretary March 18, 2003 Bridgeton, Missouri ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. WHETHER OR NOT YOU INTEND TO BE PRESENT, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE STAMPED AND ADDRESSED ENVELOPE ENCLOSED FOR YOUR CONVENIENCE. SHAREHOLDERS CAN HELP THE COMPANY AVOID UNNECESSARY EXPENSE AND DELAY BY PROMPTLY RETURNING THE ENCLOSED PROXY CARD. THE PRESENCE, IN PERSON OR BY PROPERLY EXECUTED PROXY, OF A MAJORITY OF THE COMMON STOCK OUTSTANDING ON THE RECORD DATE IS NECESSARY TO CONSTITUTE A QUORUM AT THE ANNUAL MEETING. CASS INFORMATION SYSTEMS, INC. 13001 Hollenberg Drive Bridgeton, Missouri 63044 PROXY STATEMENT Annual Meeting of Shareholders to be held April 21, 2003 This Proxy Statement is being furnished to the common shareholders of Cass Information Systems, Inc. (the "Company") on or about March 18, 2003 in connection with the solicitation of proxies on behalf of the Board of Directors of the Company for use at the annual meeting of shareholders (the "Annual Meeting") to be held on April 21, 2003 at the time and place and for the purposes set forth in the accompanying Notice of Annual Meeting, and at any adjournment or postponement of that meeting. Holders of shares of common stock, par value $.50 per share ("Shares" or the "Common Stock"), of the Company at its close of business on March 5, 2003, (the "Record Date") are entitled to receive notice of and vote at the Annual Meeting. On the Record Date, 3,367,468 shares of Common Stock were outstanding. Holders of record of Common Stock (the "Shareholders") are entitled to one vote per share of Common Stock they held of record on the Record Date on each matter that may properly come before the Annual Meeting. A plurality of the votes of Shareholders cast at the Annual Meeting is required for the election of each director. Ratification of the selection of independent auditors requires the affirmative vote of holders of a majority of the shares of Common Stock voted. Abstentions are counted in the number of shares present for purposes of determining whether a quorum is present, and are counted as having voted on each matter presented for vote. As a result, an abstention has the same effect as a vote against a proposal, but will have no effect on the vote to elect directors. Broker non-votes are counted in the number of shares present for purposes of determining whether a quorum is present, but as not being present as to matters for which voting instructions are not given. As a result, broker non-votes will have no effect on voting on any matter voted on at the meeting. Management of the Company ("Management"), together with members of the Board of Directors of the Company, in the aggregate, directly or indirectly controlled approximately 25.99% of the Common Stock outstanding on the Record Date. Shareholders of record on the Record Date are entitled to cast their votes in person or by properly executed proxy at the Annual Meeting. The presence, in person or by properly executed proxy, of a majority of the Common Stock outstanding on the Record Date is necessary to constitute a quorum at the Annual Meeting. If a quorum is not present at the time the Annual Meeting is convened, the Company may adjourn or postpone the Annual Meeting. All Common Stock represented at the Annual Meeting by properly executed proxies received prior to or at the Annual Meeting and not properly revoked will be voted at the Annual Meeting in accordance with the instructions indicated in such proxies. If no instructions are indicated, such proxies will be voted FOR the election of the Board's director nominees and FOR the ratification of the selection of independent auditors. The Board of Directors of the Company does not know of any matters, other than the matters described in the Notice of Annual Meeting attached to the Proxy Statement that will come before the Annual Meeting. Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted. Proxies may be revoked by (i) filing with the Secretary of the Company, at or before the Annual Meeting, a written notice of revocation bearing a date later than the date of the proxy, (ii) duly executing and dating a subsequent proxy relating to the Common Stock and delivering it to the Secretary of the Company at or before the vote is taken at the Annual Meeting, or (iii) attending the Annual Meeting and voting in person (although attendance at the Annual Meeting will not in and of itself constitute a revocation of a proxy). Any written notice revoking a proxy should be sent to Corporate Secretary, Cass Information Systems, Inc., 13001 Hollenberg Drive, Bridgeton, Missouri 63044 (telephone number (314) 506-5500). The proxies are solicited by the Board of Directors of the Company. In addition to the use of the mails, proxies may be solicited personally or by telephone or facsimile transmission, by directors, officers or regular employees of the Company or persons employed by the Company for the purpose of soliciting proxies. It is contemplated that brokerage houses, custodians, nominees and fiduciaries will be requested to forward the soliciting material to the beneficial owners of Common Stock held of record by such persons, and will be reimbursed by the Company for expenses incurred therewith. The cost of solicitation of proxies will be borne by the Company. The date of this Proxy Statement is March 18, 2003. 1 ELECTION OF DIRECTORS Pursuant to the By-Laws of the Company, the Company's Board of Directors is divided into three classes of approximately equal numbers of directors. Each of the eleven directors is elected for a three-year term, and the term of each class of directors expires in a different year. Directors who are not officers of the Company receive a $300 monthly retainer fee, a $600 fee for attendance at each meeting of the Board and a $400 fee for attendance at each meeting of a Committee of the Board. Upon re-election to the Board, each Director who is not an officer of the Company receives 300 shares of restricted stock. Shares are subject to a three-year vesting schedule, with 1/3 of the shares vesting each year on the anniversary date of the awards. These restricted shares are entitled to vote and to be paid dividends. The nominees for election to the Board of Directors are Mr. Bodine, Mr. Fucoloro, Mr. Krieg, and Mr. Kuehner, each of whom is a current director of the Company. The Board of Directors of the Company recommends a vote FOR the nominees for election to the Board of Directors. The members of the Company's Board of Directors whose terms will continue after the meeting, including the nominees for re-election to the Board, with certain information about each of them, including their principal occupations for the past five years, are listed below: Principal Occupation Director During Past 5 Years -------- ------------------- Robert J. Bodine Chairman, Bodine Age: 78 Aluminum, Inc. Director since 1966 (manufacturer) Current term expires 2003 Mr. Bodine is a nominee for re-election to the Board of Directors. Eric H. Brunngraber Chief Financial Officer and Age: 46 Vice President-Secretary of the Company & Director since 2003 subsidiaries since 1997 Current term expires 2005 Bryan S. Chapell President, Covenant Age: 48 Theological Seminary Director since 1998 Current term expires 2005 Lawrence A. Collett Chairman of the Board of the Company & Age: 60 subsidiaries since 1992; Director since 1983 Chief Executive Officer of the Company & Current term expires 2004 subsidiaries since 1990 Thomas J. Fucoloro Retired Age: 77 Mr. Fucoloro is a nominee for re-election Director since 1986 to the Board of Directors. Current term expires 2003 Harry J. Krieg Retired Age: 78 Chairman of the Company & subsidiaries, Chairman Emeritus, since 1992 1975 - 1992 Director since 1962 Mr. Krieg is a nominee for re-election Current term expires 2003 to the Board of Directors. 2 Principal Occupation Director During Past 5 Years -------- ------------------- Howard A. Kuehner Investor Age: 87 Mr. Kuehner is a nominee for re-election Director since 1966 to the Board of Directors. Current term expires 2003 Jake Nania Investor Age: 78 Director since 1967 Current term expires 2005 Irving A. Shepard President, Venture Age: 85 Consultants, Inc. Director since 1970 (consulting company) Current term expires 2004 Andrew J. Signorelli Vice President, Andrews Educational Age: 63 & Research Center; Founder, Director since 1986 Hope Educational & Research Center Current term expires 2004 Bruce E. Woodruff Attorney; of counsel to Armstrong Age: 72 Teasdale LLP Director since 1995 Current term expires 2005 Committees The Company's Board of Directors has standing Audit and Compensation Committees. The Audit Committee is composed of Mr. Fucoloro, Mr. Krieg, Mr. Shepard and Mr. Woodruff. The Compensation Committee is composed of Mr. Signorelli, Mr. Shepard and Mr. Bodine. The Audit Committee, which met 4 times during 2002, selects and retains the independent auditors to perform audit and non-audit services, reviews the scope and results of such services, reviews with management and the independent auditors any recommendations of the auditors regarding changes and improvements in the Company's accounting procedures and controls and management's response thereto, and reports to the Board after each Audit Committee meeting. In addition, the Committee meets with the Company's internal auditors on a quarterly basis to review the scope and results of such services. The Compensation Committee, which met 5 times during 2002, reviews and recommends to the Board the salaries and all other forms of compensation of the officers of the Company and its subsidiaries. During 2002, there were 12 meetings of the Board of Directors. Each director attended at least 75% or more of the aggregate number of meetings of the Board and committees on which he served. 3 Audit Committee Report The Board of Directors maintains an Audit Committee comprised of four outside directors. The Board of Directors and the Audit Committee believes that the Audit Committee's current member composition satisfies the Nasdaq rule that governs audit committee composition, including the requirement that audit committee members be "independent directors" as that term is defined by NASD Rule 4200 (a)(14). The Audit Committee adopted a revised version of its written charter in January 2003, which is included as Exhibit I. During 2002, the Company incurred the following fees for services performed by KPMG LLP, the Company's independent auditors: Audit Fees $101,850 (1) Audit-Related Fees $ -- Financial Information Systems Design and Implementation Fees $ -- Tax Fees $ 74,200 (1)(2) All Other Fees $ 28,489 (1)(3) (1) The Audit Committee has considered whether the provision of these services is compatible with maintaining the principal accountant's independence. (2) Represents tax compliance and preparation services. (3) Represent services performed during an information technology security review. In connection with the December 31, 2002 consolidated financial statements, the Audit Committee (1) reviewed and discussed the audited consolidated financial statements with management; (2) discussed with the auditors the matters required by Statement on Auditing Standards No. 61; and (3) received and discussed with the auditors the matters required by Independence Standards Board Statement No. 1. Based upon these reviews and discussions, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Annual Report on Form 10-K filed with the SEC. Bruce E. Woodruff, Chairman Thomas J. Fucoloro Harry J. Krieg Irving A. Shepard Executive Officers The executive officers of the Company, their ages and their positions with the Company and subsidiaries are set forth below. All officers serve at the pleasure of the Company's Board of Directors. Name Age Positions ---- --- --------- Lawrence A. Collett 60 Chairman and Chief Executive Officer of the Company and subsidiaries; Director of the Company and subsidiaries William C. Bouchein 67 Vice President - Treasurer of the Company Eric H. Brunngraber 46 Chief Financial Officer and Vice President- Secretary of the Company and subsidiaries; Director of the Company and subsidiaries Harry M. Murray 49 Chief Operating Officer- Utility Information Services John F. Pickering 52 Chief Operating Officer - Transportation Information Services 4 Executive Compensation The following table summarizes compensation with respect to each of the last three fiscal years to the individual who served as the Company's Chief Executive Officer for fiscal 2002, and to each person who was, for the fiscal year ended December 31, 2002, one of the four most highly compensated executive officers of the Company, other than the Chief Executive Officer. These persons are referred to as the named executive officers.
Long Term Compensation ---------------------- Annual Compensation Restricted Securities Name and ------------------- Stock, ($) Underlying All Other Principal Position Year Salary Bonus Awards Options (#) Compensation (1) ------------------ ---- ------ ----- ------ ----------- ---------------- Lawrence A. Collett 2002 $341,000 $ 58,000 -- -- $ 4,290 Chairman and 2001 316,000 56,700 -- -- 3,840 Chief Executive Officer 2000 291,000 58,200 -- -- 3,840 of the Company and subsidiaries; Director of the Company and subsidiaries William C. Bouchein 2002 $140,500 $ 10,000 -- -- $ 6,065 Vice President - Treasurer 2001 136,500 11,000 -- -- 6,195 of the Company 2000 134,500 9,500 -- -- 5,999 Eric H. Brunngraber 2002 $156,600 $ 29,000 -- -- $ 3,056 Chief Financial Officer and 2001 126,600 25,500 -- -- 2,586 Vice President - Secretary 2000 111,600 27,500 -- -- 2,321 of the Company and subsidiaries; Director of the Company and subsidiaries Harry M. Murray 2002 $150,000 $ 21,000 -- -- $ 2,914 Chief Operating Officer - 2001 140,000 14,700 -- -- 2,755 Utility Information Services 2000 130,000 13,000 -- -- 2,593 John F. Pickering 2002 $150,000 $ 19,080 -- -- $ 3,168 Chief Operating Officer - 2001 166,500 14,500 -- -- 3,240 Transportation Information 2000 160,000 29,000 -- -- 3,000 Services
(1) These amounts represent Company matching contributions paid on behalf of the executive under the Company's 401(k) Plan (in 2002 contributions were $3,000 for Mr. Collett, $2,255 for Mr. Bouchein, $2,587 for Mr. Brunngraber, $2,464 for Mr. Murray, and $2,478 for Mr. Pickering) and the imputed value of group term life premiums paid on their behalves (in 2002 premiums were $1,290 for Mr. Collett, $3,810 for Mr. Bouchein, $469 for Mr. Brunngraber, $450 for Mr. Murray, and $690 for Mr. Pickering). Option/SAR Grants No options were granted to the named executive officers in 2002. 5 Stock Option Plan / Stock Bonus Plan During May 1995, the Company's Board of Directors established the 1995 Performance-Based Stock Option Plan (the "Option Plan") and the 1995 Restricted Stock Bonus Plan (the "Bonus Plan"). These plans were adopted to aid the Company in securing and retaining qualified personnel. The Option Plan provides for the granting of options on up to 410,786 shares of the Company's common stock. The following table summarizes stock options outstanding as of December 31, 2002 (1): Weighted Average Exercise Options Remaining Price Outstanding Contractual Life ----- ----------- ---------------- $ 9.80 31,681 2.00 years 19.34 6,300 2.43 21.85 3,675 3.00 21.86 6,300 6.00 23.40 2,100 3.00 23.99 59,167 3.00 24.18 8,925 2.08 Of these shares, 39,679 were exercisable with a weighted average exercise price of $12.32. These options vest over a period not to exceed seven years, but the vesting period can be accelerated based on the Company's attainment of certain financial operating performance criteria. The Bonus Plan provides for the issuance of up to 102,820 shares of the Company's common stock (1). As of December 31, 2002, an aggregate of 43,600 shares of the Company's common stock had been awarded. Interest in the shares of common stock awarded under the Bonus Plan vest over a three-year period. Common stock awarded under the Bonus Plan is accounted for through the establishment of a contra shareholders' equity account. This contra shareholders' equity account is amortized to expense over the vesting period of the stock awards. (1) The exercise price and options outstanding have been adjusted to reflect a 5% stock dividend issued by the Company in December 2002. Options Exercised in 2002 and Year-end Option Values The following table summarizes options exercised during 2002, and the values of options outstanding on December 31, 2002, for the named executive officers.
Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options at Options at Shares Fiscal Year-End Fiscal Year-End Acquired on Value Exercisable/ Exercisable/ Exercise (#) Realized ($) Unexercisable (#)(1) Unexercisable ($)(1) ------------ ------------ -------------------- -------------------- Mr. Collett 5,124 $72,530 24,623 / 25,647 $355,850 / $15,645 Mr. Bouchein 1,236 17,496 57 / 2,463 35 / 1,502 Mr. Brunngraber 6,000 84,930 1,066 / 7,334 466 / 3,860 Mr. Murray 2,648 37,482 60 / 5,190 37 / 3,166 Mr. Pickering 4,634 65,594 60 / 5,190 37 / 3,166
(1) The exercise price and options outstanding have been adjusted to reflect a 5% stock dividend issued by the Company in December 2002. 6 Defined Contribution Savings Plan All full-time employees of the Company and subsidiaries are eligible to participate in the Cass Information Systems, Inc. 401(k) Plan. Employees may voluntarily defer up to 15% of pre-tax earnings subject to the IRS maximum limitation, which was $11,000 for 2002. Voluntary deferrals contributed to the 401(k) Plan by the Executive officers are included in Annual Salary Compensation in the Summary Compensation Table. The Company matches 50% of the first 3% of employee contributions, subject to IRS limitations. Amounts contributed to the Plan in 2002 for the benefit of the executive officers are included in Other Compensation in the Summary Compensation Table. Each executive officer is fully vested in Company contributions. Defined Benefit Retirement Plans Retirement Plan for Employees of Cass Information Systems, Inc. All executive officers of the Company and subsidiaries are participants in the Retirement Plan for Employees of Cass Information Systems, Inc., which covers all full-time employees. Upon retirement, participants in the plan will begin to receive monthly payments equal to one-twelfth of the sum of: (a) .9% of Final Average Earnings multiplied by the number of years of participation, plus (b) .5% of Final Average Earnings in excess of Covered Compensation multiplied by years of participation. Final Average Earnings is defined as the average annual total compensation for the five consecutive years of highest earnings during the last ten years of employment. Covered Compensation is the average of the maximum social security taxable wage bases in effect for each calendar year during the 35-year period ending with the year in which retirement age is attained under the Social Security Act. Earnings covered by the Plan equal total compensation as reported in the Summary Compensation Table including any amounts deferred under the Cass Information Systems, Inc. 401(k) Plan. Normal retirement under the Plan commences at age 65. At normal retirement the years of participation under the Plan for the executive officers listed in the Compensation Table would be as follows: Mr. Collett-41; Mr. Bouchein-13; Mr. Brunngraber-41; Mr. Murray-34, and Mr. Pickering-37. The following table shows the estimated annual benefits payable at retirement, assuming a straight-life annuity with 120 months guaranteed.
Estimated Annual Retirement Benefit (1)(2) ------------------------------------------ Final Years of Service Credited at Retirement Average --------------------------------------- Earnings 10 15 20 25 30 35 40 -------------------------------------------------------------------------------------------- $125,000 $ 15,200 $ 22,800 $ 30,400 $ 38,000 $ 45,600 $ 53,200 $ 60,800 150,000 18,700 28,000 37,400 46,700 56,100 65,400 74,800 175,000 22,200 33,300 44,400 55,500 66,600 77,700 88,800 200,000 25,700 38,500 51,400 64,200 77,100 89,900 102,800
(1) Estimated benefit calculation assumes retirement at age 65 in the year 2004 with no increase in the maximum social security taxable wage base after 2002. (2) Estimated benefits would be subject to Internal Revenue Service maximum retirement limitations in effect at the retirement date. The maximum annual compensation that may be recognized for determining benefits in 2002 was $200,000. 7 Supplemental Executive Retirement Plan In addition to the above defined benefit plan, in 1998 the Company established the Cass Information Systems, Inc. Supplemental Retirement Plan, which covers key executive officers of the Company. This supplemental plan was designed to provide additional retirement benefits to key executives whose benefits are limited by the Internal Revenue Service under the Company's qualified plan. Upon retirement, participants in the plan will receive monthly payments equal to one twelfth of 70% of Final Average Earnings and reduced proportionately for length of service less than 25 years and reduced by the participant's: (a) Qualified retirement plan benefit, (b) Primary social security benefit, and (c) 401(k) hypothetical annuity. Final Average Earnings, normal retirement age and years of participation at normal retirement are the same as under the Retirement Plan for Employees of Cass Information Systems, Inc. The following table shows the estimated annual benefits payable at retirement, assuming a straight-life annuity with 120 months guaranteed.
Estimated Annual Retirement Benefit (1) --------------------------------------- Final Years of Service Credited at Retirement Average --------------------------------------- Earnings 10 15 20 25 30 35 40 -------------------------------------------------------------------------------------------- $125,000 $ -- $ -- $ 6,100 $ 16,000 $ 8,400 $ 800 $ -- 150,000 -- -- 10,500 22,200 12,800 3,500 -- 175,000 -- 1,500 14,900 28,300 17,200 6,100 -- 200,000 -- 6,300 21,400 36,600 23,700 10,900 -- 300,000 27,200 48,300 77,400 106,600 93,700 80,900 68,000 400,000 55,200 90,300 133,400 176,600 163,700 150,900 138,000
(1) Estimated benefit calculation assumes retirement at age 65 in the year 2004. Certain Relationships and Related Party Transactions Some of the directors and executive officers of the Company, and members of their immediate families and firms and corporations with which they are associated, have had transactions with the Company's subsidiary bank, including borrowing and investments in depository accounts. All such loans and investments have been made in the ordinary course of business, have been made on substantially the same terms, including interest rates paid or charged and collateral required, as those prevailing at the same time for comparable transactions with unaffiliated persons, and did not involve more than the normal risk of collectibility or present other unfavorable features. As of December 31, 2002, the aggregate amount of all loans and available credit to officers and directors of the Company and to firms and corporations in which they have at least a 10% beneficial interest was approximately $3,374,388, which represented approximately 5.5% of the Company's consolidated shareholders' equity at that date. Bruce E. Woodruff, a director and shareholder of the Company, is of counsel to the law firm of Armstrong Teasdale LLP, counsel to the Company and subsidiaries. Mr. Woodruff does not share in fees paid by the Company to Armstrong Teasdale LLP. 8 Board Compensation Committee Report on Executive Compensation The Compensation Committee of the Board of Directors (the "Committee") is composed of three independent directors, one of whom serves as chairman of the Committee. The Committee administers the Executive Compensation Program of the Company and none of its members has been or is an employee of the Company or any of its subsidiaries. All material items relative to Executive Compensation or any benefit compensation for the entire Company are analyzed, reviewed and approved by the Compensation Committee. While the Committee may seek input occasionally from the Chief Executive Officer, the Chief Financial Officer or the Director of Human Resources, all matters are independently resolved and decided without the presence or voting of any officer of the Company or its subsidiaries. The Compensation Committee of the Board is also responsible for recommending salary levels for executive officers to the Board of Directors of the Company and recommending the overall levels of salary compensation for the entire corporation. The Committee generally seeks to maintain salaries at levels competitive with peer groups. Bonuses are available to all personnel in the Company based upon the level of profits before taxes achieved by the Company. These bonuses are distributed on the basis of merit. Performance is measured on the basis of several factors deemed relevant and bonuses are calculated on the basis of these evaluations. The determination of bonuses for the Company's executive officers is a subjective process which utilizes no specific performance criteria, but which does consider growth in the Company's profits, resources, and the quality of the Company's operations, as well as adherence to regulatory requirements. The amount of bonus available for executive officers is a percentage of the profit sharing allocation for all staff members and is based on the growth in net earnings of the Company. As a result, the amount available for executive officers in 2002 was increased from 2001 levels. The Committee utilizes the services of Peter R. Johnson & Company of West Chester, Pennsylvania in determining the levels of peer compensation within its industry. Additionally, the Committee utilizes the services of Towers Perrin for evaluation of the compensation of its CEO and CFO. The Committee considers stock options and grants to be a significant motivational tool for rewarding its executive officers and senior management. Stock options and grants provided under the Company's stock incentive programs are awarded primarily on the basis of performance of the Company, performance of the individual operating subsidiaries, the relationship of the Company's performance to other companies in its peer group, and the recommendation of the CEO. The Company utilizes the services of Towers Perrin in determining appropriate stock incentive and compensation and annually reviews information from other compensation sources for other companies performing in industries similar to those of its operating subsidiaries. The Committee's philosophy with regard to executive compensation has been to seek to provide programs which will allow the Company to acquire and maintain competent executive officers and to attract and maintain other management personnel with the capabilities and requirements determined necessary to continue to lead the Company in meeting its objectives and in furthering its growth and profitability. It is further the philosophy of the Committee to reward its people in accordance with the results that are accomplished. The Committee believes that total compensation should be related to profits and to the performance of the Company. For this reason, overall compensation of the Company's executives is tied to incentive bonus plans that are directly related to the Company's earnings. Most of the executives received bonuses in 2002 comparable to or slightly more than those received in 2001 due to the level of profits achieved in 2002. The Committee reviews the salaries of the CEO and CFO annually in December for the following fiscal year. Bonuses are calculated in July and January, and relate directly to the profit performance for the year. The CEO's bonus is a percentage of total profit sharing allocations and fluctuates with the Company's return on equity. The CEO's salary was increased in 2002 due to improved profitability in 2001. The CEO's bonus for 2002 was directly related to profit performance in 2002 and was slightly higher; no additional stock compensation was provided in 2002. Andrew J. Signorelli, Chairman Robert J. Bodine Irving A. Shepard 9 Performance Graph The following graph compares the percentage change in the Company's cumulative total shareholder return on Common Stock as quoted on The Nasdaq National Market System for the last five fiscal years with the cumulative total return, including all dividends, of (i) The Nasdaq Stock Market Index for United States companies, and (ii) The Nasdaq Computer and Data Processing Stocks Index. Comparison of Cumulative Total Returns Performance Quoted on The Nasdaq Stock Market for the last Five Fiscal Years Cass Information Systems, Inc. [The following table was depicted as a mountain chart in the printed material.] Comparison of Five-Year Cumulative Total Returns Performance Report for Cass Information Systems, Inc. Prepared by the Center for Research in Security Prices Produced on 02/10/2003 including data to 12/31/2002 Company Index: CUSIP Ticker Class Sic Exchange 14808P10 CASS 6022 NASDAQ Fiscal Year-end is 12/31/2002 Market Index: Nasdaq Stock Market (US Companies) Peer Index: Nasdaq Computer and Data Processing Stocks SIC 7370-7379 US & Foreign Date Company Index Market Index Peer Index 12/31/1997 100.000 100.000 100.000 01/30/1998 141.414 103.169 107.535 02/27/1998 141.162 112.863 122.067 03/31/1998 139.098 117.037 132.119 04/30/1998 131.991 119.015 133.231 05/29/1998 122.853 112.403 123.901 06/30/1998 122.809 120.253 146.342 07/31/1998 122.554 118.845 141.466 08/31/1998 117.447 95.281 114.928 09/30/1998 103.299 108.499 137.298 10/30/1998 104.840 113.266 133.405 11/30/1998 104.840 124.779 154.387 12/31/1998 103.003 140.990 178.389 01/29/1999 103.003 161.453 215.676 02/26/1999 103.521 146.991 191.305 03/31/1999 103.798 158.091 215.157 04/30/1999 103.277 163.108 204.184 05/28/1999 102.755 158.531 199.259 06/30/1999 103.024 172.766 223.777 07/30/1999 103.024 169.642 210.454 08/31/1999 102.236 176.797 221.652 09/30/1999 108.078 177.013 233.032 10/29/1999 99.601 191.190 250.499 11/30/1999 92.184 214.363 291.327 12/31/1999 86.564 261.484 392.437 01/31/2000 86.029 251.857 346.546 02/29/2000 87.632 299.872 410.691 03/31/2000 85.260 293.743 387.626 04/28/2000 90.656 247.070 297.028 05/31/2000 91.196 217.289 260.788 06/30/2000 90.435 255.451 316.307 07/31/2000 88.801 241.592 284.042 08/31/2000 84.770 270.174 320.098 09/29/2000 77.063 235.087 292.577 10/31/2000 75.962 215.769 267.764 11/30/2000 81.054 166.241 194.222 12/29/2000 77.914 157.417 180.620 01/31/2001 99.618 176.478 208.841 02/28/2001 91.270 136.619 159.729 03/30/2001 82.600 117.482 131.763 04/30/2001 87.905 135.006 161.883 05/31/2001 89.456 134.812 162.149 06/29/2001 89.872 138.458 171.565 07/31/2001 90.825 129.664 150.549 08/31/2001 90.553 115.548 124.232 09/28/2001 96.376 96.077 104.935 10/31/2001 96.284 108.411 121.987 11/30/2001 108.205 123.846 138.390 12/31/2001 113.284 124.886 145.443 01/31/2002 113.284 123.939 144.679 02/28/2002 115.942 111.047 130.373 03/28/2002 116.969 118.330 134.202 04/30/2002 115.594 108.502 113.617 05/31/2002 116.852 103.716 106.357 06/28/2002 116.989 94.321 106.660 07/31/2002 114.621 85.709 93.682 08/30/2002 108.062 84.801 94.146 09/30/2002 109.712 75.674 82.556 10/31/2002 110.566 86.008 99.749 11/29/2002 115.542 95.598 112.863 12/31/2002 123.414 86.327 100.276 The index level for all series was set to 100.0 on 12/31/1997 10 Principal Shareholders The following table contains information with respect to beneficial ownership of the Company's outstanding common stock, as of March 5, 2003, by: (1) each person known to the Company to be the beneficial owner of more than 5% of common stock, (2) each director of the Company and (3) each executive officer of the Company. The information reflects the 5% stock dividend issued by the Company in December 2002. The address of all such persons is c/o the Company, 13001 Hollenberg Drive, Bridgeton, Missouri 63044. Unless otherwise indicated, the named person has sole voting and dispositive rights with respect to such shares. Name of Number of Shares Percent Beneficial Owner Beneficially Owned of Class ---------------- ------------------ -------- Robert J. Bodine 88,415 (1) 2.62% William C. Bouchein 57 (2) * Eric H. Brunngraber 4,868 (3) * Bryan S. Chapell 923 (4) * Lawrence A. Collett 76,403 (5) 2.27 Thomas J. Fucoloro 315 (6) * Harry J. Krieg 53,432 (7) 1.59 Howard A. Kuehner 126,634 (8) 3.76 Harry M. Murray 9,622 (9) * Jake Nania 361,584 (10) 10.74 John F. Pickering 9,129 (11) * Irving A. Shepard 18,596 (12) * A. J. Signorelli 117,877 (13) 3.50 Bruce E. Woodruff 7,455 (14) * All executive officers and directors as a group 875,310 25.99% ---------- * Less than 1% of class. (1) Includes 105 shares granted under the Company's 1995 Restricted Stock Bonus Plan, which are subject to forfeiture; however, Mr. Bodine has voting but no dispositive rights. Excludes 10,223 shares held in a trust as to which Mr. Bodine's wife has sole voting and dispositive rights. (2) Includes 57 shares Mr. Bouchein has the right to acquire under the 1995 Performance-Based Stock Option Plan. (3) Includes 2,902 shares owned jointly with his wife. Includes 900 shares granted under the Company's 1995 Restricted Stock Bonus Plan, which are subject to forfeiture; however, Mr. Brunngraber has voting but no dispositive rights. Includes 1,066 shares Mr. Brunngraber has the right to acquire under the 1995 Performance-Based Stock Option Plan. (4) These shares are owned jointly with his wife. Includes 315 shares granted under the Company's 1995 Restricted Stock Bonus Plan, which are subject to forfeiture; however, Mr. Chapell has voting but no dispositive rights. (5) Includes 32,869 shares owned jointly with his wife. Includes 2,736 shares granted under the Company's 1995 Restricted Stock Bonus Plan, which are subject to forfeiture; however, Mr. Collett has voting but no dispositive rights. Includes 24,623 shares Mr. Collett has the right to acquire under the 1995 Performance-Based Stock Option Plan. (6) Includes 105 shares granted under the Company's 1995 Restricted Stock Bonus Plan, which are subject to forfeiture; however, Mr. Fucoloro has voting but no dispositive rights. Excludes 210 shares held in a trust as to which Mr. Fucoloro's wife has sole voting and dispositive rights. 11 (7) Includes 53,327 shares held in a trust with Mr. Krieg having shared voting and dispositive rights. Includes 105 shares granted under the Company's 1995 Restricted Stock Bonus Plan, which are subject to forfeiture; however, Mr. Krieg has voting but no dispositive rights. Excludes 53,771 shares owned by his wife. (8) Includes 61,614 shares held in a trust with Mr. Kuehner having shared voting and dispositive rights. Includes 105 shares granted under the Company's 1995 Restricted Stock Bonus Plan, which are subject to forfeiture; however, Mr. Kuehner has voting but no dispositive rights. Excludes 112,336 shares owned by his wife. (9) Includes 9,562 shares owned jointly with his wife. Includes 60 shares Mr. Murray has the right to acquire under the 1995 Performance-Based Stock Option Plan. (10) Includes 361,269 shares held in a trust with Mr. Nania having sole voting and dispositive rights. Includes 315 shares granted under the Company's 1995 Restricted Stock Bonus Plan, which are subject to forfeiture; however, Mr. Nania has voting but no dispositive rights. (11) Includes 9,069 shares owned jointly with his wife. Includes 60 shares Mr. Pickering has the right to acquire under the 1995 Performance-Based Stock Option Plan. (12) Includes 18,381 shares held in a family partnership in which Mr. Shepard has shared voting and dispositive rights. Includes 210 shares granted under the Company's 1995 Restricted Stock Bonus Plan, which are subject to forfeiture; however, Mr. Shepard has voting but no dispositive rights. (13) Includes 117,667 shares held in various trusts with Mr. Signorelli having shared voting and dispositive rights. Includes 210 shares granted under the Company's 1995 Restricted Stock Bonus Plan, which are subject to forfeiture; however, Mr. Signorelli has voting but no dispositive rights. (14) Includes 7,140 shares held in a trust with Mr. Woodruff having sole voting and dispositive rights. Includes 315 shares granted under the Company's 1995 Restricted Stock Bonus Plan, which are subject to forfeiture; however, Mr. Woodruff has voting but no dispositive rights. Section 16(a) Beneficial Ownership Compliance Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of the registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission (SEC) and The Nasdaq Stock Market. Officers, directors and greater than ten-percent shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Based on its review of the copies of such forms received by it and written representation from certain reporting persons that no Forms 5 were required for those persons, the Company believes that during 2002 all filing requirements applicable to its officers, directors, and greater than ten-percent beneficial owners were timely complied with. 12 SELECTION OF AUDITORS KPMG LLP were the auditors of the Company during the year ended December 31, 2002 and also have been selected by the Audit Committee of the Board of Directors to serve as auditors for the present year. The Board of Directors recommends to the Shareholders their ratification of the Audit Committee's selection of KPMG LLP as independent auditors to audit the accounts of the Company and its subsidiaries for 2003. KPMG LLP has served as the Company's independent auditors since 1983. A representative of KPMG LLP is expected to be present at the Meeting, will have an opportunity to make a statement if he or she desires to do so, and is expected to be available to respond to appropriate questions of Shareholders. The Board of Directors of the Company recommends voting FOR the ratification of the Audit Committee's selection of KPMG LLP as independent auditors for 2003. OTHER MATTERS Management does not intend to present to the Annual Meeting any business other than the items stated in the "Notice of Meeting of Shareholders" and does not know of any matters to be brought before the Meeting other than those referred to above. If, however, any other matters properly come before the Meeting, the persons designated as proxies will vote on each such matter in accordance with their best judgment. Whether or not you expect to be at the Meeting in person, please sign, date and return promptly the enclosed Proxy. No postage is necessary if the Proxy is mailed in the United States. SHAREHOLDER PROPOSALS Any proposal to be presented at next year's Annual Meeting must be received at the principal executive offices of the Company not later than November 19, 2003. Any such proposals should be directed to the attention of the Secretary for consideration for inclusion in the Company's Proxy Statement and Form of Proxy relating to the next Annual Meeting. Any such proposals must comply in all respects with the rules and regulations of the Securities and Exchange Commission. The Company's Form of Proxy for next year's Annual Meeting may permit the representatives named in the proxy to vote in their discretion on any other shareholder proposal of which notice has not been given to the Company by February 3, 2004. It is suggested that proponents of any proposals submit such proposals to the Company sufficiently in advance of the deadline by Certified Mail-Return Receipt Requested. By Order of the Board of Directors Eric H. Brunngraber Secretary 13 Cass Information Systems, Inc. Exhibit I Audit Committee Charter As of January 2003 The purpose of this charter is to set forth the objectives, composition, and responsibilities of the Audit Committee of the Board of Directors (the Committee) of Cass Information Systems, Inc. (the Company). I. PURPOSE The Audit Committee is appointed by the Board of Directors to assist in fulfilling its oversight responsibilities of regulatory compliance, corporate accounting and financial reporting practices of the Company and each of its subsidiaries. In addition, the Committee will: o Oversee and appraise the quality of the internal and external audit processes; o Maintain free and open means of communication between the Board of Directors, the independent auditors, the internal auditors, and management of the Company; o Serve as an independent and objective party to monitor the integrity of the financial information presented by management to shareholders, regulators, and the general public; o Review the adequacy of the Company's administrative, operating and internal accounting controls, and the Company's compliance with the letter and spirit of applicable Federal and state laws and regulations. II. COMPOSITION AND MEETINGS The Committee will be comprised of at least three directors who are (1) independent of the management of the Company, (2) receive no consulting, advisory or other compensatory fees from the Company, other than directors' fees, and (3) are free from any relationship that, in the opinion of the Board of Directors, would interfere with their exercise of independent judgement as a committee member. All members of the Committee shall have a basic understanding of finance and accounting and be able to read and understand fundamental financial statements, and at least one member of the Committee shall have accounting or related financial management expertise. The Committee will hold at least four meetings per year and such additional meetings as the Committee shall require in order to perform its designated duties. III. RESPONSIBILITIES AND DUTIES Financial Reporting and Review 1. Review and assess the adequacy of this charter at least annually. Submit the charter to the Board of Directors for approval and have the document published at least every three years in accordance with Securities and Exchange Commission regulations. 2. Review the annual audited financial statements with management and the independent auditors prior to the Company filing its annual report on Form 10-K, including any significant issues regarding accounting principles, practices and judgements. 3. Review with management and the independent auditors the Company's quarterly financial results prior to the Company filing its report on Form 10-Q, or where practicable, prior to the first public release of quarterly earnings. 1 of 3 Cass Information Systems, Inc. Exhibit I Audit Committee Charter As of January 2003 4. Discuss any significant changes to the Company's accounting principles and any items required to be communicated by the independent auditors in accordance with Statement on Auditing Standards No. 61 (SAS 61), Communication With Audit Committees. 5. Discuss earnings press releases, as well as financial information and earnings guidance provided by the Company to analysts and ratings agencies. 6. Receive and review reports from the internal auditors and the independent auditors that assess the adequacy and effectiveness of the Company's internal accounting control system; accounting policies and procedures; and, financial and accounting management. 7. Review legal and regulatory matters that may have a material impact on the financial statements, related Company compliance policies, and programs and reports received from regulators. 8. Monitor management's response and actions taken to correct any deficiencies noted by internal auditors, independent auditors or regulatory agencies. Independent and Internal Audit Oversight 9. Exercise sole authority in the selection and appointment of the independent auditors that is ultimately accountable to the Committee and the Board of Directors. 10. Exercise sole authority to approve the compensation of the independent auditors. 11. Evaluate with the Board the performance and independence of the independent auditors and, if so determined in the Committee's sole authority, replace the independent auditors. 12. Review and concur in the appointment, replacement, or dismissal of the internal auditors. 13. Assist in oversight of the internal auditors' responsibilities, performance, and the adequacy of its resources to carry out its responsibilities 14. Consider the audit scopes and plans of the internal auditors and independent auditors. Exercise sole authority to approve the terms of all audit engagements of the independent auditors. 15. Review with the internal auditors and the independent auditors the coordination of audit effort to assure completeness of coverage, reduction of redundant efforts, and the effective use of audit resources. 16. Annually, receive a formal, written statement from the independent auditors consistent with standards set by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees. The Committee shall discuss with the independent auditors and approve in advance any relationships or services that may affect their objectivity or independence. 17. Annually prepare a report to shareholders as required by the Securities and Exchange Commission. The report will be included in the Company's annual proxy statement. 18. Maintain minutes of meetings and periodically report to the Board of Directors on significant results of the foregoing activities. 19. Review the results of monitoring compliance with the Company's code of conduct. 2 of 3 Cass Information Systems, Inc. Exhibit I Audit Committee Charter As of January 2003 20. Meet with the internal auditors, independent auditors and management in private sessions to discuss any matters that the Committee or these groups believe should be discussed privately with the Committee. 21. Determine that there are no management restrictions placed on the internal auditors or the independent auditors. 22. Perform an annual assessment of the Company's subsidiary bank performance in meeting the requirements of the Community Reinvestment Act. 23. Conduct or authorize investigations into any matters within the committee's scope of responsibilities, and perform such other functions as assigned by law, the Company's by-laws, or the Board of Directors. 24. Obtain advice, as deemed by the Committee to be necessary and appropriate, from outside legal, accounting and other advisors. 25. Establish procedures for: (a) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls and auditing matters; and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters. The foregoing shall be the common activities of the Committee. These functions are set forth as a guide with the understanding that the Committee may diverge from this guide as deemed appropriate. While the Committee has the responsibility and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Company's financial statements are complete and accurate and in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditors. 3 of 3 (THIS PAGE INTENTIONALLY LEFT BLANK) THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE Mark Here FOLLOWING PROPOSALS: for Address |_| Change or Comments 1. Election of four directors to serve until the year 2006, or until their successors are elected and qualified. FOR all nominees WITHHOLD listed at right AUTHORITY (except as marked to vote for all nominees to the contrary) listed at right |_| |_| Nominees: 01 Robert J. Bodine, 02 Thomas J. Fucoloro, 03 Harry J. Krieg and 04 Howard A. Kuehner (INSTRUCTIONS: To withhold authority to vote for an individual nominee write that nominee's name on the line below.) ________________________________________________________________________________ 2. Ratification of the selection of KPMG LLP as independent auditors for 2003. FOR AGAINST ABSTAIN |_| |_| |_| When properly executed and returned, this proxy will be voted in the manner specified thereon, and in the best judgement of the Proxies on any other business which properly comes before the meeting. If no manner is specified, this proxy will be voted FOR proposals 1 and 2. Signature_________________Date__________Signature_________________Date__________ Note: Please sign as your name appears hereon. If shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give your full name as such. If a corporation, please sign in full corporate name by an authorized officer. If a partnership, please sign in full partnership name by authorized person. FOLD AND DETACH HERE -------------------------------------------------------------------------------- ^ FOLD AND DETACH HERE ^ CASS INFORMATION SYSTEMS, INC. Solicited by the Board of Directors The undersigned hereby constitutes and appoints Lawrence A. Collett and Eric H. Brunngraber, and either of them, attorneys with full power of substitution, with the powers the undersigned would possess if personally present, to vote all shares of Common Stock of the undersigned in CASS INFORMATION SYSTEMS, INC. at the Annual Meeting of Shareholders to be held at 11:00 a.m., April 21, 2003 and at any adjournments thereof on all matters properly before the meeting. (Continued and To Be Signed On Other Side.) -------------------------------------------------------------------------------- Address Change/Comments (Mark the corresponding box on the reverse side) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ^ FOLD AND DETACH HERE ^