<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[X] Preliminary proxy statement [ ]Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CITIZENS BANKING CORPORATION
- -------------------------------------------------------------------------------
(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 14(a)-6(i)(4) 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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
March 16, 1998
To The Shareholders:
The annual meeting of shareholders of Citizens Banking Corporation will be
held in the Carriage Hall Room of the Riverfront Hotel, One Riverfront Center
West, Flint, Michigan 48502, on Tuesday, April 21, 1998, at 10:00 a.m., local
time, in accordance with the provisions of our bylaws.
You are cordially invited to attend this meeting. It is important that
your shares be represented, regardless of the number you own. Therefore, we
request that you please date, sign and return your proxy promptly in the
enclosed envelope whether or not you plan to attend the meeting. Voting by
proxy will not affect your ability to attend the meeting or to change your
vote.
Sincerely yours,
Charles R. Weeks
Chairman of the Board
<PAGE> 3
THOMAS W. GALLAGHER
Senior Vice President, General
Counsel and Secretary
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS, APRIL 21, 1998
To the Shareholders of Citizens Banking Corporation:
Notice is hereby given that the annual meeting of shareholders of Citizens
Banking Corporation (the "Corporation") will be held in the Carriage Hall Room
of the Riverfront Hotel, One Riverfront Center West, Flint, Michigan 48502, on
Tuesday, April 21, 1998, at 10:00 a.m., local time, for the following purposes:
(1) To elect six (6) Class III directors to serve a three (3) year term and
until their successors are duly elected and qualify.
(2) To consider and approve an amendment to Article III of the Corporation's
Restated Articles of Incorporation to increase the total authorized common
shares from 40,000,000 shares without par value to 100,000,000 shares without
par value.
(3) To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE DIRECTORS NOMINATED
AND FOR THE PROPOSAL SET FORTH.
Shareholders of record of the Corporation's common stock outstanding at the
close of business on February 27, 1998 are entitled to notice of and to vote at
the meeting.
You are invited to attend this meeting. Please date, sign and return your
proxy promptly in the enclosed, stamped envelope whether or not you plan to be
present at the meeting. You may still vote in person if you attend the
meeting.
By Order of the Board of Directors
Thomas W. Gallagher
Secretary
Flint, Michigan
March 16, 1998
<PAGE> 4
Citizens Banking Corporation
328 South Saginaw Street
Flint, Michigan 48502
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PROXY STATEMENT
- -------------------------------------------------------------------------------
This proxy statement is furnished in connection with the solicitation of
proxies by the board of directors of Citizens Banking Corporation (the
"Corporation") to be used at the annual meeting of shareholders of the
Corporation and any adjournments thereof. The annual meeting will be held on
April 21, 1998 at the time and place and for the purposes set forth in the
accompanying notice of annual meeting of shareholders.
This proxy statement, the proxy, and notice of annual meeting of shareholders
are first being provided to shareholders on or about March 16, 1998.
The shareholders of the common stock of the Corporation ("Common Stock") as
of the close of business on February 27, 1998 will be entitled to be present
and to vote at the meeting. Each share is entitled to one (1) vote on each
matter to be voted upon at the meeting. On February 27, 1998, there were
_________ shares of Common Stock outstanding and entitled to vote. The
Corporation has no other class of stock issued and outstanding at this time
that is entitled to vote at the meeting. The board of directors requests that
you execute and return the proxy promptly, whether or not you plan to attend
the meeting. Any proxy may be revoked by the person giving it at any time
prior to its being exercised by giving written notice of such revocation to the
secretary of the Corporation, by executing a later dated proxy or by voting in
person at the annual meeting.
All share amounts and option exercise prices in this Proxy Statement have
been adjusted to reflect the 3-for-2 stock split paid on November 18, 1997 to
shareholders of record on October 27, 1997.
The shares represented by properly executed proxies will be voted in
accordance with the instructions provided therein and where no instructions are
given, will be voted in favor of the proposal and the election of the Class III
nominees identified herein. For purposes of determining the number of votes
cast with respect to the election of directors, only those cast "for" are
included. Abstentions and withheld votes are counted only for purposes of
determining whether a quorum is present at the annual meeting and determining
whether the requisite vote is received on the proposal. Although broker
non-votes and abstentions are not counted, they will have the effect of a vote
against the proposal.
The costs of soliciting proxies will be borne by the Corporation. The
solicitation of proxies will be made primarily by mail. The Corporation has,
however, retained the firm of Kissel-Blake Inc., specialists in proxy
solicitation, to solicit proxies on its behalf from brokers, bank nominees, and
other institutional holders of its stock at an anticipated cost of $7,500.00
plus certain out-of-pocket expenses. Proxies may also be solicited by
directors, officers, and other employees of the Corporation and its
subsidiaries personally, and by telephone, facsimile, or other means. No
additional compensation will be paid to directors, officers, or employees for
any such solicitation nor is any such solicitation expected to result in more
than a minimal cost to the Corporation. Arrangements may also be made directly
by the Corporation with banks, brokerage houses, custodians, nominees, and
fiduciaries to forward solicitation material to the beneficial owners of stock
held of record by them and to obtain authorization for the execution of
proxies. The Corporation may reimburse such institutional holders for
reasonable expenses incurred by them in connection therewith.
The persons named in the proxy to represent shareholders who are present by
proxy at the meeting are Victor E. George and Edward P. Abbott.
1
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below includes all of the shareholders of the Corporation known by
the Corporation to beneficially own more than five percent of its Common Stock
as of December 31, 1997. All share amounts reflect the 3-for-2 stock split
paid on November 18, 1997 to shareholders of record on October 27, 1997
<TABLE>
<CAPTION>
COMMON
STOCK
BENEFICIALLY
OWNED AS A
COMMON STOCK PERCENTAGE
BENEFICIALLY OF
NAME AND ADDRESS OWNED INVESTMENT POWER VOTING POWER OUTSTANDING
OF BENEFICIAL ----------------------------- ---------------------------- COMMON
OWNER SOLE SHARED NONE SOLE SHARED NONE STOCK
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Citizens Bank
328 S. Saginaw St.
Flint, Michigan
485021(1) 3,888,513 1,258,643 2,451,039 178,831 2,111,311 1,660,016 117,186 13.9%
CenTra, Inc.
12225 Stephens
Warren, Michigan
480892(2) 2,901,808 2,801,599 100,209 0 2,801,599 100,209 0 10.3%
</TABLE>
___________________
(1) As sole or co-fiduciary, Citizens Bank will generally vote the shares held
by it in trusts or estates in which the indenture creating the same
specifically grants such power. Shares held in all other trusts or estates in
which the bank acts as co-fiduciary will generally be voted by the other
co-fiduciary or by the bank at the direction of such co-fiduciary.
(2) The information furnished for CenTra, Inc. is based upon data which have
been supplied to the Corporation by CenTra, Inc. As set forth in the table,
CenTra, Inc. shares investment and voting power with respect to 100,209 shares.
Such powers are shared with the Manuel J. Moroun Trust under agreement dated
March 4, 1977, for the benefit of Manuel J. Moroun.
2
<PAGE> 6
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of the Corporation's
Common Stock beneficially owned as of December 31, 1997, together with the
percentage of the outstanding shares which such ownership represents, by (i)
each director and nominee for election to the board of directors, (ii) each
executive officer named in the Summary Compensation Table under "Executive
Compensation" and (iii) all directors and executive officers of the
Corporation as a group. The information with respect to directors and
executive officers has been obtained from the respective individuals and is
reported in accordance with the beneficial ownership rules of the Securities
and Exchange Commission (the "Commission") under which a person may be
deemed to be the beneficial owner of a security if such person has or shares
voting power or investment power with respect to such security or has the
right to acquire such ownership within the next 60 days. Accordingly, the
amounts shown in the following table do not purport to represent beneficial
ownership for any purpose other than compliance with the Commission's
reporting requirements. All share amounts reflect the 3-for-2 stock split
paid on November 18, 1997 to shareholders of record on October 27, 1997.
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK BENEFICIALLY
BENEFICIALLY OWNED OWNED AS A PERCENTAGE OF
AS OF DECEMBER 31, SOLE VOTING AND SHARED VOTING AND OUTSTANDING COMMON STOCK
NAME 1997 DISPOSITIVE POWER DISPOSITIVE POWER AS OF DECEMBER 31, 1997
<S> <C> <C> <C> <C>
Edward P. Abbott(1) 22,147 22,011 136 *
Hugo E. Braun Jr.(1) 24,204 24,204 - - *
Jonathan E. Burroughs II(1)(2) 232,734 228,996 3,738 *
Gary O. Clark(3) 186,259 177,121 9,138 *
Joseph P. Day(1) 5,265 5,265 - - *
John W. Ennest(4) 279,571 279,571 - - *
Lawrence O. Erickson(1) 435,359 4,500 430,859 1.6%
Victor E. George(1) 9,321 9,321 - - *
William J. Hank(5) 290,343 85,390 204,953 1.0%
Stephen J. Lazaroff 28,639 25,464 3,175 *
William F. Nelson Jr.(1) 11,478 8,766 2,712 *
Wayne G. Schaeffer(6) 125,577 110,124 15,453 *
Gerald Schreiber(7) 12,222 12,222 - - *
William C. Shedd(1) 11,849 5,816 6,033 *
James E. Truesdell Jr.(1) 43,263 43,263 - - *
James M. VanTiflin(8) 75,885 75,885 - - *
Robert J. Vitito(9) 333,051 262,193 70,858 1.1%
Ada C. Washington(10) 1,658 1,658 - - *
Charles R. Weeks(7) 175,727 169,270 6,457 *
Kendall B. Williams(1) 5,776 4,840 936 *
James L. Woloham(7) 10,550 10,550 - - *
All Directors, Director Nominees 2,746,068 1,968,877 777,191 9.8%
and Executive Officers as a Group
(28)(11)
</TABLE>
* Represents holdings of less than one percent.
(1) Includes 4,500 exercisable options to purchase Common Stock which were
granted pursuant to the provisions of the Stock Option Plan for Directors.
3
<PAGE> 7
(2)The shares shown for Mr. Burroughs II, include: 42,591 shares held in the
Burroughs' Memorial Trust, to which Mr. Burroughs II serves as one of 5
trustees. Mr. Burroughs II disclaims beneficial ownership of such shares.
(3)Includes 74,730 exercisable options to purchase Common Stock.
(4)Includes 195,555 exercisable options to purchase Common Stock.
(5)Includes 3,000 exercisable options to purchase Common Stock which were
granted pursuant to the provisions of the Stock Option Plan for Directors.
(6)Includes 93,634 exercisable options.
(7)Includes 1,500 exercisable options to purchase Common Stock which were
granted pursuant to the provisions of the Stock Option Plan for Directors.
(8)Includes 66,507 exercisable options to purchase Common Stock.
(9)Includes 216,334 exercisable options to purchase Common Stock.
(10)Includes 825 exercisable options to purchase Common Stock which were granted
pursuant to the provisions of the Stock Option Plan for Directors.
(11)The directors, director nominees and executive officers disclaim beneficial
ownership of 235,549 of these shares. Also, of the 2,746,068 shares shown as
being beneficially owned by such group, 1,022,310 represent exercisable options
to purchase Common Stock.
ELECTION OF DIRECTORS
In accordance with the Corporation's restated articles of
incorporation, the board of directors is divided into three classes. Each
year, on a rotating basis, the terms of office of the directors in one of the
three classes will expire. Successors to the class of directors whose terms
have expired will be elected for a three-year term. The directors whose terms
expire at the 1998 annual meeting of shareholders ("Class III directors") are
Stephen J. Lazaroff, William F. Nelson Jr., William C. Shedd, James E.
Truesdell Jr., Charles R. Weeks, and Kendall B. Williams. All of the current
Class III directors have previously been elected as directors by the
shareholders, except Mr. Lazaroff, who was appointed to the board of directors
pursuant to the Agreement and Plan of Merger between the Corporation and CB
Financial Corporation dated January 27, 1997. The board of directors has
nominated each of these individuals for re-election as Class III Directors at
the 1998 annual meeting of shareholders. The term for the Class III directors
will expire at the 2001 annual meeting of shareholders or upon the election and
qualification of their successors. If any of the nominees should be unable to
serve, the proxies may be voted for the election of such other person or
persons as the board of directors may recommend or the number of directors will
be automatically reduced by the number of nominees unable to serve if no
substitute is recommended by the board of directors.
Six nominees will be elected as Class III directors at the 1998 annual
meeting of shareholders. On the basis of information presently available to
the board of directors, only the six persons named above as nominees will be
nominated for election as directors. SHARES REPRESENTED BY PROXIES IN THE
ACCOMPANYING FORM WILL BE VOTED FOR THE ELECTION OF SUCH NOMINEES UNLESS A
CONTRARY DIRECTION IS INDICATED. The affirmative vote of a majority of the
votes cast at the meeting is required for election. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
4
<PAGE> 8
The name and age of each nominee and incumbent director, positions and
offices currently held with the Corporation and its subsidiaries, his or her
five-year business experience, and the year each became a director of the
Corporation, according to information furnished by such nominees and incumbent
directors, are set forth below.
CLASS III
NOMINEES TO SERVE THREE (3) YEARS
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE DURING THE
PAST FIVE YEARS, DIRECTORSHIPS
SERVED IN CERTAIN CORPORATIONS, AND
CONTINUOUSLY PRINCIPAL OCCUPATION IF OTHER
POSITIONS AND OFFICES WITH AS A DIRECTOR THAN CURRENT POSITION WITH
NAME AGE CORPORATION AND ITS SUBSIDIARIES OF CORPORATION CORPORATION AS ITS SUBSIDIARIES
<S> <C> <C> <C> <C>
Stephen J. Lazaroff 44 Director of Corporation. 1997 President, Diversified Precision
Products, Inc., a special
cutting tool manufacturer
serving the automotive and
hydraulic fittings industries.
William F. Nelson Jr. 64 Director of Corporation. 1986 President, Director, and Owner,
William F. Nelson Electric,
Inc., an electrical contractor
for commercial and industrial
businesses.
William C. Shedd 58 Director of Corporation and 1982 Attorney and Partner,
Director of Citizens Bank. Winegarden, Shedd, Haley,
Lindholm & Robertson.
James E. Truesdell Jr. 67 Director of Corporation and 1982 President-Secretary, J. Austin
Director of Citizens Bank. Oil Company of Flint, Inc., an
investment and real estate
development firm.
Charles R. Weeks 63 Chairman of the Board of 1982 Retired President and Chief
Corporation and Director of Executive Officer of the
Citizens Bank. Corporation; Director, Wolohan
Lumber Co.
Kendall B. Williams 45 Director of Corporation and 1992 Attorney and Counselor,
Director of Citizens Bank. The Williams Firm, P.C.
Previously an attorney with
Gault Davison, P.C. from January 1980
to September 1997
</TABLE>
5
<PAGE> 9
CLASS I
CONTINUING DIRECTORS - TERM EXPIRING IN 1999
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE DURING THE
PAST FIVE YEARS, DIRECTORSHIPS
SERVED IN CERTAIN CORPORATIONS, AND
CONTINUOUSLY PRINCIPAL OCCUPATION IF OTHER
POSITIONS AND OFFICES WITH AS A DIRECTOR THAN CURRENT POSITION WITH
NAME AGE CORPORATION AND ITS SUBSIDIARIES OF CORPORATION CORPORATION AS ITS SUBSIDIARIES
<S> <C> <C> <C> <C>
Edward P. Abbott 58 Director of Corporation and 1982 President and Chief Executive
Director of Citizens Bank. Officer, Abbott's Meat, Inc., a
wholesale and retail meat
distributor.
Hugo E. Braun Jr. 65 Director of Corporation and 1986 Attorney & Partner, Braun
Director of Citizens Bank. Kendrick Finkbeiner; Director,
Wolohan Lumber Co.
Jonathan E. 55 Director of Corporation. 1986 President, JEB Enterprises, an
Burroughs II investment consulting firm.
Lawrence O. Erickson 62 Director of Corporation and 1993 Chief Executive Officer, Four-Way
Director of Citizens Bank. Tool & Die, Inc., an engineering
consulting firm for metal
stamping fabrication and tool
manufacturing.
William J. Hank 65 Director of Corporation and 1987 Chairman and Chief Executive
Director of Citizens Bank - Officer, Farnham Investments
Illinois, N.A. Group; Retired Executive Vice
President of the Corporation;
Retired Chairman of the Board,
Citizens Bank - Illinois, N.A.
Robert J. Vitito 55 President, Chief Executive 1991
Officer and Director of
Corporation; Chairman of the
Board, President and Chief
Executive Officer of Citizens
Bank.
</TABLE>
8
<PAGE> 10
CLASS II
CONTINUING DIRECTORS - TERM EXPIRING IN 2000
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE DURING THE
PAST FIVE YEARS, DIRECTORSHIPS
IN CERTAIN CORPORATIONS, AND
POSITIONS AND OFFICES SERVED CONTINUOUSLY PRINCIPAL OCCUPATION IF OTHER
WITH CORPORATION AND AS A DIRECTOR OF THAN CURRENT POSITION WITH
NAME AGE ITS SUBSIDIARIES CORPORATION CORPORATION AND ITS SUBSIDIARIES
<S> <C> <C> <C> <C>
Joseph P. Day 58 Director of Corporation 1992 President, Banner Engineering &
and Director of Citizens Bank. Sales, Inc., a combustion
engineering and manufacturing
firm.
John W. Ennest 55 Vice Chairman of the 1991
Board, Chief Financial
Officer, and Treasurer
of Corporation; Vice
Chairman of the Board
and Chief Financial
Officer, Citizens Bank;
Chairman of the Board,
Citizens Bank -
Illinois, N.A.
Victor E. George 66 Director of Corporation 1982 Chairman of the Board, Victor
and Director of George Oldsmobile, Inc., an
Citizens Bank. automobile dealership.
Gerald Schreiber 63 Director of Corporation. 1997 Vice President - Sales,
Royalite Co., an electrical
wholesale distributor.
Ada C. Washington 47 Director of Corporation 1997 Community Volunteer.
and Director of
Citizens Bank.
James L. Wolohan 46 Director of Corporation 1997 Chairman, President and Chief
and Director of Executive Officer of Wolohan
Citizens Bank. Lumber Co., a retailer of
lumber, building materials and
home improvement products;
Director, Jacobson Stores, Inc.
</TABLE>
7
<PAGE> 11
MEETINGS OF DIRECTORS
During calendar year 1997, 4 regular meetings and 4 special meetings
of the board of directors of the Corporation were held. During such period,
all incumbent directors attended at least 75% of the aggregate of the number of
meetings of the board of directors and the number of meetings held by the
committees on which they serve.
COMMITTEES OF THE BOARD OF DIRECTORS
The Corporation has several committees on which members of the board
of directors serve, including an audit committee, a compensation and benefits
committee, and a directors nominating committee. The audit committee meets
quarterly and on call when needed, and the compensation and benefits committee
and directors nominating committee meet on call.
The AUDIT COMMITTEE met 4 times during 1997 and is currently comprised
of the following outside directors: James E. Truesdell Jr., chairman; Edward
P. Abbott; Joseph P. Day; William F. Nelson Jr.; and Gerald Schreiber. The
responsibilities of the committee include oversight of the internal accounting
controls for and internal audit function of the Corporation and its
subsidiaries; recommending to the board of directors the independent auditors
to be retained to conduct the annual audit of the Corporation; reviewing the
annual audit plan with the independent auditors and the internal auditors;
serving as the Compliance Review Committee pursuant to the provisions of the
Corporation's compliance policy; and reviewing the financial results and the
results of the internal and independent audits of the Corporation.
The COMPENSATION AND BENEFITS COMMITTEE met 7 times during 1997 and is
currently comprised of the following directors: Hugo E. Braun Jr., chairman;
Lawrence O. Erickson; Victor E. George; James E. Truesdell Jr.; and Kendall B.
Williams. The responsibilities of the committee include approval of all
aspects of corporate executive compensation and administration of the
Corporation's compensation and benefits plans.
The DIRECTORS NOMINATING COMMITTEE met 1 time during 1997 and is
currently comprised of the following directors: Charles R. Weeks, chairman;
Hugo E. Braun Jr.; Jonathan E. Burroughs II; Victor E. George; and Robert J.
Vitito. The responsibilities of the committee are: to determine a desirable
balance of expertise among board members; to identify qualified candidates to
fill board positions; to provide aid in attracting qualified candidates to the
board of directors; to recommend the slate of director nominees to the board of
directors for inclusion in the Corporation's proxy statement for election by
the shareholders at the annual meetings; to consider director nominees proposed
by shareholders; and to handle such other matters as may be properly delegated
to the committee by the board of directors. Shareholders proposing director
nominees at any annual meeting of shareholders shall provide written notice in
accordance with the bylaws of such intention to the secretary of the
Corporation at least ninety days prior to an annual shareholders meeting for
which such nominations are proposed and with respect to an election to be held
at a special meeting of shareholders, such notices must be given by the close
of business on the seventh day following the date on which notice of such
meeting is first given to shareholders.
8
<PAGE> 12
COMPENSATION OF DIRECTORS
During 1997, directors of the Corporation (with the exception of Mr.
Weeks who has a separate arrangement as described below) were paid an annual
retainer of $6,000 plus the sum of $900 for attendance at each meeting of the
board of directors. Non-officer directors were paid $600 for each committee
meeting attended with the exception of the committee chairpersons who were paid
$900. Committee member directors who are also employees of the Corporation do
not receive fees for committee meeting attendance.
The Corporation also maintains the Stock Option Plan for Directors.
Annually during the ten year term of the Plan, each nonemployee director
serving on the board of directors immediately following the annual meeting of
shareholders will receive an automatic grant of a non- qualified stock option
to purchase 1,500 shares of Common Stock at an exercise price equal to the fair
market value per share of Common Stock on the date of the annual meeting of
shareholders. Each such option will become exercisable six months following
the grant date and expire five years after grant. On April 15, 1997, pursuant
to the Plan, nonemployee directors received a stock option grant to purchase
1,500 shares of Common Stock of the Corporation at an exercise price of $20.75
per share.
In April 1996, the Corporation entered into a contractual arrangement
with Mr. Weeks, pursuant to which he agreed to serve as chairman of the board
of the Corporation and as chairman of the executive and nominating committees
of the Corporation's board of directors. Pursuant to such arrangement, Mr.
Weeks is currently paid an annual fee of $206,000 which is inclusive of any
other annual retainer or meeting fees otherwise normally paid to directors of
the Corporation. Such fee is paid in quarterly installments in February, May,
August and November of each year until the end of the term of the appointment
on April 30, 1999. The fee will be increased to $212,180 in May 1998. In
addition to such fee, Mr. Weeks is entitled to be reimbursed by the Corporation
for reasonable out-of-pocket expenses incurred in his capacity as chairman upon
presentation of an appropriate accounting to the Corporation. In the event Mr.
Weeks should fail to be re-elected as a director of the Corporation or be
removed as chairman of the board (for reasons other than willful misconduct or
neglect) prior to the expiration of the term of the appointment, Mr. Weeks
would be entitled to one half of the annual fees prorated for the remainder of
the term. If Mr. Weeks should voluntarily resign as chairman of the board
prior to the expiration of the term, he will forfeit all right to future
payment under the agreement. In the event of the death or permanent and total
disability of Mr. Weeks, any unpaid fees will be prorated to the date of death
or permanent and total disability.
PROPOSAL TO APPROVE AN AMENDMENT TO THE
RESTATED ARTICLES OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED COMMON SHARES
The Restated Articles of Incorporation (the "Articles") presently
authorize 40,000,000 shares of Common Stock, no par value. As of January 1,
1998, 28,047,518 shares of Common Stock were issued and outstanding and
1,120,165 shares of Common Stock were reserved for issuance pursuant to the
Corporation's benefit plans.
Proposed Amendment. The board of directors is seeking approval of an
amendment to the Articles to increase the number of authorized shares of Common
Stock to 100,000,000 shares as set forth in the following shareholder
resolution:
9
<PAGE> 13
"RESOLVED, that the Restated Articles of Incorporation of this
Corporation be amended by changing Article III so that, as
amended, Article III, which sets forth the total authorized
capital stock of this Corporation shall read as follows:
'The total authorized capital stock is:
<TABLE>
<S> <C> <C>
1. Common shares: 100,000,000 shares, no par value
2. Preferred shares: 5,000,000 shares, no par value.'"
</TABLE>
Reason for Proposed Amendment. The proposed additional shares of
Common Stock could be issued for any proper corporate purpose, including the
acquisition of other businesses, the raising of additional capital for use in
the Corporation's business, stock splits, the payment of stock dividends or
other distributions in shares of stock, or in connection with employee stock
incentive programs. While the Company currently has no understandings or
commitments with respect to the issuance of the additional shares of Common
Stock, it is considered advisable to have the authorization to issue such
shares in order to enable the Company, as the need may arise, to move promptly
to take advantage of market conditions and the availability of other favorable
opportunities without the delay and expense involved in calling a special
shareholders meeting for such purpose.
The authorization of additional shares of Common Stock will not, by
itself, have any effect on the rights of holders of existing Common Stock.
Depending on the circumstances, any issuance of additional shares of Common
Stock may dilute the present equity ownership of current shareholders. Holders
of Common Stock have no preemptive rights to participate in any such issuance.
If the proposed amendment to the Articles is approved, the Board of
Directors will have the authority to issue the additional authorized shares or
any part thereof to such persons and for such consideration as it may determine
without further action by the shareholders except as required by law, the
Articles or the rules of the Nasdaq Stock Market or any stock exchange on which
the Company's securities may then be listed. The Nasdaq Stock Market, on which
the issued shares of Common Stock are listed, currently requires shareholder
approval as a prerequisite to listing shares in certain limited circumstances.
It should be noted that while the Corporation has no present plans to
use the additional authorized shares of Common Stock for any particular
purpose, the availability of additional shares of Common Stock could render
more difficult or discourage a takeover attempt. For example, additional
shares of Common Stock could be issued and sold to purchasers who oppose a
takeover bid which is not in the best interests of the Corporation, its
shareholders and its constituencies or could be issued to increase the
aggregate number of outstanding shares of Common Stock and thereby dilute the
interest of parties attempting to obtain control of the Corporation. In
connection with any issuance of shares of Common Stock, the board of directors
is required to determine that such issuance would be in the best interests of
the Corporation and its shareholders. It is possible that such shares could be
sold with or without an option, on the part of the Corporation, to repurchase
such shares, or on the part of the purchaser, to put such shares to the
Corporation. If used to render more difficult or to discourage a takeover
attempt, the effect of the additional authorized shares of Common Stock might
be (i) to deprive shareholders of an opportunity to sell their stock at a
temporarily higher price as a result of a tender offer or the purchase of
shares by a person seeking to obtain control of the Company or (ii) to assist
incumbent management in retaining its present position. Such an attempt to
acquire control is unlikely at the present time, however, in view of certain
measures currently in place.
10
<PAGE> 14
Certain existing provisions of the Corporation's Articles and its
Amended and Restated Bylaws (the "Bylaws") may under certain circumstances have
anti-takeover effects. The provisions in the Articles (i) provide that that
board of directors shall consist of three classes of directors, each class
serving a staggered three year term; (ii) provide for a two-thirds shareholder
vote to amend, alter, add or repeal certain provisions in the Bylaws; (iii)
provide that corporate actions may be taken without a shareholders' meeting if
written consent setting forth such action is signed by the holders of at least
two-thirds of the outstanding voting stock; and (iv) provide that in the
absence of a two-thirds vote of the continuing directors approving the
transaction, a business combination between the Corporation or a subsidiary and
related person must comply with certain specified conditions including that the
aggregate consideration per share be equal to the highest consideration
previously paid by the related person or his affiliates for any shares; or in
the alternative, the transaction must receive a favorable vote of at least
two-thirds of the outstanding voting shares and a majority of the shares held
by other than such related person. The provisions in the Bylaws (i) permit
shareholders' meetings to be called by shareholders only upon the request of
the holders of at least two-thirds of the outstanding shares entitled to vote;
(ii) permit a director to be removed from office only for cause upon the
favorable vote of the holders of at least two-thirds of the votes entitled to
be cast; and (iii) require any shareholder intending to make a nomination at an
election meeting to provide specific information regarding the proposed
nominees to the Secretary at least ninety (90) days in advance of the meeting.
None of these Articles or Bylaws provisions may be altered or amended without
the affirmative vote of at least two-thirds of the votes entitled to be cast
unless the amendment is recommended by more than 75% of the directors.
In addition, the board of directors of the Corporation adopted a share
purchase rights plan on July 20, 1990 which may under certain circumstances
have anti-takeover effects. Specifically, on July 20, 1990, the board of
directors declared a dividend distribution of one Right for each outstanding
share of Common stock of the Corporation. Each Right entitles the registered
holder to purchase from the Corporation under certain circumstances one
one-hundredth of a share of Series A Preferred Stock at a price of $75 per one
one-hundredth of a share, subject to adjustment to prevent dilution. In the
event any person or group acquires 15% or more of the outstanding shares of
Common Stock or if certain other events occur involving a potential
change-in-control of the Corporation, each Right will entitle the registered
holder (other than such acquiror) to purchase, for the $75 exercise price,
shares of Common Stock having a market value of $150.
The Corporation is also subject to Chapter 7B of the Michigan Business
Corporation Act which provides that "control shares" of the Corporation
acquired in a "control share acquisition" have no voting rights except as
granted by the shareholders of the Corporation.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO AMEND THE
RESTATED ARTICLES OF INCORPORATION. A majority of shares outstanding and
entitled to vote at the meeting is required to approve the proposal.
Consequently, abstentions and broker non-votes will have the same effect as a
vote against the proposal.
11
<PAGE> 15
EXECUTIVE OFFICERS
The following information is provided for those officers currently
designated as executive officers by the Corporation's Board of Directors and
includes the President, Chief Financial Officer, Controller, and Secretary of
the Corporation, officers of the Corporation who are in charge of principal
business units, divisions or functions, and officers of the Corporation or its
subsidiaries who perform significant policy making functions for the
Corporation.
YEAR BECAME
EXECUTIVE OFFICER OF
NAME AGE FIVE-YEAR BUSINESS EXPERIENCE THE CORPORATION
Richard T. Albee 54 Executive Vice President of 1996
Citizens Bank (December 1997
to present); Senior Vice
President of Citizens Bank
(April 1994 to present).
Also served as President of
former subsidiary bank of the
Corporation which was
consolidated with Citizens
Bank (January 1988 to April
1994).
Daniel E. Bekemeier 41 Senior Vice President and 1996
Controller of Citizens Bank
(April 1995 to present); Vice
President and Controller of
Citizens Bank (September 1989
to April 1995).
Nicholas J. Cilfone 47 Senior Vice President of 1985
Corporation (August 1988 -
present); Executive Vice
President of Citizens Bank
(June 1996 to present). Also
served as Executive Vice
President of former
subsidiary bank of the
Corporation which was
consolidated with Citizens
Bank (October 1991 to June
1996).
Gary O. Clark 56 Executive Vice President of 1986
Corporation (July 1986 -
present); President and Chief
Executive Officer, Citizens
Bank - Illinois, N.A.
(February 1994 - present);
Senior Executive Vice
President, Chief Operating
Officer and Senior Credit
Officer of Citizens Bank
(October 1991 - February
1994).
Gary P. Drainville 48 Executive Vice President of 1985
Corporation and of Citizens
Bank (December 1993 -
present); Director of Human
Resources of Corporation and
of Citizens Bank (December
1985 - June 1996); Senior
Vice President of Corporation
and of Citizens Bank
(December 1985 - December
1993)
12
<PAGE> 16
YEAR BECAME
EXECUTIVE OFFICER OF
NAME AGE FIVE-YEAR BUSINESS EXPERIENCE THE CORPORATION
John W. Ennest 55 Vice Chairman of the Board of 1983
Corporation (October 1991 -
present); Chief Financial
Officer and Treasurer of
Corporation (July 1994 -
present); Vice Chairman of
the Board and Chief Financial
Officer of Citizens Bank
(June 1996 to present)
Chairman of the Board,
Citizens Bank - Illinois,
N.A. (August 1992 - present);
Chief Executive Officer,
Citizens Bank - Illinois,
N.A. (August 1992 - February
1994).
Thomas W. Gallagher 45 Senior Vice President of 1989
Corporation (July 1993 -
present); General Counsel of
Corporation (August 1988 -
present); Secretary of
Corporation (January 1989 -
present); Senior Vice
President and General
Counsel, Citizens Bank
(August 1988 - Present).
Wayne G. Schaeffer 51 Executive Vice President of 1987
Corporation (December 1993 -
Present); Chief Financial
Officer and Treasurer of
Corporation (August 1988 -
July 1994); Senior Vice
President of Corporation
(August 1988 - December
1993);President - Flint,
Citizens Bank (June 1996 to
Present); Senior Executive
Vice President and Chief
Operating Officer, Citizens
Bank (July 1994 - June 1996);
Chief Financial Officer,
Citizens Bank (December 1985
- July 1994); Executive Vice
President, Citizens Bank
(December 1993 - July 1994).
Thomas C. Shafer 39 Executive Vice President of 1996
Citizens Bank (June 1996 to
present); Senior Vice
President of Citizens Bank
(November 1994 to June 1996);
City President, Michigan
National Bank - Flint (April
1992 to November 1994)
James M. VanTiflin 50 President - Saginaw, Citizens 1996
Bank (June 1996 to present);
President and Chief Executive
Officer of former subsidiary
bank of the Corporation which
was consolidated with
Citizens Bank (February 1995
to June 1996); Executive Vice
President of Citizens Bank
(August 1992 to February
1995).
13
<PAGE> 17
YEAR BECAME
EXECUTIVE OFFICER OF
NAME AGE FIVE-YEAR BUSINESS EXPERIENCE THE CORPORATION
Robert J. Vitito 55 President and Chief Executive 1986
Officer of Corporation (April
1996 to present); President
and Chief Administrative
Officer of Corporation (July
1994 - April 1996); Executive
Vice President of Corporation
(July 1986 - July 1994);
Chairman, President and Chief
Executive Officer of Citizens
Bank (May 1996 to Present);
also served as Chairman of
the Board of former
subsidiary bank of the
Corporation which was
consolidated with Citizens
Bank (January 1987 to June
1996)
Jack S. Werner 50 President - Bay City/Midland, 1996
Citizens Bank (June 1996 to
present). Also served as
Chairman and Chief Executive
Officer of former subsidiary
bank of the Corporation which
was consolidated with
Citizens Bank (May 1991 to
June 1996).
Citizens Bank and Citizens Bank - - Illinois, N.A. are wholly-owned
subsidiaries of the Corporation.
14
<PAGE> 18
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Corporation and its subsidiaries, to or on
behalf of the Corporation's Chief Executive Officer and each of the four other
most highly compensated executive officers during 1997 (the "Named Officers")
of the Corporation (determined as of the end of the last fiscal year) for the
fiscal years ended December 31, 1995, 1996, and 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
NAME AND PRINCIPAL COMPENSATION
POSITION ALL OTHER
YEAR SALARY ($) BONUS ($) OPTIONS/ COMPENSATION(2)($)
SARS(#)(1)
<S> <C> <C> <C> <C> <C>
Robert J. Vitito 1997 313,000 168,859 110,667 22,418
President and Chief 1996 278,273 143,882 92,433 20,419
Executive Officer 1995 241,442 112,864 77,625 19,916
John W. Ennest 1997 252,850 94,870 66,580 23,596
Vice Chairman, Treasurer 1996 243,148 72,754 55,533 20,419
and Chief Financial 1995 234,414 90,442 75,873 19,982
Officer
Wayne G. Schaeffer 1997 157,000 70,156 39,870 7,764
Executive Vice President 1996 141,476 59,778 31,222 7,653
1995 127,229 55,688 35,377 5,994
Gary O. Clark 1997 173,000 38,341 26,104 10,396
Executive Vice President 1996 164,377 28,216 27,517 10,084
1995 160,975 35,874 19,747 17,071
James M. VanTiflin 1997 145,196 56,765 16,200 6,462
President - Saginaw, 1996 132,490 48,369 13,050 6,138
Citizens Bank 1995 126,601 34,936 11,250 5,721
</TABLE>
(1)The numbers of options have been adjusted to reflect the 3-for-2 stock split
paid on November 18, 1997 to shareholders of record on October 27, 1997.
(2)The amounts set forth in the "All Other Compensation" column for 1997
represent: (i) contributions of $7,125 to the Corporation's Amended and
Restated Section 401(k) Plan on behalf of each of the Named Officers (except
Mr. VanTiflin for which the contribution totaled $6,119) to match 1997 pre-tax
elective deferral contributions (included under Salary) made by such
individuals to the Plan; (ii) insurance payments with respect to term life
insurance as follows: Mr. Vitito $2,093, Mr. Ennest $3,271, Mr. Schaeffer
$639, Mr. Clark $3,271 and Mr. VanTiflin $343; and (iii) $13,200 paid to
Messrs. Vitito and Ennest for services as a director of the Corporation.
15
<PAGE> 19
STOCK OPTION GRANTS
The following table contains information concerning the grant of stock
options under the Corporation's Third Amended Stock Option Plan (the "Option
Plan") to the Named Officers during 1997:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS/ VALUE AT ASSUMED ANNUAL
UNDERLYING SARS RATE OF STOCK PRICE
OPTIONS GRANTED TO EXERCISE OR APPRECIATION
/SARS EMPLOYEES IN BASE PRICE EXPIRATION FOR
NAME GRANTED(#)(1) FISCAL YEAR ($/SH)(1) DATE OPTION TERM(2)
5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
R.J. Vitito 73,500(3) 13.17% 21.83 05/29/2007 1,009,218 2,557,559
37,167(4) 6.66% 21.33 06/09/2002 219,062 484,070
J.W. Ennest 29,100(3) 5.22% 21.83 05/29/2007 399,568 1,012,584
37,480(4) 6.72% 22.00 06/09/2002 227,810 503,402
W.G. Schaeffer 25,050(3) 4.49% 21.83 05/29/2007 343,958 871,658
14,820(4) 2.66% 22.00 06/09/2002 90,078 199,050
G.O. Clark 7,500(3) 1.34% 21.83 05/29/2007 102,981 260,975
18,604(4) 3.33% 21.17 06/09/2002 108,795 240,409
J.M. VanTiflin 16,200(3) 2.90% 21.83 05/29/2007 222,439 563,707
</TABLE>
_______________________
(1)The numbers of shares and exercise prices have been adjusted to reflect the
3-for-2 stock split paid on November 18, 1997 to shareholders of record on
October 27, 1997.
(2)Such "potential realizable values" represent the value of such options at the
end of their term, assuming a 5% and 10% appreciation in the price of the
Common Stock compounded annually over the term without discounting for
inflation. The actual value of such options is dependent upon actual
appreciation in the market price of the Common Stock during the term of the
options.
(3)These stock options are non-qualified stock options granted pursuant to the
Option Plan. The options are exercisable in whole or in part during the term
thereof once vested, beginning November 29, 1997. Generally such options
become vested on a graduated basis in accordance with a pre-determined option
vesting schedule which is based upon a rolling average 4 quarter return on
average assets ratio ("ROA") for the Corporation with a minimum vesting of 10%
upon the Corporation's achieving a 1.09% ROA and a 100% vesting upon the
Corporation's achieving an ROA of 1.25%.
(4)These stock options are non-qualified stock options which were automatically
granted as reload options pursuant to the provisions of the Performance
Partnership Program ("PPP") of the Corporation which was established under the
Option Plan. Under the PPP, initial grants of non- qualified stock options
("Initial Grants") were made to such participants in 1992 in connection with
their agreement to participate in the
16
<PAGE> 20
PPP. The provisions of the PPP required a participant to contribute currently
owned shares of Common Stock to the PPP, and to subject such shares together
with shares subsequently acquired under the PPP to certain transfer
restrictions. Under the PPP, the vested portion of the Initial Grant would be
automatically exercised by the administrator pursuant to an automatic
stock-for-stock exchange procedure utilizing the shares then credited to the
participant's account, provided that the spread between the exercise price and
the fair market value of the Common Stock at such time resulted in a gain of at
least a specified number of shares and at least six months and one day had
lapsed since the last such exercise. Each time a portion of the Initial Grant
or a subsequently granted reload option was exercised, a participant would
automatically receive an additional reload option to purchase a number of
shares equal to the number of shares received upon exercise less the number of
shares realized as a gain from the transaction. Reload options became fully
exercisable six months after grant and have an exercise price equal to the fair
market value per share of Common Stock on the date the reload option was
granted. The "reload option" feature of the PPP was discontinued by the
compensation and benefits committee effective June 30, 1997. Such action had
the effect of causing all participation in the PPP to cease.
OPTION/SAR EXERCISES AND HOLDINGS
The following table provides information, with respect to the Named
Officers, about the exercise of options and/or SARs during the last fiscal
year, and the unexercised options and SARs held as of the end of the fiscal
year:
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON VALUE OPTIONS/SARS AT FISCAL IN-THE-MONEY OPTIONS/SARS
NAME EXERCISE REALIZED YEAR END (#) AT FISCAL YEAR END
------------------------------ --------- ---------------
(#) ($) EXERCISABLE ($) EXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
R.J. Vitito 52,809 341,073 216,334 59,190 3,770,731 811,502
J.W. Ennest 75,720 688,734 195,555 24,871 3,799,627 346,257
W.G. Schaeffer 15,969 24,991 93,634 20,869 1,740,577 288,495
G.O. Clark 22,638 87,899 74,730 7,425 1,421,749 105,018
J.M. VanTiflin 3,000 41,875 66,507 14,193 1,348,018 197,648
</TABLE>
17
<PAGE> 21
PENSION PLANS
The following table shows the estimated annual pension benefits
payable to the Named Officers at normal retirement age 1/ under the
Corporation's qualified defined benefit pension plan, based on remuneration
that is covered under the plan and years of service with the Corporation and
its subsidiaries:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
-------------------------
REMUNERATION(2)
15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$ 75,000 $ 16,000 $ 22,000 $ 27,000 $ 33,000 $ 38,000
115,000 27,000 36,000 45,000 54,000 64,000
155,000 38,000 51,000 63,000 76,000 89,000
195,000 49,000 65,000 81,000 98,000 114,000
</TABLE>
__________________________________________
(1)Normal retirement age is the later of age 65 or the fifth anniversary of the
participant's entry into the plan.
(2)The law in effect throughout calendar year 1997 limits remuneration
considered for benefit purposes to $160,000. Messrs. Vitito, Ennest, and Clark
have supplemental plans that pay benefits based upon earnings in excess of the
pension plan limitations, which plans are described below.
A participant's remuneration covered by the Corporation's pension plan
is his or her "average monthly compensation," which is computed over the 60
consecutive months of the participant's last 120 months in which he or she
received the greatest compensation, multiplied by 12 months. For this purpose,
compensation is defined as the participant's base salary, exclusive of bonuses,
overtime, and fringe benefits, but includes the participant's 401(k) salary
reduction contributions. Covered remuneration for the named executives as of
the end of the last calendar year is $160,000 for Messrs. Vitito, Ennest,
Schaeffer, and Clark, and $150,780 for Mr. VanTiflin. The estimated credited
years of service for each named executive is as follows: Mr. Vitito, 30; Mr.
Ennest, 15; Mr. Schaeffer, 14; Mr. Clark, 23; and Mr. VanTiflin, 23. Benefits
are computed as a straight single life annuity beginning at normal retirement
age and are not subject to offset for social security or other benefits.
The Corporation has an agreement with each of Mr. Vitito, Mr. Ennest
and Mr. Clark which provides that they shall be entitled to receive a
retirement benefit at age 65 equal to 60%, 50% and 55%, respectively, of their
average annual base salary over the consecutive 60-month period in which they
received the highest compensation during their final 120 months of employment
with appropriate percentage reductions in the event of retirement before age
65. That portion of the retirement benefit not covered by the Corporation's
pension plan and social security are covered by a supplemental retirement
benefits plan. Under the combined plans, the estimated annual benefits payable
to Mr. Vitito, Mr. Ennest and Mr. Clark upon retirement at age 65 would be
approximately $263,638, $198,787 and $141,873, respectively.
18
<PAGE> 22
CHANGE-IN-CONTROL AGREEMENTS
The Corporation has entered into change-in-control agreements with
each of the Named Officers. Each agreement provides severance benefits to the
Named Officer if there is a change-in-control of the Corporation and the Named
Officer's employment with the Corporation is actually or constructively
terminated within twenty-four (24) months thereafter. A "change-in-control" of
the Corporation is generally defined as the acquisition by any person or group
of 20% or more of the outstanding Common Stock in a transaction which has not
been approved by a majority of the board of directors, a liquidation or
dissolution of the Corporation, a sale of substantially all of the assets of
the Corporation, or a merger, consolidation or combination in which the
Corporation is not the survivor or, under certain circumstances, a change in
the majority of the members of the board of directors within a two-year period.
A Named Officer's employment is deemed to have been constructively terminated
following a change-in-control if (i) there is a significant reduction in the
scope of the Named Officer's authority or in the extent of such Officer's
powers, functions, duties or responsibilities, or (ii) there is a reduction in
the Named Officer's rate of compensation, or (iii) fringe benefits are not
provided to such Named Officer on a basis commensurate with other executives of
the Corporation, or (iv) there are changes in the Named Officer's
responsibilities which would require moving such Officer's job location outside
of lower Michigan.
Each Agreement continues until two years after a change-in-control of
the Corporation and generally provides severance benefits of a lump-sum payment
equal to two years salary and bonus plus medical, dental and life insurance
coverage for a period of eighteen months. Further, each Agreement provides for
additional payments to make the Named Officer whole, on an after-tax basis, for
any excise tax imposed by Section 4999 of the Internal Revenue Code. Any Named
Officer whose employment is terminated and who thereafter receives the benefits
provided under such change-in-control agreement may not, for a period of
twenty-four months following termination of employment, accept employment,
consult for or otherwise assist any other financial institution which conducts
business from a location within fifty (50) miles of any location of the
Corporation or its subsidiary banks.
19
<PAGE> 23
COMPENSATION AND BENEFITS COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The compensation and benefits committee of the board of directors of
the Corporation (the "Committee") consists of five directors who are not
employed by the Corporation and are not eligible to participate in any of the
Corporation's benefit plans other than the Stock Option Plan for Directors.
The following report is submitted by the Committee.
OVERVIEW AND PHILOSOPHY
The Committee, pursuant to authority delegated by the board of
directors of the Corporation, is responsible for determining and implementing
compensation and benefit systems for executive officers and other employees of
the Corporation. The Committee determines the annual salaries and other
compensation for executive officers based upon recommendations from the
Corporation's President and Chief Executive Officer, as well as information
from the Corporation's Human Resources Department and independent outside
consultants. The Corporation's Chairman provides input and recommendations
with respect to the compensation of the Corporation's President and Chief
Executive Officer. The Committee's determinations relating to executive
compensation are intended to:
* align the financial interests of the executive officers with
the long-term interests of the Corporation's shareholders;
* attract and retain high performing executive officers to lead
the Corporation to greater levels of profitability; and
* motivate executive officers to attain the Corporation's
performance goals by placing a significant portion of such
officers' financial reward at risk relative to achievement of
Corporate goals.
In furtherance of these objectives, the compensation package
structured for the Corporation's executive officers has three primary
components: base compensation (including salary, pension and welfare benefits
and perquisites), annual cash awards under the Management Incentive Plan
("MIP") for performance during the previous year, and long term, stock-based
compensation generally awarded under the Corporation's Third Amended Stock
Option Plan (the "Option Plan").
BASE COMPENSATION
Given the Committee's continuing emphasis on performance-based
long-term and short-term compensation, base compensation for executive officers
has been established by the Committee at competitive levels based upon
information available to the Committee relating to compensation for
corresponding executive positions at similarly situated financial institutions.
Executive officer salaries are evaluated by the Committee on a periodic basis
utilizing information from independent outside compensation consultants, the
Corporation's Human Resources Department, and input from the Corporation's
President and Chief Executive Officer. Input from the Corporation's Chairman
is utilized with respect to the salary of the President and Chief Executive
Officer. To determine the actual base salary for each executive officer, the
Committee also takes into account individual performance, experience, and
unique contributions or needs for certain expertise required by the
Corporation.
20
<PAGE> 24
Base Compensation of Chief Executive Officer.
The Committee reviewed Mr. Vitito's performance for 1996 in November
of that year and awarded him a 5.56% merit increase effective January 1, 1997.
In support of such increase, the Committee noted the operational and managerial
efficiencies that have been brought about as a result of Mr. Vitito's
initiative to consolidate the Corporation's Michigan banking franchise into a
single bank and to rename the Corporation's Illinois banking franchise to
provide a common identity with the Michigan Bank. With regard to such
initiative, the Committee specifically noted that the product standardization,
systems conversions and unified name for the Corporation's banks are expected
to create operational and marketing efficiencies that should contribute
substantially to the Corporation's performance going forward. Moreover, the
Committee emphasized the effectiveness of the management and corporate
governance structure developed and implemented by Mr. Vitito in connection with
such consolidation to foster the community banking strategies strongly endorsed
by the Board of Directors of the Corporation. Also in support of the January
1, 1997 increase, the Committee noted that the Corporation had achieved record
earnings in 1996 while continuing to maintain strong credit quality.
MANAGEMENT INCENTIVE PLAN
All of the Corporation's executive officers participate in the MIP.
The MIP is designed to motivate participating officers of the Corporation and
its subsidiaries to attain goals based upon net earnings of the Corporation and
its subsidiaries and the achievement of individual objectives. The amount of
an individual's MIP award is a function of (i) the midpoint of the salary range
for the individual's position, (ii) the "participation rate" established by the
Committee for the individual, (iii) the performance of the Corporation or the
subsidiary for which the individual has or shares responsibility, and (iv) the
extent to which the individual achieved agreed-upon objectives for the year.
Each of these factors is described below.
Midpoint of Salary Range and Participation Rate. As described under
"Base Compensation," the Committee determines a salary range for each executive
officer's position based upon competitive factors. Similarly, the Committee
assigns a "participation rate" to each position based on the same factors
ranging from 15% for lower level executive officers to 40% for the Chief
Executive Officer. The participation rate multiplied by the midpoint of the
individual's salary range is that individual's "Award Base" under the MIP,
which is subject to adjustment based on Corporate and individual performance as
described below.
Corporate Performance. As a general practice under the MIP, no
amounts will be awarded unless the Corporation's net earnings for the year
equal or exceed: (i) 90% of the profit plan target approved by the
Corporation's board of directors for that year, and; (ii) 100% of the previous
year's earnings (the greater of these amounts is referred to as the
"Threshold"). Nonrecurring expenses or income items affecting earnings are
evaluated and may be excluded in the discretion of the Committee from the
profit plan earnings calculation to the extent of management's inability to
control such items. Earnings below the profit plan target, but higher than the
Threshold, automatically reduce the Award Base while earnings above the profit
plan target automatically increase the Award Base. For 1997, the Corporation's
net operating earnings after excluding a one time third quarter special charge
(discussed below) significantly exceeded 1996 earnings and slightly exceeded
the 1997 profit plan target.
21
<PAGE> 25
Individual Objectives. Individual executive performance also affects
the amount of a participant's individual award. Annually, each executive
officer establishes objectives, subject to approval by the officer's
supervisor. Depending upon the extent to which these objectives are achieved
during the year, a participant will be eligible to receive from 0 to 150
percent of the Award Base, adjusted for Corporate performance as described
above.
Chief Executive Officer Award. Mr. Vitito received an award of
$168,859 under the MIP for his 1997 performance on the same basis as the other
executive officers. The primary individual MIP objective of Mr. Vitito was to
have the Corporation's earnings reach the 1997 profit plan target. In
evaluating performance of this objective, the Committee noted that after
excluding from earnings the special third quarter charge attributable to the CB
Financial Corporation acquisition and to the outsourcing of the Corporation's
data processing systems (discussed below), the Corporation's operating earnings
during 1997 exceeded any prior year in it's history and slightly exceeded the
profit plan target for 1997. The second objective of Mr. Vitito was to
complete, effective July 1, 1997, the acquisition of CB Financial Corporation
and its three subsidiary banks headquartered in Jackson, St. Johns and
Charlevoix, Michigan and to consolidate such banks with and into the
Corporation's Michigan Bank. In evaluating performance of this objective, the
Committee noted that the acquisition had been completed in a timely manner and
that the acquired banks had been successfully and efficiently integrated into
the Corporation's Michigan Bank with the operating costs of the acquired banks
being reduced more rapidly than contemplated in the related acquisition
analysis. Further, with regard to such objective, the Committee noted that on
a combined basis, the three banks acquired have added approximately $826
million in additional assets to the Corporation's balance sheet, bringing the
total asset base of the Corporation to approximately $4.4 billion at year-end.
A third significant objective of Mr. Vitito under the MIP was to cause an
analysis to be undertaken to determine whether the Corporation should outsource
its data processing and computer operations and thereafter, if such a strategy
were determined to be in the best interests of the Corporation, to oversee the
selection process of choosing the most appropriate "strategic partner" to
handle the Corporation's data processing and computer operations. In
evaluating performance of this objective, the Committee noted the thoroughness
of the overall process developed to study the proposal, the quality of the
selection process for determining which company should become the Corporation's
data processing "strategic partner" and once approved, the thoroughness in the
development of the contractual understanding as between the Corporation and the
strategic partner ultimately selected. The Committee concluded that Mr. Vitito
had fully met the profit plan target for 1997, had successfully acquired and
integrated the CB Financial Corporation banks with and into the operations of
the Corporation's Michigan Bank, and had prudently overseen the data processing
outsourcing project. Moreover, the Committee noted that the Corporation's
Common Stock had a total return of approximately 69% for the year. Based upon
the foregoing, the Committee determined that Mr. Vitito was entitled to 115% of
his Award Base.
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LONG-TERM STOCK-BASED COMPENSATION
The Option Plan provides for a variety of different types of
compensation arrangements, such as stock options, restricted stock, and stock
appreciation rights, which increase in value as the value of the Common Stock
increases. The purpose of these and similar long-term compensation
arrangements is to more closely align the financial interests of executive
officers and other key employees with the long-term interests of the
Corporation's shareholders by linking a significant portion of their
compensation directly to stock price growth or decline.
In furtherance of such purpose, the Committee generally makes annual
grants to executive officers of stock options with an exercise price equal to
the fair market value of the Common Stock on the date of grant. Such options
vest and generally become exercisable as the Corporation's return on average
assets increases in accordance with a vesting schedule pertaining to such
option grants. The Committee has adopted option grant guidelines to reflect
competitive practices of other similarly situated financial institutions.
These guidelines, implemented by the Committee with the assistance of the
Corporation's outside compensation consultants, employ a modified Black-Scholes
option valuation model to estimate the present value of long-term incentive
compensation for corresponding executive positions at similarly situated and
performing financial institutions. A similar analysis is performed to
determine the comparative value of an option to be awarded under the Option
Plan. Based upon this information and other information concerning
compensation practices within the financial services industry, an appropriate
participation rate for each of the executive officers in the Plan is assigned.
The option grant size for each executive officer is then determined by dividing
the product of the position's salary mid-point and participation rate by the
current market price of Common Stock, subject to being increased or decreased
by the Committee based upon its evaluation of the officer's individual
performance.
Other options received by the executive officers during 1997 were
reload grants made automatically under the provisions of the PPP. All
participation in the PPP terminated effective June 30, 1997 as a result of the
Committee's determination to discontinue the "reload feature" of the PPP.
Chief Executive Officer Long Term Compensation. Mr. Vitito received
an option grant from the Committee in the amount of 73,500 shares during 1997
in accordance with the formula described above. Mr. Vitito also received
37,167 reload grants made automatically under the provisions of the PPP.
Deductibility of Executive Compensation. Section 162(m) of the
Internal Revenue Code of 1986, as amended, restricts the deductibility of
executive compensation paid to the Corporation's Chief Executive Officer and
any of the four other most highly compensated executive officers at the end of
any fiscal year to not more than $1,000,000 in annual compensation (including
gain from the exercise of certain stock option grants). Certain
performance-based compensation is exempt from this limitation if it complies
with the various conditions described in Section 162(m). The Option Plan
contains a restriction on the number of options that may be granted which is
intended to cause compensation realized in connection with the exercise of
options granted under the Option Plan to comply with these conditions and be
exempt from the Section 162(m) restriction on deductibility.
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<PAGE> 27
The Committee does not believe that other components of the
Corporation's compensation program are likely to result in payments to any
executive officer in any year which would be subject to the restriction on
deductibility and has concluded that no further action with respect to
qualifying such compensation for deductibility is necessary at this time. The
committee intends to continue to evaluate from time to time the advisability of
qualifying future executive compensation programs for exemption from the
Section 162(m) restriction on deductibility.
HUGO E. BRAUN JR. VICTOR E. GEORGE
LAWRENCE O. ERICKSON JAMES E. TRUESDELL JR.
KENDALL B. WILLIAMS
24
<PAGE> 28
SHAREHOLDER RETURN
Set forth below is a graph which summarizes the cumulative return
experienced by the Corporation's shareholders over the past five years compared
with the S&P 500 Index and the Keefe, Bruyette & Woods, Inc. 50 Bank Index.
Such presentation assumes that the value of the investment in the Corporation's
Common Stock and each index was $100 on December 31, 1992 and that all
dividends were reinvested.
Cumulative Total Returns
Five Years Ended December 31, 1997
Value at Year End
1992 1993 1994 1995 1996 1997
CITIZENS $100 $133 $153 $169 $185 $313
KBW 50 $100 $106 $100 $160 $227 $332
S&P 500 $100 $110 $112 $153 $189 $252
25
<PAGE> 29
COMPENSATION COMMITTEE INTERLOCKS AND
CERTAIN TRANSACTIONS AND RELATIONSHIPS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Hugo E. Braun Jr., Lawrence O. Erickson, Victor E. George,
James E. Truesdell Jr., and Kendall B. Williams served on the compensation and
benefits committee of the board of directors of the Corporation throughout the
last completed fiscal year. None of these individuals are or have been
employees of the Corporation.
Committee member Braun is a partner in the law firm of Braun Kendrick
Finkbeiner which rendered legal services during 1997 to the Corporation's
Michigan banking subsidiary, Citizens Bank. Citizens Bank plans to employ this
firm for additional services in 1998.
OTHER TRANSACTIONS WITH OFFICERS AND DIRECTORS
During 1997 the banking subsidiaries of the Corporation had, and
expect to have in the future, banking transactions, in the ordinary course of
business, with directors, officers and their associates. These transactions
were made on substantially the same terms, including interest rate charges and
collateral requirements, as comparable transactions made with unrelated parties
prevailing at the time of such transactions and did not involve more than the
normal risk of collectability or present other unfavorable features.
During 1997, the firm of Winegarden, Shedd, Haley, Lindholm &
Robertson, of which director William C. Shedd is a partner, rendered legal
services to Citizens Bank. Citizens Bank expects to employ this firm for
additional services in 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Corporation's
directors, executive officers, and any persons holding more than 10% of the
Common Stock (collectively, the "Reporting Persons") are required to report
their ownership of the Common Stock and any changes in that ownership to the
Commission and to the Nasdaq Stock Market ("Nasdaq"). Specific due dates for
these reports have been established and pursuant to applicable rules, the
Corporation is required to report in its proxy statement any failure to file by
these due dates. Based on corporate records and certifications received from
the Reporting Persons, all required reports of Reporting Persons have been
timely filed with the Commission and the Nasdaq. In making these statements,
the Corporation has relied on the written representations of its directors,
executive officers, and its principal shareholder, and on copies of the reports
that such persons have filed with the Commission.
26
<PAGE> 30
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
In 1997, Ernst & Young LLP, performed audit and audit related services
for the Corporation and its subsidiaries which included examination of the
consolidated financial statements of the Corporation, and consultation with the
Corporation and its subsidiaries on accounting and reporting matters. Upon
recommendation of the audit committee, the board of directors has again
selected Ernst & Young LLP, as independent auditors. Representatives of Ernst
& Young LLP, will attend the annual meeting, will have an opportunity to make a
statement, and will be available to answer questions that may be asked by
shareholders.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder of the Corporation to be considered for
inclusion in the proxy statement for the 1999 annual meeting must be received
by Thomas W. Gallagher, the secretary of the Corporation, by the close of
business on November 16, 1998.
ANNUAL REPORTS
Appendix A to this proxy statement contains the information required
to be included in an annual report pursuant to the rules of the Commission,
including audited financial statements, management's discussion and analysis of
financial condition, and results of operations and five year selected financial
data. Upon request, the Corporation will provide without charge a copy of its
annual report on Form 10-K.
OTHER MATTERS
The board of directors is not aware of any other matters which may
come before the meeting. However, should any such matters properly come before
the meeting, it is the intention of the persons named in the accompanying proxy
to vote in accordance with their judgment on such matters.
CITIZENS BANKING CORPORATION
Thomas W. Gallagher
Senior Vice President, General
Counsel and Secretary
Flint, Michigan
March 16, 1998
27
<PAGE> 31
(FRONT OF CARD)
CITIZENS BANKING CORPORATION
FLINT, MICHIGAN
PROXY BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS - APRIL 21, 1998
The undersigned shareholder of Citizens Banking Corporation (the
"Corporation") hereby appoints Victor E. George and Edward P. Abbott or either
of them, my proxies or proxy, with full power of substitution to vote all
shares of stock of the Corporation that the undersigned would be entitled to
vote at the annual meeting of shareholders of the Corporation to be held in the
Carriage Hall Room of the Riverfront Hotel, One Riverfront Center West, Flint,
Michigan, on Tuesday April 21, 1998, at 10:00 a.m. local time, and at any
adjournments thereof, and upon the matters referred to on the reverse side of
this proxy, all of which are being proposed by the Corporation, and in their
discretion, upon such other matters as may properly come before the meeting
including the election of any person to the Board of Directors where a nominee
named in the Proxy Statement dated March 16, 1998 is unable to serve or, for
good cause, will not serve. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN
THE MANNER DIRECTED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
EACH NOMINEE NAMED AND FOR THE PROPOSAL LISTED ON THE REVERSE SIDE OF THIS
PROXY.
For participants in the Corporation's Amended and Restated Section 401(k)
Plan ("Plan"), this card also provides voting instructions to the Trustee under
the Plan for the undersigned's allowable portion, if any, of the total number
of shares of Common Stock of the Corporation held by such Plan as indicated on
the reverse side hereof. These voting instructions are solicited and will be
carried out in accordance with the applicable provisions of the Plan.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and the Proxy Statement dated March 16, 1998 and ratifies all that
the proxies or either of them or their substitutes may lawfully do or cause to
be done by virtue hereof and revokes all former proxies.
<PAGE> 32
(BACK OF CARD)
Please mark
your votes as
indicated in [x]
this example
1. ELECTION OF DIRECTORS THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
EACH OF THE NOMINEES LISTED.
For all nominees Withhold Class III (three year term): Stephen J.
listed (except as Authority Lazaroff, William F. Nelson Jr., William C.
marked to the as to all Shedd, James E. Truesdell Jr., Charles R.
contrary) nominees Weeks and Kendall B. Williams.
listed TO WITHHOLD AUTHORITY TO VOTE FOR ANY
NOMINEE, DRAW A LINE THROUGH THE NOMINEE'S
NAME.
[ ] [ ]
2. Proposal to amend Article III of the Corporation's Restated Articles of
Incorporation to increase the total authorized common shares from
40,000,000 shares without par value to 100,000,000 shares without par
value.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as Attorney, Executor, Personal
Representative, Administrator, Trustee or Guardian, please give full title as
such. If signing on behalf of a corporation please sign in full corporate name
by President or other authorized officer. If signing on behalf of a
partnership, please sign in partnership name by authorized person.
Dated: _________________________________, 1998.
_______________________________________________
Signature
_______________________________________________
Signature if held jointly
